If your company stocks inventory, the odds are about 60% of it is slow moving and very costly to maintain. On the other hand, it also plays a very important role in providing a high level of immediate availability and long term customer service.
Every year that you hold onto slow and non-moving inventory, it costs an average of 25% in carrying costs. And, that is for each year that you hold onto it. It is taking up space in your warehouse, using up resources and working capital. Plus its annual minimal sales will not come close to covering its 25% carrying cost, reducing the profits from your faster moving inventory.
Using your reserves to write off inventory may free up some space and resources – but now you have lost availability to those items. And, you know that once you scrap inventory, you are going to need some of it again!
Same as scrapping except now it may be competing against you and/or your customers! Or, even worse, the inventory may come back to you through dealer returns!
GPS has developed a 3-Step Inventory Management Approach that will help you identify slow moving inventory and minimize or eliminate its ownership costs while still retaining availability to provide your customers long term product support.
GPS can show you how, when properly managed, this unpredictable demand inventory can actually add to your bottom line. History points out that 5-6% activity will occur annually. Its sales will produce pure profit when the inventory carrying cost is eliminated or managed to its lowest level.