How to Put Your Excess
Inventory to Work for You!
A Guide to Managing Excess
Inventory
© Educational Assistance
Ltd. 2003
Excess inventory is inevitable
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The market for business surplus is
estimated at $350 billion annually
(World Bank abstract)
Overruns, inaccurate forecasts, new
products, returned, discontinued retail
items
Downsizing, relocations & mergers can
generate excess assets too
© Educational Assistance
Ltd. 2003
Excess Inventory Leads to
Inefficiency and Higher Costs
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Non-productive material management
Wasted warehouse space
Utility expenses
Insurance and Taxes
Opportunity Cost (-) impact on bottom
line
© Educational Assistance
Ltd. 2003
Traditional Disposal Options
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Reverse Logistics –
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Sell Excess Inventory –
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Recycle Inventory –
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Donate Inventory – The process of giving inventory to a
The process of planning,
implementing and controlling flows of raw materials, in process
inventory, and finished goods, from the point of use back to a
point of recovery (vendor).
The process in which product
is remarketed as a means of recapturing costs.
The process in which the structure
of a product is destroyed in order to recapture its materials.
not-for-profit organization.
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Waste– Disposal of inventory through traditional landfills.
© Educational Assistance
Ltd. 2003
Costs/Benefits of Disposal
Options
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Reverse Logistics
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Sell Excess inventory
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Recycle Inventory
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Donate Inventory
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Waste
• Financials
• Bottom Line
• Employee Costs
• Insurance/Taxes
• Opportunity Cost
• Space Utilization
• Operations
• ROA
• Re-marketing
control
• Product Liability
© Educational Assistance
Ltd. 2003
Reverse Logistics
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Benefits:
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• Does Not Re-Enter
Distribution
Channels
• Most Predictable
• Reduces Product
Liability
Costs:
• Re-Stocking Fee
• Transportation
Charges
• Not 100% Removal
• Personnel Costs
• Turn-Around Time
• Opportunity Costs
© Educational Assistance
Ltd. 2003
Sell Excess Inventory
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Benefits:
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• Some $ recovery
• May be able to
Control Distribution
Channels
Costs:
•
•
•
•
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Fragmented market
Turn-Around Time
Opportunity Costs
Fees for Sale
May Interfere with
Distribution
Channels
• Product Liability
• Very low $ potential
© Educational Assistance
Ltd. 2003
Sample Current Liquidator Prices
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Marilyn Monroe microphone radio $5.00 each (retail
value $29.95)
42 piece art set - 8% of retail
Pallet of 2 ton prof. truck/van jacks 4000 lb capacity.
$ 479.99
Ocean prince sardines - $.25 each
2 truckloads of excess paper products bought for
$7,000 listed for sale at $21,000
© Educational Assistance
Ltd. 2003
Recycle Inventory
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Benefits:
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• 100% Removal
• Environmental
Stewardship
• Positive Corporate
Image
• Avoid penalties &
fines
Costs:
• Recycling Fees
• Transportation Fees
• Potential Liability
from Environmental
negligence
© Educational Assistance
Ltd. 2003
Computer Recycling
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Obsolete computers contain: lead, mercury,
cadmium, chromium, lithium, nickel and zinc
If mismanaged (not-recycled) these materials can be
harmful
Also, precious metals go un-recovered
Sample recycling cost: $0.15/pound
“Take-Back Programs”
Regulations regarding patient data
© Educational Assistance
Ltd. 2003
Landfill/Waste
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Benefits:
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• “Out of Sight – Out of
Mind”
• 100% Removal
Costs:
• Waste Management
Fees
• Environmental
Negligence
• Creates Negative
Corporate Image
among
employees/outsiders
• Liability (HIPAA)
© Educational Assistance
Ltd. 2003
Donate Excess Inventory
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Benefits:
•
•
•
•
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Lower Tax Liability
100% Removal
Positive PR
Environmentally
responsible
• After-market control
Costs:
• May incur shipping
costs
• Initial Effort to
Identify Suitable Notfor-Profit Partners
• Misunderstood
Option
© Educational Assistance
Ltd. 2003
How to select a recycler or charity
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Excess Inventory
Recycler
State Local Permits
Fees
Disposal Certification
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Charitable Organization
Mission & Experience
After-Market restrictions
Efficiency & Resources
Ability to offer 170 e (3)
above-tax write off
© Educational Assistance
Ltd. 2003
Tax Considerations
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Inventory/Product Donations are also called in-kind
donations
IRS rule 170 e (3) can help increase deduction
Cost basis: $500
FMV
: $1000
170 e (3) : $750 write-off or ½ difference +
C and sub-chapter S corporations tax status
Receiving charity cannot dispense tax advice
© Educational Assistance
Ltd. 2003
Excess Inventory Management
Resources
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www.epa.gov/epr (Extended Product
Responsibility Page)
www.safety-kleen.com (electronic scrap
from clients only)
www.surplus.net (liquidators network)
www.equipment.net (specialty excess)
www.guidestar.org (non-profit network)
www.irs.gov(tax issues)
© Educational Assistance
Ltd. 2003
For additional help
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Contact EAL
Corporate Development Director
Call 630-690-0010
email us at [email protected]
visit us on the web at www.ealworks.org
© Educational Assistance
Ltd. 2003