Your field service business may have excess inventory from overstocking, incorrect forecasting or changes in demand.
Carrying too much stock may seem like a good problem to have, but it can become a financial burden and a logistical nightmare for your business.
In this guide, we will cover the following:
What is excess inventory?
- Excess inventory is any stock that exceeds projected demand. In field service, it's a surplus of the products and materials your team uses for operations or customer jobs.
- Surplus inventory can occur when you order more stock than you need, leading to a buildup of unused items. It can result in increased storage costs, reduced cash flow, and decreased profits.
The causes of excess inventory
- What causes excess inventory? Before finding practical ways to prevent it, let's identify the leading causes of carrying too much stock.
- If your predictions about future demand for your services are inaccurate, you could end up with excess inventory.
- Some of the causes of inaccurate forecasting include a lack of market research, poor coordination between your sales, production and inventory management teams, and forecasting methods that fail to consider changing market conditions.
Poor inventory management
- Poor planning, not tracking inventory levels, a lack of coordination between your departments, and miscommunication can all lead to your team ordering stock unnecessarily, leading to surplus inventory.
Changes in demand
- The demand for your services may change, leading to excess inventory. Several factors can influence customer demand, including a change in your customers' disposable incomes, an increase in price, rising inflation, or a change in their taste or preference.
- Errors in data collection or entry can lead to incorrect inventory levels. As a result, your team may order materials you have in stock, resulting in excess inventory. Inaccurate data is often caused by human error, but it could also result from your team using an inefficient inventory management system.
The disadvantages of excess inventory
- Your business may carry excess stock to avoid understocking or because you believe you can respond faster to customer orders.
- But, the cost of excess inventory outweighs the benefit.
- Discover the reasons why it's never a good idea to carry too much stock.
- Excess inventory takes up valuable storage space and requires extra resources like rent, insurance, and staff to manage stock. Surplus stock can depreciate or become outdated, making it difficult or impossible to sell excess inventory.
Reduced cash flow
- Excess inventory ties up capital you could use to pay debt, expenses, or suppliers. You may also miss out on business opportunities like investing in new service offerings or expanding into new markets.
- An overstocked warehouse can become cluttered and disorganised, making locating and managing inventory difficult. As a result, it may take your technicians longer to find the materials they need for projects, leading to delays.
Managing excess inventory: 6 steps to optimise stock levels
- Follow these steps to improve inventory management, optimise stock levels and prevent overstocking.
1. Assess your inventory
- Keep track of your inventory levels with an Inventory Management System. A quick look at the system will confirm which items you have a surplus of to ensure you only order items you need to meet demand.
2. Use accurate forecasting techniques
- Accurate forecasting can help you improve inventory management and prevent overstocking. To improve the accuracy of your forecasts, keep up-to-date records of your inventory so you can use past data to predict the future and use forecasting tools and software to save time and produce a more accurate forecast.
3. Conduct regular inventory audits
- Inventory audits help you see how much stock you have so you have a clear idea of what materials you need to order to prevent overstocking. To improve inventory accuracy, use Inventory Software to record the number of items available. The software stores all your data on a cloud-based system everyone in your team can access.
4. Organise your warehouse
- A well-organised warehouse makes locating stock easier for you and your team, which is helpful when your team needs to find materials quickly or complete an inventory audit on time. Optimising your storage space can also minimise the risk of damage to inventory.
5. Automate inventory management processes
- To improve inventory accuracy, automate as many inventory management processes as possible. Manual processes can slow your operations and lead to mistakes, but you can speed up processes and reduce human error with automation.
- Automate your purchase order process with Inventory Software by creating recurring orders to ensure the right materials arrive on time and don't have to be stored for long periods.
6. Liquidate your excess inventory
- You can sell your excess inventory at a discounted price to optimise your warehouse space, reduce storage costs, improve cash flow, and regain some of the capital used to buy stock.
- When removing excess inventory, remove the items you're selling from your Inventory Management System to ensure you keep an accurate inventory record.
Say goodbye to excess inventory
With our Inventory Management System, you can say goodbye to excess inventory and reduce storage costs, improve cash flow, increase efficiency, and improve profitability.