I’ve been in the imaging supplies surplus business for the better part of 15 years. Every day, I speak to copier dealers who all have a common and ongoing problem—obsolete and overstocked inventory.
Having some obsolescence is key to providing top-notch service to their customers. It allows for technician’s car stock to be kept full, and provides the flexibility to ship from stock rather than source product at slower turnaround times and smaller profit margins.
For some, the problem of obsolete inventory is an issue they only care to address once or twice a year, maybe after a meeting with (or mandate from) management. For others who understand the multi-faceted cost savings (space, tax benefits, etc.) of writing off product sooner rather than later, they may dig into their inventory a bit more often, maybe once a quarter or so.
Often a dealer will send me a list of obsolete inventory items, and I’ll go through it to find we can only buy about 30 percent of the product. However, if they had sent the same list only six months earlier, I would have been able to buy 50 percent of the product or more. The reasons for the delay are understandable:
- They have always done the write-offs at a certain time of year. Why would they look at doing write-offs more often? After all, it is OBSOLETE PRODUCT.
- They don’t want to be stuck looking to source a product they might still need in the next few months.
While both of these reasons are legitimate, more harm than good can come from keeping product too long. You could end up missing the resale window. Yes, you may have to re-source the occasional oddball product, but if you are able to recoup some value on 50%-60% of your obsolete inventory as opposed to 30%, it’s worth it.
Shelf-Sitters
There’s also the issue of slow-moving product versus obsolete product. Many times, dealers will wait until there is zero movement on product before they try to sell it as surplus. While they may have eliminated the risk of having to source a product, they also missed the resale window to recoup maximum value for the old product. Even worse, this could result in recouping no value at all and they end up in the trash.
A more prudent exercise is to look at run rate versus quantity on hand. It stands to reason if you have 20 pieces of a product on hand and you are using one per month on average, you may want to look at selling some off and keeping only three to six months’ worth on hand—especially if that usage has been steadily slowing.
Realizing this was a problem, OEM Connect partnered with NEXERA (BEI Services). Bud Karakey, vice president of customer engagements at NEXERA, also deeply understood the problem of slower-moving and obsolete inventory and the drag it can have on profitability. To help address this problem for the dealers within the NEXERA network, Karakey created the OPN (Overstock Parts Network). In its infancy, the OPN allowed NEXERA dealers to sell slower-moving items to other NEXERA network dealers.
Since this model is very similar to what OEM Connect has done for over 20 years, Karakey and I saw it as a match made in heaven. Combining NEXERA’s wealth of usage data with OEM Connect’s large distribution network—not to mention its 35,000 square foot warehouse and seasoned purchasing/salespeople—the OPN has been taken to the next level. The noble cause of finding homes for older product, while at the same time helping to reduce a dealer’s obsolete inventory, has become easier than ever.
However, the mission to educate and help copier dealers still marches on. The resale window is tight, and the time to sell old inventory is yesterday. In fact, a NEXERA study shows that less than 18% of inventory age 18-plus months will get used, meaning 82% will be written off and trashed.
Salvaging Supplies
The importance of surplus companies in our industry cannot be overstated. Every year, copier dealers write off hundreds of thousands of dollars of obsolete product. This puts a strain on both their bottom line and the environment, as the product often ends up in a landfill. By selling obsolete product to a surplus company, a number of positive things occur:
- The company selling the product usually recoups more value than a straight write-off.
- People and companies still using the machines have the opportunity to buy products at significant discounts (OEM Connect resells genuine OEM products at 20%-30% below dealers’ manufacturer cost).
- The environment benefits, as many end-of-life products are put to use.
Not all companies have the resources to address their slow-moving inventory each month. But by looking at it more than once or twice a year, dealers can minimize their risk, maximize their cash flow and do their part for the environment in one fell swoop. For selling obsolete product, sooner is almost always better than later.
If you’re having challenges in inventory management and need some help, please feel contact us directly at OEM Connect at (978) 207-1055 or via email at Tcooper@oemconnect.com. You can also reach Karakey at (307) 250-7214, Bud.karakey@nexera.net.
