Excess Inventory: Advantages and Disadvantages

7/13/20 10:30 AM

Inventory is a substantial component within many operations. Having inventory on-hand will lead to increased customer satisfaction and ultimately ensure for on-time delivery, which is by far one of the most important aspects to the customer experience. As customers seek to obtain items rather quickly, this will only increase loyalty simply due to the fact that customers know the business keeps products in stock at all times, thus fulfilling delivery times. If inventory moves regularly and quickly, then business owners are likely to carry some excess inventory of popular items.

Excess Inventory: Advantages and Disadvantages

Excess inventory has both various advantages and disadvantages that can both benefit and harm your business. This is why it is important to take a look into both areas and ultimately decide whether or not excess inventory is an adequate solution for your business and demand. Therefore, within this blog, we are going to discuss the advantages and disadvantages pertaining to excess inventory within an operation.

Advantages of Excess Inventory

The advantages pertaining to excess inventory include the following:

  • Fast Fulfillment – As things are in stock, you will be able to ensure that customer fulfillment times are always met within the timeframe that they are requesting. Customers will receive product in hand much faster, which is by far one of the most important aspects within the consumer experience. This is a fundamental part of quality customers service and will keep your customers coming back.
  • Low Risk of Shortages – Having excess inventory will also ensure that shortages are almost eradicated. For example, if a factory goes down and is unable to produce product, then this can cause issues within operations that are categorized as JIT. Having excess inventory will allow you to have a buffer to some extent for when these situations occur, and ultimately still be able to ship product to consumers within the timeframe that is needed. You may also experience seasonal increases, which excess stock will only ensure that these potential increase in sales are accounted for.

With the advantages associated with excess inventory, there are also a series of disadvantages as well.

Disadvantages of Excess Inventory

The disadvantages of excess inventory include the following:

  • Storage Costs – One of the biggest downfalls of inventory-based organizations is the amount of costs associated with storage. The more stuff that you have, the more space that is needed. Warehouse space and holding large amounts of inventory will only lead to increased costs within an operation and will increase these costs through storage, inventory control, audits, and even requiring additional manpower to work the warehouse. Overall, warehousing product can be expensive.
  • Obsolete Inventory – Obsolete inventory can also be a major downfall and could even bankrupt your business if you are following short-term demand. If you find yourself holding the newest technological advancement for consumers – you will more than likely only be holding that for a short period of time before something new comes out. Stocking up on this particular product and then deciding to never innovate and continuously improve, will only lead to obsolete inventory once the craze is over. This will leave you will a substantial amount of inventory on hand – and no one to sell to.

A software that can aid with inventory management is PlanetTogether’s Advanced Planning and Scheduling (APS) Software. PlanetTogether’s Advanced Planning and Scheduling (APS) Software is a must for manufacturing operations that are seeking to enhance overall efficiency and ultimately reduce any costs within the operation as a whole. PlanetTogether’s Advanced Planning and Scheduling Software enables manufacturing operations around the globe to be able to fulfill delivery timeframe requirements, reduce inventory, and ensure for enhanced customer experience.

Advanced Planning and Scheduling Software 

Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.

  • Create optimized schedules balancing production efficiency and delivery performance
  • Maximize output on bottleneck resources to increase revenue
  • Synchronize supply with demand to reduce inventories
  • Provide company-wide visibility to capacity
  • Enable scenario data-driven decision making

Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.

Related Capacity Planning Video

 APS Resources

Topics: Inventory Management

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