Categories: Inventory Management
By Mark Tomalonis
Principal, WarehouseTWO, LLC
Summertime! The season for neighborhood lemonade stands! Did you ever set up a lemonade stand in front of your house when you were a child? Do you have a child who has set up a lemonade stand this summer? In either instance, why did someone buy lemonade? Typically, there are only two reasons why someone would buy your lemonade:
In our experience, the vast majority of people who buy lemonade from a neighborhood child’s lemonade stand do it only because they are being nice.
Imagine setting up a “lemonade stand” for your company’s dead inventory. Will other wholesaler-distributors buy your dead inventory, just to be nice? Would YOU buy another distributor’s dead inventory, just to be nice?
In either case, probably not.
No peer distributor is going to buy your dead inventory, just to be nice. And you are not going to buy another distributor’s dead inventory, just to be nice. There must be “thirst” for one’s dead inventory. What drives that thirst?
Peer distributors will buy your dead inventory only if they need it, only if they are “thirsty” for it. In most communities of peer distributors, that thirst is driven by one or more of these factors:
Lack of availability / long lead times from your supplier: Does anything that you sell have a factory lead time of three weeks or more? Your customers likely will not tolerate that delay. Today’s industrial end-customers behave just like consumers: they expect everything and anything to be available now, for immediate shipment. Your dead inventory may be another distributor’s unexpected backorder.
Minimum purchase quantity or PO value restrictions imposed by your supplier: Do any of your suppliers impose minimum package quantity requirements? Your dead inventory may resolve another distributor’s small quantity demand, allowing that distributor to avoid minimum quantity requirements or penalties.
High unit costs for small quantity purchases: Do you and your peer distributors lose discount or pay higher unit costs when buying small quantities of rarely sold, small volume items? Are these cost differences significant?
Even if the above factors are minor influences in your business, inventory-sharing can help you sell dead inventory. For many distributors who buy and sell dead inventory via WarehouseTWO, these factors affect no more than five percent (5%) of their sales transactions.
To attract other distributors to buy your dead inventory, follow these simple steps:
Active members of WarehouseTWO frequently sell dead inventory to peer distributors. Here are examples of the success our members have had:
"In fourteen months, we sold $26,000 worth of dead inventory, at a profit. I would have scrapped part or all of this had I not been participating at WarehouseTWO."
Components and Controls
Carlstadt, NJ USA
"Through WarehouseTWO, we’ve sold items which hadn’t moved in six or seven years. It’s great to sell these items and get them off our shelves."
Geib Industries Inc.
Franklin Park IL, USA
"I had a long-time customer go under this past summer. I took back a lot of product for credit, to cover what this customer owed us on its account. I posted this inventory to WarehouseTWO and sold it in three days!"
Oil Filter Service Company
Portland, OR USA
About the Author
After a successful career in sales and operations management in the wholesale-distribution industry, Mark Tomalonis is now principal of WarehouseTWO, LLC. He amuses himself by writing articles, such as this one, to help wholesaler-distributors execute their operations better. Mark’s articles and tips are published in WarehouseTWO’s monthly e-newsletters. Click here to subscribe.
WarehouseTWO, LLC is an independent “inventory-sharing” service created exclusively for durable goods manufacturers and their authorized distributors, and for any group of durable goods “peer” wholesaler-distributors, such as members of a buying/marketing group or cooperative. To learn how inventory-sharing with WarehouseTWO can help your business, visit the WarehouseTWO website, or email firstname.lastname@example.org.