The true cost of excess inventory

Although semiconductor shortages have caused widespread disruption across many sectors, the impact has been far from even. In this week’s Computer Components Ltd (CCL) blog, we look at which industries have been hardest hit, and why.

Although every electronics company tries to run the leanest manufacturing process possible, it is inevitable that excess electronic components will build up over time. While dealing with excess stock can be a headache, will holding on to it cause you greater pain in the future? Adam Chinery, Managing Director at CCL, explains why hoarding your excess stock may be costing you more than you think.

Why do companies hold on to excess electronic components?

Many OEMs and EMS companies in the electronics industry will hold on to excess electronic components for many months, and sometimes years. This may be obsolete chips, discontinued electronic components or slow-moving parts.

Firstly, it can be tempting to leave excess inventory on the books, treating it as a potential asset at full value in the hope that there will be another surge in demand. However, these occasions are few and far between due the fast-moving nature of today’s electronic manufacturing sector.

Secondly, there is also often a reluctance for purchasing departments to face taking a hit on the cost of their inventory investment. The resell value of excess components is usually only around 5 to 10% of the original cost price. It is unavoidable that this will occur from time to time, and such losses are usually offset by gains on more popular production lines. If the company offloads excess inventory as scrap, the loss is even greater.

Finally, identifying and logging excess components can be time-consuming and is often not made a priority. If the data on your inventory logging system is not kept up to date, this can mean that time needs to put aside for a more manual process. Fitting this into a busy schedule can be a challenge.

Will hanging on to excess for too long lose you money?

Although there are some valid reasons to hang on to surplus electronic components, these need to be weighed up against the disadvantages.

Most importantly, the longer your excess electronic stock sits unused on your warehouse shelves, the more both its quality and resale value will diminish. Electronic components will almost always depreciate over time, and in many cases quite quickly. Doing nothing is arguably the worst way to deal with the issue of surplus electronic inventory. The good news is that the newer to the market the item is, the more likely you will be able to regain a larger percentage of your original cost price.

Additionally, the cost of storing your excess electronic chips should be included in the total cost. Even if you have your own warehouse, you should still factor in your extra costs for electricity, insurance, property taxes and maintenance. These costs can mount up, and sometimes as surplus stock builds up, you can risk not having enough space for new items.

So, what is preventing you from dealing with your excess electronic stock right now?

For many, it is simply the time and hassle involved in organising this. The process of promoting surplus electronic stock, liaising with bidders, and organising the logistics required to transport items to one or more buyers can be complex and time-consuming.

Take the pain out of selling excess electronic inventory

Established in 1997, CCL has considerable experience of selling excess electronic components on behalf of our thousands of customers globally. We offer a personal end-to-end service for OEM and EMS companies with surplus electronic components to sell. Our experienced account managers will take care of all freight, insurance and warranties for you, so all you need to do is pack up your stock ready for collection.

Generate revenue now or wait for the maximum return?

If you are looking for a fast solution to your excess inventory, CCL will provide an offer on individual lines or the whole lot. This means you can sell your excess and receive cash immediately. Using bespoke software, we match your excess stock to our database of BOMs and proactively market it to our extensive network of OEMs, CEMs, and distributors worldwide to ensure a highly competitive offer.

If you are willing to sell your items over the course of 12 months, CCL’s Consignment Partnership Programme will offer the maximum return as sales are negotiated against market demand. This means you can expect to achieve an average of 60% of the original cost price. And, with current component shortages, many will achieve 100% or more of the cost price.

Our Consignment Partnership Programme allows you to release valuable warehouse space, with the flexibility to recall unsold items if there is an unexpected surge in demand.

Get the best return for your excess electronic components with our Consignment Partnership Programme.

How does CCL’s Consignment Partnership Programme work?

• You send us a list of your inventory
• We arrange the shipping from your warehouse to ours
• We proactively market your stock
• You will receive regular offers for your stock
• When prices are agreed you will receive the money for your stock
• You will receive a monthly report on your sales from your Account Manager

With our worldwide shipping partners, we will arrange fast and efficient collection of your overstock to be delivered to our warehouse at no cost to you.

Contact us for a free valuation of your excess electronic components.

Author: Adam