Friday, 27 April 2012

Buyers Guide to Identifying Excess & Obsolete Electronic Component Inventory

When we talk about excess or obsolete inventory, we are of course referring to inventory of which the quantity you are holding in stock is surplus to requirements. Maybe production operations which originally were intended to use that stock have slowed or even stopped. Perhaps there is new hazardous materials legislation which leaves the stock obsolete and unusable to you. Either way the cost of long term storage for this stock will have to be eventually taken into account as a business expense and it can result in potentially large losses. Companies are constantly fighting to reduce costs and improve sales. If you are an OEM or CEM then managing your excess and obsolete electronic component inventory can be just as important.

When auditing your business, one step that should be considered is identifying your excess and obsolete stock. This can be a challenging task that needs to take into account possible future production schedules and ever changing legislation regarding the health and safety issues of certain substances. For instance, manufacturers of medical equipment (previously exempt from the RoHS directive) now have to start making plans to comply with the updates to the law. Like what happened when the original RoHS directive came into affect, it is likely that many companies will fail to get the most out of their non-compliant components while they still can. Many will be left with unusable component lines in storage. Click here for more information regarding the RoHS legislation

By using the best estimates you can for future production volume you can plan ahead more effectively when component lines are going obsolete. It will enable you to see how long your current inventory will last and what replacement parts you need to source first.

Of course if a component line is sat in your inventory and the productions which utilized it have already ceased then the stock is already excess and possibly obsolete. This is what many businesses are finding when they audit their own warehouses. Excess stock with no possible chance of it being utilized in any of their production schedules and because of the RoHS directive, it may be impossible for it to ever be used by your industry.

However, it is not all doom and gloom. There are 6 important steps you should take in order to maximise the return on this obsolete stock.
  1. Identify Your Obsolete, Excess & EOL Electronic Component Inventory 
    Firstly you need to recognise which component lines in your warehouse are excess, EOL or obsolete. Component lines go obsolete all the time and as yet there is no industry wide notification system to inform you of obsolescence. You should maintain communication with your suppliers in order to help you identify when a particular line is going obsolete.
  1. Create Your Inventory List 
    Once you have identified the inventory, you must then develop a list of the items you wish to dispose of and include all the relevant information so that the potential buyer can make a bid. Details you will need to include are; Manufacturers Part Number, Quantities, Date Code, Manufacturer & RoHS Status.
  1. Send Electronic Component Disposal Partners the List 
    Select several electronic component disposal partners and send your list to them. This will allow you to take your pick of the quotes they send back and give you more choice.
  1. Review the Offers Received 
    Quotes you receive for this stock will be based on the current market value of the stock. Excess buyers typically offer between 10 and 30 percent of the market value. This can depend on factors such as the age of the stock, RoHS compliance and previous sales history. Usually initial offers may be open to some negotiation.
  1. Consider the Disposal Options 
    There are three main disposal options the excess buyer may provide you with.
  • Immediate Payment 
    Quite simply, once a price is agreed and the stock has been appraised, the stock will be quickly removed with the minimum of disruption and at no extra cost. With this option there should be no removal charges and no future liability on any parts.
  • Full Consignment 
    This option involves the removal of your stock to the disposal partners warehouse, who will market it globally on your behalf via a network of global distributors. The disposal partner should pay full transportation costs and provide insurance cover. You retain full title over the stock until it sells, this gives you the best chance of maximising your return whilst also allowing you to recall any unsold goods at any time.
  • Part Payment and Part Consignment 
    This is the best option when you are in need of an initial up front payment from the disposal partner, but also want to maximise your revenue.
  1. Set Up a Collection Time & Date 
    Once you have agreed a deal with your buyer, they will then make arrangements for the removal of stock from your warehouse. They will need to know the weight and dimensions of the packages in order to arrange the most cost effective and speedy transportation method.
In the electronics sector, obsolete means obsolete. There is no chance that a component line, once identified as obsolete, is ever going to have its original market value and the longer it sits in your warehouse the more value it loses and the more it costs you in the long run. After a component line goes obsolete there may be a surge in its value as other companies try and secure what remaining stock there is left. However, as the companies who used the component move away from its usage in their product and source an alternative, its value will decrease rapidly and your warehousing costs will be growing year on year.

Working with a company who specialise in excess inventory management is the best way to mitigate the risks involved with obsolete and excess components. At Trading Specialists we appreciate the dynamic nature of the market we are in and by working with us we can help you prepare for component obsolescence and get the most out of your excess inventory while you can. We have a global network of electronic component distributors lined up to market your inventory to the rest of the world, increasing the chances of it selling. We will even take on the responsibility of unburdening you of your excess stock and removing it to our purpose built, anti-static warehouse where we will cover the costs of storage until it sells. Don't tolerate excess inventory wasting your company resources. In business we take immediate action if anything else is costing us money unnecessarily. Your excess inventory should be no different.

Start by sending us your excess and obsolete stock lists today or for more information, give us a call on +44 (0) 1904 436 444.