Excess at-risk inventory ultimately impacts a company's bottom line. But because companies are more focused on the development and promotion of new products, the problem of excess inventory is seldom a priority. Companies often resort to high-overhead marketing promotions, rebates, or complete inventory write-offs to unload their excess inventory.
Let the (Excess) Inventory Flow!
Rather than falling back on these detrimental practices under duress, many have wondered whether there might be better, more deliberate ways of dealing with the conundrum of excess inventory instead of customarily writing it off against financial reserves, which directly impacts the bottom line. The advent of the Internet and the well-embraced auction paradigm to drive competitive bidding (which has in some cases proven to increase recoveries by 20 percent or more) has prompted the foundation of companies like FreeFlow. Chief executive officer (CEO) and founder of FreeFlow, Alan Scroope, had long felt there is a gap in the systems and tools that would allow his former employers to deal properly with this continual problem. Namely, there was no systematic or transparent solution that would allow companies to promote their stock to their existing customers. Neither was there one to help these companies liquidate their stock into emerging markets or into geographies where this inventory could be cannibalized.
It is certainly no news today that the Internet has been a disruptive technology that has irreversibly changed many of our habits. One change for sure comes from the convenience of leisurely Web browsing and online shopping from our cozy places, albeit sometimes unfortunately bundled with the inconvenience of late or incorrect delivery and lack of order visibility and status tracking, followed by annoying and costly returns (and then unnecessary trips to the postal office, just to negate any promised convenience in the first place). Other Internet-based phenomena include business-to-business (B2B) auctions and reverse auctions. Namely, given the success of eBay in the consumer arena, one might wonder whether some eBay-like practices can help B2B sales too, since Web-based auction portals should allow users to seize the power of the Internet for speed and anytime, anywhere access. To refresh our memories, according to Wikipedia, reverse auction (also called procurement auction, e-auction, sourcing event, e-sourcing, or eRA) is a B2B tool used in industrial procurement. It is a type of auction in which the roles of the buyer and seller are reversed with the primary objective of driving purchase prices downward. While in an ordinary auction buyers compete for the right to obtain a good, in a reverse auction, sellers compete for the right to obtain money (by providing a good or service).
FreeFlow believes that there should be alternate channels for a company's excess inventory, representing significant opportunistic sales opportunities without creating the channel conflict described in Let the (Excess) Inventory Flow! The trick is in finding those opportunities without distracting the sales force. The first logical step would be to engage the existing channel by establishing a private auction platform to post the inventory. Members of the sales team—or selected channel partners and retailers—could then bid competitively on the inventory. Minimum price thresholds would be set and bidding activity would take prices upward from there. These opportunities would afford sales representatives and retailers alike the opportunity to generate upside sales revenue by buying in inventory at a discounted price (with the price still being above contractual price protection thresholds). In addition, they would allow for creative sell-through programs (for example, truckload sales at a regional big-box retailer—without the cost and overhead of marketing promotions).
Similar principles would apply to excessive spares inventory or global spares inventory balancing. Traditionally, due to the age and condition of the product, the usual destination for excess spares inventory is to the scrap bin. However, with recycling legislation—and costs—on the increase, scrapping excess inventory is not as smart or as easy as it once was. Imagine the convenience of having a 24x7 intranet marketplace within a global service organization, where each location can advertise excess spares inventory or flag shortages to all other locations. The intranet provider can immediately send an e-mail to the other registered member locations, alerting them to the excess components. Or, if the host company wishes, an e-mail can be sent only to those registered members requiring the product. If another location needs the inventory, it can enter a bid for the excess inventory, whereby the user company will receive an e-mail that a bid has been entered and, after accepting it, the inventory will be on its way to the buyer. In the case that such a simple solution to global spares inventory balancing within the organization does not work, again, a flexible bidding technology should allow the user company to take its excess spares inventory to the open market to solicit as many brokers or buyers as needed to ensure competitive bidding, while ensuring that freight costs do not further erode recovery margins.
This brings us to the second step of active product inventory disposition (PID), which can run sequentially or in parallel to the first. Companies would again use the private auction platform to market their inventory to alternative channels, which may consist of some or all of the following: non-contracted retailers interested in making an opportunistic buy, buyers in emerging markets, or the tens of thousands of e-tailers doing business on eBay, Amazon, or Yahoo. Owing to its industry expertise and connections (currently with 3,500 approved brokers on board), FreeFlow helps user companies find the right market for their products and brings those candidates to its private auction, where competitive bidding drives the maximum market price on the inventory.
Let the (Excess) Inventory Flow!
Rather than falling back on these detrimental practices under duress, many have wondered whether there might be better, more deliberate ways of dealing with the conundrum of excess inventory instead of customarily writing it off against financial reserves, which directly impacts the bottom line. The advent of the Internet and the well-embraced auction paradigm to drive competitive bidding (which has in some cases proven to increase recoveries by 20 percent or more) has prompted the foundation of companies like FreeFlow. Chief executive officer (CEO) and founder of FreeFlow, Alan Scroope, had long felt there is a gap in the systems and tools that would allow his former employers to deal properly with this continual problem. Namely, there was no systematic or transparent solution that would allow companies to promote their stock to their existing customers. Neither was there one to help these companies liquidate their stock into emerging markets or into geographies where this inventory could be cannibalized.
It is certainly no news today that the Internet has been a disruptive technology that has irreversibly changed many of our habits. One change for sure comes from the convenience of leisurely Web browsing and online shopping from our cozy places, albeit sometimes unfortunately bundled with the inconvenience of late or incorrect delivery and lack of order visibility and status tracking, followed by annoying and costly returns (and then unnecessary trips to the postal office, just to negate any promised convenience in the first place). Other Internet-based phenomena include business-to-business (B2B) auctions and reverse auctions. Namely, given the success of eBay in the consumer arena, one might wonder whether some eBay-like practices can help B2B sales too, since Web-based auction portals should allow users to seize the power of the Internet for speed and anytime, anywhere access. To refresh our memories, according to Wikipedia, reverse auction (also called procurement auction, e-auction, sourcing event, e-sourcing, or eRA) is a B2B tool used in industrial procurement. It is a type of auction in which the roles of the buyer and seller are reversed with the primary objective of driving purchase prices downward. While in an ordinary auction buyers compete for the right to obtain a good, in a reverse auction, sellers compete for the right to obtain money (by providing a good or service).
FreeFlow believes that there should be alternate channels for a company's excess inventory, representing significant opportunistic sales opportunities without creating the channel conflict described in Let the (Excess) Inventory Flow! The trick is in finding those opportunities without distracting the sales force. The first logical step would be to engage the existing channel by establishing a private auction platform to post the inventory. Members of the sales team—or selected channel partners and retailers—could then bid competitively on the inventory. Minimum price thresholds would be set and bidding activity would take prices upward from there. These opportunities would afford sales representatives and retailers alike the opportunity to generate upside sales revenue by buying in inventory at a discounted price (with the price still being above contractual price protection thresholds). In addition, they would allow for creative sell-through programs (for example, truckload sales at a regional big-box retailer—without the cost and overhead of marketing promotions).
Similar principles would apply to excessive spares inventory or global spares inventory balancing. Traditionally, due to the age and condition of the product, the usual destination for excess spares inventory is to the scrap bin. However, with recycling legislation—and costs—on the increase, scrapping excess inventory is not as smart or as easy as it once was. Imagine the convenience of having a 24x7 intranet marketplace within a global service organization, where each location can advertise excess spares inventory or flag shortages to all other locations. The intranet provider can immediately send an e-mail to the other registered member locations, alerting them to the excess components. Or, if the host company wishes, an e-mail can be sent only to those registered members requiring the product. If another location needs the inventory, it can enter a bid for the excess inventory, whereby the user company will receive an e-mail that a bid has been entered and, after accepting it, the inventory will be on its way to the buyer. In the case that such a simple solution to global spares inventory balancing within the organization does not work, again, a flexible bidding technology should allow the user company to take its excess spares inventory to the open market to solicit as many brokers or buyers as needed to ensure competitive bidding, while ensuring that freight costs do not further erode recovery margins.
This brings us to the second step of active product inventory disposition (PID), which can run sequentially or in parallel to the first. Companies would again use the private auction platform to market their inventory to alternative channels, which may consist of some or all of the following: non-contracted retailers interested in making an opportunistic buy, buyers in emerging markets, or the tens of thousands of e-tailers doing business on eBay, Amazon, or Yahoo. Owing to its industry expertise and connections (currently with 3,500 approved brokers on board), FreeFlow helps user companies find the right market for their products and brings those candidates to its private auction, where competitive bidding drives the maximum market price on the inventory.
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