Making Space: The Challenge of Surplus Inventory
Surplus inventory is a major issue that affects the entire industry
The problem of surplus inventory continues to plague manufacturers and distributors in the heating, ventilation, and air conditioning (HVAC) sector. This is a natural result of working in an industry at the mercy of ever-changing regulations and consumer whims. However, recognizing the pitfalls of excess inventory and the available solutions can help HVAC players manage their extra stock.
Surplus inventory is a major issue that affects the entire industry, but it’s also part of doing business. There are always new laws and industry rules you have to follow in the heating and air conditioning industry, especially when you’re talking about changes to product efficiencies. Then, you have to deal with the reality that distributors change their manufacturers all the time.
These are problems that wholesalers and manufacturers deal with on a regular basis, and they’re always looking for ways to resolve the issues that come up when handling surplus excess or obsolete inventories.
Surplus stock is a result of numerous factors. New technologies, for example, can render current HVAC equipment obsolete, while updates to regional HVAC codes and standards can eliminate one’s ability to sell specific models in certain jurisdictions.
There are products that you can no longer sell in their marketplace, because if you do, the seller could face a fine for selling them. For example, the law in Canada now requires very high-efficiency gas furnaces, which means everything under a certain number cannot be sold. At that point, you need to find someone who can buy that model from you and sell it in a different market, or risk a fine if you try to sell it in yours.
Left ignored, surplus inventory can create a host of logistical and financial headaches. Valuable warehouse space can become crammed with unsellable goods, and the need to clear space can turn the sales team’s focus away from selling goods that will actually turn a profit to those that simply need to go.
Certainly, surplus inventory is a challenge that industry has faced for years. Thankfully, there are solutions that can relieve this operational pain. For example, one might be inclined to sell excess or obsolete inventory at significantly reduced rates to recoup some costs and clear up space. The risk with this method is that doing so could limit future sales. I remember one customer who decided to run a tent sale where they dumped all their older inventory products on contractors, but what happened is that those contractors became stuck with product they couldn’t sell. Therefore, there were unable to buy current product because they were maxed out on their credit limit. It created a big problem.
Another solution includes partnering with an HVAC equipment redistributor who can purchase excess inventory from manufacturers and distributors and find it a new home in other markets across the country. As with all service providers, it pays to work with redistributors who have access to said markets, will offer a fair price for the inventory, and manage every aspect of the transaction from the first offer to the final pickup.
The rewarding part of the job for companies like ours is getting to help these companies clear up their warehouse spaces, so they can free up cash flow and be in a position where they can put their energy back into selling current product.