Why scrapping excess stock is never the answer

Why scrapping excess stock is never the answer

Glen Bodilly sits down to discuss excess inventories and why scrapping is never the answer.

Glen Bodilly joined Cyclops Electronics in 1999. During his 19 years with one of the UK’s most renowned independent distributors, he has progressed through a variety of sales roles and now oversees the company’s international excess stock division.

Drawing on his experience within the industry, what are his thoughts on issues surrounding the management of excess inventories of electronic components? And are today’s manufacturers missing an opportunity to generate additional income from redundant inventories?

cyclops excess Glen

 

Excess is something all manufacturers will have to contend with. How can OEMs best manage it?
For manufacturers, nothing can be certain, except for excess and taxes. Even the most efficient supply chains will leave manufacturers with excess stock, and then there’s other issues such as changing consumer, manufacturing and technological demands.

It’s unfortunate and frustrating but ultimately, it’s inevitable. The best solution is to prepare for it. Have a structure in place that you can rely on and know what it is you are trying to achieve.

Do you, for example, want to sell it quickly or work with a third party to optimise a financial return? 

How does Cyclops help its customers manage their excess?

Since becoming Excess Manager, I have helped Cyclops invest heavily in the excess division and we pride ourselves on a simple approach to help maximise return on investment whilst providing a tailored plan
for each circumstance.

What is the biggest misconception when it comes to excess inventories?

Too many manufacturers see excess in a completely negative light and simply scrap it. We want to prove otherwise.

Cyclops offers other solutions that not only take away the hassle of managing excess, but also produce a greater return

Scrapping is an easy fix, though. Why should OEMs explore alternatives?

Scrapping can be an easy fix and the headline figures associated with writing off the stock for taxation purposes can be appealing. However, thisis not always the case. Scrapping incurs costs and consumes valuable resources.
Instead, OEMs can unlock more revenue by working with an excess inventory partner

How, exactly?

We recently put together a deal with a UK aerospace manufacturer that had traditionally scrapped their excess inventory to offset the loss
against future tax liability.

Under current UK regulations, the business would be able to claim 19% of the stock’s original value back against their tax liability by destroying it.

However, we tabled a more beneficial plan of action. The OEM sold the stock to us but was still able to offset the depreciation realised between original purchase costs and their sale price to us.

This meant they received an upfront payment for the stock and was still able to offset the write off value against future tax liability.

In total, the OEM was able to recoup £25,000 more (a 23.7% increase) by working with us.

The entire process took 3 weeks to realise and was managed through one point of contact.

We’re actively buying excess inventory on an international scale. We have purchased over £7 million worth of stock in the last year and
are keen to work with more manufacturers to help them maximise the value held in their excess.

If you would like to enhance the financial forecast for your excess stock of electronic components, contact us today for a free demonstration of the benefits to working with Cyclops Excess or just upload your stock-list.

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