In the dynamic world of aerospace manufacturing, excess inventory can be a common challenge for Original Equipment Manufacturers (OEMs) and Contract Electronics Manufacturers (CEMs).
Cyclops Excess had the opportunity to assist an aerospace manufacturer facing a significant surplus stock dilemma, helping them receive an extra £25,000.
The aerospace manufacturer found themselves burdened with a substantial amount of excess inventory due to various reasons—minimum order or packaging quantities from distributors, buffer stock for increased production, project cancellations, and redesigns.
This surplus inventory was not only occupying valuable resources but also constricting warehouse space. Traditionally, the company had resorted to scrapping excess stock for tax purposes, a practice that seemed inevitable until they explored an alternative with Cyclops Excess.
The company did this periodically and under current British law, would be able to claim 19% of the stocks original value back against a future tax bill. This, however, was not the most efficient course of action. Although the business was able to receive some financial return for its surplus stock, there was a feeling that the company was still getting a poor return.
Upon approaching Cyclops Excess, the manufacturer sought a solution that would not only alleviate their financial burden, but also improved the efficiency and cost-effectiveness of their supply chain.
After initial discussions, we presented an outright bid to purchase the excess inventory. The key advantage of our offer was the ability for the manufacturer to write off the stock's depreciation, providing a double benefit—a reduction in tax liability and an upfront payment that immediately benefited the business.
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The company stated their excess stock had an original value of £575,000. Under normal circumstances, they would be able to claim 20% back against their tax liability for the following financial year. This would equate to £115,000. As end-of-life and excess inventory, the stock was essentially worthless to the company, and they were looking to achieve the highest financial return possible.
After initial discussions, we were able to make an outright bid to purchase the inventory. Crucially, our offer would still allow the manufacturer to write off the stock’s depreciation to claim back against a future tax bill, effectively giving them two revenue streams instead of one.
Our method allowed the company to obtain a total of £140,000 back from redundant stock, split between their tax liability and an upfront payment that would benefit the business immediately.
This allowed them to receive £25,000 more than if they had just written the stock off, as they traditionally had been doing.
The entire procedure took 3 weeks to realise (from the moment the first offer was tabled) and was managed through one point of contact. As we managed the transfer and the inventorying of goods, we removed time-consuming processes from the manufacturer, enabling them to free up valuable human resources.
All of this combined meant that the company not only received a greater financial return for their stock, they also recouped previously ‘wasted’ manpower and resources, which were re-invested in both new and existing projects within the organisation.
Cyclops Excess successfully navigated the complexities of excess inventory management, delivering a comprehensive solution that went beyond the conventional approach. This case study exemplifies how strategic inventory management can transform challenges into opportunities for growth and efficiency.
If you are seeking advice on how to manage your excess electronic component inventory, our team is ready to assist. We will guide you through the process and find the most suitable solution for your specific situation.
