4 Approaches to Helping Channel Partners Liquidate their Inventory
Excess inventory in the distribution channel can result in a plethora of financial obstacles and business-to-business challenges. The ripple effect of stagnating “dead goods” carried out by your distributing partners can result in:
- Increased warehousing costs
- Damaged goods; decrease in production quality
- Marketplace obsolesce
- Reduced flexibility to modify inventory due to lack of storage
- And more…
As a vendor, you want your partners to be excess-inventory free when distributing your product(s). In order to become an efficient business that consistently generates revenue and maximizes margins, channel inventory must be (accurately) aligned to market demand.
Most vendors are simply too preoccupied and/or quota-driven to notice that over-selling inventory to partners is actually hurting their ROI, gross margins, and partners’ performance.
If certain partners are having trouble liquidating their inventory to the next stage in the channel, here’s your chance to help; by assisting channel partners to get rid of “dead inventory,” not only will they thank you for it, but it will also help you to pump more productivity/revenue into your own business.
1.) Organization and Accounting Accuracy
What is your partner’s procedure in documenting current inventory levels? Lost and/or misplaced inventory is one of the largest (and avoidable) reasons why warehouse distributors often misevaluate their SKUs—resulting in potentially damaging monetary issues.
Methodical and comprehensive accounting procedures should be a mandatory component of successful inventory management. Communicate transparently with your channel partners and offer your advice to their pain points regarding excess inventory. Do they have an additional inventory warehouse that is not accounted for? Is their ERP system not up-to-date? The harder you look, the fewer reasons you have behind misreported inventory data.
2.) Modifications in Packaging
For warehouse distributing partners struggling to get units moving, another good piece of consulting advice may be to encourage partners to repackage their inventory.
For example, instead of selling 250 units of the same product in one box, perhaps suggest selling 75 units in a single, yet smaller box. This modification in inventory packaging may become more appealing to prospective end customers’ consumer base.
3.) Remove the Old Leftovers
Remember when mom gave you that delicious tuna casserole to put into your fridge. My guess is, after a couple of days, you made absolutely sure to stay as far away from it as possible.
But, for whatever reason, you didn’t throw it out.
Now, besides angry roommates and a small ‘fishy’ odor, no harm nor foul, right? Wrong. You took up valuable space for other perishable items you and/or your roommates could actually enjoy.
The same illustration can be applied to the channel industry, as “worthless inventory” with not even a Hail Mary’s chance of being purchased, is often littered throughout the warehouse of distributors. The accumulation of “worthless inventory” means that “dead inventory” will only continue to rot and take up more room from new, higher-demand inventory.
This is where partners should use caution when adding new stock due to the added risk of barring the burden of excess inventory.
When a distributing partner receives a “sexy” request from an end-customer, there is added pressure to fulfill their warehouse order with the proposed SKU. But with market competition high and modification in consumer demand even higher—there is a strong possibility that partner’s excess in inventory will only continue to grow once the order is canceled.
4.) Have Partner’s Designate an Inventory Watchdog
It may sound silly, but you may want to consider encouraging partners to hire/designate an “inventory watchdog” whose only responsibility is to keep an eye on “dead inventory,” SKUs, stock rotation, etc.
This individual should be a competent and experienced specialist in ordering and evaluating inventory as well as understanding lead times, market modifications, demand forecasting, tracking SKUs, and managing sales/returns.