With continued disruptions across logistics operations, market volatility has become the new normal for the global supply chain. Companies utilizing spreadsheets or manual processes are flying blind, with limited visibility into critical business operations.
More and more companies are harnessing the power of AI to usher in a new era of efficiency and optimization for supply chain management. The next wave of the AI revolution is poised to tackle one of the industry’s longstanding challenges—excess stock within supply chains.
Excess stock is inventory purchased in excess of demand, and often becomes old, dusty piles of inventory lying around warehouses that haven’t been moved in ages. It's a problem plaguing many businesses’ operations, resulting in tied-up valuable capital and soaring storage costs.
With AI, businesses can prevent excess stock before it happens. AI empowers businesses to forecast demand with unprecedented accuracy, optimize production schedules, and streamline distribution channels. AI-powered functionalities can operate both proactively—ensuring excess stock doesn’t recur—and reactively—helping teams redistribute excess stock moving forward.
The Big Excess Stock Problem
Managing inventory levels across warehouses is a balancing act. Businesses have to monitor fill rates to show how well they’re keeping up with orders and managing their inventory, while also facing moments without the necessary stock on hand to fill orders. That’s where keeping extra stock comes in handy, especially for those unexpected influxes of orders. But what happens when businesses over-forecast or purchase larger than normal quantities of stock?
Businesses that find themselves drowning in excess stock have higher risks of creating more, which impacts critical cash flows. In 2023 alone, it was estimated out-of-stocks accounted for a $1.2T loss, with overstocks contributing $562 billion in losses globally, according to a study by IHL Group. As operating costs soar due to excess stock, businesses’ overall competitive advantage takes a toll, due to increased warehouse costs, stock-taking, insuring, shrinkage and damage often faced. Businesses tied up with excess stock also miss out on opportunity costs—the money tied up in excess could have instead been used to purchase optimal stock volume that sells faster.
Excess stock and the money sitting idle in warehouses generate nothing of value and ignoring it doesn’t make it go away—it just makes the impact worse. However, the tech revolution is on the horizon, and businesses can harness AI-powered capabilities to manage excess stock better than ever before.
Technology and the Ultimate Excess Stock Toolkit
Excess inventory for any business that carries stock is inevitable, but it can be kept at a minimum with ease. Businesses can reduce the risk of generating excess and facilitate the redistribution of it at a minimal cost in several ways.
Businesses can utilize an inventory management system with effective classification, forecasting, demand planning, safety stock and ordering modules to place the best possible order in the first place. Most times, businesses are running an enterprise resource planning (ERP) solution that has an inventory control module or using a built-in minimum / maximum re-order feature. With an inventory management system, users can gain better functionality and results than they’re getting from their current solution. A key requirement of this system is a dashboard that identifies and displays the excess items by descending excess value, providing users full visibility into the current status of their excess stock.
Utilizing AI-powered tools can give businesses access to the ultimate digital assistant, designed to analyze all inventory data quickly to anticipate potential problems and provide recommendations in real-time, enabling customers to respond and rectify issues before they become longstanding problems. Integrating AI-powered functionalities and inventory management strategies can also help businesses identify over-forecasted items, which gives leaders the ability to correct these items as soon as possible. In turn, this gives businesses the greater ability to review lead times, especially from suppliers that they’re purchasing the most inventory from.
Today’s Inventory and Beyond
Inventory is the foundation of many businesses. Implementing tech-first inventory management solutions is mission-critical in addressing major issues like excess stock. Managing inventory should run with care and precision, and AI-powered functionalities can give businesses optimal results. This is not an area where businesses should take a back seat—in today’s tech-driven world, businesses must be in the front seat of all operations and unlock the AI-powered enablement necessary to bring greater visibility, accuracy and optimization to operations for the future.
