Surplus stock is stock a company no longer needs, or holds in larger quantities than expected demand. While unused, it ties up working capital and occupies warehouse space that could be used for stock the business actually needs.
Controllable causes
Event-driven causes
Surplus often results from multiple decisions and events,
not a single purchasing mistake.
Controllable causes can often be reduced through better purchasing parameters, stock visibility and ownership. Event-driven causes cannot always be prevented, but regular stock reviews help identify surplus early and determine whether it is still needed or should be sold.
Your system only shows part of the surplus. The rest is on the floor. Cover both.
Systems
Warehouse
Do the walk-round
Walk the main storage areas with someone from maintenance or operations. A physical inspection can help identify stock that is missing from or no longer accurately reflected in your systems. Start with the locations that hold the most value.
Sort every possible surplus item into one of five categories. This is what turns a long list into a set of decisions.
| Category | What it means |
|---|---|
| Slow-moving | Still needed, but used less often than expected |
| Excess quantity | Needed, but you hold more than foreseeable demand |
| Obsolete | No longer needed by the current operation |
| Project surplus | Bought for a project that was completed or cancelled |
| Needs review | Unclear status, but may still protect a critical line or process |
→ Rank the list by value: high to low
→ Anything you cannot classify goes in the needs review category
→ Record the reason, not just the category, to avoid the same discussion reoccurring
With your surplus identified and classified, you have a clear starting point. In the next part, you can determine what value that stock still holds and what it costs to keep it.