Overstock

Overstock in business means an excess or overabundance in the stock or supply of a certain product or products. Having an overstock means that the company is carrying the cost of excess products by having them in stock. While this is not necessarily a bad thing if the products will sell over time, it does tie up money that could have been invested into another area of the business. Additionally, overstock may be taking up valuable space in the warehouse so new products can’t be brought in. Because of these issues, many companies try to avoid having overstock by ordering just enough from the supplier to meet consumer demands and timing shipments just before the product is needed. To get rid of it to make room for new product businesses often have to reduce the price of overstocked items so that they will sell quickly.

To help prevent overstock in the first place a business needs to be able to accurately project consumer demand. Demand may be triggered by season, marketing effort or a new consumer trend just to name a few causes. A solid business will be able to predict or control demand for their products relatively accurately and so in most cases, overstock can be limited. Still, overstock cannot be completely eliminated as consumers ultimately determine when and what they will purchase from a given company. This actually works to the consumer’s advantage in many cases because a company will discount overstock to get rid of it quickly.

Timing shipments just in time for the demand to hit a peak is a common practice in many businesses. This model of preventing overstock works well with seasonally based businesses such as clothing, gift items and other seasonally dependent businesses where the demand for goods is rather predictable. If you time the shipment too late, however you will suffer from the opposite of overstock and have a shortage. A backorder can result in unhappy customers. So avoiding an overstock and a shortage is the goal of timing shipments to your warehouse.

Consumers can take advantage of overstock. Just after a season is a great time to take advantage of companies that are trying to get rid of their overstock. For example, just after Christmas you can get all kinds of deals on seasonal goods. Many people stock up on overstock deals in anticipation of the coming holiday season. What companies lose in selling items at full price they can often regain in selling larger volumes of reduced overstock items. There is a fine line companies follow, but if overstock is approached with thought and care, it can be managed effectively and still turn a profit.

So no matter whether you are a customer looking for a bargain on overstock items or a business trying to effectively manage overstock, timing is everything. Overstock can build up when you least expect it so the response time to dealing with it is often essential. Customers anticipate overstock deals at certain times so you can take advantage of that when selling your products.