Strategies for reduce excess and obsolete inventory

Abstract

The age of slow-moving, dead, or obsolete inventory is typically between one and two years. Excess inventory and obsolete inventory represent a problem for the company and the entire society from the technical, economic, and environmental aspects, depending on the type of inventory. Through research, it was found that close to 20 to 30% of all stock is excess or obsolete; therefore, this type of stock must be properly controlled and disposed of. Many company owners look for solutions in renting, buying, or building new warehouse spaces, not knowing that they could solve the problem of excess inventory through management systems. The question arises, whether to invest in a new storage space where the accumulation of excess and obsolete stocks would continue, or whether to invest in a new, better management system. Through the case company example, it was shown that by implementing the management strategies mentioned in the paper, there is a reduction in excess inventory, and a higher inventory turnover ratio, without disturbing the level of service.

The goals of the work were to do research and to assess the state of obsolete stocks in companies from Bosnia and Herzegovina with a focus on the process industry, wood industry, pulp and paper industry, and metal industry. Also, for at least one company, develop a systemfor the prevention of excess and obsolete inventories, identify and qualify obsolete inventories, define a strategy for resolving obsolete inventories, and evaluate the effects of the implemented strategy. All the set goals have been reached, which can be seen in more detail further through the work.

The following expected research objectives and results were achieved:

The overview of obsolete inventory in B&H companies was done through a questionnaire.

The lists of key reasons that lead to inventory obsolescence were mentioned through research in surveyed companies as well as through case studies.

Strategies to prevent and solve obsolete stocks are also listed through research in surveyed companies as well as through case studies.

Effects of developed strategy for management and resolving obsolete inventory implemented in one real company was done, and through the example of raw materials and finished products, it was shown how the implementation of strategies leads to a reduction in inventory and an increase in the inventory turnover ratio.