What is Excess Stock
Backlogged for a long time, lying in the warehouse, stock becomes stagnant and finally waste.
Today we will talk about excess stock in detail:
1. What is excess stock?
2. Where is it from?
1. What is excess stock?
Excess stock is risky inventory that is not used temporarily or never has a chance to be used.
The ideal inventory state is of course zero inventory, which allows for better capital flows and more profitability. More inventory not only takes up more warehouse space and money, more seriously also hide many problems in production operations.
In especially a lot of parts stock, long-term not used and difficult to sell, to use, it's kind of useless; to throw away, it's a little wasteful; to sell, we can't get a good price. After a long time, these parts would get rusted and rotted and still occupy a lot of human and financial resources. This is called excess stock.?
Not flowing causes excess stock, but how long does it take for a batch of parts to be called excess stock? There are different standards and opinions about this, some say six months, some say 3 months, many companies take the shelf life as the limit, after which the parts would be thought as excess stock. In conclusion, the stock with excessive amount, low consumption and low inventory turnover is excess stock.
Why is it important to know about excess stock? Though it is important to understand it, but it is even more important to understand how it is caused, in that way we can completely solve the problem.
Excess stock is also common stock, it becomes excess stock just because of the uncertainty of demand. The packaging form is the same as common stock, there are three main factory packaging forms: TAPE & REEL, TRAY, TUBE.
①TAPE & REEL is the most common. There is "Cut Reel" in excess stock, which means it is cut off: sometimes a whole tray of parts cannot be used up, so the reel of used parts is cut off.
②TRAY is also a common type of excess stock. There are many small cubes on a tray, each with a piece of IC in it, which can be removed when used. Generally speaking, some expensive ICs will be packed in the tray, there are some capricious ICs of one or two dollars will also be packed in the tray, but it's not common. As excess stock, there may be only half or a few pieces of ICs left in a tray.
③The third kind is TUBE, the appearance of TUBE is a flat square plastic tube. We use TUBE when the pin is long and easy to break.
2. Where is excess stock from?
The reason why there is excess stock is very complex, we can think about the items left unused at home for a long time and how they were generated originally. Excess stock is familiar with these items, the main difference is that they are purchased based on different reasons, the former is purchased based on production needs, while the latter is often purchased based on personal needs.?
In general, there are both external and internal reasons for excess stock: external reasons include order changes or cancellation, quality problems, returns, etc; internal reasons include engineering changes, excessive purchases, wrong purchases, experimental production, material surplus, etc.
However, sometimes the excess stock may not only be due to a single external or internal reason, but may be caused by a chain reaction of several reasons.
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To sum up:
①Inaccurate forecast
Market is ever-changing, many manufacturing companies produce according to order and demand. When their production plans can not catch up with the changes of customer demand, supply exceeds demand, excess stock is produced. How to solve this problem? In the execution, the procurement department should establish close contact with the the production department and the sales department, to establish a reasonable forecasting system based on demand, to ensure that procurement can be balanced with production and sales.
②Order cancellation and returns
Customer cancels the order when the planning department has completed the procurement and there is no other place to consume that stock, then it will become excess and obsolete inventory. When the customer requests a return, the marketing department should inform the material department and the finance department at the first time. The material department is responsible for counting and warehousing the returned and sending the confirmed quantity to the marketing department. PMC (Production Material Control) should give priority to consume this stock with other orders. If there is no suitable order, and the inventory backlog is more than three months, then the material department should fill out the "excess stock processing list", and send to the general manager for processing advice, which should be executed by the warehouse.
③The products are not up to standard and need to be returned to the factory for repair
All products will be randomly inspected by the technical quality department, if failed in the first inspection, a second random inspection will be conducted, if it is determined that there are (type, specification, material, performance) substandard products, PMC should feedback to the procurement department in time, contact with the supplier as soon as possible to arrange for the return or change, finally warehouse arranges the storage and delivery. Inspection personnel should strengthen the refinement of the inspection equipment to reduce the possibility of "passing fish eyes for pearls" and eliminate the possibility of bad products into the warehouse.
④Engineering changes
Electronic components update quickly, both because of the development of technology and the policy changes. For example, the publication of the ROHS instruction made many non-standard components to be replaced immediately.
Engineering changes include two aspects: design changes and process upgrades. General design changes may not stop when they involve major quality problems, without these changes the quality will be poor. When the design is changed, the procurement activity or stock should be modified in time to reduce the stock; if the process upgrades, we can communicate with the quality engineering department to replace the existing stock after it is all consumed.
⑤Key parts changes (replacing parts)
In the manufacturing industry, parts change is very common. There are several reasons for parts changes in general.
Among them, cost, quality and compliance issues are the main reasons of excess stock; excess stock generated by cost and compliance issues can be consumed internally by adjusting the production lines and prioritizing the old stock to be used up before using the new stock.
⑥Laboratory
Technology and quality department or research and development department need to do some test to improve the company's product process, the remaining test parts easily become excess stock, but usually in a small quantity, technicians can deal with it according to "New Material Test Management".
⑦Poor management of storage and production line
Electronic components are different from other general items, its own structure determines it will have easily the problems of corrosion, deformation, rust, weathering, corrosion, etc. These problems will indirectly lead to excess stock. Generally speaking, it is possible to avoid having excess stock by storage: the warehouse staff should regularly clear the warehouse to check the stock condition; before putting the products into production line, the quality department should do a second sampling check to kill excess stock of production line in the cradle.
3. Epilogue
Excess stock has always been a thorn in the side of supply chain management, of which the rate of excess stock is one of the core indicators. Therefore, the management, control and reduction of excess stock are among the main missions of supply chain.?
There are many methods and practices to manage and reduce excess stock. No matter which method is adopted, the first step is to determine excess stock, that is, which stock is exactly the excess and obsolete stock.
Afterwards I will also post about how to deal with excess stock. If you have excess stock to deal with, of course you can also contact me or go to our website: https://www.icsuperman.com/