What are your options for dealing with excess or obsolete spare parts inventory?
Typically there are four:
1. Do nothing
2. Write off and dump
3. Utilize at another site/location
4. Sell
Option 1 achieves nothing, except setting a poor example on what the company expects of management. This approach says, ‘if there is a problem, ignore it and eventually someone else might deal with it.’
Option 2 takes some effort, will involve costs for disposal, and, due to the write down, is generally not popular with senior finance people – unless the company is already losing money!
Option 3 is usually the best because it saves the company from spending money on buying items already owned. It does require some organization and protocols. It also requires you to have other sites that use the parts and a standardized approach to numbering and description. Not possible for many companies.
Option 4 also requires some effort but also brings some reward in terms of revenue. OK, it’s not likely to be anywhere near what you paid but, hey, if it brings in more than it costs to organize that’s an economic win!
Our Obsolescence Risk Calculator can provide guidance on where risks might exist and where further investigation or planning may be needed.
Click here for information on our Practitioner Playbook.
Posted by Phillip Slater