5 Costs of Having Too Much Inventory

Wednesday, June 14, 2023

One of the biggest decisions business owners need to correct is carrying too much stock in their warehouses and trucks. Overbuying is usually caused by manual inventory and warehouse management systems that are clunky, inaccurate, and costly. The costs associated with purchasing, transporting, and storing can take a massive bite out of your operating budget and, eventually, your profit.

You end up paying multiple costs when you overbuy inventory. Read on to see where these costs come from, how using Contractor Dispatching Software can help, and how to avoid them.

1. The item cost

If your inventory isn’t updated in real time, you are simply guessing how much you have in stock. You may then buy new products at a higher cost than usual because you think you need to replenish your stock.

2. Transportation cost

Transportation costs tend to run high, especially during certain times of the year when fuel prices traditionally increase. This is especially relevant as we deal with supply-chain issues and rising gas prices. If you are ordering inventory that you don’t need, you are paying too much in transport fees.

3. Labor cost

Once the unnecessary stock you’ve purchased arrives, you must pay workers to unload the trucks and get them safely into the warehouse. Those labor costs can add up quickly, especially if you have a large or heavy order. The workers unloading the delivery will also have to spend time reorganizing the goods already inside the warehouse to make room for the new delivery.

4. Storage cost

If you add inventory you didn’t need, you will pay the costs to carry them in your warehouse. Increased costs for keeping the items in good condition and safely stored are not good for any business. Especially as they collect dust while your techs are out on the field. When Field Service businesses hold excess stock, they run the risk of having it become obsolete. Technology changes rapidly, and products that were once in high demand can quickly become outdated.

5. Lost profit cost

When you have too much inventory, you need to sell more. For most Field Service businesses, running a sale to offload excess items from the warehouse eliminates the extra carrying costs. However, if you are forced to drop the price to get them out the door fast, you’ll make less of a profit. This can be particularly problematic for small businesses or those with limited capital. When cash is tied up in excess stock, it may not be available to invest in other areas of the business, such as marketing or new equipment, which can hinder growth and limit the business's ability to remain competitive.

An automated inventory management system can eliminate the cost of over-ordering. Contractor Dispatching Software use real-time transactions and tracking, so you always have an accurate counts.

Inventory Management Solution: How to Prevent Buying Too Much Inventory

All these extra costs can be eliminated. Contractor dispatching software, such as Thermogrid based on today’s smart technology, can eliminate the cost of having too much inventory. Contractor Dispatching Software uses real-time transactions and tracking, so you always have accurate information.

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