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Surplus inventory – it's the nature of the beast. Try as manufacturers and distributors might, the accumulation of unsellable goods in one's inventory is virtually impossible to avoid.

“In our industry, change is extremely common – and that change will inevitably always lead to surplus inventory. It's just the way it is,” agrees Steven Lazar, founder of Lazco Corp.

Possible to prevent or not, there is a benefit to recognizing the root causes of surplus inventory; if not to understand what's affecting your books at the end of the month, but to take precautions down the road.

Here are the five main drivers:

  • Shifting regulations: Equipment in the heating, ventilation, and air conditioning (HVAC) space are constantly at the mercy of changing regulations. In Canada, for example, furnaces are now required to meet 90% AFUE (annual fuel utilization efficiency). That means the 80% AFUE furnace sitting in the back corner isn't going to move any time soon in its current market. 
  • Line changes: When distributors move to another line, that can shift leave previous purchases collecting dust.
  • Industry trends: Manufacturers and wholesalers are at the whim of industry trends. What might be a popular HVAC equipment model or innovation one season may drop in popularity without warning the next. Herein, it pays to stay on top of sector trends.
  • Model changes: Manufacturers are constantly improving their products. That means what's cutting-edge now may be rendered outdated – or worse, obsolete – with the next generation.
  • Cancelled projects: While not a common cause of surplus inventory, it is possible to be left holding on to equipment that's been ordered for a now-defunct project.

Knowing the causes if surplus inventory is one thing, dealing with them effectively is a different matter. Notes Lazar, “Once you accept that there's no way around surplus inventory, the next natural questions are: how much is it costing your business, and how are you going to manage that expense?”

No doubt, excess inventory can land a direct hit on a company's bottom line. It can also pull the sales team's focus away from what's “hot” and moveable towards equipment that has little chance of selling. Add to that the fact that loading up contractors with old inventory can get in the way of making better sales, and it's easy to see why surplus inventory is an industry headache.

“I was raised in this business and I've been at it for a long time, and the one thing that's always been an issue is dealing with the stuff you can't sell,” relates Lazco, noting that it's this experience that motivated him to establish Lazco Corporation with the express mission of finding new markets and sales opportunities for buyers with excess supply.

After all, says Lazar, dealing with surplus inventory isn't easy, but it's a regular part of doing business. Knowing the causes and solutions are therefore critical to preventing the negative effects from stacking up.

Steve Lazar is founder and Owner of Lazco Corporation. To obtain a purchase quote for your surplus inventory, email Lazcocorp@gmail.com. For more, visit http://www.lazcocorp.com/

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