Every industrial distributor deals with the looming problem of dead inventory at the end of every period. Yet, even though they know that the less inventory they have the better off their business is, the task of actually moving dead inventory is easier said than done. IBC knows that this issue is crucial to the success of our distributors, which is why we’re sharing some fresh ideas about ways to turn dead inventory into live opportunities.
There are a multitude of guides advising businesses on how to move their dead inventory. Suggestions range from returning the stock to the supplier to donating it for tax credit. While all viable, these recommendations fail to solve the problem at its core –they might help cut a business’s losses, but they don’t help turn a profit on dead inventory. In addition, they can be difficult to actually follow through with and do not encourage sales representatives to take an active role in moving obsolete stock. In the end, it all boils down to this: what innovative methods exist for moving dead inventory out of the warehouse, into the hands of buyers, and turned into a profit for you?
Hub Industrial: Bringing New Life to Dead Inventory
The best examples are real-world examples, and so we looked to Hub Industrial Supply, an IBC Independent Distributor, for their solution. Gabriel Curry, President of Hub Industrial Supply understands the importance of inventory management. “Inventory is something that can put you out of business,” said Curry, “and so inventory management is absolutely vital to your business’s success.” When he looked at the problem of dead inventory, he found an inventive solution that delivered astounding results. Click over here to watch a quick two and a half minute video about Hub Industrial's process, and then read on.
The Florida-based industrial distributor supplies MRO supplies and has about $3 million in inventory. Over the past few years, Hub Industrial has been actively integrating strategies to decrease the amount of dead inventory on the shelf. For example, Curry had added accountability to the performance goals of his sales representatives by having them commit to moving a certain amount of dead inventory each month. As such, the company was already ahead of the industry average with only 6% of dead inventory unturned in three months, and six to eight thousand dollars in dead inventory moved monthly. Curry, however, wanted to improve.
Introducing Innovative Strategies
Curry and his team devised a dead inventory sales contest to incentivize representatives to move even more dead inventory off the shelves. The contest was simple: over the course of one month all dead inventory sales would go into a pot. At the end of the month, whichever representative had moved the most dead inventory would receive 10% of the total dead inventory sales in the pot. In addition, to encourage participation, any individual salesperson who sold above a certain dollar amount of dead inventory would receive a $1,000 bonus.
The results exceeded expectations. In the first week alone, Hub Industrial moved double the amount of dead inventory that it typically moved in an entire month. The company then added a twist in which moving inventory that had not received hits in 12 months was worth twice the amount, and by the second week of August, Hub Industrial had sold quadruple the amount of inventory they usually moved in a single month. With the bonus amount increasing with every sale, representatives were getting more and more involved.
When August concluded, the results of Curry’s plan were astonishing: Hub Industrial moved over eight times the amount of inventory during the contest month than in any other normal month. Curry’s new idea not only put Hub Industrial in a better position, but helped create a solution to a problem that plagues many distributors.
Turning the challenge of moving dead inventory into a sales contest is just one innovative way to tackle this issue. What creative strategies have you used? Share them below and help inspire other distributors to bring new life to dead inventory.
Ron Nuñez is President and COO of IBC. The IBC network is one of North America’s leading alliances of industrial, bearing & power transmission, electrical, and subassembly distributors with over 550 branch locations and total sales in excess of $6.64 billion. IBC stands apart from other buying groups by helping Independent Distributors proactively grow sales through our National and Minority Contract programs. IBC competes effectively against national “big box” chains with a strategy that promotes local Independent Distributors’ technical expertise and IBC’s award-winning strategic account management. Learn more by visiting IBC at www.industrialbuyers.com or call (888) 509-5609.