Every industrial company deals with excess and obsolete inventory at some point. Some manage it. Most postpone it. Few truly optimize it.
Excess and obsolete inventory, or E&O, is not just old material sitting in the warehouse. It is capital that has stopped flowing. It represents purchasing decisions made under uncertainty, demand shifts, engineering changes, forecast errors, minimum order quantities, discontinued products, and sometimes simply growth.
The problem is not that E&O exists. The problem is what happens next.
What E&O Really Costs
Most companies underestimate the financial impact.
Idle inventory typically costs between 20 and 30 percent of its value every year.
That includes storage, insurance, handling, depreciation, and internal labor.
But that is only the visible cost.
The invisible cost is frozen working capital.
Every box that sits untouched is money that cannot be reinvested in production, innovation, debt reduction, or margin improvement.
And then comes the final stage. The write-down. The write-off.
The moment when what could have been recovered becomes an accounting loss.
At that point, the damage has already been done.
Why E&O Is Not Just a Warehouse Issue
E&O often gets labeled as a warehouse problem because that is where it physically lives.
But the warehouse does not create excess inventory. Decisions do.
Forecasting decisions. Procurement strategies. Safety stock policies. Engineering revisions. Product lifecycle changes.
When inventory stops moving, cash usually slows down too.
That is why E&O is fundamentally a cash flow issue, not a storage issue.
The companies that understand this shift treat E&O as a financial lever, not a cleanup task.
Why It Rarely Gets Prioritized
In most organizations, E&O lives in a gray area.
It sits between planning, purchasing, operations, and finance. No single owner fully controls it.
Day-to-day operations always feel more urgent. Production deadlines, supplier negotiations, customer shipments.
Obsolete inventory rarely feels urgent until it is already too late.
It is not apathy. It is structural friction.
Without a clear process, clear ownership, and clear incentives, E&O quietly grows.
The Most Common Myths
Many companies delay action because of persistent misconceptions.
“We might use it someday.”
If an item has not moved in 12 to 24 months, the probability drops dramatically.
“It does not cost anything to keep it.”
Carrying cost alone disproves that.
“It is too complicated to sell.”
In reality, complexity often comes from lack of process, not lack of demand.
“It is safer to wait.”
Waiting accelerates value loss.
“No one wants this.”
In global industrial markets, demand often exists somewhere else.
Breaking these myths is usually the first step toward real recovery.
How to Prevent E&O Before It Happens
Optimization starts upstream.
Track slow-moving inventory monthly.
Slow movers are early signals, not just minor inefficiencies.
Review safety stock assumptions regularly.
Improve cross-functional visibility between engineering and purchasing.
Use ABC logic and aging brackets in every quarterly review.
And most importantly, act early. Value decays over time. The sooner an item is identified as surplus, the more options remain.
A Practical Framework to Prioritize Action
Not all obsolete inventory deserves equal attention.
Start with value. High-value items represent higher recovery potential and higher risk.
Then look at velocity. Some parts still have market demand. Others do not.
Apply ABC analysis to focus on high-impact SKUs first. Add aging brackets to introduce urgency.
Value, velocity, priority, aging. Simple lenses. Clear decisions.
This removes emotion and debate from the process.
How to Make Inventory Reviews Actually Useful
Quarterly reviews should not just explain what happened. They should decide what changes.
Separate slow-moving from truly obsolete stock.
Translate inventory into cash impact, not units.
Focus on a short list of high-value items.
Assign clear ownership.
Define the liquidation path before the meeting ends.
A review without action is just reporting.
The Role of Ethics and Transparency
Any solution touching inventory and money must be clean and auditable.
Clear manager approval. Traceable listings. Documented transactions. Transparent financial reporting.
If the process cannot stand up to internal review, it will never scale.
That is why governance matters as much as recovery.
Turning E&O Into Working Capital
The goal is not just to clear shelves. It is to restore flow.
Supply2Flow was built around that principle.
No seller fees.
Full transaction transparency.
Clear approval structure.
The company keeps 100 percent of the sale value.
A 2 percent facilitator reward can motivate action, or, if preferred, that reward can remain with the company.
The focus is not compensation. It is momentum.
When inventory moves, cash moves. When cash moves, the business becomes more flexible.
Excess and obsolete inventory will always exist in industrial operations. That is normal.
What separates strong operators from average ones is not whether they generate E&O. It is how fast they identify it, prioritize it, and convert it back into value.
If inventory has stopped flowing, it may be time to look at your working capital, not just your warehouse.
