Many electronic manufacturers put excess and obsolete (E&O) component stock in the ‘too-hard’ basket. These companies are missing out on an extra revenue stream. Plus, failure to act means they are contributing to global electronic waste (e-waste) pollution.
The e-waste produced worldwide each year is worth over $62.5 billion. A tonne of e-waste contains 100 times more gold than a tonne of gold ore. Gold is just one of many precious metals used in microchips.
There is money to be made with excess inventory, so where are companies going wrong?
Here are 10 mistakes to avoid.
1. Waiting until after year-end
When maximising return from E&O stock, time is of the essence. A common mistake we see at Component Sense is electronic manufacturers ignoring their excess until the end of the year when they need to plug a financial hole. Good things take time, and while we can often redistribute components for customers in a hurry, allowing more time will lead to a more significant return.
“The majority of companies do not take action regarding their excess stock until after the year-end inventory. This causes a mad rush and does not allow enough time to get the best possible price,” said Monika Simionescu, Account Manager.
2. Assuming recycling is environmentally friendly
While recycling E&O stock is more sustainable than dumping parts in a landfill, it is less environmentally friendly than redistribution. Many electronic manufacturers have the misconception that recycling unwanted parts is the most responsible decision.
Recycling e-waste is much more dangerous and time-consuming than recycling general waste. The process often involves sorting by hand, with workers exposed to toxic chemicals and explosive batteries. For all this trouble, only 10 out of 60 chemical elements in e-waste can be recycled.
Even Component Sense is forced to occasionally recycle electronic components that are not fit for redistribution. However, this is a last resort. Redistributing excess components to be used by another company is a more sustainable and profitable solution.
3. Holding out for better market conditions
Some electronic manufacturers wanting to maximise return on their E&O stock are tempted to delay redistributing until the market is more advantageous. This stalling is often a big mistake, as a truly favourable market only happens once in a blue moon.
The COVID-19 pandemic created the last gold rush for those manufacturing and selling components. But this blip in the market was the first of its kind since Y2K in 2001. Do you really want to wait another 20 years before redistributing your excess?
4. Thinking redistribution negatively impacts brand image
At Component Sense, we believe a sustainable supply chain is something to sing from the rooftops. Unfortunately, many electronic manufacturers keep their efforts to redistribute E&O stock quiet.
While some believe that redistributing excess indicates poor forecasting, this perception is far outweighed by the positivity of running an environmentally conscious business. A 2020 McKinsey US consumer sentiment survey found that 60% of respondents would pay more for sustainable products.
5. Trying to redistribute inventory in-house
Component Sense has rapidly expanded in recent years due to our expertise in reading the electronics market. A common trend we witness is electronic manufacturers trying to redistribute E&O stock independently. This can be an expensive and time-consuming mistake for those without our extensive experience and quantity of industry contacts.
“Companies usually give the role of handling E&O to a buyer or student. It takes time and effort to analyse the market and set up the right price when selling parts,” explained Monika Simionescu, Account Manager.
6. Panic forecasting
No matter what technology is used, forecasting is, ultimately, an educated guess. While you may think you can predict demand, external factors can uproot plans in an instant, leaving you with a warehouse full of components you do not have a use for. This volatility is why forecasting too much, or panic forecasting, can be a costly cause of excess.
You can not blame electronic manufacturers for over-forecasting. After all, once they lock into an order with a chip maker, they can not change it. However, a less-than-more approach can reduce e-waste and sometimes save money in the long run.
7. Choosing the wrong redistribution option
Each electronic manufacturer is different. As such, Component Sense offers three core redistribution options to meet their needs best. These include:
A common mistake by those in the electronics industry is jumping the gun and not researching the best way to move E&O stock based on their supply chain and business size. The best thing to do is speak with a Component Sense expert for advice. Email firstname.lastname@example.org.
8. Wanting too much for excess
At the end of the day, money makes the world go round. Understandably, electronic manufacturers want the largest return possible for their E&O stock. But asking for too much for excess can sometimes alienate buyers entirely.
“When it comes to pricing excess component stock, some companies get a bit greedy. Instead of focusing on selling their excess at a fair price, they push it too far,” said Monika Simionescu, Account Manager.
9. Assuming that all legacy components have no use
Legacy — or obsolete — stock refers to components that are theoretically too old and unusable. Some electronic manufacturers make the mistake of assuming all legacy parts belong in the dump or being recycled.
Legacy stock can often still be redistributed and used, albeit not for a significant profit. Some older components still have a purpose. For example, particular old chips could keep an old piece of industrial equipment worth millions of dollars going for another 10 years.
10. Lack of flexibility with quantities
We hear from various customers at Component Sense, from billion-dollar companies to electronics enthusiasts working on a passion project in their garage. When redistributing E&O component stock, a common mistake is not being flexible with the quantity of parts.
A lot of electronic manufacturers want to hold on to their excess in case priorities change. This is understandable and is why Component Sense partnered with logistics company DSV. This partnership means that your excess can be stored locally during consignment. That way, you can get stock back quickly should you need to.
“Some companies prefer full reels or boxes instead of small amounts when selling excess parts,” said Monika Simionescu, Account Manager.
Take control of your E&O stock with Component Sense
These are just ten mistakes to avoid when getting the best price for your E&O component stock. Redistributing stock is well worthwhile both financially and environmentally.
By avoiding these mistakes, not only are you impacting your bottom line, but you are also sending a positive message to your customers. If you want to know more about how to redistribute excess electronics, speak to a member of the Component Sense team.