The end of the financial year, or fiscal year as some call it, can be stressful for electronic manufacturers.
It is a crucial period for senior leaders as they complete their 12-month accounting cycle, reconciling revenue and expenses. Financial data from the previous 12 months is combed through. One detail revealed during this process is how successfully — or unsuccessfully — the business has managed its excess and obsolete (E&O) component stock.
For many businesses, managing excess is not a core priority. As such, a lot of companies scramble to balance the books in the months (or weeks) leading up to their financial year-end. Typically, this approach does not leave enough time to get the best possible return for their extra inventory.
At Component Sense, we recommend taking control of your E&O stock as soon as it becomes surplus to requirements or setting up a long-term solution. However, we understand that forecasting does not always go to plan. This blog will provide pointers for companies that have left redistributing their excess to the last minute.
“The sooner you put your excess on the market, the more money you will get for it, and you avoid getting no money for it at all,” explained Component Sense Sales Director, Rose McGee.
1. Understand your options
Component Sense offers three core redistribution options. In most cases, two of these options (InPlant™ and Consignment) require some time to sell excess for the optimal price. If electronic manufacturers are in a hurry, they generally utilise our Outright Purchase solution. In terms of pricing, our redistribution options can be roughly outlined like this:
- Outright Purchase: Approximately 10% return depending on market conditions
- Consignment: Minimum 50% return depending on market conditions
- InPlant™: Minimum 100% return depending on market conditions
With Outright Purchase, Component Sense can bid on your stock within 24 hours of receiving your inventory list. If accepted, your excess can be lifted and paid for within the next 48 hours. Instead of sending your excess list to numerous brokers who selectively choose the best parts, we buy it all. However, it's important to note that an on-the-spot cash offer will generate a different return than opting for a longer-term redistribution option.
You might also consider scrapping your excess. While recycling may generate a small amount of money, it harms the environment more than redistributing. Recycling components only saves a small portion of available minerals, and practices like smelting electronic waste pollute the air.
Top tip: If you are still determining which redistribution method is best for your business, our team is always happy to answer any questions. Otherwise, you can take our quiz, which includes ten simple multi-choice questions.
2. Keep excess stock in-house or with Component Sense
When it comes to the grey market, trust is the aim of the game. Buyers of redistributed components want to see photos of your components, proof of authenticity, and date codes in real time. Keeping your excess on hand in your warehouse or with Component Sense can be vital to redistributing it quickly.
When your excess inventory is within arms reach, your parts can be listed as ‘in stock’ rather than just ‘available.’ For buyers, components listed as in stock indicate that they will get what they ordered quicker, making them more enticing than other market options.
Thanks to Component Sense’s partnership with global logistics company DSV, we can provide electronic manufacturers with the best of both worlds. If you choose to consign your excess, we can uplift it from your warehouse within 48 hours to be stored locally, while we advertise your E&O inventory as in stock to our extensive re-distribution network. This offering with DSV is another reason not to leave redistribution to the last minute.
3. Be flexible and set expectations
Many businesses operate within a unique financial year cycle due to their business operations or to align with key customer fiscal years. In saying that, a large portion of electronic manufacturers still have their fiscal year-end in line with the tax or calendar year. As a result, the electronic grey market can quickly become saturated with components for sale around these times.
Ultimately, the price variance for components on the grey market comes down to supply vs demand. When your excess is listed at the end of the calendar or tax year, it can mean your parts will not fetch the same price they would have had at other times of the year. Redistributing excess is valuable at any time of the year because you can at least recuperate some of the cost. However, if you could get a higher return with some planning, why would you not?
It can also prove vital to allow Component Sense the flexibility to split your stock so we can sell your excess inventory in smaller quantities. Providing our business with as much control as possible, allows us to sell your excess in batches depending on what our buyers are shopping for.
Proactively manage your excess with Component Sense
It is common for electronic manufacturers to enter panic mode as the end of the financial year approaches. As a result, many companies rush to move their excess stock at the last minute. Component Sense can often redistribute parts quickly or buy your E&O components upfront. However, this may result in a lesser return than if you provide ample time for the stock to gain traction.
Excess plays a significant role in your finances. Setting up a long-term solution to actively manage and redistribute your E&O inventory makes financial sense. Not to mention, options like Consignment or InPlant™ can also remove unnecessary stress.
Email us today to discuss the best redistribution option for your business.