Excess & Obsolete Inventory: A Practical Guide for Manufacturers and Distributors
Every warehouse has it: parts that haven't moved in a year, lines you no longer carry, components for products you stopped building. This guide covers how to find excess and obsolete inventory, what your options are, and how to recover the most cash from it.
Excess, obsolete and dead stock: what's the difference?
- Excess inventory is stock you still sell or use, just far more of it than you'll need soon. A common rule of thumb is anything above 12 to 24 months of expected demand.
- Obsolete inventory has no expected future demand from your own customers or production: discontinued items, superseded part numbers, or parts for equipment you no longer run.
- Dead stock is a practical label for anything with no sales or usage in 12 months or more, whatever the reason.
The labels matter less than the decision. Every one of these items costs you money each month it sits, and most of it loses value the longer it waits.
Why it's worth dealing with now
Holding inventory isn't free. Warehouse space, insurance, taxes, cycle counts and handling add up. Carrying cost is commonly estimated at 20% to 30% of inventory value per year. Stock also loses value as packaging ages, part numbers are superseded, and fewer machines in the field use it. A lot that would sell well today can be close to worthless in five years.
How to find your excess and obsolete stock
- Pull last-sale or last-usage dates for every SKU from your ERP or WMS. Sort by the oldest.
- Calculate months on hand: quantity on hand divided by average monthly demand. Flag anything over 24 months.
- Check for superseded and discontinued part numbers, and lines you've dropped from your catalog or line card.
- Separate what you must keep: service commitments, warranty spares, and critical spares for your own equipment.
- Note condition: sealed in original packaging, opened, or used. Condition drives value more than anything else.
Your options, compared
| Option | Best for | Speed | Watch out for |
|---|---|---|---|
| Return to vendor | Recent, current-catalog stock with a return program | Weeks | Restocking fees; usually not available for old or discontinued items |
| Transfer or redeploy | Multi-branch distributors or multi-plant manufacturers | Weeks | Only works if another location actually uses it |
| Discount through your own channels | Items you still sell, just too many of | Months | Undercuts your normal pricing; slow for obsolete items |
| Sell in bulk to a surplus buyer | Mixed lots, slow movers, discontinued and obsolete stock | Days | Make sure the offer covers the whole list, not just the best items |
| Scrap or recycle | Damaged, unidentifiable or truly worthless items | Days | Check surplus value first; obsolete parts are often worth more than scrap |
What determines what your excess inventory is worth
- Brand and category demand. Automation and electrical brands with a large installed base sell steadily on the surplus market.
- Condition and packaging. New in sealed original packaging is worth the most, then open box, then used.
- Obsolescence. Discontinued parts often hold or gain value, because plants still running that equipment need spares.
- Quantity per SKU. A few units of many SKUs usually sells better than hundreds of one SKU.
- List accuracy. Clean manufacturer part numbers and quantities get faster, firmer offers than vague descriptions.
Preparing your inventory list
A good list makes the whole process faster, whoever you sell to. Include these columns:
- Manufacturer (brand)
- Manufacturer part number
- Description
- Quantity
- Condition: new in box, open box or used
- Location, if stock is spread across sites
A straight export from your ERP is usually fine. You don't need photos for a first offer.
Download our free inventory spreadsheet
A note on accounting
Many companies carry a reserve for excess and obsolete inventory, and writing stock down or selling it below book value has accounting and tax effects. Talk to your accountant about the right treatment before you clear a large lot. Recovering cash from stock that's already reserved or written down often looks better on paper than people expect.
If your excess includes PLCs, drives or HMIs from lines that are no longer made, read our discontinued automation lines guide first. Discontinued parts in good condition are often worth more than current slow movers. To score your own stock in two minutes, use our excess inventory value checklist.
Ready to clear excess inventory?
VB Industrial Supply buys excess and obsolete automation, electrical, MRO and cutting-tool inventory from manufacturers and distributors. Send your list and get one offer for the whole lot, usually within one business day. We cover freight and pay on arrival.
Get a quote for your excess inventoryDownload the spreadsheetPublished by VB Industrial Supply, Ventura, California. We buy and sell surplus industrial parts every day; this guide reflects what we see working for the companies we buy from.