Disadvantages of overstock

In operating any business, we want to ensure that we have enough stocks to fulfil customers orders.  Keeping a large amount of inventory or stock can be advantageous as it would mean there is a lesser chance of having not enough stocks for customers.  However, holding a large amount of inventory have their disadvantages.  Below are some disadvantages of holding too much inventory.

Storage costs

Having a large amount of inventory also means you need more space to store them.  Warehouse/storage space does not come cheap and furthermore you may need to pay more insurance costs to insure those inventories.

Market demand / trend

Consumers are prone to follow the market trend in their purchases.  Consumers who may purchase a lot during May – July may not make the same purchase in the next May – July.  Reason is there may be market trends that affect their decision.  Having more stocks will then make the goods outdated and it also takes up warehouse/storage space.   This is usually for the case for products such as electronics goods, softwares or fashion.

Perishable goods deteriorate

In some business that sell food products, keeping a large quantity will have the risk of the food products getting bad when they are not sold much before their expiry date.  Food product deteriorate over time and it is a risk to keep large quantity.

Discounts

Normally most owners who overstocks will need to have huge discounts out to consumers in order to clear up the warehouse/storage space.

MadSoft solutions has stand-alone accounting solutions or inventory solutions only or integrated with accounting solutions tailored for small medium enterprise, which has enterprise level functions for such as multiple-level user rights access for authentication, scheduled backup to ensure regular backup and full audit trail. 

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