Excess stock is a term used in inventory management, and is often called the number of different things, Overstock, stock surplus, excessive stock, or excess inventory. It does not matter what you call it, one thing that remains constant is the risk of additional stock to your company’s bottom line.
Companies that hold additional stock levels in their inventories generally know that the issue was due to poor forecasting and poor management of replenishment or not tracking the life cycle properly stages of a product.
Excessive stock levels come with many different costs that organizations should be concerned about. First, the revenue associated with inventory products is lost with the market’s low demand. There are company dollars tied up in capital that are directly related to the original purchase of goods and sometimes associated costs to store inventory referred to as “carrying costs”.
Carrying costs quickly add up to many different factors, including rent or mortgage payments, equipment costs, labor costs, utilities, insurance, and interest that are on the stock. not been sold.