Surplus transactions are tricky, and every single party involved knows this. The entire situation makes managing risks in surplus transactions essential to protect everyone involved, and to make sure you offer it as a whole.
Buyers, sellers, and partners. Everyone needs a level of certainty in that you will offer protection during any transactions and regardless of their scale.
More than being about others, it is about you.
We mention this because many companies and entrepreneurs consider risk management for transactions and “someone else’s business.” However, you are the #1 affected in all this when it isn’t done right.
Challenges like overstock, stockouts, and unexpected changes in demand exist. When they take place, effective risk management helps reduce financial losses. In the process, it improves supply chain flow and builds trust among stakeholders.
This means that regardless of the difficulties, you get a whole experience and maintain your business.
At Coastal Surplus Solutions, we prioritize every aspect of risk management. If we didn’t, we wouldn’t be able to offer safe transactions and results.
Take the time to learn how everything is handled and see why the risks are not something to play with.
What Are the Risks in Surplus Transactions?
How can you handle risks if you are unaware of them?
Surplus entrepreneurs, more often than not, truly start their businesses without proper knowledge of what the risks are. Not only for them but also every person and party involved.
Before you start establishing risk management protocols and methods, take the time to work more, learning about what you are trying to prevent.
Surplus transactions carry several risks, including:
- Overstocking.
Buying more inventory than needed ties up cash and increases storage costs. You lost capital and are forced to sell if you want to get your investment back.
Having an investment that does not return quick unless it was planned ends up being more of a problem.
- Stockouts.
Running out of inventory can cause lost sales and unhappy customers.
While you would think that overstocking is the worst, this tops the list.
Most customers get desperate about what is involved or when they will get their items. If you ran out of stock and are unable to offer more soon, this leads to problems for all parties.
- Obsolete or Slow-Moving Inventory.
But having old surplus items that don’t sell quickly can lose value or become outdated is not a good idea either.
There is a balance to achieve and while it is incredibly hard, you want to focus on the key details to manage the risk.
- Inaccurate Forecasting.
Poor predictions of demand can lead to excess or insufficient stock.
This is when AI-powered tools and machine learning are coming in handy. More than being an extra or optional resource, they are more needed than ever.
- Supply Chain Disruptions.
Delays or backlogs can cause inventory to pile up unexpectedly. This makes you go back to the first risk, or have issues with the prices even if you handle the sales later on.
How Can Surplus Businesses Manage These Risks?
With the risks clear during your transactions, you can move forward with the solutions.
How do you prevent further issues? What happens with all the management?
Our experience and, according to the Small Business Bureau, you want to establish measures that focus on general, but also specialized, situations.
- Improve forecasting and inventory visibility. You want to implement inventory software to handle it better.
- Set clear inventory policies to prevent issues with overstock or stockouts.
- Monitor inventory regularly and take the time to go over every single detail.
- Balance risk tolerance and how much you can afford to lose. Do you want to keep more inventory? Or do you want to accept higher holding costs? This is the “make a decision” part.
- Use multiple sales channels to maximize your efforts and profits.
Feel free to work with our team at Coastal Surplus Solutions to get all the help needed.
We will be there to offer support with risk management or to handle surplus goods for you.
