Excess Electronic Component Inventory Management

For many manufacturers, electronic component excess continues to grow. Macroeconomic concerns and continued geopolitical instability from sanctions, war, and energy crises have kept consumer demand low. Large quantities of electronic component inventory, ordered during the pandemic's height to meet voracious consumer demand, remain unsold and unused.

Many original equipment manufacturers (OEMs), contract manufacturers (CMs), and electronic manufacturing service (EMS) providers unintentionally mismanaged stock demand during the global semiconductor shortage. Market fluctuations and disruptions happened instantaneously as pandemic lockdowns led to the shuttering of semiconductor fabrication plants. To circumvent long lead times or prepare for the temporary loss of a manufacturing source due to lockdowns, many OEMs, CMs, and EMS providers double ordered stock.  

Double ordering, or over-buying, is just one of the ways excess inventory can occur. It was one of the main contributing factors to the rise of electronic component excess currently impacting the semiconductor supply chain post global shortage. Other factors that have contributed to the ongoing chip glut post shortages are noncancellable orders, inaccurate market projections, an economic downturn, unpredictable consumer demand, and late stock delivery. Most causes can be sorted into three different areas.  

• Shipment Delays: 60% of excess inventory is caused by complications during shipment and delivery, such as processing times, order frequency, and international regulations.  
• Technical Challenges: 25% of excess inventory is caused by supply chain management difficulties, such as lack of visibility into market demands or incorrect purchase orders.  
• Miscellaneous Factors: 15% of excess inventory is caused by more minor issues, including stock that does not meet market quality requirements.

Most excess electronic component inventory is caused by shifting consumer behavior and market fluctuations. For OEMs, CMs, and EMS providers, demand, while usually not hard to predict if one has complete supply chain transparency, can change much faster than it takes for manufacturing processes to decrease. When market demand shifts, it is usually long after stock orders have been purchased, like what happened with the semiconductor shortage and now ongoing chip glut.  

Now, excess inventory is growing because stock ordered during the semiconductor shortage is finally arriving.  ‍

Challenges of Excess Electronic Component Inventory

OEMs, CMs, and EMS providers with excess electronic component inventory face many complications beyond disuse, such as additional costs for storage, warehouse maintenance, and obsolete waste. Excess inventory is a significant drain on company revenue in many ways, including increased inventory costs that can be utilized elsewhere and diminished profits as excess inventory racks up additional costs until it possibly exceeds its recommended lifespan.  

If an electronic component cannot be sold due to expiration or damage, it wastes dozens of resources from production costs to storage fees and even increases its impact on the environment. The longer a company possesses excess inventory, the more revenue it will lose. Thousands of dollars can be tied up in inventory management, and excess inventory not only restricts cash flow to other areas of a business, such as operations, but it can also reduce the funds meant to invigorate company growth.  

Should these components become obsolete or unusable during storage, every additional cost that went into storing excess inventory is now a waste the company must eat. After the global semiconductor shortage, many manufacturers do not have the financial power to divert costs to store excess electronic component inventory for longer than necessary.  

These challenges associated with excess inventory are unavoidable. The primary prevention method is not possessing excess inventory in the first place. Unfortunately, manufacturers do not purposefully purchase components to obtain excess stock. Once an OEM, CM, or EMS provider has excess supply, it must be mitigated rapidly. If not, these complicated issues will only add up.  ‍

Excess Inventory Mitigation and Management

To prevent excess inventory, the best way to do so would be through market intelligence tools that utilize robust historical data and predictive analytics to help supply chain managers and procurement teams become aware of future market disruptions. This way, OEMs, CMs, and EMS providers can take quick, decisive action to prepare for upcoming market fluctuations strategically.  

Should excess inventory become unavoidable, which it often is, there are several solutions that OEMs, CMs, and EMS providers can consider.  

• Use in Other Products: It is pertinent to assess whether excess stock can be used in other products as a direct replacement (DIR) or form-fit-function (FFF) alternate.  
• Return or Refund: If an OEM, CM, or EMS provider has a good relationship with a particular supplier and possesses negotiating power, a company can return excess stock.
• Trade: Some OEMs, CMs, and EMS providers might be struggling with component shortages, whereas others are grappling with excess. Keep an eye on opportunities to trade your excess stock with another.  
• Sell Your Excess: The best way to prevent additional costs from storing excess and recouping capital is through selling your excess to interested buyers.  

Some options may be more viable than others due to the resources one manufacturer may have over another. Excess electronic component inventory has no one-size-fits-all solution, as more prominent manufacturers may have a far easier time negotiating with suppliers to cancel orders. However, the best way OEMs, CMs, and EMS providers of any size can handle excess inventory is by selling it through an online marketplace.  

Selling Excess Inventory to Recover

Manufacturers that sell through an online marketplace for electronic components can leverage the distributor’s existing buyer audience and marketing efforts to sell their excess electronic component inventory quickly. Exemplary online marketplaces have indexed and discoverable product detail pages (PDPs) for all components distributed through their sites. Excess stock offers with PDPs can be found on popular search engines, like Google, Bing, and Baidu. One of these impressive e-commerce sites for electronic components is Sourcengine.

Sourcengine is the leading digital marketplace for electronic components and is now helping companies sell their unwanted excess stock to recoup lost cash flow. With over 100,000 professional buyers visiting the site, Sourcengine allows manufacturers of any specialty and size to sell their excess electronic component inventories on its leading e-commerce with the help of its Excess Estimator tool.  

The Excess Estimator is part of Sourcengine’s integrated bill of materials (BOM) management tool, Quotengine, and allows users to quickly estimate the maximum amount they can gain by selling their excess. Users can include the target sell price of their excess inventory for a more thorough estimate.  

To begin selling excess inventory on Sourcengine, the first place to stop is Sourcengine’s Sell Your Excess feature. Once there, you can sell your excess in several ways depending on your specific needs.  To get started selling your excess electronic component inventory, all you have to do is visit Sourcengine’s Sell Your Excess feature. Once there, you can choose a selling model that best fits your company’s specific goals.

With the end of the year approaching, now is the best time for manufacturers to offload excess electronic component inventory through a reputable distributor like Sourcengine. Some industry sectors are still grappling with remaining supply constraints for components, and as supply depletes, purchasing excess inventory is a time-efficient and cost-effective alternative after years of shortage-inflated costs.