What does the term "Disposal of Surplus Inventory" involve?

The term "Disposal of Surplus Inventory" specifically refers to the process of selling, donating, or recycling excess stock to recover value. Organizations accumulatemore inventory than needed for various reasons, such as overproduction or changes in demand. Disposing of this surplus effectively involves strategies to minimize losses associated with excess inventory.

This process is critical because it allows companies to regain some financial value from items that would otherwise take up valuable storage space or become obsolete. By selling surplus inventory, a company can convert unsold goods back into cash flow. Donations can enhance a company's reputation and fulfill corporate social responsibility goals, while recycling aligns with sustainability practices.

In contrast, increasing storage capacities does not resolve the issue of surplus but merely creates more space without addressing the underlying problem. Keeping obsolete stock indefinitely results in additional costs such as storage and potential depreciation without recovering any value. Lastly, while transferring inventory to different facilities may be necessary for better inventory management, it does not constitute disposal as it does not remove surplus from the system.