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2.9 Excess & Obsolete (E&O)

Inventory that does not turn over is a liability, not an asset. This chapter establishes the "Red Flags" for slow-moving inventory and the disposition processes to recover capital or floor space.

2.99.1 ExcessThe &Aging ObsoleteTriggers

  • 90 Days (Warning): Inventory with no demand for 90 days is flagged for review. Planner must justify retention.
  • 180 Days (Charge): Material with no movement for 6 months triggers a "Carrying Cost" evaluation. Customer may be invoiced for storage.
  • 365 Days (E&O)

    • The "Red Flags": IdentifyingMaterial slow-movingwith stockno beforemovement itfor becomes1 deadyear stock.is classified as Obsolete.

    2.9.2 Disposition Paths

    1. Return to Vendor: Restocking fee negotiation.
    2. Disposition:Customer Ship: The process for scrapping, selling backShip to vendors, or charging the customer (linkedif toliability Bookis 10established Liabilityin terms)MSA).
  • Broker Sale: Liquidation for cents on the dollar.
  • Scrap: Physical destruction and tax write-off.

    • Final Checklist

    Inventory Age

    Classification

    Action Required

    > 90 Days

    Slow Moving

    Planner Review / MRP Check

    > 180 Days

    Excess

    Customer Notification / Storage Fee

    > 365 Days

    Obsolete

    Mandatory Disposition (Ship/Scrap)

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