- The Owl Solutions
How Reducing Inventory Write-offs Improves Your Triple Bottom Line
Updated: Feb 28
Reducing inventory write-offs is one of the most effective strategies for improving your Triple Bottom Line (TBL). The TBL, or 3P model, stands for people, planet and profit. By improving on any of these elements you will see a positive impact on all three. Reducing inventory write-offs helps to improve each of these elements in different ways.
From a financial standpoint, reducing inventory write-offs can have an immediate positive effect on the Profit portion of the TBL. Inventory write-offs occur when products reach their expiration date or become obsolete before they're sold, resulting in a loss to the company's bottom line. Companies today are losing between 1-3% of their annual revenue to expired inventory (The Owl Solutions, 2021).
Reducing this type of waste through better forecasting, planning and technology tools can help companies reduce their financial losses and improve their profitability.
When it comes to People, reducing inventory write-offs also has a positive effect. With more accurate forecasts and better planning, there is less need for employees to be overworked in order to manage excess inventories and meet customer demand. Most inventory professionals manage inventory levels through Excel spreadsheets. This is problematic because it results in countless hours spent vetting data, operating on "old data," and increased opportunities for human error.
In the past, few resources are put towards managing surplus inventories which free up more capital that can be used elsewhere within the business. Traditionally organizations invested in technology tools for other departments but with the affects of the pandemic, leaderships is recognizing the importance of investing in detail tools for supply chain professionals. Data analytics will be a significant driver of improved inventory planning within organizations.
Finally, reducing inventory write-offs also benefits our Planet as it lessens the amount of resources needed to produce new items that would have been wasted otherwise. Companies may also have an easier time meeting environmental regulations as they are able to plan production more accurately and use fewer resources than if they were dealing with higher levels of waste due to incorrect forecasting.
In conclusion, reducing inventory write-offs is one of the best strategies for improving all three components of the TBL – people, planet and profit – as it reduces financial losses from wasted materials and enables businesses to plan their production more accurately while freeing up resources for other areas within the business or giving back to employees. All in all, this makes for a healthier environment both inside and outside the company walls which ultimately leads to long-term success for everyone involved!