Do you see your inventory for what it really is?
You’ve probably noticed a question that was asked and then answered in an ad in a recent issue of this magazine.
The question is: “Do you see your inventory for what it really is? Cash?”
I would daresay your inventory is worth more than cash or gold, although you may not always see it that way.
Why do I say your inventory is worth more than cash? Your inventory – when purchased wisely – continues to grow in value every day.
Why do I think your inventory is more valuable than gold? Because although gold continues to grow in value, it costs more to safely store gold away than it does to store your inventory.
I’ve read articles for years about how sitting inventory costs you money for storage. Although a sitting inventory is taking up space, you know that whatever it is will likely be needed by someone in the future who will be willing to pay a bit more for it then.
Sitting inventory isn’t a desirable thing for retail giants such as Walmart because their entire philosophy is built on a fast turn of stock. And if your warehouses are cramped for space, fast turnover may be what you need. But I’ve also read articles in the past that put a dollar value on goods that sit too long based on the perceived annual cost of the storage overhead. This doesn’t always apply when the storage area will continue to be there with or without the stock.
Realize what a wonderful business you’re in because while the service and manufacturing part of our industry is often hand-to-mouth and it can be harmed or destroyed by a bad economy, your stock is an investment in the future that can grow as the value of the dollar drops and the value of gold rises. So perhaps sitting stock shouldn’t be viewed as needing to be marked down for quick sale but as gold reserves.
This is the same point I’ve been making for several years when it comes to the need to recover used refrigerants or to purchase stocks of new refrigerants being phased out. Back in the early 1990s, I traveled throughout this country speaking to industry groups about the then-coming phase-outs of CFCs such as R-11 and R-12. And back then many openly told me I was crazy for saying R-12 (which was selling for less than $2 per lb.) would soon reach $80 per lb.
Have you checked its price lately? And I’ve been giving the same warning about the price of HCFCs such as R-22 for the past 15 years. Just a reminder, it was selling for about $3 per lb. back then. Don’t you wish you still had a warehouse full of it that you bought for $3 per lb. (even used)?
Yes, there are items that will probably not sell too well in the future, such as old filter dryers or old pipe insulation or old copper tubing that hardens with age. Old motors, compressors and controls are another story.
Don’t throw away the old scrap metal because although the price of metals seems to vary widely, even its value seems to be tied to the value of gold.
So don’t undervalue your sitting stock or the soundness of the business you’re in because those who are invested are sitting on gold reserves.
This article was originally titled “Sitting on a pile of gold” in the May 2015 print edition of Supply House Times.