1. © Educational Assistance Ltd. 2003 How to Put Your Excess Inventory to Work for You! A Guide to Managing Excess Inventory

2. © Educational Assistance Ltd. 2003 Excess inventory is inevitable l The market for business surplus is estimated at $350 billion annually (World Bank abstract) l Overruns, inaccurate forecasts, new products, returned, discontinued retail items l Downsizing, relocations & mergers can generate excess assets too

3. © Educational Assistance Ltd. 2003 Excess Inventory Leads to Inefficiency and Higher Costs l Non-productive material management l Wasted warehouse space l Utility expenses l Insurance and Taxes l Opportunity Cost (-) impact on bottom line

4. © Educational Assistance Ltd. 2003 Traditional Disposal Options l Reverse Logistics – The process of planning, implementing and controlling flows of raw materials, in process inventory, and finished goods, from the point of use back to a point of recovery (vendor). l Sell Excess Inventory – The process in which product is remarketed as a means of recapturing costs. l Recycle Inventory – The process in which the structure of a product is destroyed in order to recapture its materials. l Donate Inventory – The process of giving inventory to a not-for-profit organization. l Waste– Disposal of inventory through traditional landfills.

5. © Educational Assistance Ltd. 2003 Costs/Benefits of Disposal Options l Reverse Logistics l Sell Excess inventory l Recycle Inventory l Donate Inventory l Waste Financials Bottom Line Employee Costs Insurance/Taxes Opportunity Cost Space Utilization Operations ROA Re-marketing control Product Liability

6. © Educational Assistance Ltd. 2003 Reverse Logistics l Benefits: Does Not Re-Enter Distribution Channels Most Predictable Reduces Product Liability l Costs: Re-Stocking Fee Transportation Charges Not 100% Removal Personnel Costs Turn-Around Time Opportunity Costs

7. © Educational Assistance Ltd. 2003 Sell Excess Inventory l Benefits: Some $ recovery May be able to Control Distribution Channels l Costs: Fragmented market Turn-Around Time Opportunity Costs Fees for Sale May Interfere with Distribution Channels Product Liability Very low $ potential

8. © Educational Assistance Ltd. 2003 Sample Current Liquidator Prices l Marilyn Monroe microphone radio $5.00 each (retail value $29.95) l 42 piece art set - 8% of retail l Pallet of 2 ton prof. truck/van jacks 4000 lb capacity. $ 479.99 l Ocean prince sardines - $.25 each l 2 truckloads of excess paper products bought for $7,000 listed for sale at $21,000

9. © Educational Assistance Ltd. 2003 Recycle Inventory l Benefits: 100% Removal Environmental Stewardship Positive Corporate Image Avoid penalties & fines l Costs: Recycling Fees Transportation Fees Potential Liability from Environmental negligence

10. © Educational Assistance Ltd. 2003 Computer Recycling l Obsolete computers contain: lead, mercury, cadmium, chromium, lithium, nickel and zinc l If mismanaged (not-recycled) these materials can be harmful l Also, precious metals go un-recovered l Sample recycling cost: $0.15/pound l “Take-Back Programs” l Regulations regarding patient data

11. © Educational Assistance Ltd. 2003 Landfill/Waste l Benefits: “Out of Sight – Out of Mind” 100% Removal l Costs: Waste Management Fees Environmental Negligence Creates Negative Corporate Image among employees/outsiders Liability (HIPAA)

12. © Educational Assistance Ltd. 2003 Donate Excess Inventory l Benefits: Lower Tax Liability 100% Removal Positive PR Environmentally responsible After-market control l Costs: May incur shipping costs Initial Effort to Identify Suitable Not- for-Profit Partners Misunderstood Option

13. © Educational Assistance Ltd. 2003 How to select a recycler or charity l Excess Inventory Recycler - State Local Permits - Fees - Disposal Certification l Charitable Organization - Mission & Experience - After-Market restrictions - Efficiency & Resources - Ability to offer 170 e (3) above-tax write off

14. © Educational Assistance Ltd. 2003 Tax Considerations l Inventory/Product Donations are also called in-kind donations l IRS rule 170 e (3) can help increase deduction Cost basis: $500 FMV : $1000 170 e (3) : $750 write-off or ½ difference + l C and sub-chapter S corporations tax status l Receiving charity cannot dispense tax advice

15. © Educational Assistance Ltd. 2003 Excess Inventory Management Resources l www.epa.gov/epr (Extended Product Responsibility Page) www.epa.gov/epr l www.safety-kleen.com (electronic scrap from clients only) www.safety-kleen.com l www.surplus.net (liquidators network) www.surplus.net l www.equipment.net (specialty excess) www.equipment.net l www.guidestar.org (non-profit network) www.guidestar.org l www.irs.gov(tax issues) www.irs.gov

16. © Educational Assistance Ltd. 2003 For additional help l Contact EAL l Corporate Development Director l Call 630-690-0010 l email us at info@ealworks.org l visit us on the web at www.ealworks.org