Items which are degenerated out of date – mostly superseded by a better design and sophisticated technology are known as obsolete items. It is quite unreasonable to expect sales forecasting and production planning to match exactly in reality. It is variety, though not absolutely impossible.
In case of over anticipation, enthusiastic and optimistic sales forecasting, excess materials are found in the stores. Further in the stores. Further, constant, continuous, sweeping, successive and rapid changes take place with its sky rocketing pace in the designs an specifications of the materials and components. So the slow moving items are surplus in this fast moving society. As a consequence, obsolete products and their parts constitute a continuing source of surplus materials.
Besides, the lag between production planning and its actual commencement as well as commencement of production and its completion is very vital. The longer the time period in between there are more chances that either technical or product changes nearly sweep the schedule of materials. The ease with which technology can generate surplus is highlighted by the single but very eye catching fact that in many today over 50% of the products sold did not even exist just 10 years ago.
Moreover, excessive forward buying as well as planned over buying are another common and yet profound source of surplus materials. These entail the hazards of surplus obsolescence, deterioration and errors in stock taking and record keeping.
Surplus, Obsolete or Damaged Equipment:
All machines and equipment at some point in their life become surplus for two primary reasons – one, they wear out with passage of time and secondly they become technologically obsolete with the invention of better technology machines. It is however, a normal and yet noteworthy experience of all that, in today’s rapidly advancing technological system, it is the second factor above that counts for surplus rather than first one. In this sense, machines or tools are seldom worn out they have to be replaced in view of changed circumstances to avail better functioning.
In addition, the steady improvement has been a greater change particularly for capital expenditure programs. The capital investment conceded the best and prudent in light of present state of technology is obliterated, preposterous and non-sensical with the years succeeding in future. Every manager, therefore, has been at his wife’s end and makes haunting efforts to prolong the life of its capital equipment as long as possible. But for the fact of the reasons of obsolescence, breakdowns, introduction of new products or new methods of production, replacement of major capital assets buildings mandatory.
For the fact that these obsolete equipment or components can be modified to the latest deign or sold to the original user of the original deign they prefer but to dispose of them as surplus – even as scrap in some extreme cases.
Disposing of Surplus:
When the material has been categorized as surplus, it is the Reclamation Department or purchasing Department to take charge of it. Unlike sale of other items of the organization, disposal function is entrusted under the purview of Purchasing Department rather than Sales Department. The reason lies in that the Purchasing Department that undertakes buying of diversified materials, parts, tools equipment etc., has reasonably better knowledge of who else uses the same material , that what can be the alternative uses, and how and where the same can be put to use in own concern. Based on this set of precise and ready information, Purchasing Department comes out with disposal function with utmost efficiency and profitability. To put more Sales (Marketing) Department has much to look after its major products an in these days of keen competition, it can’t afford to divert it effort for such second grade ales function. So disposal of surplus if thrown to sales Department would mean overburdening the back that has already been at its full swing. Doubtless to say, the Purchase Department and serve well in this regard.
The information regarding the surplus item can be well served to the authority concerned in the specified form.