Where to be made?
Disposal of surplus can take the following routes, to enlist the possible channels.
1) Circulation within the concern
2) Return to supplier
3) Direct sale to another firm
4) Sale to dealers or brokers
5) Sale to scrap consultants
6) Sale to employees
7) Donations to educational institutions.
Circulation within the concern: circulation of surplus items, if surplus can be put to some alternative productive use, in the same concern is best of all the disposal programs. This channel has some added features. Use of surplus items on the concern itself negates all possibilities of “bargain Loss” or ‘Deal Reduction’ that is a common phenomenon in other disposal programs. Further, the administrative cost is saved to a greater extent when the surplus item (s) is (are) put to use somewhere also within the concern that otherwise would have been a must to get rid of these surplus in the profitable manner.
Return to supplier: If the surplus materials are not found useful in the concern, the next best method is to return these to the suppliers. Most often, suppliers as a courtesy to good account allow return of surplus materials. This may particularly be allowed for the items which do not perish with time and are not rendered obsolete so swiftly. Depending upon the account to trace, size of the order, material’s intrinsic value, its degree of contamination etc. even scrap items are also allowed to be returned to the suppliers.
This method finds favor particularly with precious materials whose residue quality (i.e. surplus to the concern) is capable of same definite use somewhere else. The sum that such deed fetches mostly covers the original cost for surplus items and equals a reasonable compensation for scrap items.
Selling to other firms:
Alternatively, the firm may resort to open market and find out some concerns using the same materials lying with the concern as surplus stock. The clients for surplus items encompass mostly the competitors, although some users in other spheres of activities can’t be ignored. For scrap items, sales is said to be ideal when the production surplus scrap is the raw material of another concern.
Compared to the first outlet of surplus and scrap, this channel is a bit costlier, since the sincere efforts to identify the alternate potential users of the concern’s surplus items, to be in touch with them, to persuade and to sign the deal inevitably involves cost outlay in items of administrative cost and human efforts.
Selling to Dealers–Brokers: Where the concern is not in a position to lay its access to he potential users of the surplus materials directly, the sale of such item to the dealers or agents is the best channel open to it. The dealer acts as an intermediate agency to relieve the concern of its surplus accumulation and to acquire the requirements for the users.
The inlet of funds under this channel is reduced to the extent that the dealer or broker or agent charges commission. However, this method does not necessitate the cost of finding out and entering into the deal with the customer from the open air. In spite of that, such dealers constitute an excellent outlet for surplus materials.
Such disposal may be effected by:
1) Inviting offers from time to time
2) Public Auction
3) Annual Contract
When the concern adopts first method – Inviting offers at a regular interval (say quarterly, or half yearly) or as and when it thinks necessary, it releases the advertisement for the sale of surplus, in the local dailies, on ‘AS IS WHERE IS’ basis. The tenders from the parties interested are invited. On the basis of comparative study of the tenders received, and the organization’s specific requirement the most suitable tender is accepted.
At the public auction, dealers bid against each other and the highest bidder is sold the surplus. Unlike inviting tenders, public auction my not be found suitable for it proves danger of bidding on mutual understanding.