networking and data communications assets. I discussed the issues of “why” you have surplus inventory and why IT and Electronic product is different from other asset disposal challenges. The “why” is the basis for disposal strategy and time is the crucial element here. With a longer time frame you have the opportunity to maximize your asset sales. The time allowed for disposing of surplus assets and the return on investment on those surplus assets is directly proportional. Essentially, the quicker you want to move the surplus, the lower your ROI expectations should be.
• Solicitation of Bids
• Internal Sales Force
1. Going. . .Going. . .Gone! The Auction Block
When you are dealing with a substantial amount of product or have surplus buildings, entire plants, real estate, heavy equipment, industrial equipment and the like, auctions may be your best option, but
2. Bids Rule . . . but still do not take full advantage of market value dynamics to maximize ROI consistently. Probably the majority of surplus IT and Electronic inventory sales are through a bidding process. It’s a time-honored method of disposal and seems like a fair and uncomplicated procedure. The outcome usually results in your selling an entire lot of inventory and management can’t argue with the results. Again, it’s a pretty fast and effective way to move surplus. You send out a list of what you have, give a deadline for bids to be submitted, select the highest bidder (much like an auction
1) An Investment Recovery Association member and RDS have a sales arrangement. I had my IR contact send out a list of 10 items that are brand new, current and popular telecom cards to several suppliers they previously sold to and see what, if anything, they would bid on each board. The result? Zero offers. The 10 items sent out were items we had sold in the previous 90 days, from a consignment inventory with time to negotiate on product value, to those same purchasers for over $25,000.
2) A state government communications network (not an Association member) reported that on a recent bid list they circulated to about forty-five purchasers, they had just two responses. The bids were from $1-$2 for each item on the list, and all were good, usable and re-saleable equipment. They sold the lot for $900. A survey of the market revealed these same items where being sold in the $40,000 – $50,000 range. Again, based on more detailed product evaluation and negotiation rather than blanket ‘inventory lot’ bids.
3) And an example of the results of time for diligence and negotiation in a bid situation:
An Association member had a lot of Pentium II & III computers. They sent out 18 bids and received 11 back. The bids ranged from $15,000 to $60,000 with most in the $30,000-$40,000 range. Since the drives needed to be erased as part of the sale, the seller informed me that most of the bids (ours included) factored in the expense to perform a Department of Defense level erasure. At RDS we thought the computers were worth $33,000 based on what we estimated the cost of freight and erasure would be but the lot sold for $60,000. This member covered all of his company’s bases by interviewing the top three bidders to see how they specifically would address the erasure issue and required a signed sales agreement by an officer of the company. They also required documentation after the drives were erased and made sure the company had errors & omissions coverage. Sounds like someone did their investment recovery homework as recommended at our semi-annual seminars!
The point here is that most lots of inventory will sell – if they sell at all – for very little, especially if the equipment is old albeit useable. If the equipment is of a current or fairly recent generation, and benefits from some product/market diligence and negotiation effort you will have more interest and indeed, a higher resale.
3. An Internal Sales Capability Puts You In the Drivers Seat . . . And takes better advantage of market value dynamics for your assets If you have the resources and the cooperation from management,
When you act as a distributor you increase the potential of selling items to someone at higher prices because they have an immediate, specific need for it. This may not move the entire surplus, but the
Probably the one word that describes being a distributor is flexibility. So, if you want to maintain complete control of the process and you have the resources for it and the flexibility, this may be the best way to proceed. It will yield the highest return. Additional note: you also have the option with an internal sales force to target other end-users in your industry (especially through the Association) and skip the middleman altogether. In such a case you will get the absolute maximum from your ROI!