Definitions for "Excess inventory"
Any inventory above the minimum manually-specified or system-calculated level required to support production and distribution operations. Excess inventory definitions may include any inventory above zero, above a defined safety stock level, or over a defined number of days supply.
The amount of inventory in the system beyond what is needed to satisfy market needs and cover for uncertainty in demand or supply.
According to a Ministry of International Trade and Industry survey, domestic inter-industry trading totaled 580 trillion yen for 1998. Assuming an average inventory turnover ratio of 1.66 months at firms listed on the first and second sections of the Tokyo Stock Exchange and Osaka Securities Exchange, the combined inventories across all industries amount to about 80 trillion yen. Of this figure, the proportion that exceeds an acceptable level is estimated to be 5%, or about 4 trillion yen. Because excess inventory depresses product value and reduces available storage space, companies strive hard to reduce the amount of stock on hand. Disposing of excess inventory is quite difficult, however. For industrial machinery makers with long turnover periods, or clothing makers susceptible to seasonal variations, reducing inventories can be a major problem. The increasing popularity of the Internet, however, is providing new opportunities for companies to find buyers of their unwanted products, helping firms streamline operations.