What does the term "excess inventory" refer to?

The term "excess inventory" refers to stock that exceeds current demand or storage capacity. This situation arises when the amount of inventory on hand is greater than what is needed to meet customer demands or operational needs. Managing excess inventory is crucial because it ties up capital, incurs carrying costs, and can lead to waste, especially if the items become obsolete or require handling and storage for extended periods.

When inventory levels surpass demand, businesses may need to implement strategies to reduce excess stock, such as discounts or promotions to encourage sales or potentially liquidate products. By effectively managing excess inventory, organizations can optimize their resources and improve overall operational efficiency.