YARDLEY, PA, - Distributors often pay for dead and slow-moving stock several times - first when they purchase it, then over and over again carrying costs.
In addition, distributors in many parts of the country must also pay local and state inventory taxes - even on stock that has collected dust for years. "It doesn't make any difference if it's dead stock or not," said Joe Bagley, general manager of Massasoit Tool Company in Rhode Island. "They still tax us on it."
Prophet 21 Trading Partner Connect, an Internet trading network that streamlines the commerce process between distributors and their manufacturer/suppliers and end users, helps distributors eliminate obsolete inventory, saving them thousands of dollars in taxes every year.
"Amid shrinking margins and skyrocketing carrying costs, distributors - especially those taxed on what's in their warehouse - must find ways to keep their inventory levels low," said Chuck Boyle, Prophet 21 president and CEO. "Many Prophet 21 users have accomplished this with Trading Partner Connect - saving thousands of dollars in annual tax levies in the process."
Saving Thousands of Dollars in Taxes
Using Trading Partner Connect to establish online trading relationships with other distributors, Bagley sold his dead stock to distributors in other parts of the country who welcomed the opportunity to buy at a discount items their customers demanded. In addition, Bagley used the Internet trading network to source items quickly and reduced the amount of safety stock he needed to carry. The net result was a 12 percent drop in inventory levels over a two-year period.
"You don't have to keep quite so much stock on hand because you can usually get whatever you need pretty quickly from one of your trading partners," he said. "And, you can usually sell the inventory that you're not moving to another distributor who is - even if he's halfway across the country."
Bagley estimated that he saves about $5,000 per year on his tax bill because he no longer pays levies on the dead, slow-moving, and safety inventory he once carried. "That's a few thousands dollars a year that we can re-invest in our business," Bagley concluded.
Since 1967, Prophet 21 has been a leader in providing durable goods distributors with innovative, adaptive solutions essential for running their businesses. For more information, please visit www.p21.com.
