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Three Heads are Better Than One to Avoid Deadstock

PostDateIcon June 20th, 2009 | PostAuthorIcon Author: Amerisource
Slow Moving, Obsolete Goods & Deadstock
Three Heads are Better Than One
By Jason Bader
Managing Partner – The Distribution Team
 
As we roll through the back half of the year, many manufacturers are gearing up for their Fall product launches.  Programs are being created and promotional literature is going to press.  Prepare yourself for the latest improvement to your favorite products.  Since football season is around the corner, get ready for the “Touchdown to Savings” sheet.  It seems like this one never gets old.  The manufacturer’s reps are gearing up for a full scale assault on your purchasing folks.  Take the time now to prepare them to ask the right questions so you can avoid problems in the future.
 
Buyer beware.  The leading cause of dead stock is bright, shiny new items.  This is the new improved model of the new improved model that you still have on the shelf from last Spring.  This is worse than your run of the mill dead stock.  This stuff was dead on arrival.  We seem to have forgotten that only a few short months ago, during the annual physical inventory, our warehouse was filled with the unsold carcasses of last season’s sales darlings.  Dead inventory kills your profitability in two ways.  Not only does it tie up capital; but it actually costs you money in handling.  I think that we all agree, dead inventory should be avoided at all costs.  Since we know that new items cause dead stock, we should use caution and scrutiny when adding new items to our inventory.
 
Manufacturer sales reps are trained professionals.  They are masters at telling you how great your life would be if you sold their product.  More often, they appeal to the emotional side of the buyer.  An old friend of my father’s once told me, “It’s easy to sell to a salesman.  Just get his head to start nodding…”  So given this bit of gray haired wisdom, who do you think these reps target in your company?  The Sales Manager!  Salespeople love to have new things to sell.  I should also note that the owner of the company, usually with the heart of a salesman, is also easily excited about new items.  More DOA(Dead On Arrival) stock can be attributed to owners than anyone else in the company.  Here is a quick tip:  Don’t let the owner of the company wander through a trade show alone.  There are tons or bright shiny new things at trade shows.
 
As I said earlier, we must make it difficult to bring new items into the company.  Instead of letting just one person make the buying decision, consider forming a committee of three.  The three committee members should be the Sales Manager, the Purchasing Manager and the Controller.  The Sales Manager is there to determine the market for the product.  Who are the potential customers?  Does it replace a current item?  The Purchasing Manager is there to determine how to buy the product.  Sometimes buying a lesser quantity as a test is a more prudent alternative.  You may pay a premium; but you won’t be stuck with a mountain of inventory if it fails.  Finally, the Controller is there to determine how to finance the purchase.  By utilizing the committee, you will reduce the chance for an emotional buy. 
 
In my former company, we called this group a “Line Buying Committee”.  The group met on a monthly basis to review new product offerings.  During the review process, some very important things need to be accomplished.  Marketing plans need to be established.  I’ve been around this industry long enough to know that paperwork is akin to swallowing cod liver oil.  Keep the plans simple, leave the powerpoint slides to someone else.  A simple one page plan will suffice. 
 
While marketing a new product is exciting, creating the exit strategy is the key to inventory success.  The most important task of the committee is to develop three different exit strategies for the product in the event that it is not the greatest thing since sliced bread.  Each of these exit strategies needs to have a time line.  For example, if we do not sell our projected quantity within the pre-determined time frame, what is the cost of returning it to the vendor?  Again, don’t make these plans too complicated.  You can sell it off at a discount, return it to the manufacturer, or you can throw it in the dumpster.  One of the more creative solutions might be to give it to the salesperson that had to have it, in the form of Christmas bonus.  You must not allow this new item to become buried on your shelves and contribute to your dead inventory. 
 
The least painful way to dispose of a failed product addition is to simply return it to the vendor.  Have you ever noticed how some manufacturers reps seem to become less available when you are trying to return something?  Sure, they were in your office on a daily basis prior to the sale.  In addition, many reps will give you a verbal return policy, “Sure, if it doesn’t work out for you, we’ll just take it back.”  Verbal agreements just don’t cut it today.  Get the return policy in writing with timeframe and costs clearly defined.  Be wary of those individuals who won’t sign a simple agreement.  Remember, we are trying to make it hard to create dead inventory in our companies. 
 
In order to help weed out the less than reputable companies, I developed a little checklist for every new line presented to the company.  This will assist the committee in making a good decision on the line. 
 
Manufacturer Name
 
  • Make sure that the full name and address of the company, including the parent company, is written down.
 
Representative Name
 
  • Request the name of the representative, and the person’s immediate supervisor.  If it is an agency, request the name of the principal.
 
Shipping Location
 
  • Where will your products be shipped from?  This will help you understand lead times.
 
Freight Policy
 
  • How much do I have to buy to get freight prepaid?  Any special considerations for overnight shipments?
 
Terms
 
  • When do I have to pay?  Is there an incentive for fast payment?  Are there special terms (ie net 90) for the first order?
 
Volume Rebates
 
  • Does the manufacturer offer a rebate program based on annual purchases?  How does the rebate come (cash, merchandise credit, other)?
 
Co-Op Advertising Funds
 
  • Does the manufacturer give marketing assistance funds?  What is the policy?
 
Pricing Available on Disk
 
  • Does the manufacturer provide price updates on a disk?  What format is it in?  You should know what format that you would prefer to see it in. 
 
Training Support
 
  • How does the manufacturer handle training on their products?  Who is expected to pay for this training?  Are there any videos or other material available?
 
Engineering Support
 
  • Does the manufacturer provide any assistance with getting a product specified with an engineer or architect?
 
Local Distribution
 
  • Who else distributes the product locally?  How are they doing with it?  Why do you want to add more distribution?
 
Average Gross Profit Margin
 
  • What kind of margins should we expect from the line?  What are the ultra sensitive items?
 
Market Potential in Dollars
 
  • Ask the representative to give you an idea of the market potential.  This will help you determine your inventory strategy.
 
Guaranteed Sell Through
 
  • This is where we ask the manufacturer to take back unsold items in the line.  I would suggest that this should be a six month minimum.  Shoot for 12.  Be sure to review the line in the final month and determine what needs to go back.
 
Certificate of Liability
 
This may seem a bit odd; but not to those who have been stung in a product liability suit.  Make sure that the manufacturer has adequate liability insurance. 
 
This checklist is just a guide.  If you would like a copy of the checklist, please email me and I will send you a simple checklist to help you prevent a build up of DOA inventory.  You need to modify it to meet your specific needs.  Most reps will not be able to fill out all the questions on the spot.  Let them bring it back for a follow up call.  The pace at which they return the information can give you some insight on how hard this rep is willing to work on your behalf.
Amerisource Industrial Supply can help you reduce your MRO inventory.
PostCategoryIcon Posted in Excess Inventory, Inventory Management Information | PostCommentsIcon No Comments »

New Items 06/16/09

PostDateIcon June 16th, 2009 | PostAuthorIcon Author: Amerisource

Excess Slow Moving Inventory Items for Sale – Janitorial Supplies
The following product has been added to the ‘Janitorial’ category.

Product: Jumbo Roll Tissue Holder
Manufacturer: Scott Paper
Offer Price: $19.00
Description: Original Scott Paper’s blue and grey jumbo roll tissue dispenser. Includes key and mounting instructions

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http://www.deadstocknetwork.com/Product.aspx?id=11275

The following product has been added to the ‘Janitorial’ category.

Product: Junior Twin Tissue Holder
Manufacturer: Scott Paper
Offer Price: $15.00
Description: Original Scott Paper’s twin junior roll tissue dispenser with translucent smoke cover and grey back. Includes key and mounting instructions

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http://www.deadstocknetwork.com/Product.aspx?id=11276

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Excess, Slow Moving Inventory

PostDateIcon June 11th, 2009 | PostAuthorIcon Author: Amerisource
There are not Stages of Deadness
By Scott Stratman
Founder – The Distribution Team
 
  
Over the past 20 some years of working with distributors, one thing I have found in common with every single one is the existence of dead stock.  It is nothing to brag about, but there are some distributors who work with more dead stock than live inventory.  There are some who think it is dead and forget about it.  Then there are those who like to keep their dead stock around for years on end, almost to the point that it becomes part of the family.
 
I tell distributors all the time that there are not stages of deadness.  In other words, inventory does not go through stages like dying, dead, really dead and then stinky dead!  If it is dead then it is dead.  Make something happen.  Many distributors believe in the stages of deadness.  They think it might be dead with a heartbeat so maybe we can revive it.  We often believe that if we hit our dead stock with some electronic charge (like a sales promotion), it will pop up off the table and start living again.  This is not true.
 
One of the major reasons so many distributors have larger quantities of dead stock than they would like is because they do not have a rule of dead stock.  I challenge all distributors to establish a company dead stock rule or definition.  When I ask distributors their definition of when something becomes dead, I hear no sales in ninety days, no sales in six months and no sales in twelve months as common answers.  Those actually sound wonderful if you ask me.  But then let’s add a dose of realism to those answers.  In other words, what is really happening in their operations?  What I find as the truer definitions are something like no sales in twelve months, no sales in twenty four months, no sales in five years.  I even hear that some distributors use the rainbow method of identifying dead stock.  This is not a commonly known method, but too often it is applied.  The rainbow method is used by distributors who do annual physical inventories and put colored inventory stickers on the product once it is counted.  Each year they use a different colored sticker. When all the colors of the rainbow have been applied to a product, they deem it dead.  Hey at least it is a visual method of knowing what is dead.
 
I admit, the rainbow method is a terrible approach for anyone, but it is still being used today.  Now let’s look at some more practical ways to handle the dead stock you have in your inventory.  Let’s step back and look at a company definition that you can really live with and implement.  I would contest that no sales in six months is a great strategy but too hard for many to implement.  Find a definition and rule that most of your inventory can live with and most your people can execute.  Let’s use the no sales in twelve months as a realistic rule. 
 
Using this approach, you can easily run a report at the beginning of every month and look at those items with no sales in the previous twelve months.  I call it the “13th month first day report”, or “your inventory obituary”.  In other words, using this approach allows you to easily identify which products died last night (the last day of the previous month).  In an article we published years ago, I thought it would be a great idea if all your dead stock would start stinking as soon as it died.  Then you could just walk in the vault the first of the month and smell your way to the dead stock.  For some distributors, the first day of each month might be pretty stinky.  But since most of the hard goods we deal with do not stink all by themselves, we need a report to help make them smell up the place.  The “13th month first day report” is just that.  It will quickly list out all items that have had no sales in the past twelve months.  This list needs immediate attention.  If we do nothing, another thirty days will pass and more dead stock will pile up.  Having said that, what do you think is the worst thing that can happen on the first day of the thirteenth month?  Yep you guessed it, we sell one! I say that is the worst because you know you will have someone come up and tell you something like “See I told you if we kept this stuff long enough someone would buy some!”  It can only get worse when we think that it is now alive, and we go buy more of it.  I hate to be the bearer of bad news.  If it is dead, according to our definition, then it is dead forever.  Now take action.
 
Similar to when a human dies, the mortician works on us immediately because we start to decay and smell bad.  Your dead inventory will only cause infection to your good inventory if you do not act immediately.  Once identified as dead, you should make the appropriate adjustments to your accounting system.  You should also adjust all ordering controls in your software such that no one can buy anymore of it.  You might want to consider moving it out of the good inventory because if you don’t, you might know it died on paper, but you may not be able to find it in your vault.
 
I see a number of distributors who actually have created an inventory graveyard for their dead stock.  They identified it as being dead, moved it out of the living inventory and set it in a predetermined location.  Some have even decorated the graveyard with dark colors and the grim reaper standing guard.  Why would they do something like this you might ask?  Well, many distributors will take the dead stock and move it higher up on the shelves, maybe to the top shelf to get it out of the way.  You just compounded the problem.  You not only have dead stock, but you just implored the age old rule of “out of sight out of mind”.  Putting it out of the way, and out of sight, only makes your dead stock “deader”.  Ok, maybe it becomes more dead, but in any event, you will not keep it in focus if it is out of view.  Remember there are not stages of deadness!
 
Once identified as dead, and moved out from the good and living inventory, you can work on it more actively.  You see it all the time and your daily efforts will be more focused on moving it out.  By the way, don’t kid yourself, once inventory has died there is only one action item left – move it!  The goal is to make it go away or disappear from your inventory.  There are plenty of ways o make that happen and we will talk about those in our next article.  However, at this point some distributors have plenty to do after reading this.  Let me outline the steps you need to take when your inventory had died to eliminate any confusion:
 
1)  Establish a company wide dead stock rule – and follow it.
2)  Print out your inventory obituary on the first of every month
3)  Make the appropriate cost adjustments or write downs in your accounting system
4)  Pull it out of your good and living inventory
5)  Adjust your purchasing controls such that no one can buy more of something that has    
     already died once.
6)  Establish a dead stock area or cemetery in your vault so everyone can see what died.
7)  Do not push it up to the top shelves and use the “out of sight out of mind” strategy.
8)  Appoint someone to start dealing with it on the 1st of the month – a dead stock manager.
9)  Don’t ignore it, because in another 30 days something else might be dead, and you do not want to use the “rainbow method” of inventory management. 
10)  Do whatever it takes to make this stuff disappear!
 
Remember, there are not stages of deadness when it comes to inventory.  When something is dead, take action before it starts to stink.  It is when you do nothing, or you become too emotional about disposing it, that you end up spending many more hard earned dollars.  If you take the easy way out when it comes to dead stock, you will soon need a full time dead stock manager just to deal with the mess you created.  So if you don’t have a rule of dead stock today, establish one soon, because the 1st of the next month is just around the corner. 
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New Items 06/11/09

PostDateIcon June 11th, 2009 | PostAuthorIcon Author: Amerisource

The following product has been added to the ‘Food Service’ category.

Product: 5″X2″X18″ Wine Bag
Manufacturer: Bonita Pioneer
Offer Price: $74.85
Description: Single wine merchandise bag printed on oatmeal paper.

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http://www.deadstocknetwork.com/Product.aspx?id=11273

The following product has been added to the ‘Food Service’ category.

Product: 5″x2″x18″ Wine Bag
Manufacturer: Bonita Pioneer
Offer Price: $74.85
Description: Single wine paper merchandise bag printed on white gloss cote paper.

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http://www.deadstocknetwork.com/Product.aspx?id=11274

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New Items 06/10/09

PostDateIcon June 10th, 2009 | PostAuthorIcon Author: Amerisource

The following product has been added to the ‘Food Service’ category.

Product: 9×6x6 Carryout Gable Box
Manufacturer: Bonita Pioneer
Offer Price: $27.00
Description: Large carryout gable box printed with an artistic multicolor design.

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http://www.deadstocknetwork.com/Product.aspx?id=11271

The following product has been added to the ‘Food Service’ category.

Product: 9×6x6 Carryout Gable Box
Manufacturer: Bonita Pioneer
Offer Price: $27.00
Description: Large carryout gable box printed with Meal Time design.

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http://www.deadstocknetwork.com/Product.aspx?id=11272

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New Items 06/09/09

PostDateIcon June 10th, 2009 | PostAuthorIcon Author: Amerisource

The following product has been added to the ‘Food Service’ category.

Product: 13″x7″x12.5″ Carryout Bag
Manufacturer: Bonita Pioneer
Offer Price: $70.00
Description: Paper carryout shopping bag with oatmeal twisted paper handles, printed with artistic multicolor logo.

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http://www.deadstocknetwork.com/Product.aspx?id=11270

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New Listing 06/03/09

PostDateIcon June 4th, 2009 | PostAuthorIcon Author: Amerisource

The following product has been added to the ‘Food Service’ category.

Product: Vigne 7 oz champagne
Manufacturer: Cardinal Glass
Offer Price: $69.75
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11263

The following product has been added to the ‘Food Service’ category.

Product: Vigne 15 oz tall wine
Manufacturer: Cardinal Glass
Offer Price: $75.35
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11264

The following product has been added to the ‘Food Service’ category.

Product: 12-1/2 oz old fashion
Manufacturer: Libbey Glass
Offer Price: $30.00
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11265

The following product has been added to the ‘Food Service’ category.

Product: 9 oz hourglass pilsner
Manufacturer: Libbey Glass
Offer Price: $15.25
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11266

The following product has been added to the ‘Food Service’ category.

Product: 5-1/2 oz footed rock
Manufacturer: Libbey Glass
Offer Price: $18.15
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11267

The following product has been added to the ‘Food Service’ category.

Product: slot lid for 1/6 size pan
Manufacturer: Vollrath
Offer Price: $2.27
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11268

The following product has been added to the ‘Food Service’ category.

Product: 10 oz soda
Manufacturer: Libbey Glass
Offer Price: $18.95
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11269

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New Items 05/27/09

PostDateIcon May 28th, 2009 | PostAuthorIcon Author: Amerisource

The following product has been added to the ‘Packaging’ category.

Product: CORNERBOARD 2″ X2″ X 28″
Manufacturer: CARAUSTAR
Offer Price: $396.47
Description: CORNERBOARD 2″ X2″ X 28″ X .160 PRINTED UNITED WE STAND 2210 PCS/SKID1 COLOR RED PRINTING WITH THE AMERICAN FLAG

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http://www.deadstocknetwork.com/Product.aspx?id=11244

The following product has been added to the ‘Packaging’ category.

Product: POLYBAGS RL 18X24X1.5MIL
Manufacturer: LADDAWN
Offer Price: $69.22
Description: POLYBAGS ON A ROLL, 18″ X 24″ X 1.5 MIL, 1000 BAGS PER ROLL

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http://www.deadstocknetwork.com/Product.aspx?id=11245

The following product has been added to the ‘Packaging’ category.

Product: POLYBAG RL 24″ X16″ X36″
Manufacturer: LADDAWN
Offer Price: $37.84
Description: POLYBAGS ON ROLL, 24″ X 16″ X 36″ X 2MIL, 200 BAGS PER ROLL.

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http://www.deadstocknetwork.com/Product.aspx?id=11246

The following product has been added to the ‘Packaging’ category.

Product: POLYBAGS RL 24″ X 36″
Manufacturer: LADDAWN
Offer Price: $62.00
Description: POLYBAGS ON ROLL, 24″ X 36″ X 1.5MIL, 500 PER ROLL.

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http://www.deadstocknetwork.com/Product.aspx?id=11247

The following product has been added to the ‘Packaging’ category.

Product: POLYBAGS 2″ X 3″X2MIL
Manufacturer: LADDAWN
Offer Price: $4.05
Description: POLYBAGS 2″ X 3″ , 1000/BAGS PER CASE

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http://www.deadstocknetwork.com/Product.aspx?id=11248

The following product has been added to the ‘Packaging’ category.

Product: KRAFT RECYCLED 15″ X 40LB
Manufacturer: GEMINI FIBER
Offer Price: $5.92
Description: KRAFT PAPER- RECYCLED, 8.5 DIA

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http://www.deadstocknetwork.com/Product.aspx?id=11249

The following product has been added to the ‘Packaging’ category.

Product: EXCELSIOR # 732 SPUR 72LB
Manufacturer: AMERICAN EXCELSIOR
Offer Price: $35.00
Description: EXCELSIOR # 732 SPUR 72LB BALE

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http://www.deadstocknetwork.com/Product.aspx?id=11250

The following product has been added to the ‘Packaging’ category.

Product: SHRINK BAG 88″X55″X 5MIL
Manufacturer: LADDAWN
Offer Price: $81.00
Description: SHRINK BAG 88″X55″X 5MIL, 50 BAGS PER ROLL, OPEN ON 88″ SIDE

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http://www.deadstocknetwork.com/Product.aspx?id=11251

The following product has been added to the ‘Packaging’ category.

Product: PADDED MAILERS HS #7
Manufacturer: Ivex
Offer Price: $19.00
Description: PADDED HEAT SEAL MAILERS, 14 1/2″ X 20″ JET PAK, 50/CASE

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http://www.deadstocknetwork.com/Product.aspx?id=11252

The following product has been added to the ‘Packaging’ category.

Product: POLY MAILERS 10″ X 13″
Manufacturer: Polyair
Offer Price: $54.00
Description: POLY MAILERS 10″ X 13″, FASTPACK 500/CASE

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http://www.deadstocknetwork.com/Product.aspx?id=11253

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New Items 05/28/09

PostDateIcon May 28th, 2009 | PostAuthorIcon Author: Amerisource

The following product has been added to the ‘Janitorial’ category.

Product: White Lid
Manufacturer: Rubbermaid
Offer Price: $1.90
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11254

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New Items 05/26/09

PostDateIcon May 26th, 2009 | PostAuthorIcon Author: Amerisource

The following product has been added to the ‘Restaurant Equipment’ category.

Product: pass through dishwasher
Manufacturer: Blakeslee
Offer Price: $5,000.00
Description: BLAKESLEE PASS THROUGH DISHWASHER, NEW, Blakeslee model d8 208/240 v/ 3 phase, heated electric water (hi temperature) unit brand new but out of warranty since it has sat on our showroom to long, still would need to purchase a booster heater for final rinse sanitization, approximate cost would be about $1300 for the booster heater (new) or can be retro fitted for chemical sanitization by a plumber, comes with 2 racks and owners manual located in MADISON WI 608-256-0695 $5000

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http://www.deadstocknetwork.com/Product.aspx?id=11240

The following product has been added to the ‘Safety’ category.

Product: Green 4pt Hard Hat
Manufacturer: North Safety Products
Offer Price: $7.00
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11241

The following product has been added to the ‘Janitorial’ category.

Product: 8lb Hotel Upright Vac
Manufacturer: Oreck
Offer Price: $200.00
Description:

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http://www.deadstocknetwork.com/Product.aspx?id=11242

PostCategoryIcon Posted in Excess Inventory, Janitorial, Restaurant Equipment, Safety | PostTagIcon Tags: , , , | PostCommentsIcon No Comments »
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