Q: My supplier has some extra stock from my order. They said they would like my authorization to liquidate it and get some money for scrap. Is this a good idea?
A: If the goods are already in their finished form and have more value as a final product rather than scrap, it is a bad idea to allow your supplier to liquidate your stock as they see fit because it may very well end up being sold rather than recycled and that could have gray market implications.
Here are a few suggestions.
1. Have the terms of your contacts and purchase orders clearly state what will happen to scrap and extra stock. Have an agreement before production even starts!
2. If you do agree to having it scrapped, you need some proof it was destroyed or recycled. You may need to hire an independent 3rd party if you can’t make the trip yourself. Very important if you have intellectual property like a famous brand or innovative product to protect.
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