The excess inventory alert is a notification system helping indicate when the amount of stock on hand exceeds the desired level based on restock settings, sales forecasts, storage fees, and financial strategies. This alert is crucial for managing inventory effectively, avoiding overstock situations, and optimizing the supply chain.

To explain the given value proposition and recommended actions in layman's terms, let's break down the two actions presented and understand what they each mean for a business trying to manage its inventory efficiently:

This option considers the net cost of storing items in a warehouse versus removing them when they're not selling. Here's the breakdown:

- **Storage Fees:** This is the cost you pay to keep your items stored in a warehouse. These fees are typically charged based on the amount of space your inventory occupies and how long it stays there.

- **Cost of a Removal Order:** This is the expense involved in taking your unsold goods out of the warehouse. It includes logistics costs like packing, labor, and transportation.

In simple terms, this option tells you whether it's cheaper to keep paying for storage or to pay once to remove your excess inventory. You choose this option if the net cost (storage fees minus removal costs) is the lesser financial burden compared to the alternative.

This option explores the potential revenue from discounting your excess inventory to encourage sales:

- **20% Discount:** You reduce the price of the goods by 20% in hopes of making them more appealing to buyers.

- **Marginal Profit Per Unit:** This is the profit you make on each unit sold after applying the discount. It factors in the reduced sale price minus the cost of the goods.

- **Number of Excess Units:** This is the quantity of unsold items that you're trying to move through the discounted sale.

This calculation multiplies the reduced profit per unit by the total number of units you hope to sell. The idea is to estimate how much extra money you can make by selling off the surplus stock at a discounted price rather than letting it sit in storage.

The formula advises choosing the higher value between these two options. The rationale is straightforward:

- **Option 1 (Removing Inventory):** This is more about cutting your losses. You opt for this if continuing to pay storage fees is more costly than the one-time expense of removing the goods.

- **Option 2 (Discounting Inventory):** This option aims at turning a potential loss into an opportunity for profit, even if it's less than what you originally anticipated. It's about making the best out of a surplus situation.

The goal of this formula is not to predict exact savings or profits but to prioritize actions that mitigate losses and enhance potential gains from excess inventory. It helps in decision-making by comparing the financial impact of either continuing to store the inventory or incentivizing its sale through discounts.