What it costs a provider to hold spare routers
The real costs of keeping routers, ONTs and spares on the shelf, the risk of running short, and how a provider can see and count stock by location.
By Achekam · · 5 min read · For Telecoms businesses in South Africa, Nigeria, Kenya
Walk into the storeroom of most fibre and wireless providers and you will find a shelf of boxed routers, a crate of ONTs, some access points, drums of drop cable and a corner of older models nobody quite wants to throw away. It looks like readiness. It is also money that is not in the bank.
Providers in Johannesburg, Abuja and Mombasa face the same pull in two directions. Run short and an installation slips, a customer waits and a sale may walk to a competitor. Over-buy and cash sits on a shelf while the vendor announces next year's model. This article looks at what holding equipment actually costs, how to think about the right level, and how a provider can keep track of what it holds and where.
Stock on the shelf has a price
ACCA's study material on stock control lists the reasons businesses hold inventory: to meet customer demand, to take bulk discounts and to cut the total cost of re-ordering. It lists the drawbacks just as plainly: storage costs, the cost of capital tied up in the stock, and deterioration, obsolescence and theft. ACCA's technical article on stock control works through how those costs pull against each other and how the economic order quantity balances them.
For a provider, each item on that list has a familiar face:
- Storage: the storeroom rent, shelving, security and insurance, plus the van space taken up by stock that rides around all week.
- Capital tied up: every router bought ahead of need was paid for with money that could have cleared an overdraft or funded a tower upgrade.
- Deterioration and damage: boxes crushed in transit, cables kinked, devices that fail after sitting in a hot van.
- Obsolescence: the most expensive of the four in telecoms, covered below.
- Theft: small, valuable, resaleable equipment walks.
Which costs really move with order size
ACCA makes a useful distinction when it explains the economic order quantity: only costs that change with the quantity ordered belong in the calculation, so fixed costs such as storekeepers' salaries are left out. Apply the same discipline when you argue about stock levels. The storeroom manager's salary is the same whether you hold one box of routers or ten, so it should not decide how many to order. Insurance on the stock value, the interest on the money tied up and the risk of obsolescence do rise with the quantity, and those are the costs to weigh against a supplier's bulk discount.
Obsolescence: the model changes before the box is opened
ICAEW, in its guidance on managing cash flow and inventory, warns that overstocking can tie up cash in stock that may become obsolete or go out of date. In a provider's world that is not a remote risk. Vendors replace router models, a new Wi-Fi standard makes last year's devices harder to sell to customers who read reviews, and a network upgrade can leave a pallet of ONTs that no longer suits the equipment in the field.
Some habits keep the exposure down:
- Buy in smaller lots when a vendor's product cycle is short, even if the per-unit price is a little higher.
- Issue the oldest compatible stock first, so the newest models are not the ones that sit.
- Review slow-moving items every quarter and decide early: use them on lower-tier packages, return them under the supplier's terms or sell them on.
- Ask your accountant how stock that has lost value should be treated at year end, rather than leaving it at full cost.
Running short: the installation that did not happen
The opposite mistake has a cost too. ICAEW explains that understocking improves cash flow but risks stock not being available to meet customer demand. For a provider, that unmet demand is concrete: the technician arrives without the right router, the customer's activation date slips, and the first impression of your service is a missed appointment.
The answer is not a bigger storeroom but better information. Investopedia explains that SKU data lets a business see what it has in stock, track how inventory moves, set reorder points and decide what to reorder ahead of busy seasons. A provider that tags every model by its own code can see which devices go out fastest, which branch runs short first, and how far ahead of a promotion it needs to order.
Seeing quantities by location in Achekam
With the Warehousing add-on, a business keeps its stock locations on the server (warehouses, stores, bins and vans) with the quantity on hand at each. For a provider, that means the head-office storeroom, each branch and each installer's van can be a location of its own, so the question "who has a spare router near this customer?" has an answer.
Stock moves between locations through transfers that go from draft to dispatched to received. When fewer units arrive than were sent, the short delivery is recorded as wastage, which gives you a trail when a box goes missing between the storeroom and a van. How to run van stock day to day is covered in keeping track of equipment on installer vans.
Counting, and what the ledger does not see
A stock count is where theory meets the shelf. With the Warehousing add-on, a count sets a location's quantity to what was actually counted and records the difference as an adjustment, so the system matches the storeroom after each count.
Be clear about the limits, because they matter for your books. Stock counts, wastage, transfers and opening quantities do not post to the general ledger: only till sales and till returns move the inventory account. Goods received against a purchase order do not add stock either. So when a count finds missing routers, the quantities update, but the value in the inventory account does not change on its own. Your bookkeeper or accountant records the loss with a manual journal, which is refused if it does not balance or falls in a closed month, and corrected only by a reversal. Agree who prepares that journal after each count, and keep the count sheet as its support.
Whether routers you lend to subscribers belong in stock at all is a separate question, answered in routers: fixed assets or stock?.
A short stock review to run each quarter
- List every model you hold, by location, with the quantity and the month it was last issued.
- Mark anything a vendor has replaced, and decide what will happen to it.
- Compare the quarter's installations with the stock issued, and investigate gaps.
- Check the inventory value in the ledger against the counted quantities at cost, and journal any difference.
- Agree reorder points for the models you install most, using the last quarter's issue rate rather than instinct.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
