Surplus refers to anything in excess of what is needed.
In a business, having surplus product means producing or manufacturing more goods than what is demanded by the market.
Having goods in surplus is something that businesses do not wish to have happen. It leads to waste and probably the lowering of the market value of that product. The reason for the lowering of value is of course simply the dynamics between supply and demand. Since supply is more than the demand, the producers/manufacturers are left with several options:
Dispose of the surplus goods. This is wasteful, but if the goods are perishables, then they have no option but to throw them away before they rot in storage. Even if the goods are not perishables, disposing of excess product may be an option if present and future demand will not be enough to lead wastage.
Store/hoard. Storing goods that can still be sold in the future is an option for non-perishables and goods that don’t get outdated easily. Hoarding can also be done to create a false sense of supply shortage (even with a surplus) to control market prices. This is illegal.
Consume. Goods can be consumed by using the product to make other products or simply giving them away to employees (as bonuses) or charities (tax deduction).
Trade. The surplus goods can also be traded for other products.