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Suppose you need to store inventory. How much should you carry? At first blush, the answer is simple: Enough to meet demand, but not so much that it sits around, tying up capital.
Maintaining this optimal amount is more difficult than it sounds. If items move too fast, you will run out of stock and might find yourself in a backorder situation. If items do not move quickly enough, you’ve bought too much inventory. There’s lead time too: If you need to reorder, you want to reorder before running out of items, not when the last item leaves your shelves.
Worst of all, your ideal inventory is something of a moving target. What was a popular item last year might not be this year. Or, a new promotion might make a slower-moving item suddenly fly off the shelves.
Given all these complexities, how do you fine-tune your inventory so that just the right amount of stock is in your warehouse and on your shelves?
If these steps sound complicated or costly, consider what happens if a company does not fine-tune its inventory. On the one hand, getting into an Out of Stock situation means backorders and possibly reneging on a brand promise. On the other hand, getting rid of excess inventory through trade, discount, auction, or donation means that your business will likely fail to recoup the initial investment.
Technology is certainly an important tool when doing such fine-tuning. The right technology can implement the needed integration, automation, and data-gathering. It can also make the complex-but-necessary calculations that will make you look like an operations whiz.
To see what we mean, contact us for a demonstration of how Infoplus can optimize inventory levels on the fly, using real-time data.
Until then, you should also check out our white paper, "Know Thy Inventory: The 3 rules of inventory and how to play by them." It goes into much more detail about some of the challenges in keeping optimal invenotry levels.
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