Shifts in Demand
Some goods might not sell due to shifts in market demand. For example, a clothing store that stocks too many tank tops during the summer may find itself unable to get rid of the tank tops before fall. During the autumn, consumers might demand different types of clothing, like T-shirts or sweatshirts, leaving the company with a large quantity of goods on hand that simply take up space.
Deterioration and Obsolescence
Some companies sell goods that tend to deteriorate or perish over time, such as food products. Keeping a large amount of perishable inventory on hand risks the possibility that you will be unable to sell some of the inventory in time before it goes bad, which can force you to throw away product. Similarly, certain types of products, such as computers and other electronic devices tend to become obsolete quickly. Keeping a large inventory of such products is risky because consumers might not be willing to buy old versions of products at a price that is profitable when new or updated versions become available.
Carrying a large volume of items on hand means you need a large amount of space to store your inventory. Storage space like warehouses and storage rooms cost money to build, rent and maintain. Storage facilities require workers to categorize and organize items and transport items from one place to another. In addition, high levels of inventory can lead to higher insurance costs.
While high levels of inventory can be a disadvantage, carrying too few goods on hand can also be harmful to a business. Running out of an item could mean that you miss out on sales and profits, and customers will go down the street to someone else. Ultimately, administrators must set inventory levels that maintain buffer stock, sell inventory items before it is designated as obsolete, avoid stock-out situations and eliminate storage costs.
To take advantage and control at the same time requires planning and dedicated policy implementation. A comprehensive software package provides accuracy and mastery of your company’s needs and demands. FreshVu2Go handles all these challenges and more.
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