Other Ways Excess Inventory
Can Cost You Money

Just to mention a few:

• If you end up investing too heavily in this year’s inventory, part of it may be with you next year, when it is no longer worth as much.
• If too much of your working capital is tied up in unneeded inventory, it won’t be available to invest in newer products (you know: the ones your competitors are making such a big deal about).
• Money tied up in slow moving inventory is money that will not be readily available should business slow or some other unforeseen event occur.
• Money tied up in the wrong merchandise can also be money that is not available to take advantage of special opportunities.

One retailer I know watches his inventory levels like a hawk. As a consequence, when one of his major suppliers offered him the opportunity to buy a closeout of 500 $50 items for $7.50 each, he was in a position to jump on it. It will likely take him several years to dispose of all 500 of these items — but, you know, at that kind of margin, who cares?

Things to remember »

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