Effective inventory management is crucial to modern business because it provides a cushion to balance the uncertainties between supply and demand. It can be viewed in a positive manner; however, holding onto excess inventory can lead to problems. The physical space taken up by stock always comes at a price: inventory held in the warehouse ties up company cash and working capital which could potentially be used for other purposes. Lower inventory costs result in a higher return on assets. If business owners know that holding inventory costs money and negatively impacts the company cash flow, why not simply slash it to the bone? It’s a balancing act, to be sure, and inventory control software can help your company determine how much inventory to keep on hand at any one time.
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