It’s time to tame the excess inventory beast, to slay the dead stock dragon.
In this excellent analysis of the true cost of holding inventory, Vijay Sangam provides a thorough explanation of why it costs money to hold too much inventory. Many entrepreneurs are (rightly) very concerned about the consequences of not having sufficient inventory to meet customer demand. But this concern frequently translates into gross overstock, and if you don’t realize how much that can cost you, you have no way to assess, evaluate and optimize your inventory levels.
When I previously wrote about dead stock, I glossed over the carrying costs of inventory somewhat. But this just reinforces the point, and I’ll say again: most small and medium-sized distributors are, at this moment, carrying dead stock that is costing them money.
So is it time for you to start actively managing inventory? Try using this calculator to calculate your inventory carrying costs. The results may scare you.