Businesses face inventory management challenges with varying degrees of difficulty. From struggling with how much product to keep on the shelves to waging the battle between decreasing costs and increasing quality, determining how to manage inventory effectively—and the inevitable result of doing this successfully (or not)—can make or break any business. For many manufacturers, high levels of operational complexity and increasing pressures surrounding regulatory compliance compound this struggle. These additional variables weigh heavily on the already dynamic operational environment, demanding a balance that can be hard to manage.
Maintaining the correct levels of inventory is delicate balance. Levels should be high enough to provide effective speed to market, but low enough to limit investment and risk. Each business must take into consideration the damage that can be done by not properly balancing the two when determining these values. Having too much inventory can result in mismanaged handling and holding costs, disposal fees and potentially even regulatory fees for environmental non-compliance, all of which translate to reduced profit. Not having enough inventory can result in a loss of market share because of an inability to effectively service customer needs or meet price expectations.