The inventory cycle's impact on retail business performance

Economy August 07, 2014 01:00


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ONE OF THE KEY success factors in retail trading is effective inventory control. A proper inventory level must be maintained to serve customers and keep the business running.

However, excessive inventory can also become a big problem. Too much inventory will cost the company additional storage and handling costs. Moreover, when inventory is getting older, losses may result from obsolescence and shrinkage.

Food products have expiry dates that represent the longest period |during which the products can be |consumed. On the other hand, |apparel may have to encounter |the seasonality of the products. Therefore it is important for businesses to ensure that inventory is kept at the appropriate level to support their operations.

From the inventory-management perspective, the inventory cycle in a business can start from selecting the right products for sale, followed by ordering goods, receiving them, stock-keeping, distribution to sales outlets and returning left products to warehouses for further disposition. The following are factors that should be considered with regard to efficient inventory management:

nSelection of the right |products. It is important that |the company knows its target customers. This may need some market research to understand the available gap that the product can fill. Second, based on historical data analysis, |the company should be able to iden