The Purpose of Holding Inventory

Inventory turnover ratio can help determine whether your consumer demand is high or low. A slow inventory turnover ratio usually implies weak sales and/or surplus inventory. High turnover ratio, on the other hand, can mean strong sales or lacking inventory. To avoid running out of supplies, you’ll need holding inventory. So, what is the purpose of holding inventory? To be responsive to consumer demand. The faster you can fulfill orders that come in, the more positive an experience your customers will have and the more likely they’ll return in the future and tell their friends to buy from you. Having products on the shelves and in your warehouses ensures your customers have instant access to the products they’re looking for. Holding inventory isn’t the only business model that works for your supply chain. Could drop shipping be a better option for you? Under that setup you don’t have to hold as much inventory in a warehouse, but simply tell your vendor(s) to ship specific items directly to your customers. This is an important model for you to consider. Drop shipping certainly isn’t for every business because it adds an extra layer between you and your customers, but it can save money on warehouse space and carrying costs. It also minimizes unsold inventory. Looking for more warehouse management ideas? Contact Fishbowl today for inventory software solutions that can help you streamline processes.