Reducing inventory levels has a number of advantages for your business. In general, if you turn inventory over quickly, it means you are selling products efficiently. Carrying inventory has costs that are more expensive the more inventory your have on hand. You have to pay for people, utilities and administration to manage it.
By reducing your inventory, you limit the amount of floor space and storage area you have to dedicate to holding the excess. You may cut the number of stock workers you need and reduce administrative costs of logging and moving inventory around. Plus, the more area of your business dedicated to holding excess inventory, the less space you have where you can merchandise items likely to sell in a timely manner.
Reducing inventory also minimizes your waste. Some products perish, expire or simply go out of season or style. By reducing your inventory levels, you mitigate the value of products that are thrown out or sold at marked down prices. This reduces your overall inventory costs and improves your bottom line. Plus, marking down items to get them sold can instill a price orientation in your customers that is hard to overcome.
Regular customers often stop in to window shop their favorite businesses on a regular basis. By reducing inventory and getting it turned over quickly, you can move merchandise around and keep fresh products rotating on a regular basis. The more new displays and products customers see when they stop in to browse, the more likely they are to continue to come back and spend money routinely.
When you only carry the inventory necessary to meet near-term customer demand, you free up working capital to invest in other business needs. Needed building and equipment repairs, renovations of stores and research and development are examples of areas where you could invest money saved by not over spending on inventory. Prioritizing where to put money in the short-term to drive business growth is key to getting the ball rolling toward long-term financial success.