Thursday, January 04, 2007

Your Inventory cost you money

Your Inventory cost you money

Most Philippine retailers tend to over stock on inventories for different reasons. Some suppliers will provide additional discounts for bulk orders or those who pay in cash. Some do over stock because there might be a sudden demand by customers and they might miss the opportunity to earn big due to not having enough supply to meet the demand. Or perhaps there might be a pending price increase due to the rising cost of raw materials or increase in labor cost. But whatever the reasons, inventories do cost you money.

There may be advantages in stocking up on your inventories, but there are some downsides to that also, and sometimes the bad out weights the good and you might incur a loss rather than profit from it. By stocking up on inventories, you are tying up your money otherwise spent on more important business matters. If your space is limited, you might rent a warehouse just to store your inventories for a couple of months, which will cost you money and add to your overhead cost.


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