How to Deal with an Overstocked Inventory
February 7th 2007 14:30
Chin Chin Power Bits Orange
This is where study and consideration from past years of operations as well as consumer demand and purchasing power of the target market will be needed. The management team of any company can properly determine the feasibility of maintaining a large inventory matched with the expected demand for a commodity. Adding perhaps a 10% additional stock is more than sufficient before the actual re-order point for the manufacturing of the finished goods of a product can be considered.
The lean and peak seasons of a company is another deriving factor towards determining the property inventory level a company should consider. Lean season would usually be the period to which products would be demanded at a lower pace. In most cases, reaching the normal or average period for their demand would be the relieving stage on worries regarding slow moving stocks.
For peak seasons, the possibility here is not being able to meet the high demand for the product. This usually ensues because of unforeseen demand which may suddenly experience a boom in certain times. The sudden rise in demand would have to be made up for sufficient inventory levels in the supply.
As illustrated, observing the proper economical theories on the law of demand and supply certainly needs to be addressed and given the needed attention. Proper levels and proper distribution to conform to the needs of outlets, distributing channels and consumer demands all have to be on the same page.
Failure to do so would mean brand deficiency in being able to maintain the expectations levels and building on brand reliability as well. These areas are things which most people would surely want to avoid as much as possible if a business is aiming to penetrate a congested market, regardless of the category they are eyeing.
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Comment by Ash
Australian Traveller
Flashes of memories
Comment by Brian
Thanks for the insight. Yes I agree that looking for alternative suppliers is a good idea, as long as the budget for operations permits it. For sure, even forecasts would be subject to revisions as market trends fluctuate regularly as well