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Inventory management helps retailers address another costly inefficiency that happens when products expire or become obsolete. With lower inventory costs and enough supply to fill every order, retailers improve profitability. Also, with real-time information on sales and stock, retailers can react quickly by reordering, transferring stock from another location or drop shipping to the customer. This amount will be larger for bestsellers than for unpopular products. Retailers can use inventory management tools to determine how much stock is “just right” to have on hand, neither too much nor too little. To avoid disappointing customers and missing sales, retailers want to avoid running out of inventory. Other savings include shipping, logistics, depreciation and the opportunity cost that comes from not having an alternative product that might sell better. When you know how much stock you have and how much you need, you can pinpoint inventory levels more accurately, thereby reducing storage and carrying costs for excess merchandise. They are more likely to have enough inventory to capture every possible sale while avoiding overstock and minimizing expenses.įrom a strategic point of view, retail inventory management increases efficiency. Inventory management is vital for retailers because the practice helps them increase profits. What Is the Importance of Inventory Management in Retail?