Weak Inventory Balance Can Contribute to Losses
The instability between overstock and stockout of inventory can shrink the profit margin of your company. If you invest your money buying more inventory than it can sell in (overstock), the products will remain there and ultimately count off as losses. You have to deduct the costs from profits which creates a deficit in the budget. Likewise, when you run out of stock, you fail to fill your customers’ orders and give them the chance to purchase from your competitors. Lack of proper inventory balance can also lead to an increase in the obsolescence of inventory due to expiry or seasonality and a reduction in cash flow.