The premise that reducing inventory to its minimum will yield maximum benefits is overly simplistic. Less inventory does mean less holding cost, but that’s only a fragment of the whole picture.
The Multi-Dimensional Reality
Inventory optimisation is a balancing act among three pivotal variables:
- Goods Availability: Your inventory must be sufficient to meet customer demand.
- Inventory Levels: Holding too much inventory results in high costs and obsolescence risks.
- Logistic Costs: Procurement, shipping, and handling costs are also part of the equation.
The Inescapable Truth
No matter how refined your strategy is, compromises will have to be made. You will face some level of out-of-stock scenarios, inventory overstock, or additional logistic costs. It's an inevitable part of the game.