We’ve all heard a statement like “The More You Buy, The More You Save”. As a consumer, this offer is tempting. It works great as long as you can use everything you’ve purchased before it goes bad or becomes obsolete. Retailers are tempted by these offers as well. Suppliers sometimes offer the best prices in exchange for high-minimum order quantities. Sure, the cost per item is lower, but the retailer ends up parking the extra inventory on the stockroom for some time before getting the profits he hopes to gain. Is that a bad thing? An article on Retail Science, Using GMROI To Evaluate Your Inventory Investment, explains how keeping just enough merchandise on hand to meet upcoming demand, lowers your inventory investment and improves profits, even if you end up paying a little more for the privilege of buying less.

George Maginnis