How much inventory should I be carrying at any point in time? Managing inventory levels is arguably the most difficult challenge for any retailer, music retailer or otherwise. The challenge stems from many unpredictable factors, including having to guess what your customers will ultimately buy, unexpected downturns in the economy, real estate and the stock market, changes in technology, erratic manufacturing and product availability, high purchase requirements by suppliers with coveted product lines, and a general lack of prudent inventory management knowledge by many retailers.
How Many Dollars Should be Tied Up in Inventory?
Invariably, retailers may often find themselves carrying too much product, too much of the wrong product and/or not enough of the right product. This leads retailers to search for an answer to how much inventory needs to be carried to achieve profitability. Of course, that answer depends on store size, profit margins achieved, operating overhead and a few other factors. But there is a simple way to roughly calculate how many dollars should be tied up in inventory at any point in time, at least to the point of knowing whether you are over- or under-inventoried.
Watch this video to learn how to calculate an inventory level that’s right for your store.