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It's
important to be aware of all the costs associated with inventory,
especially the costs of carrying too much inventory. This includes not
only direct costs of storage, insurance and taxes, but also the cost of
money tied up in inventory. Consider these important tips:
Maintaining
a wide assortment of stock - but not spreading the quick-selling
products too thin
Increasing
inventory turnover without sacrificing the service level
Keeping
stock low without sacrificing service or performance
Obtaining
lower prices by making volume purchases without ending up with
slow-moving inventory
Having
adequate inventory on hand without getting caught with obsolete items
Computing
your inventory turnover ratio is a simple way to monitor and measure how
well you are doing. This value gives a rough guideline by which you can
set goals and evaluate performance. Remember that the turnover rate varies
with the function of inventory, the type of business and how the ratio is
calculated (whether on sales or cost of goods sold). You can obtain
industry averages from trade associations.
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