Frequently Asked Questions
What is the purpose of inventory?
The purpose of inventory is to provide retail operations with an ongoing, perpetual supply of goods and materials. To see this purpose fulfilled, your business needs to find a ‘sweet spot’ between carrying too much and too little inventory, without ever running out of stock completely. This balance (often achieved with the help of inventory management software) will provide a notable increase to profitability and keep your company’s services running smoothly.
What are the main types of inventory?
While inventory is an umbrella term for the array of goods you sell or produce, there are actually separate subcategories of inventory you’ll want to pay attention to. The five types of inventories are: raw materials, work-in-progress, finished goods, packing materials, and MRO supplies. Although there are other kinds of inventory on the market, these five are generally the most popular or prevalent, and most often found on a company’s official financial accounts.
What does inventory reveal about a business?
Tracking and/or analyzing inventory data is a great indicator of business performance, especially when looking at inventory turnover. When a company is able to sell its inventory faster than its competitors, it’s likely to enjoy lower holding costs and better profit margins — which, in turn, lends itself to greater efficiency of sale and more success in the long run.