Managing inventory operations can be a tough task for a company but it is something they must do in order to satisfy customer demand, control unnecessary inventory and make profits. Size and location matters in the inventory process as having merchandise siting is going to imply more costs for the company. The company would need to use space that can be used for something productive within the company moreover; some products need to be at a specific temperature so paying more in electrical bills would not be convenient for the company. Another risk is that some products have a shelf life so if the company doesn’t sell those products by a certain date the products would go bad and all the costs involved with the production of that product would end up in the garbage as well. Another risk is that some products go out of style very fast or the designs/formulas are improved/changed therefore, the stored inventory would be obsolete in the current market as everybody always wants “the latest”. Theft is another risk, since there is not much control over these large quantities, theft can definitely be possible.
On the other hand, having inventory also can have benefits. When companies order in big quantities they usually receive discounts so their costs are lower than if ordering less products. Another benefit is that if demand suddenly changes and it goes up for any reason, the company would have available inventory to satisfy customer demand which would increase customer satisfaction.
In order to avoid losses companies can work with JIT (just in time) inventory. Working with orders is a good way to avoid unwanted inventory as all the merchandise will move out as soon as it’s ready to be shipped. Companies can also plan ahead of time when their products can go on sale; promotions can attract people to buy merchandise. The company will sell their products at a lower price but still make profits instead of losing everything. They also should keep track of all their inventory (balance sheets, etc.) so they take a deeper look to their cycles (when there’s more customer demand, when distributors order the least, etc.) so they can at least based their production on past experiences. Also, having cameras in their storage rooms would be good as well so they can see if their employees are stealing that merchandise.