Your margin is not the only factor in doing business.

When you rationalize inventory, you are halfway through cost-cutting.

  • How much qty I have,

  • How much time it takes to sell,

  • What is the minimum order quantity,

  • What is the reorder point,

  • How much should be the buffer stock

If you manage to answer all these questions for every product you have.Of course with the help of tools! (MS Excel is more than enough). Trust me you are a pro at inventory management.

Let me start this article by asking this question

Say we have two products to sell.

One Jewellery with 30% margin and other simple FMCG product with 10%

Which one would you choose?

Pause and ponder.

Our natural answer would be Jewellery as it has a 30% margin.

But the actual answer to the question is insufficient data.

Why? We don't have any data regarding how fast a product sells.

Why do we need the fastness of a product?

Let us understand by example,

  1. If I sell jewellery worth Rs.100 twice a month, at the end of the month, My sale is 200 rupees and my profit amount is 60 rupees(30*2)

  2. If I sell FMCG worth Rs.100(Same value) 10 times a month, at the end of the month, My sale is 500 rupees and my profit amount is 100 rupees(10*10)

Overall gain = How much margin for every selling * How many times I sell

Since FMCG has more moving than jewellery, FMCG owner has a greater overall gain compared to Jewellery owner.[Rs.100 > Rs.60]

Your overall gain is directly proportional to margin and fastness.

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Disclaimer: This article is me speaking to me through this blog! Short Intro: If you want to innovate in a particular field, you need to understand how things work in the first place. Innovation is a