Why is inventory management important?

Inventory management is crucial because it directly impacts a business's ability to meet customer demand while controlling costs. Maintaining the right amount of stock ensures that products are available when customers want to purchase them, which enhances satisfaction and loyalty. Conversely, having too much inventory can lead to increased holding costs, spoilage, or obsolescence, which can strain financial resources.

Proper inventory management balances supply and demand effectively, helping to minimize excess inventory costs while preventing stockouts that can lead to lost sales. This strategic approach allows businesses to make more informed decisions about ordering, storage, and sales forecasting, fundamentally contributing to overall operational efficiency and profitability.