What is a good practice to maintain inventory levels effectively?

Practicing the 80/20 inventory rule is an effective method for maintaining inventory levels because it helps businesses focus on the most impactful products. This rule, also known as the Pareto Principle, suggests that roughly 80% of effects come from 20% of the causes. In a retail context, this translates to the realization that a small fraction of inventory items typically generates the majority of sales and revenue. By identifying and prioritizing these key items, retailers can manage their stock more efficiently, ensuring they maintain adequate levels of high-performing products while avoiding overstocking less critical items. This targeted approach not only optimizes inventory turnover but also enhances cash flow and reduces holding costs, leading to better overall financial performance.

Maintaining inventory levels effectively requires a strategic approach, and understanding which items drive the business allows retailers to make informed decisions regarding purchasing, stock levels, and promotions.