A new report from Forbes is shedding some light on one of the most damaging factors affecting overall U.S. gross domestic product and the bottom lines of businesses across the country. In Q1 2014, the report notes, GDP shrunk by an estimated 2.1%. Overstocked inventories contributed to 1.2% of that loss. While Q2 showed some return to form with growth of over 4%, industry insiders are worried that the lack of effective inventory control management will continue to cripple both American economic growth and the companies that fuel that growth.
In the Past, Many Understood the Value of Inventory Planning and Control
The problem, ostensibly, is that whereas in the past the majority of businesses understood that inventory controls were essential for a retail business in a service, not a goods, driven economy, that seems to have slipped a staggering number of small to medium sized businesses’ minds. Consider, according to the Office of the United States Trade Representative, 68% of U.S. GDP is built on the back of the service sector.
For retailers specializing in goods, this means fierce competition within a smaller, more insular sector of the economy. In turn, that means having to more closely monitor inventory levels, as competitive forces can either mean selling out all of your stock quickly or leaving it to rot in a warehouse; the latter, of course, is an extremely poor option, because it costs a lot of money to house that extra inventory, not to mention the opportunity it provides employees to walk off with your products (e.g. your money) in their pockets.
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