𝗕𝘂𝘀𝘁𝗶𝗻𝗴 𝗠𝘆𝘁𝗵𝘀 𝗼𝗳 𝗠𝗮𝗻𝘂𝗳𝗮𝗰𝘁𝘂𝗿𝗶𝗻𝗴 – 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗜𝘀 𝗔𝗻 𝗔𝘀𝘀𝗲𝘁

Myth: nventory is an asset” – say the accountants. It adds value to the business. The more the better.

Reality: Inventory = your Cash embedded in the business.

You can use it as collateral for a loan – at a fraction of book value?  

Book value is a fraction of market value, after that’s been discounted to sell.

So how much value is left when you’ll never even know until it’s sold?

Risk: Production gets more efficient at making batches customers didn’t order.

The difference is inventory.

So there’s less capacity left to make what they did order.

All this does is accumulate cost and tie up cash.

But Just-in-Time has its own problems.

Ring any bells for you?

Have you ever wondered why you have so much inventory and still get shortages?