Charles Leikauf explains how inventory management drives profit in product businesses. Forty percent of lost U.S. sales come from stockouts. He recommends buying based on forecasted demand, not past sales, and using safety-stock calculations tied to peak historical sales and lead times.
Let's go into number 2. Number 2 is our favorite thing in the world, which is inventory. There's multiple components of inventory. We have stock, right? So how much do you currently have? We have the forecast and then we have payment terms, right? BMT. So stock forecast payment terms. So when you are purchasing stock, you want to do it off of how much you have forecasted, right? How much you are going to sell, not how much you sold. 40% of all lost sales in the United States come from not having enough stock. So if you're able to lead or fix stockouts as a fractional CFO or small business owner, you can make so much more money for you and for your clients by making sure you have the appropriate amount of stock. There's a calculation you can look up online called safety stock, which is how much do you need to buy if you sell the most you've ever sold with the longest amount of lead time. So you can look up the safety stock calculation here. [FOREIGN]
