Lara GuevaraSupply Chain expert (Product and Service)

You Are Restocking the WRONG Products

6 Feb 2026 · 2 min

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1:36

Lara Guevara explains why restocking by sales volume wastes cash on low-profit items. Use contribution margin instead: rank your SKUs by how much profit each unit generates, then restock the winners and consider dropping the bottom 20%. One brand improved cash flow by shifting inventory investment toward high-margin products.

Chapters

When cash is tight, which products do you restock first? Contribution margin tells you Most founders prioritize inventory by sales volume or gut fill. But a high volume product with low CM ties up cash without generating profit. Here's how to use CM for inventory decisions. Reorder priority when you cannot restock everything, prioritize high CM products They generate more cash per unit sold stock depth High CM products deserve more safety stock a stock out cost you more because each missed sale is higher profit loss discontinuation decision Low CM products that also have low velocity those are candidates for sunsetting. They're tying up warehouse space and cash for minimal return Promotional decisions Running a sale Discount the low CM products and you're trying to clear protect margins on high CM winners. Example a brand I work with had 200k in inventory when we mapped by CM, 40% of their inventory was in products contributing less than 10% margin. They were funding losers while their winners stocked out. We shifted buying to high CM products. Same inventory investment, better cash generation. Ranked your SKUs by contribution margin. Your bottom 20% might need a hard look Comment priority for the inventory prioritization template.