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Inventory Management Software: The Cost of Stock Imbalances

Inventory Management Software: The Cost of Stock Imbalances
Many companies rely on inventory management software to maintain optimal stock levels.

Effective inventory control is often regarded as one of the cornerstones for success in business. Having overstocked items can inflate overhead costs while too many out-of-stock items can cause your customer satisfaction levels to take a nosedive. It’s one of the reasons why many companies today use inventory management software to find a balance.

These product fluctuations affect a variety of businesses, which is why this type of software isn’t limited to any one sector. For instance, it can be used in:

  • Retail
  • Warehousing and distribution
  • Manufacturing
  • Rental companies

One of the reasons inventory control is so important is that, beyond the upfront cost of purchasing your inventory, there are other costs—both direct and indirect—involved. Here is a look at how they could affect your business, and what inventory management software can do to help.

Capital Costs

As mentioned, this is the most apparent inventory cost you’ll encounter. In order to receive goods, you must first pay for them. It’s basic economics.

However, the more money you tie up in unsold inventory, the less money you’ll have at your disposal to improve other aspects of your business. This could include:

  • Marketing and promotion
  • Hiring staff
  • Store improvements
  • Research and training

By using inventory management software, you can track inventory more effectively and reduce the instances of product imbalances by establishing minimum and maximum stock levels.

Stock Storage Costs

It costs money to store product and materials. Whether you keep it in a back room of your shop, or you rent or own a warehouse, these spaces require an investment to maintain. This comes in the form of:

  • Lighting
  • Heating
  • Security
  • Maintenance
  • Rent/mortgage

In short, the more stock you carry, the more it will cost to store it. Which brings us to our next point…


Whether you sell clothing or cars, the longer your stock sits unsold, the more its value diminishes. On top of that, it also becomes more susceptible to:

  • Theft
  • Damage
  • Misplacement
  • Depreciation

Out-of-Stock Items

While it’s difficult to quantify, out-of-stock items will negatively impact the bottom line of your business. When a customer visits your store expecting to buy an item they need, only to find out you don’t have it, not only will you lose out on that potential sale, you risk losing a customer altogether.

So What’s the Solution?

One of the best things you can do to reduce your inventory costs and streamline your operation is to understand what those costs are. With its detailed reporting capability, inventory management software can help you recognize areas where your inventory control needs to tighten up. This will allow you to be more adaptable to changing market conditions and trends.

If you also run an online business, check out our post: 3 Ways Inventory Software Manages Your Online and In-Store Sales.

If you’re looking for inventory management software, call the specialists at Windware Softare. Our System Five is an integrated software program designed to help you manage all aspects of your business effectively.

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