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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2022 Annual Theme: Stakeholder Capitalism
Market-Based Solutions to Vital Economic Issues
Feb 1, 2014

Retail Inventory: Managing the Canary in the Coal Mine


Retail inventory is a statistic that is closely watched by retailers as well as their investors, lenders, and suppliers. Retailers not only benefit from inventory, but also bear the cost of excess inventory. Investors, lenders, and suppliers interpret this statistic for signs of the retailer’s health, future sales prospects, and impending costs. This article synthesizes the perspectives of investors, lenders, and suppliers on inventory. Moreover, the article shows that inventory turns, a commonly used metric to identify excess inventory, has important limitations that reduce its utility for all these stakeholders. It then presents a new metric, adjusted inventory turns, which can be effectively utilized by all stakeholders to assess whether a retailer is carrying too much or too little inventory.

Note: Research papers posted on Research Gate, including any findings, may differ from the final version chosen for publication in academic journals.

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