Dan Kennedy (and others) say "Inventory is Evil".
Owning an inventory-based business, I have to agree.
#1 it's expensive to get started or grow - as you have to buy inventory before you can sell it
#2 it's a giant risk for not moving (requiring mark downs), getting stolen, going obsolete, etc
#3 long cash conversion cycle means lots of debt
Macy's has a 50+ day cash conversion cycle (how long it takes from when they pay for the goods until they collect money from their customers), while Apply has a NEGATIVE 50 day cash conversion cycle - meaning they GET PAID 50 days before they have to pay their vendors. You can't understand how huge this is unless you've run a business before, but this means Apple can grow their business interest-free.
What are your thoughts on inventory? How do you manage it?
PS: For many businesses inventory is a NECESSARY evil which can be used to create value, but it's still evil.
Owning an inventory-based business, I have to agree.
#1 it's expensive to get started or grow - as you have to buy inventory before you can sell it
#2 it's a giant risk for not moving (requiring mark downs), getting stolen, going obsolete, etc
#3 long cash conversion cycle means lots of debt
Macy's has a 50+ day cash conversion cycle (how long it takes from when they pay for the goods until they collect money from their customers), while Apply has a NEGATIVE 50 day cash conversion cycle - meaning they GET PAID 50 days before they have to pay their vendors. You can't understand how huge this is unless you've run a business before, but this means Apple can grow their business interest-free.
What are your thoughts on inventory? How do you manage it?
PS: For many businesses inventory is a NECESSARY evil which can be used to create value, but it's still evil.
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