How should a retailer plan for inventory of goods and supplies?

How much inventory do you need to have on hand to appropriately service the number of customers you have and the expected growth? You want to have the right amount to fill all the orders, but not too much that you are saddled with products you can’t sell.

For example, if you know anyone that needs an iPhone 4 sublimation-ready case, I have a shelf full of them. I didn’t plan accordingly and ended up with too much product I could not sell. On the other side, though, if you are selling holiday ornaments, you don’t want to run out at the end of November and hope a supplier has them in stock. There is a good chance you are going to have to search far and wide and even possibly deal with an increased cost due to supply and demand. These are important decisions that need to be planned out. By using a budget as a tool, it helps you make the right decisions.

—MontCo Consulting and 2 Regular Guys