“Get comfortable with days of inventory, not weeks,” said Home Depot’s senior vice president of supply chain, in The Wall Street Journal.
Home Depot is not alone in reducing inventory levels. Nordstrom and Ross have also joined the ranks of retailers trimming inventory in hopes of slashing backroom and distribution costs, minimizing markdowns, and decluttering stores. Yet retailers that reduce inventory in the wrong way will also mark down their profits. Before shifting strategies, retailers seeking to “right-size” their inventory must consider the impact of limiting inventory on sales both in-store and online.
Companies can pinpoint which assortments and inventory levels fit just right by testing new inventory levels and assortments in a subset of stores, and comparing their performance to that of similar stores.