Why is inventory management critical in category management?

Inventory management is critical in category management primarily because it minimizes stockouts and excess inventory. This aspect is vital for maintaining the balance between supply and demand. Effective inventory management ensures that products are available when customers want them, thereby preventing lost sales and enhancing customer satisfaction.

By keeping track of inventory levels, businesses can forecast demand more accurately and adjust their purchasing and stocking strategies accordingly, which enables them to respond swiftly to market changes. Conversely, excessive inventory can lead to increased holding costs, waste, and markdowns, which can negatively impact profitability. Therefore, the ability to manage inventory effectively is key to optimizing a retailer's product assortment and maximizing sales while minimizing costs. This is why minimizing stockouts and excess inventory is a fundamental aspect of successful category management.