Best practices for inventory management
Proper inventory management is one of the practices that can contribute most to improving COGS. After all, inventory management seeks to optimize a company's stock as much as possible in line with demand so that, on the one hand, there are no stock-outs and, on the other hand, unnecessary stock is not stored in the company's warehouses.
In this regard, it is important to plan the objective demand with adequate precision in order to ensure that adequate stock is available at all times (plus the obvious safety stock necessary to avoid possible problems due to loss or breakage of goods).
If more inventory is stored than the company needs, the COGS increases and, consequently, the company's profitability is reduced. But, on the other hand, it is not advisable to have just the right amount of stock, since any eventuality can put the goods at risk of non-delivery, leading to dissatisfaction on the part of the customers.