What is the primary objective of accurate inventory forecasting beyond preventing stockouts?

The primary objective of accurate inventory forecasting, beyond preventing stockouts, is to minimize holding costs and avoid excess inventory, thereby optimizing working capital. Stockouts lead to lost sales and dissatisfied customers, but holding excess inventory ties up capital in unsold goods, increasing storage costs, potential obsolescence, and the risk of price reductions to clear out slow-moving items. Accurate forecasting allows you to order the right amount of product to meet anticipated demand, reducing the need for large safety stocks and minimizing the risk of overstocking. For example, if you accurately forecast demand for 100 units of a product per month, you can order accordingly, avoiding the cost of storing an extra 50 units that might sit unsold for months. This optimization of inventory levels directly impacts profitability by reducing storage expenses, minimizing waste, and freeing up capital for other business investments, such as marketing or product development. Therefore, it's not only about having enough, but having the right amount to avoid unnecessary costs.