Your supplier has it now. Your customers may want it six weeks from now.
The discount is real. So is the cash leaving the account. Inventory can create margin, but it also sits, moves, sells, and replenishes on a timeline that deserves more than a hopeful sales forecast.
If sell-through takes twice as long, does the purchase still make sense?
01
Discount is not contribution
A lower unit cost can improve margin, but only sold inventory produces revenue. Include freight, storage, markdown risk, spoilage or obsolescence where relevant.
02
Cash replenishes last
The sequence is supplier commitment, purchase, arrival, selling period, customer payment, then cash replenishment. The gap spans the full sequence.
03
Size the position
Buying less may preserve flexibility; buying more may secure price or availability. Compare the incremental contribution of each position rather than defaulting to the largest order.
Sources and further reading
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