This analysis subtracts the cost of carrying inventory from the gross profits generated from the sale of specific items. Review this article and use its analysis to justify stocking each and every slow-moving product. Critical items may not have an adjusted margin that is equal to or greater than the other costs the company incurs in the course of doing business. But they should be associated with other items whose profitability is large enough to compensate for carrying the average investment of these products. The adjusted margin analysis will also identify the actual profitability of slow-moving products that experience high gross margins.
Most companies have to maintain slow-moving products in inventory.
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