What is a major consequence of inaccurate inventory records?

Inaccurate inventory records can significantly lead to increased operational costs. When inventory levels are not accurately recorded, it can result in overstocking or stockouts. Overstocking ties up capital in excess inventory, incurs additional storage costs, and may lead to losses from obsolescence or spoilage, depending on the type of goods managed. On the other hand, stockouts can disrupt operations and lead to lost sales opportunities, customer dissatisfaction, and potential loss of business, all of which further inflate operational costs.

Accurate inventory records are essential for effective supply chain management since they allow for precise demand forecasting, timely reordering, and optimal inventory turnover. This ensures that resources are used efficiently while avoiding the financial pitfalls associated with mismanagement of inventory.