The two ways bad inventory costs you at once.

One problem wearing two masks

Walk any warehouse and you will find both at once: shelves heavy with items that have not moved in months, and empty slots where the fast sellers should be. Most organizations treat these as separate fires. Purchasing pushes to cut stock; sales pushes to never run out. The tug of war never ends, because both sides are right, and both are describing the same underlying failure: inventory that is not matched to real demand.

The double bill

Bad inventory charges you twice. First in frozen cash: every dollar sitting in a slow-moving SKU is a dollar not funding growth, and it quietly ages toward obsolescence. Second in lost sales: every stockout on a product customers wanted is margin that walked out the door, sometimes for good, taking a little loyalty with it. Both costs land in the same P&L, in the same period, and together they dwarf almost any software line item.

Why averages lie

The reason teams miss this is that forecast accuracy looks fine on average. The trouble is that on average hides the SKUs that matter. A portfolio can post a respectable headline error while being badly wrong on the exact items that drive revenue and cash. You do not manage a business on the average item; you manage it on the specific ones. Accuracy has to be read SKU by SKU, not as a single comforting number.

Fixing both at once

The way out is to stop optimizing one side at a time. Right-size each item against its own demand pattern and its own risk, and the overstock and the stockouts shrink together, because they were never two problems. You free the cash trapped in dead stock and protect availability on the items that earn, at the same time. That is the whole game: service and working capital moving in the same direction, instead of against each other.