Inventory Control
Are you running out of space?
Inventory control is managing the quantity you keep of an item on hand. You may think great, I want as much as possible. However, I will show you how to think about it so you have a more optimal level. You want to keep an amount of something to a point where you don’t run out of it, but at the same time you don’t want such an abundance that causes problems. Having too much of something means your storage costs are higher and your money is sitting idle in inventory when it could been doing something more productive.
Keeping inventory has an associated storage cost. At the extreme you need a storage unit and you will pay money to store your belongings. However, even storing items in your house has an associated cost. Depending on your situation it will differ dramatically. I live in a house in Texas. I could probably buy a dozen Costco-sized toilet paper packages and hide them in my attic. My brother lives in Manhattan and buying more than 6 rolls would shrink his livable space.
Your fridge has a fixed amount of space. If you shop at Costco and buy a ton of food it may not all fit. Two gallons of milk are ready to fall out and your fresh corn spoiled after being hidden behind a box of kombucha (true story). You can see that at a minimum there’s an opportunity cost to each item you put into your fridge. One thing we decided for was to only store small containers of condiments. This way the doors can fit everything and things don’t get hidden. An extreme case was when we lived in a flat in Lisbon with 10 people. The fridge was much smaller than American sized and each room only got one shelf! As a result my wife would go to the market every day or two to get food. We would only store a liter of milk at a time. That’s a situation when I would have loved some more inventory but was constrained by storage. To be unconstrained by storage would mean purchasing another fridge which would’ve been an expensive solution in a rented flat.
In modern society buying something is so accessible that you don’t need to store much of anything. Water is on tap, gas is at every gas station, and you can get a delivery person to get you almost anything in a few hours.
The goal isn’t to never run out
If you are never running out of anything then you’ve probably have too much or you are constantly placing orders. Life has ups and downs so you probably won’t be ready for everything. I’m guessing you don’t have an extra hard drive on hand just in case yours happens to break tomorrow.
Since you’ve been adulting for awhile, you probably have a sense of what is the right amount of things. However, I do see people fall into the trap of going too big on non-disposal items. When determining what you need you often think of the largest use case and that can lead to having excess.
Let’s say you are buying a house and then going to remodel it. You think, yeah, I’ll use this house for me and my family, but what about the times when I have guests? What if we host Thanksgiving? If you host, then you’ll need a two guest rooms for those people from out of town, 20 place settings, a double oven for cooking, and a hot tub for 8. If you are optimizing for the extreme event that come very infrequently then you’ll have items that aren’t getting used and are essentially “stored” until needed.
When does it make sense to buy in bulk?
Often bulk purchases are done because they are more cost effective. Instead of buying a pack of 24 diapers for $12 you can get 140 for $35, a much better deal. However, if money is extremely tight that may not be an option and you have to run a tight ship restocking regularly. Note, if this is you I highly recommend finding somewhere to cut in order to buy diapers in bulk because I’ve witnessed that the price difference is so dramatic it will help you a lot.
So if bigger is cheaper then how big should you go? Certainly you don’t want to buy more than you need. I could purchase a gallon of molasses, but it would take years and be unwieldy to pour out a tablespoon. For me, I don’t want so much that it will expire or take me a year or longer to finish. However, there are exceptions. If buying a small bottle of shampoo will last 3 months and cost $5, but the big one will last you 2 years and is $15 then I’d probably go big assuming it fits just fine in the shower. However, as mentioned before, with condiments, we chose to go small.
If something is new then getting a smaller size first is good. It is no fun when you buy a 24 pack of lychee carbonated drinks only to find it tastes terrible.
Conclusion
Like all things, you situation will vary. What makes sense for my home may be ruinous for yours. However, I hope you can take this concept and find some applications in your life.