MANAGEMENT ARTICLE
Do We Need to Increase Inventory When Sales Rise? Separating Demand and Price Effects Through Costco's Performance
Total sales, comparable sales, and FX-adjusted metrics answer different questions. Using Costco's public performance as a starting point, this article presents a framework for connecting quantity, inventory, and supply lead times to choose alternative ordering strategies.
When management receives a report that sales have increased, the remaining question is how much to increase orders and staffing for the next month. However, translating the sales growth rate directly into an inventory growth rate can lead to misunderstanding changes in selling prices or exchange rates as volume growth.…
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