What is the objective of understanding customer demand in inventory management?

Understanding customer demand in inventory management is crucial because it directly influences how inventory levels are maintained and adjusted. The primary goal is to align the stock on hand with the actual needs and buying patterns of customers. By accurately assessing demand, a business can determine the right quantity of each product to stock, reducing the risk of overstocking or stockouts.

Adjusting inventory levels accordingly allows a business to optimize its resources, minimize holding costs, and enhance customer satisfaction by ensuring that popular items are readily available while avoiding excess inventory of less desirable products. This aligns perfectly with effective inventory management practices aimed at maximizing sales and profitability through responsive stock management.