Margin-based inventory optimization prioritizes products based on their contribution margin rather than just sales volume. It helps allocate inventory investment to the most profitable items. This approach enables smarter decisions by aligning inventory strategy with business profitability goals. For instance, a high-selling but low-margin item may receive lower priority than a slower-moving but high-margin product. Inventory systems that implement margin-based optimization use real-time sales and cost data to determine optimal stocking levels. This maximizes ROI on inventory while reducing the carrying cost of low-value or low-margin products.
