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Capital Lock

Capital lock is the period during which money invested into inventory is unavailable for other uses — spanning production, transit, receiving, storage, and the time until the inventory is sold and cash is collected.

Why It Matters

  • Longer capital lock reduces liquidity and limits growth capacity.
  • Increases financial risk during demand fluctuations.
  • Makes slow-moving or long-lead-time SKUs significantly less attractive, even with good margins.
  • Hides inefficiencies that are invisible when evaluating SKUs only by profit per unit.

Connection to Capital

Capital lock reduces the frequency of capital cycles, lowering effective returns even when per-cycle profit appears strong.

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