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Average inventory is the calculation of the average inventory level over a specified period. Understanding exactly what is inside of the warehouse and where it is located can help manufacturers speed fulfillment, cut costs and improve customer service. Effective inventory management, which includes monitoring a warehouse's average inventory, allows suppliers to maintain the right balance of stock in the warehouse. It also helps suppliers to replenish when necessary and ensure product availability when and where it is needed without having to maintain costly excess back-up or buffer inventory.