Nice post Ryan. To further expand on your comment Ryan, specifically detail for someone that might not completely understand the detail to what you explained specifically your comment towards less risk:
"Overall, no inventory means less risk to you as a retailer".
Inventory means that you must have a location or place in which to house that inventory. The cost of the location, rent, human resources in which to manage that inventory, supply chain management, purchasing, accounting, all costs associated with buying, housing, and shipping a product. In addition, Inventory is an asset in which you spent liquid assets (cash), or credit, same as cash because you will at most have probably a 30 day net. However, at the year end, the government looks at the inventory as an asset (assets are cash or inventory, machinary, computers, etc), you have to pay taxes on the inventory (depreciation is a form of expense, but you can only depreciate a percentage on the value of the asset over time) Inventory does not have a depreciation unless you find that it has become obsolete or you will not be able to sell it and it becomes scrap. Assets that are not liquid such as cash.
So tying my statement back to Ryans comment, the Risk is, do you have the liquidity to pay the taxes on the assets. Will you sell the inventory, if not, you are left holding the asset, which you can eventually write off over time (depreciation). However you have probably already invested a great deal of $ in liability insurance on your workers, the warehouse, and possible loss due to fire water damage, etc. Most of the costs are in Human Capital and the cost of handling the item more times than necessary. Six Sigma is a very excellent tool in which to identify and trim costs and improve quality, thus reducing costs, improving profitability while improving quality of product and/or quality of service.
For example you have an ecommerce site and you sell T-shirts. You do not integrate an efficient order management software and you are trying to handle the orders via email. The T's get made late, and they ship late, you are in a hurry and you don't have time to QA the T-shirt. Efficiency is, you utilize something like Zen Cart that has an efficent order management system and shipping capabilities.
Next problem. You have your people manually entering the sales into Quickbooks. But they are making mistakes and the reports from Zen don't match quickbooks and your CPA is charging you lots of $$$$'s to fix the problem. So you now figure out you need to take it a step further and integrate your order management system with your financial software so that you can have accurate financial records so you can actually look at an accurate profit and loss statement and income statement.
Just In Time (JIT) is a similar example of controlling costs. However, it is still a different principle. Walmart uses JIT, which can really cause many problems for suppliers. I won't expand on Walmart principles though.
