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Expanded Explanation: Inventory management involves overseeing the flow of items from manufacturer to warehouse and from these facilities to point of sale. Effective inventory management helps maintain the right balance of stock in a warehouse to ensure high customer order fill rates and good product availability.

Potential Issues: Poor inventory management can lead to either excess stock or stockouts, both of which are detrimental to cash flow and profitability. Overstocking ties up cash, while understocking can result in lost sales and unhappy customers.

Example: For a small retail store, the inventory includes all the items available for sale, like clothing or electronics.

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