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Why do companies hold inventory?


Rain
Posts: 10
 Rain
Topic starter
Active Member
Joined: 2 years ago

What are the reason for companies to hold inventory? The revenue is tied to the inventory hold cost in this case right?

4 Replies
WarehouseBlueprint
Posts: 62
Member
Joined: 5 years ago

Holding of the inventory is because there is always an imbalance in terms of supply and demand. Whenever the demand increases, there will be a lag time before the inventory can arrive in time. To prevent stock out from happening, the companies will hold the stock in the warehouse, so as to meet the demand whenever the needs arise.

Even though the inventory holding cost is incurred, it is less expensive than stock out incidents.

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Jessica Herron
Posts: 34
Eminent Member
Joined: 11 months ago

The primary reason for holding stock is to generate revenue through the sale of goods and services.

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Tom
Posts: 16
 Tom
Active Member
Joined: 2 years ago

What happen if the forecast is not accurate and the stocks are not selling?

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Mary
Posts: 21
 Mary
Eminent Member
Joined: 2 years ago

Then you will have goods basically sitting in the warehouse. Not an ideal situation for the company.

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