How does an organization decide whether or not to hold inventory?

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How does an organization decide whether or not to hold inventory? Why are these reasons important?

Nov 8th, 2015

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According to MSG, the reasons for holding inventory, even regarding inventory in the form of raw materials to make a product are to "meet variation in production, cater to cyclical and seasonal demand, economies of sale and procurement, take advantage of price increase and quality discounts, reduce transit costs and transit times, and the fact that long lead and high demand items need to be high in inventory" ("Need for Inventory Management - Why do Companies hold inventories?").  These reasons are important, because by acknowledging these reasons, the company producing the product out into the public can monitor the amount of profit made more accurately and not worry about loosing profit because of low demand so much.


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Nov 8th, 2015

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