What are the reason for holding inventory?

The primary reason for holding stock is to generate revenue through the sale of goods and services. To avoid the risk of a stock-out occurring and the subsequent potential towards lost sales, a company will typically hold some level of stock on hand. This is generally referred to as buffer or safety stock.

What is the primary purpose of inventory?

The main function of inventory is to provide operations with an ongoing supply of materials. To achieve this function effectively, your business should strive to find a sweet spot between too much and too little, without ever running out of stock.

What are the four primary reasons that companies hold inventory quizlet?

  • To Meet Customer Demand(cycle stock)
  • To Buffer Against Uncertainty in Demand and/or Supply(safety stock)
  • To Decouple Supply from Demand(strategic stock)
  • To Decouple Dependencies in the Supply Chain.