Business – 4.2 Inventory management – Managing inventory | e-Consult
4.2 Inventory management – Managing inventory (1 questions)
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Raw‑material inventory is held to ensure that production can start promptly when demand arises, avoiding delays caused by shortages. It also allows a business to purchase inputs in bulk when prices are favourable, reducing unit costs.
- Advantages:
- Ensures continuous production and reduces the risk of stock‑outs.
- Enables bulk buying, which can lower purchase prices and provide price‑stability.
- Disadvantages:
- Capital is tied up in inventory, increasing carrying costs.
- Risk of obsolescence or spoilage, especially for perishable or rapidly changing materials.