Here are some interesting points from the article which are worth considering...
- Excessive inventory tends to turn over less and remain in inventory longer than lower inventory levels. The longer inventoy remains in the warehouse, the more the company runs the risk of the inventory becoming obsolete.
- Holding inventory requires the company to pay carrying costs such as storage, insurance and possibly even interest charges.
- Any inventory maintained within warehouse shelves reduces the company's ability to purchase additional inventory or store additional finished products.
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