The CEO of the organization has declared "war" on excessive inventory. Operational people within the organization want more inventory available to produce the products for the customer. The financial analysts agree with the CEO.
- Why are there 2 viewpoints, and why do they vary?
- What are the drawbacks to excess inventory?
- What are the benefits of excess inventory?
- What is your position on maintaining excess inventory? Provide the rationale behind your answer
The CEO and financial analysts typically prefer lower levels of inventory because of the carrying costs associated with having too much inventory. For example, most inventory is paid for with borrowed capital, so there are additional interest charges incurred by having excessive inventory levels. In addition, extra space may be required to store the extra inventory, and extra labor costs associated with receiving, inventorying, and moving the extra stock. Spoilage and obsolescence is of concern because with additional inventory comes the higher propensity for it to go bad; get ...
Material requirements planning are examined. The benefits of excess inventory are determined.