Benefits of holding Inventory

Holding inventories bears certain advantages for the enterprise.

The important advantages but not confined to the following only are as follows:

  1. Avoiding Losses of Sales:

By holding inventories, a firm can avoid sales losses on account of non-supply of goods at times demanded by its customers.

  1. Reducing Ordering Costs:

Ordering costs, i.e., the costs associated with individual orders such as typing, approving, mailing, etc. can be reduced, to a great extent, if the firm places large orders rather than several small orders.

  1. Achieving Efficient Production Run:

Holding sufficient inventories also ensures efficient production run. In other words, supply of sufficient inventories protects against shortage of raw materials that may at times interrupt production operation.

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