Holding inventories bears certain advantages for the enterprise.
The important advantages but not confined to the following only are as follows:
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.
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.
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.