Podcast
Questions and Answers
What happens to money when a business holds too much stock?
What happens to money when a business holds too much stock?
Money is tied up in unproductive assets.
Name two costs associated with holding inventory.
Name two costs associated with holding inventory.
Storage, handling, labor, insurance, theft and obsolescence
What risk does a business run if it has too little stock?
What risk does a business run if it has too little stock?
Losing business.
What might happen if a manufacturer runs out of an important component?
What might happen if a manufacturer runs out of an important component?
If a retailer buys stock that is not in demand, what may eventually happen?
If a retailer buys stock that is not in demand, what may eventually happen?
Flashcards
Poor Inventory Control
Poor Inventory Control
Holding too much, too little, or the wrong kind of stock, leading to tied-up capital and potential losses.
Inventory Holding Costs
Inventory Holding Costs
The costs associated with storing inventory, including storage, handling, insurance, theft, and obsolescence.
Risk of Insufficient Stock
Risk of Insufficient Stock
Losing potential revenue due to insufficient stock levels, which can lead to customer dissatisfaction and lost sales.
Capital tied up in Inventory
Capital tied up in Inventory
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Production Components
Production Components
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Study Notes
- Ineffective inventory control causes problems for businesses
- Poor inventory control can result in a business holding:
- Too much stock
- Too little stock
- The wrong sort of stock
- Large inventory quantities tie up money in unproductive assets
- Inventories do not generate returns until sold
- Building up inventories incurs costs and may cause insufficient revenue flow
- Inventory holding costs include:
- Storage
- Handling
- Labour
- Insurance
- Stock theft
- Stock becoming outdated
- Buying the wrong stock can lead to serious issues
- Retailers may have to sell unwanted stock at a loss
- Too little stock can cause a business to lose business
- Manufacturers running out of components may halt production
- Customers may go to rivals and never return if left waiting
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Description
Explore the challenges and costs associated with ineffective inventory control. Learn about the risks of holding too much, too little, or the wrong stock, and how it impacts business finances and customer satisfaction. Understand the various inventory holding costs involved.
