Reasons For The Inventory Of Inventory

1042 Words Apr 12th, 2016 5 Pages
Inventory represents the current amount of goods/products that a company has in stock. The inventory levels usually fluctuate due to the sales rate of a product. Inventory levels determine the increase or decrease in the production for a manufacturer or to order more or less of the product, if it is a stock item for a retail store. Inventory is usually a business’s largest asset and inventory decisions constitute a delicate balance between shortage costs, holding costs and ordering costs. Most companies have a base stock and a safety stock in their inventory. There are various reasons for inventories to fluctuate:
(a) Seasonal variations: This is one of the biggest reasons for inventory fluctuations especially for retail stores since with changing seasons, various major events, holidays; there is always a fluctuation in demand as compared to the normal business demand.
(b) Unexpected demands: Sometimes there is unexpected demand of certain products by the consumers like during a winter storm, hurricane or other event. This leads to unusually high demand for certain products and this can have a major effect on the inventory levels.
(c) Price discounts: Sometimes to take advantage of a certain type of discount from the manufacturer or supplier of a raw material, parts etc., businesses buy more product at a discounted price, which changes their inventory levels. This could be a temporary change in the inventory levels.
(d) Price increase: In certain circumstances, businesses…

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