What are the three basic reasons for keeping an inventory?

1.	What are the three basic reasons for keeping an inventory?
Answer» The three basic reasons are : 1. Time: The time lags present in the supply chain from supplier to user at every stage, requires that you maintain certain amounts of inventory to use in this lead time. Inventory is to be maintained for consumption during variation in lead time. 2. Uncertainty: inventories are maintained as buffers to meet the uncertainties in demand, supply and movement of goods. 3. Cost effectiveness: bulk buying movement and storing brings in cost effectiveness thus inventory is needed.

Answer»

The three basic reasons are :

1. Time: The time lags present in the supply chain from supplier to user at every stage, requires that you maintain certain amounts of inventory to use in this lead time. Inventory is to be maintained for consumption during variation in lead time.

2. Uncertainty: inventories are maintained as buffers to meet the uncertainties in demand, supply and movement of goods.

3. Cost effectiveness: bulk buying movement and storing brings in cost effectiveness thus inventory is needed.

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