Having an inventory is not a sign of waste. According to Wild (2017), an inventory helps to keep on track all items such as goods in stock, the property, and the contents in a building. The management team can utilize the inventory to optimize the company’s profits. This can be through meeting variation in the production demand, catering to seasonal and cyclical demand, economies of scale in the procurement process, taking advantage of quantity discounts and price increase, and a reduction in the transit times and transit costs.
The management team can be justified to hold inventories while trying to lower the inventory levels. For a firm to make profits, holding the inventory will help in avoiding lost sales, it will lead to gaining quantity discounts, reducing order cost, reduction in the risk of production costs, and achieving an efficient production runs. On the other hand, it is prudent to try and have low inventory levels. Low inventory levels lead to more usable cash in the company reduced holding costs, an easier organization in the firm, and the creation of more space. Both holdings of the inventories and the lowering of the inventory levels lead to the optimization of profits in the organization (Centre, Alliance, & Insurance, 2016).
Having lean initiatives in a firm can help to reduce the expenses leading to increased profit margins. Having lean measures in a firm without the employees’ support and input,…
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