What are the Consequences of Over Investment in Inventory?
Holding excessive inventory can have several negative impacts:
Increased Holding Costs: Storage, insurance, and maintenance costs rise with higher inventory levels. Obsolescence Risk: Inventory may become outdated, especially in fast-paced industries like technology. Cash Flow Issues: Tying up capital in inventory can limit a company's ability to invest in other areas. Reduced Profit Margins: Excessive stock can lead to markdowns and discounting to clear out inventory.