The correct answer is:
Inventory obsolescence.
If inventory is held for long periods there is a higher risk of it becoming obsolete before it can be sold.
Disruption of production schedules and loss of customer goodwill are more likely to occur if there is a inventory out, the likelihood of which is increased by holding lower amounts of inventory.
Shipping and handling costs are likely to increase if a reduction in the inventory holding period is achieved by placing smaller, more frequent orders. |
