(b) Reasons for the low inventory holding periods
(i) The company may have put tight inventory control policies into force, either through choice
or necessity in order to minimise the working capital requirement during a period of growth.
(ii) The company may use superior manufacturing process controls compared to the other firms in the industry, eg just in time (JIT). This will minimise the levels of raw material inventories and work in progress.
(iii) The company may occupy a particular niche in the market which means that its product range is small by comparison with other firms in the industry. This would mean that it would have to hold a lower level of inventory than other firms in the industry.
Inventory turnover has however been increasing steadily over the period in question. |
