Although lower inventories and a just-in-time approach receive considerable attention in the business media, some organizations prefer high levels of inventory. Why would they want to hold a large inventory?

What will be an ideal response?

In the retail sector, some firms target a high level of inventory due to customer service considerations. If an item is in stock, then the customer can rely on finding it whenever they decide to place an order. If a customer values one-stop shopping, it may make sense to have high levels of inventory just to keep customers within the store. Some items are critical; a stockout may result in considerable inconvenience or a threat to safety and well-being. To the producer, a high cost of placing an order or high setup or transportation cost may provide motivation for a large stock of materials. A large inventory will improve labor and equipment utilization and will also help producers take advantage of quantity discounts.