Question

What makes certain inventories risky? Why some more than others? Give some examples and explain

Answer 1

Inventories of perishable goods or goods with less life cycle value are very risky as they are associated with huge Qualitya and damage costs.

For example FMCG product like milk is a perishable goods with life cycle time of just 1 or 2 days, And during summer its life time even gets reduced further, so in these scenerios even though there is huge demand, it is advisable to stock in the inventories with less risky percentage, as the damage and quality costs will he higher with the course of time.

2. Let us consider another example of stocking in Cell phones of new brand. As any new brand the price falls by 10 -50% in the next year, it is not advisable to stock in inventories at high numbet, whete the inadequate sales in the intial days might result in less revenues and even losses during course of time, if goods not got sold. So minimal inventories is advisable for this kind.

So products/goods which are of high volatile demand and high quality or damage cost are not adbisable to have inventories in high number.