Question

Inventory is carried for various reasons. A supplier of lawn mowers may choose to carry an abundance of product in the spring. Those products represent a “sale” to the sales department, and a high level of customer service with a slim chance of lost sales. Discuss what these lawn mowers represent to the finance, marketing and manufacturing departments.

Answer 1

To finance, these lawn mowers represents a small investment incurred in holding cost to save a huge cost of lost sales and sum of money that will be unlocked and come back in circulation after sale. To marketing, it is a buffer against uncertainty which might caused by need to fulfill large orders after running campaigns. For manufacturing, it is something dynamic in nature that needs consistent look out to plan and pace the production process and a buffer against sudden need to step up the production and a possible need to subcontract or purchase from outside.