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What are the advantages of holding large inventories?
AStorage becomes cheaper and stock never ages
BCash is released and holding costs disappear
CMost demands are met and bulk discounts are earned
DSuppliers can be dropped and reordering stops
Answer & Solution
Correct answer: C. Most demands are met and bulk discounts are earned
1. A large inventory means the firm can meet most production and customer demands as they arise.
2. Buying in large quantities also lets the company take advantage of quantity discounts.
3. Those two gains are real, which is why the decision is a genuine trade-off rather than an obvious choice.
4. Storage and obsolescence work against large inventories rather than for them, so option A states the case backwards.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 10 "Achieving World-Class Operations Management", section Inventory Management: Not Just Parts_
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