Problems related to Overstocking : There is a greater chance of theft by employees, Greater insurance and security costs , Unsold stock may become obsolete if fashion/trends change, Unsold stock may deteriorate. , Capital is tied up in inventory , More storage space is required which could be used for production, Problems related to Understocking : Placing frequent orders, thus increasing admin costs., Customers dissatisfaction, if they don’t receive their order on time, Damage to reputation if business is unable to complete orders., Production halts if stock runs out, If only buying small quantities = lose out on bulk-buying discounts.,

Management of Operations - Stock Management

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