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INVENTORY





            WHY KEEP INVENTORY





                                                    meet
                                                  demand


                                    Lead                        Smoothing
                                    time.                      requirements

                                               why keep
                                               inventory

                                    Keep
                                                                 Quantity
                                 operations                      discount.
                                  running


                                                   Hedge.









            Why would a firm hold more inventory than is currently necessary
            to ensure the firm's operation? The following is a list of reasons
            for maintaining what would appear to be "excess" inventory.




                            January     February    March       April        May         June
              Demand           50          50          0         100         200         200
               Produce        100         100        100         100         100         100
             Month-end         50         100        200         200         100           0
              inventory

            Table 1 : Inventory requirements
   49   50   51   52   53   54   55   56   57   58   59