Consequences of Understocking: Reduced cost for storage., Reduced cost for security and insurance., Sales can decline if stock levels are lower than demand., Can lead to stock running out causing production to stop., Customers may not get their orders leading to a poor reputation for the business., Can lead to a reputation for being unreliable if orders are not fulfilled., Consequences of Overstocking: Increased cost of storage., Larger insurance costs and increased security., Capital is tied up in stock so cannot be used for investment in other areas., Increased risk of stock being stolen or damaged, Increased risk of stock becoming obsolete., Increased risk of stock going out of fashion/perishing., Allows business to meet any increase in demand from customers, It provides a buffer to prevent production disruptions in case of supply chain issues,

Consequences - Overstocking vs Understocking

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