Consulting Case Interview Practice Questions

Answer: a, b, d - Reducing inventory turns can happen by selling faster or reducing the amount of inventory held. Holding inventory is risky - your inventory can fall substantially in value in bad circumstances (product becomes obsolete due to new product launch, commodity risk, economic slowdown.) Additionally, you reduce holding costs. You spend less on your warehouse, inventory insurance and lose less to theft. You also have less cash invested at any given time.

Key Takeaway: Reducing inventory too much results in stockouts which makes customers unhappy, so there is a balance to be struck.