Commonly Used Terms
What is the Anticipation Inventory?
Every company keeps its stock in relation to its customer demand. Anticipation Inventory is the stock a company keeps expecting a change in customer demand in the near future. This stock would provide benefits to companies by satisfying their customers if there is a surge in demand.
We can take the example of a cold drinks retailer. The retailer would stock more cold drinks in summer than in winter. This is because he anticipates more customer demand for cold drinks in Summer.
- Anticipation inventory enables a business to meet changing consumer demands. For example, during Halloween times, there is a high demand for pumpkins. So if more pumpkins are stocked during this time, it will prove fruitful for the business person.
- It ensures that the retailer is able to provide consistent output and a stable workforce throughout the year without stock-outs during varying consumer demand.
- Protection against uncertainty is one of the biggest benefits of stocking products in an extra amount by estimating their future demand. The future is not certain, but if you are lucky enough to hold the products that have risen in the demands due to unforeseen circumstances, then you can cash in on the opportunity and earn more.
- It costs more money to store inventory, and the longer it sits around, the more money it will cost to the business, and the less likely a customer is to want it. The true cost of inventory includes the inventory itself, costs associated with storing the inventory, and the opportunity cost of the money that was used to purchase the inventory.
- The impact of anticipated inventory stays longer than the normal inventory error. In normal inventory error, the impact lasts only till the time the stock remains, but when a stock is stored in anticipation, the chances are that the business might have a hard time selling off the products because of its quantity.