Why firms fail to accurately stock the right quantities of products depends on multifarious factors.

Firstly, even despite the best economic forecasts, they are at best, strong likelihoods of an event occurring; hence predictions about future demand are likely to be wrong; thus firms cannot know the perfect quantity. Nevertheless, inventory systems have been developed that allow a company to reduce the risk of having excess or insufficient stock, like those governed by the ‘Just-in-time’ principle do best at limiting excess stock. An example of a firm that has demonstrated success with this model is Wal-Mart.

It should be noted that perfect quantity can be achieved on a custom-order basis. While this model is not ideal for all consumer goods, it does well under circumstances like those affiliated with luxury purchases like high-end automobiles or government infrastructure components like trains, planes or ships like those related to government awarded contracts to companies like Irving shipping. This implies that the product is produced after the consumer has demanded it and is willing to wait for it.

To conclude typical market circumstances for most goods make it difficult to accurately predict consumer demand and thereby maintain the leanest and fastest moving inventories.

Word Count: 200

Sources:

• http://web.archive.org/web/20040909200301/http://www.businessreport.com/newsDetail.cfm?aid=127

• http://money.howstuffworks.com/wal-mart.htm

• http://www.canadianmanufacturing.com/general/halifaxs-irving-big-winner-in-33-billion-federal-ship-contracts-44865

• http://www.huffingtonpost.com/theblog/archive/walmart-movie-posters.jpg