The higher inventory levels were also taking up more space. Fred Hollis had submitted a requisition to the finance director to pay for more storage racking. The extra racks were necessary because existing ones were full, and parts stored on the floor were suffering occasional damage in an increasingly cramped factory. Some parts were recently returned by a customer, who felt that damaged packaging indicated damaged products. Naturally, Fred was concerned when his request for more storage space was turned down owing to spending reductions imposed in response to price cuts demanded by customers