Why inventory Bad?
Many of us think of inventory as a "necessary evil"
During times of booming markets and brisk sales, we appreciate the necessity of inventory as the "ammunition" for doing business. But when the market boom fizzles out and sales stump, we suddenly feel the "evil' of inventory, too. Inventory is thus a two-faced entity, sometimes an angel and sometimes a devil In JIT production, inventory always has only one face: the Devil's.
If you were to ask me why inventory is a bad thing. I could give you the following general reasons.
1. Inventory adds weight the interest payment burden
Anytime we need to procure capital, we must pay the cost of such capital. The general term for this cost is "interest." For whatever amount of time the materials purchased with such capital sit "idle" as inventory, the invested capital does nothing except incur interest debt and is therefore a pure and simple addition to the company's interest payment burden
2. Inventory takes up space
Obviously, inventory has some bulk and therefore needs space. If we allow inventory to accumulate, we soon must either put up with cramped factory floors or must invest further capital in new shelves or new warehouse facilities.
3. Inventory creates the need to convey and handle waste
Stopping something to keep it in one place implies movement before and after the stopping. Moving things to intermediate locations from where they will need to be moved again, and loading and unloading these things from the conveyors are all forms of waste.
4. Inventory invites defects
If left idle long enough, "nonperishable" items will begin to rust or otherwise suffer time-related deterioration.