Sahay, Cavale and Mohan (2003:96) indicated that if a
company does not hold sufficient inventory, it could result in
the opportunity cost of lost business, resulting in lost revenue
for the company. However, holding excessive inventory
could result in the opportunity cost of funds being tied up
in inventory and possible obsolescent inventory. Therefore, a
detailed analysis of the opportunity cost trade-offs is required
to determine the optimum level of inventory for firms.