Holding extra inventory to cushion against an unexpected increase in demand illustrates the _____________ motive.

Question

Quizplus · Accepted Answer

The precautionary motive involves holding extra inventory as a precaution against unexpected events or emergencies like sudden rises in demand, supply chain disruptions, etc. This motive is used to ensure that the company has enough stock to meet customer demand and avoid stockouts. The other motives, such as speculative, transaction, and just-in-time, do not apply to this scenario.

Holding Extra Inventory to Cushion Against an Unexpected Increase in Demand