What do you understand by the term inventory? Explain the functions of inventory. 

Inventory refers to the stock of goods or materials that a business holds for production, sales, or consumption. Inventory management is the process of ensuring that the right amount of inventory is available at the right time, in the right place, and at the right cost.

Functions of inventory:

1. Meeting Customer Demand: Inventory serves as a buffer between demand and supply. It ensures that the required goods or materials are available when customers demand them. Inventory helps to avoid stockouts and lost sales, which can lead to dissatisfied customers and lost revenue.

2. Smoothing Production: Inventory can help to smooth production by ensuring that the required raw materials and components are available when needed. It allows businesses to take advantage of economies of scale by purchasing materials in bulk and reducing the cost of production.

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