Always having plenty of material in stock feels like a sensible precaution against supplier delays, but every euro invested in stock is capital tied up and unavailable for anything else — paying down borrowing, investing in a machine, covering an unexpected bill.
The hidden cost of too much stock
Beyond the capital tied up, an oversized store brings additional costs: physical space, the risk of deterioration or obsolescence, and time spent managing it. These are real costs rarely accounted for explicitly, but they weigh on the business all the same.
The opposite risk: too little stock
On the other hand, stock held too thin exposes you to production stoppages for want of material, with an equally concrete cost in delays and postponed work. The aim is not to minimise stock at all costs, but to find the level that balances the two opposing risks.
A practical test: how fast material turns over
Watching how quickly a particular material is actually consumed — its turnover — helps distinguish justified stock from capital sitting still out of habit. Slow-moving materials held in quantity "just in case" are usually the first place to look when freeing up capital.