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Thus there is a need to decide which approach is the best in different contexts. Generally, there are four basic approaches to managing inbound inventory. They are namely inventory speculation, inventory postponement, inventory consignment, and reverse inventory consignment.

The inventory speculation approach is one which a firm would purchase items and physically hold them within its storage facilities before demand or usage requirements for them are certain...

Benefits of such include quick response to demand or usage needs and the ability to protect against fluctuations in prices. This also allows a firm to make use of bulk discounts and reduce transportation costs. Cost disadvantages include opportunity cost and financial burden of having cash tied up in physical inventory; incurrence of high holding costs due to need for storage; handling and tracking; and expense of inventory obsolescence...

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