What is a potential risk associated with overstocking inventory?

Overstocking inventory can lead to higher operational costs due to storage requirements. When an organization holds more inventory than needed, various costs are incurred, including additional warehousing space, utilities, security, and insurance. Overstock can also lead to increased handling costs as employees spend more time managing excess stock. Furthermore, having excess inventory increases the risk of obsolescence or spoilage, particularly in industries dealing with perishable goods, which can further inflate costs. Thus, while maintaining a certain level of inventory is necessary for ensuring that products are available to meet customer demand, overstocking can significantly burden a company's finances and logistical operations.