Which of the following is NOT a reason for holding inventory?

Holding inventory serves various strategic purposes in operations management, and understanding these reasons helps in effective inventory management.

Seasonal demand refers to the fluctuations in product demand that occur at different times of the year. Businesses often hold inventory to prepare for these predictable spikes in demand to ensure they can meet customer needs without stockouts.

Safety stock is an additional quantity of inventory kept on hand to mitigate the risk of stockouts caused by uncertainties in supply and demand. This is particularly important in environments with variable lead times or demand patterns.

Pipeline inventory consists of goods that are in transit between vendors and warehouses or between warehouses and customers. Holding this inventory is essential to ensure that products are available as they move through the supply chain, thus maintaining a smooth flow of goods and services.

In contrast, excess holding costs are not a reason to hold inventory; rather, they represent a disadvantage of holding too much inventory. These costs include expenses related to storing goods, such as warehousing, insurance, and depreciation, which can negatively impact a company's overall financial performance. Therefore, while managing inventory is critical, incurring excess holding costs is undesirable and not a strategic reason for holding inventory.