This is the recurrent concern in every company. There is of course not a unique reason but a global context that lead to this situation

 

Reason#1:Price pressure / Forecast presumption

It’s not a surprise that the pressure on the cost is getting stronger and stronger. Thus one of the most well-known option for the sourcer to better pricing is to commit for larger quantities. Simply trust the forecast that have been made by the sales & marketing, bet that the number will be reached, may be in a longer period than expected. So the target price of the product will be reached, but the excess inventory is not under control.

The problem will appear after couple of month production, if the committed volume does not reach the forecast. Another risk will be technical modifications which may happen, making some components inventory become obsolete!

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