What is a potential disadvantage of bulk purchasing?

The choice highlighting increased carrying costs if not managed properly is valid as it points to a significant potential disadvantage of bulk purchasing. When organizations choose to buy in bulk, they often do so to achieve economies of scale and lower per-unit costs. However, storing large quantities of inventory can lead to increased carrying costs, which encompass expenses such as warehousing, storage, insurance, and potential spoilage or obsolescence of goods. If not effectively managed, these costs can outweigh the benefits gained from the bulk purchase.

Organizations must actively manage their inventory levels and consider factors such as demand forecasts and storage capabilities. Failure to do so may result in excess stock that ties up capital and increases operational costs. Thus, while bulk purchasing can be advantageous, it also requires diligent oversight to mitigate the risks associated with increased carrying costs.