There are three main purposes or motives of holing inventories:

a. The transaction Motive : Which facilitates continuous production and timely execution of sales orders .

b. The precautionary Motive which necessitates the holding of inventories for meeting the unpredictable change in demand and supplies of materials.

c. The speculative Motive which induces to keep inventories for taking advantage of price fluctuations saving in re ordering costs and quantity discounts etc.