What can be the result of poor demand forecasting on inventory?

The result of poor demand forecasting on inventory can indeed lead to higher chances of excess inventory or stockouts. When demand is inaccurately predicted, a company may end up overstocking products that aren't selling as anticipated, leading to excess inventory. This situation ties up capital and incurs additional holding costs, such as storage expenses and potential obsolescence of goods.

Conversely, if the forecast underestimates demand, the business may face stockouts, meaning they do not have enough inventory to meet customer demand. This can result in lost sales and damage to customer relationships, as consumers turn to competitors who can provide products when needed.

Effective demand forecasting is crucial for maintaining optimal inventory levels to balance supply and demand. Therefore, when forecasting is inaccurate, it typically leads to challenges that exacerbate either surplus or shortages in inventory, making the selection of this answer quite apt.