If the order quantity increases, what is the expected effect on inventory levels?

When the order quantity increases, inventory levels are expected to rise correspondingly. This relationship stems from the basic principles of inventory management, which dictate that an increase in the quantity of goods ordered naturally leads to a higher volume of stock being received and stored.

A larger order quantity means more units are added to the existing stock, thereby increasing the overall inventory levels. This heightened inventory may help a business maintain service levels by ensuring adequate stock to meet customer demand, prevent stockouts, and take advantage of bulk purchasing benefits such as discounts.

While fluctuations in inventory may occur due to various factors such as demand variability or supply chain disruptions, the fundamental relationship between order quantity and inventory levels points to an increase in stock with larger orders. It's essential to manage the impact of increased inventory on holding costs and potential obsolescence, but primarily, an increase in order quantity is directly related to rising inventory levels.