An important economic concept is return on investment. Generally speaking, the main goal of business owners is to try to maximize dollars earned/dollars investe

An important economic concept is return on investment. Generally speaking, the main goal of business owners is to try to maximize dollars earned/dollars invested. High inventory costs increase the denominator, which reduces ROI-the very thing you're trying to maximize. This all assumes that capital is your main constraint. But you can apply the same concepts to any other constraint. For example, if you're trying to maximize dollars earned/hour of labor, you want to minimize the amount of labor tied up in inventory.