In order to achieve economies of scale, a manufacturer is interested in producing large quantities. Which of the following functions of inventory will assist the manufacturer in achieving this goal?
In order to achieve economies of scale, a manufacturer is interested in producing large quantities. Which of the following functions of inventory will assist the manufacturer in achieving this goal?
To achieve economies of scale, a manufacturer needs to produce large quantities without being restricted by the downstream demand. This can be facilitated by the decoupling function of inventory. Decoupling inventory acts as a buffer between different production stages, allowing each stage to operate independently. This enables the manufacturer to produce goods in large quantities, ensuring continuous operation and efficiency, thus achieving economies of scale.
Decoupling is a function of inventory that will assist the manufacturer in achieving economies of scale by enabling it to produce large quantities without being overly constrained by the downstream demand. Decoupling inventory acts as a buffer between different stages of production or supply chain, allowing for the independent operation of each stage. This enables a manufacturer to produce large quantities of goods without being overly concerned about downstream demand, as the decoupling inventory can absorb any imbalances between production and demand.
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Balancing supply and demand involves maintaining an optimal level of inventory to meet customer needs while minimizing holding costs.