Trade-offs within inventory control can arise across many supply chain activities, including:
- Transport costs versus delivery time; and
- Total costs versus customer service levels.
There are potential trade-offs that exist across inventory costs and stockholding costs.
Short lead times are possible when the supplying company holds finished goods inventory in its warehouse ready for sales orders to be placed, or can manufacture or purchase very quickly.
However, there may be additional cost for the company, with investment in the additional stock that has already been made or increased manufacturing capability and flexibility, through high levels of personnel.
The benefits to holding stock or having flexible “ready to go” employees is that when a customer order is placed, the order can be dispatched and delivered immediately. This is in contrast to longer lead times for make to order items.
