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i. Meeting customers demand
Maintaining finished goods inventory allows a company to immediately fill custom demand for
product. Failing to maintain an adequate supply of FGI can lead to disappointed potential
customers and lost revenue.
ii. Protecting against Supply shortage and delivery delays.
A supply chain is only strong as its weakest link and accessibility to raw materials is sometimes disrupted. That is why some companies stocks certain raw material to protect themselves from disruptions in the supply chain and avoid idling their plants and other facilities.
ii. Separating operations in a process
Inventory sub assemblies or a partially processed raw material is often held in various stages throughout a process. Work in process inventory protects an organization when interruptions or break downs occur with a process. Maintaining wipe allows other operations to exist in another part of the process.
iv. Smoothing production requirement and reducing peak period capacity need.
Business that produce non perishable products and experience seasonal customers demand often
try to build up inventory during slow periods in anticipation of the high- demand period. This allows the company to maintain throughput levels during peak period and still meet higher customer demand.
v. Taking advantage of quality discount
Many suppliers offer discounts based on certain quality breaks because large orders tend to
reduce total processing and shipping costs while also allowing suppliers to take advantage of economies of scale in their own production process.
NatalieR answered the question on June 13, 2022 at 09:31
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