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High versus low inventory levels

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Many companies build up their inventory levels to:
1. Accommodate for uncertainties in demand;
2. Take advantage of economies of scale;
3. Accommodate for unreliable suppliers;
4. Accommodate for quality issues;
5. Accommodate for production and scheduling errors.
Yet, JIT and Lean Manufacturing philosophies state that inventory is considered waste and should be eliminated as much as possible.
1. Please make a post which makes the case for building up inventory levels.
2. Please make a second post which makes the case for using JIT & Lean Manufacturing to eliminate as much inventory as possible.
3. Please make a third post in which you choose a company (or industry) and discuss which of these inventory methodologies you would follow and why.

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Solution Summary

The solution discusses situations wherein high and low inventory levels are beneficial for an organization. The solution makes a case for using JIT and Lean Manufacturing to eliminate as much inventory as possible.

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1. High inventory levels or high level of safety stock is preferred for those products that face a seasonal demand, ie, strong uptick in demand during peak seasons. For such products, it is important to create high inventory levels to cater to the increased demand for such peak season. This helps the organization to avoid shortage of goods in other ...

Solution provided by:
Sandeep Bardia, MBA
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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