In typical make-to-stock manufacturing, the term inventorycan refer to raw material, manufacturing work-in-process, finished goods, component and sub-component parts, and supplies (consumables). Note that all of these are a part or a product of the build cycle.
Inventory management systems provide visibility of inventory levels and allow coordination of order size, quantity, and intervals. While the purpose of just-in-time operations management is to keep inventory levels low, following lean manufacturing principles, most businesses still maintain a supply of inventory.
With the understanding that inventory can be costly to maintain and generally consumes large amounts of working capital, respond to the following:
- Identify at least two reasons why a business would want to keep a supply of inventory on hand.
- Identify at least two advantages of the flexibility provided by maintaining inventory. Additionally, describe what a business can do with this flexibility.