Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to

Question

Quizplus · Accepted Answer

Producing or purchasing in large lots allows a stage of the supply chain to take advantage of economies of scale, which lowers the cost per unit produced. This results in a lower average cost of production, leading to a lower cost of goods sold and potential savings passed onto the customer. Therefore, cycle inventory exists to allow a stage of the supply chain to exploit economies of scale and lower cost.

Cycle Inventory Exists Because Producing or Purchasing in Large Lots