Cycle inventory exists in a supply chain because different stages exploit economies of scale to

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Cycle inventory is the inventory held by a stage in the supply chain to meet demand fluctuations. It exists because different stages in the supply chain exploit economies of scale to lower total cost. By producing in large batches or holding large inventories, a stage can reduce unit costs and pass on the savings to the next stage or the end customer. This results in cycle inventory being held by the stage, which is an additional cost to the supply chain.

Cycle Inventory Exists in a Supply Chain Because Different Stages