Firms can significantly reduce the safety inventory they require by physically aggregating inventories in one location,which will generally decrease transportation costs.

Question

Quizplus · Accepted Answer

Aggregating inventories in one location can reduce safety inventory levels due to the risk pooling effect, but it may increase transportation costs because products are farther from some customers, leading to longer delivery routes.

Firms Can Significantly Reduce the Safety Inventory They Require by Physically