Operations Management: Processes and Supply Chains, 12th Edition

Inventory Placement

A fundamental supply chain design decision that affects performance is where to locate an inventory of finished goods. Placing inventories can have strategic implications, as in the case of international companies locating distribution centers (DCs) in foreign countries to preempt local competition by reducing customer delivery times. However, the issue for any firm producing standardized products is where to position the inventory in the supply chain. At one extreme, the firm could use centralized placement, which means keeping all the inventory of a product at a single location, such as a firm’s manufacturing plant or a warehouse, and shipping directly to each of its customers. The advantage would come from what is referred ...