Inventories: The Buffer between Production and Consumption
When a consumer or company buys something, the seller has three ways to meet the requirements of the purchase.
First, the seller can make the purchased item on the spot, a particularly common practice for service providers. Many services—haircuts, personal training, restaurant dining—are personal in nature; providing and producing the service are the same thing. You can’t perform a haircut at a time different from when the consumer is sitting in the chair.
Not all services require such immediacy. If you have your tax return done by an accountant, there is a period of time between when you hand over your documents and you are told how much you owe the Internal Revenue Service. ...
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