Section: Fundamentals of Supply Chain Management

To achieve increased profits, a company must balance inventory investment with order-fill rates. High order-fill rates often require maintaining higher levels of inventory to meet customer demand promptly, which can increase inventory holding costs. Conversely, minimizing inventory investment might lead to stockouts and lower order-fill rates, resulting in lost sales and customer dissatisfaction. Therefore, effective supply chain management involves finding an optimal balance where inventory levels are sufficient to meet demand without incurring excessive costs, thus enhancing profitability. This balance does not directly conflict with plant capacity, sales volume, or lead times as critically as it does with order-fill rates.References: Chopra, S.,
& Meindl, P. (2016). "Supply Chain Management: Strategy, Planning, and Operation."

Section: Implementation and Operations