While keeping inventories as low as possible tends to reduce cost and improve efficiency, it also leaves a firm vulnerable to supply disruptions.

Question

Quizplus · Accepted Answer

When a firm keeps low inventories, it may not have enough buffer stock to sustain operations during supply disruptions. This makes the firm vulnerable to production stoppages and customer dissatisfaction, which can ultimately affect profitability.

While Keeping Inventories as Low as Possible Tends to Reduce