Cycle inventory exists in a supply chain because different stages exploit economies of scale to lower total cost.

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Cycle inventory refers to the inventory that is held at different stages of the supply chain to balance the production and demand fluctuations. These inventory buffers are created to take advantage of economies of scale, reduce the costs associated with frequent production setup changes, and improve production efficiency. Therefore, cycle inventory exists in a supply chain because different stages exploit economies of scale to lower total cost.

Cycle Inventory Exists in a Supply Chain Because Different Stages