Key benefits include:
– Transportation cost savings. Positioning inventory closer to the point of use has obvious benefits in terms of reducing basic transportation costs. In addition, companies can eliminate or reduce premium transportation.
– Lower inventories. High inventory costs are perhaps the most significant hidden logistics expenses. With production in Asia or other overseas locations, companies typically carry relatively high levels of inventory near the target market to guard against supply chain disruptions such as storms at sea, strikes at ports, and other issues. This approach also increases risks that the inventory will lose value if prices fall or the product loses popularity in the marketplace.
In a challenging economy, lower inventories
help companies reduce costs and adjust more efficiently to changes in customer demand.