Potential costs in the event of nondelivery or inadequate quality. The higher such costs and the greater the risk of incurring them, the less latitude the company has for rapidly shifting supply sources or delaying negotiations or contracts. These costs influence required inventory levels and safety stocks, but they mainly affect production. Changing a source of supply might, for example, make it necessary to modify the production process. In the case of materials for highly automated production processes (such as certain alloy steels or carbide tools), the costs of such modification could be prohibitive.