Length of time that goods are in transit decreases

Costs of running out of stock decreases

Variability of sales decreases

Cost of carrying inventory decreases

Relies on suppliers to deliver products when needed

Depends on a great number of highly motivated suppliers

Relies on competent suppliers, which eliminates the need for backflush costing

Shifts responsibility for order taking and fulfillment to the supplier

Increases standard delivery quantity

Decreases deliveries required to maintain production

Eliminated non-value-added operations

Increases total number of suppliers to ensure competitive bidding

$30,000

$50,000

$75,000

$100,000

Trade discounts, collection agencies, and credit approval

Trade discounts, cash discounts, and electronic funds transfers

Cash discounts, collection agencies, and electronic funds transfers

Factoring, pledging, and electronic funds transfers

Safety stock + (Lead time * Sales during lead time)

Lead time + (Safety stock * orders)

Safety stock * lead time * orders

Safety stock * lead time + sales during lead time/sales per week