Inventory reductions in the supply chain should also be expected to yield lower operating costs. It is not unreasonable to expect, for many value chains, that a dollar in inventory reduction will yield a dollar in operating cost reductions. In reality, inventory hides inefficiencies in processes and generates some of its own. The supply process variability mentioned above is one area where significant inefficiencies are usually found. These include costly activities like expediting transportation or production, which results in the added cost for that activity and also in the disruption in the flow of other products.
Inventory also drives what is frequently unnecessary storage and increases the handling of products.
Inventory inhibits flexibility. Within the store, for example, too much inventory affects shelf productivity and impacts assortment opportunities. Even the time to market for new products can be impacted by inventory congested value chains. By focusing on the flow of supply to consumers, without the clouding effect of inventory, participants can discover previously hidden bottlenecks in the flow and address them. In turn, taking care of these now-visible inefficiencies can reduce process costs.