Suppliers and high inventory

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Question

Suppliers and High Inventory: If Dell orders parts with minimal lead time, suppliers might need to keep a substantial inventory to meet Dell's demands promptly. This anticipatory stock could lead to higher holding costs for the suppliers due to storage, insurance, and capital. Incurring Holding Costs: Maintaining a high inventory translates to higher holding costs for the suppliers. These costs can be significant, particularly if the parts have a limited shelf life or are tech components that quickly become outdated. Cost Responsibility: Typically, suppliers attempt to pass these costs onto Dell by embedding them in the price of goods. However, as Dell competes on cost efficiency, they may resist such price increases. Ultimately, if suppliers cannot pass costs to Dell, they might absorb these costs, risking their profit margins. In many cases, these additional costs can trickle down to customers through higher product prices.

Reference no: EM133840888

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