Final answer:
A responsive supply chain strategy helps a company reduce inventory carrying costs by leveraging technology, optimizing transportation, and ensuring labor rights. Access to less congested transport routes and economies of scale in production further drive down costs, leading to increased profitability.
Step-by-step explanation:
When a company employs a responsive supply chain strategy, it maximizes its potential to minimize inventory carrying costs. This kind of strategy involves using the latest technology, efficient transportation methods and vehicles, and adapting smart policies to withstand national emergencies and ensure a smooth supply chain. Sharing innovation with developing countries can speed up product delivery to markets. Moreover, protecting labor rights integrates with supply chain management to create ethical and efficient operations.
In locations near less congested freeways and with access to rail or water transport, companies can significantly reduce their transportation expenses, improving overall profitability. For instance, a messenger company that benefits from lower gasoline prices can expand its delivery area and increase supply, thus boosting profits. Additionally, companies like Costco and Walmart exemplify how economies of scale help in reducing the average cost of production as output increases, resulting in larger factories that can produce goods more cheaply than smaller ones.