Final answer:
The process used by manufacturers and resellers to minimize inventory and align supplier deliveries with production needs is called just-in-time (JIT) delivery. It improves quality control and reduces warehousing requirements by having parts delivered as they are needed. JIT contrasts with economies of scale and bulk-reducing strategies, but it does create potential vulnerabilities in the supply chain.
Step-by-step explanation:
The inventory management and purchasing process that manufacturers and resellers use to minimize inventory levels and schedule deliveries from suppliers to synchronize with production needs is known as just-in-time (JIT) delivery. Adopted widely by American car manufacturers in the 1980s, this strategic approach ensures that components like bumpers, tires, and fenders are delivered only when needed for assembly, which significantly cuts down on warehousing requirements. Quality control is enhanced through JIT because any issues with supplier parts become apparent quickly, avoiding the accumulation of defective inventory. With JIT, suppliers often need to be located within a day's drive of the assembly plant, leading to the emergence of sub-assembly plants competing to win contracts and seeking cost-effective solutions, such as non-union labor.
In the broader context of production and economies of scale, companies like Costco or Walmart take advantage of large-scale operations to lower the unit costs of goods. This principle does not directly relate to JIT but emphasizes the strategic importance of production scale in managing costs. On the other hand, bulk reducing industries locate production near raw material sources because it is cheaper to ship the final product than the raw materials. Similarly, JIT can create vulnerabilities in the supply chain, where a strike at a sub-assembly plant can halt the entire production process due to the lack of inventory.