Final answer:
Improving low inventory turnover can be achieved by adopting just-in-time delivery, where smaller quantities of inventory are ordered more frequently. This can better match sales and reduce costs associated with storing large inventories. The concept of economies of scale also applies; larger output can decrease costs per unit, but strategic location selection is crucial for minimizing shipping costs.
Step-by-step explanation:
The mention of inventory turnover relates to business operations, specifically to how a company manages its inventory to improve efficiency and reduce costs. A low inventory turnover indicates that a company is not selling or replacing its inventory as quickly as it could be, which can lead to increased storage costs and decreased cash flow. One strategy to improve inventory turnover is ordering merchandise in smaller quantities but at more frequent intervals, which can better align inventory levels with actual sales patterns. This approach embraces the principles of just-in-time delivery, which was successfully adopted by Japanese car manufacturers in the 1980s to improve efficiency and reduce the need for large warehouses. It can lead to better quality control and reduced storage expenses, although it requires more precise coordination with suppliers.
The concept of economies of scale explains that increasing the quantity of output can lead to decreased costs per unit. This is exemplified by large retailers like Costco or Walmart. However, a balance must be struck as very large inventories can become costly if turnover is low. Moreover, locations for production should be strategically chosen to minimize shipping costs, taking advantage of ideal logistical points such as near uncrowded freeways or with access to rail or water transport.
From a broader perspective, optimizing inventory turnover and scale of production can ultimately lead to consumers benefitting from increased productivity, resulting in a wider variety of goods available at lower prices. However, this may come at the expense of increased labor exploitation, as seen with the pressure on wages and benefits due to companies seeking low-cost, non-union labor.