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What is a customer order decoupling point? Why is it important?

Short Answer

Expert verified

The consumer order decoupling point is where inventory is stored to fulfill the consumer's demand as and when it arises. This point is important as it decides the inventory investment that is to be made by the firm/company.

Step by step solution

01

Customer decoupling point

Thecustomer decoupling point is the point at which the inventory position is determined, i.e., the consumer triggers the manufacturing activity. The closer this point is to the consumer, the quicker the consumer can be served. Selecting a customer order decoupling point is a strategic decision as it determines the time required to serve the customer and influences the inventory investment.

02

Importance of customer order decoupling point

The importance/significance of this point is that it determines the buffer stock of materials, goods, and parts that a supplier will keep with them. The fulfillment of consumer demand in the quickest way possible requires heavy inventory investment. The inventory investment made on ultimate goods is costlier than the investment made on raw material inventory.

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