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The shorter the customer lead time, the higher the inventory investment.
Shows the process of source to make to deliver and how much time and investment it takes for each type of order.
The inverted triangles represent customer order decoupling points.
Make-to-stock orders: customer lead time is short, and inventory investment is high. Decoupling point is at the end of the make cycle.
Assemble-to-Order: Customer lead time is medium, inventory investment is medium, and the decoupling process happens halfway through the make time.
Make-to-Order: Customer lead time is longer, inventory investment is low, and the decoupling process happens before the make cycle.
Engineer-to-order: Customer lead time is long, inventory investment is low, and the decoupling point is at it's source.
many firms serve a combination of these environments and a few will have all simultaneously.
The arrows going in a circle has to do with lead time. The order comes in and then goes back out, with the lead time determining the length of time. Make-to-stock typically has the shortest lead time, and engineer-to-order has the longest lead time.
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