During these tough economic times, it is a challenge for companies to predict customer demand well--as a result; they are likely to end up with either excess inventory or stockouts. However, both these results are very expensive in these times. Due to tight credit markets, financing inventory is not only challenging, but also extremely expensive. However, one cannot err on the conservative side either--under declining business opportunities, companies can not afford to lose customers who are still buying. As a result, it is critical that companies streamline their supply chains--so they are responsive to changing customer demand and can meet their requirements without either carrying excess inventory or encountering stockouts.
Source: Industry Week