To achieve the objective of increased profits, a company that implements supply chain tactics must effectively address the conflicts between inventory investment and:

A fundamental conflict in supply chain management exists between inventory investment and customer service levels, often measured by order-fill rates. To achieve high order-fill rates, a company typically needs to hold more inventory (especially safety stock), which increases carrying costs and the risk of obsolescence. Conversely, a primary tactic to reduce costs is to lower inventory investment. This, however, increases the risk of stockouts, leading to lower fill rates and potentially lost sales. Effectively balancing this trade-off is essential for maximizing overall profitability.

A: Plant capacity and inventory are related (e.g., building inventory to smooth production), but the direct profitability trade-off is with customer service. B: Sales volume is a primary driver for inventory levels, not a conflicting objective in the context of this classic trade-off. C: Lead times are a key factor in determining inventory levels, but the core conflict is between the cost of that inventory and the service it provides.

Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation (6th ed.). Pearson. Chapter 11, "Managing Economies of Scale in a Supply Chain," discusses the trade-off between inventory cost and customer service (fill rates).

MIT OpenCourseWare. (2016). Introduction to Supply Chain Management. 1.260J / 15.770J / ESD.260J. Lecture notes on "Inventory Management" detail the relationship between inventory levels and service levels (e.g., fill rate).