Which factors are known to affect inventory levels?

The factors that most significantly affect inventory levels include demand variability, lead times, and order quantities.

Demand variability refers to the unpredictable fluctuations in customer demand. When there are significant changes in demand, businesses must adjust their inventory levels accordingly to either increase stock in anticipation of higher sales or decrease inventory to avoid excess.

Lead times are the duration between placing an order and receiving the goods. Longer lead times can lead businesses to hold more inventory as a buffer against stockouts, while shorter lead times might allow for reduced inventory levels since items can be restocked more quickly.

Order quantities also play a critical role in inventory management. The larger the order quantity, the more inventory is received at once, which can influence how much is stored on hand. Conversely, smaller order quantities may lead to more frequent reordering, impacting overall inventory levels throughout a business cycle.

While other options present various business aspects that can influence performance and strategy, they do not directly pinpoint factors that systematically alter inventory levels in a supply chain context as clearly as demand variability, lead times, and order quantities do.