Production smoothing

Production smoothing is the motive for holding inventories according to which a firm can reduce its costs by keeping the amount of output it produces steady and allowing its stock of inventories to respond to fluctuating sales.

Definition

According to Macroeconomics by Mankiw (7th edition),

Production smoothing. The motive for holding inventories according to which a firm can reduce its costs by keeping the amount of output it produces steady and allowing its stock of inventories to respond to fluctuating sales.