119. Read the following passage, then answer the question below.

In the 1950s, the Japanese automaker Toyota began developing a manufacturing approach that later became known as just-in-time production. Short of capital and storage space, the company sought to reduce waste by delivering parts to the assembly line only when they were needed. Instead of stockpiling inventory, factories kept supplies minimal and relied on a signaling system, originally cards called kanban, to trigger the production of replacements.

The benefits were considerable. With fewer parts in storage, firms tied up less money, and defects were discovered quickly, since a faulty batch could not hide in a warehouse for months. Competitors in the United States and Europe, who had long equated large inventories with security, adopted similar methods in the 1980s and 1990s, and just-in-time practices spread to industries from electronics to hospitals.

The same features that made the system efficient, however, made it fragile. Because suppliers deliver in small quantities and on tight schedules, a disruption anywhere can stop production everywhere. In 2011, an earthquake and tsunami in Japan damaged factories that made specialized components, and automakers around the world suspended production within days. A decade later, shortages of semiconductors forced many manufacturers to idle assembly lines despite strong demand.

These episodes have led some companies to rethink the balance. Rather than abandoning the approach, many are building modest reserves of critical parts and finding second sources of supply. The change involves a trade-off: extra inventory costs money in normal times, but it may prevent far larger losses in rare ones. Economists note that firms alone have weak incentives to hold such reserves, because the costs fall on them while some of the benefits of a stable supply chain are shared by society.

What can be inferred about firms and inventory reserves?