Practice Quiz

Supply Chain Management

Category - Inventory

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Which of the following statements is correct about obtaining a high level of accuracy for inventory records?
  1. It will usually lead to a reduction of inventory levels.
  2. It is not necessary to achieve because of safety stocks and safety lead-time.
  3. It will result in savings that are likely to be small and difficult to determine.
  4. It is probably impossible to achieve and will be costly to obtain.
Explanation
Answer: A - In a level strategy, inventories are built up in anticipation of future demand or backlogs are carried over from high to low demand periods. This ensures a high level of accuracy for inventory records and, due to low changing capacities, usually leads to a reduction in inventory levels as well.
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