True/False The high cost of inventory has motivated chain management and quality

Question

True/False The high cost of inventory has motivated chain management and quality management companies to focus on efficient supply reduce inventory. uncertainty along the supply chain it may be possible to significantly 3. Inventory is a stock of items kept by an organization to meet external demand only. 4. Inventory management is concerned with how much to order and when to order Large amounts of inventory may be purchased to take advantage of price discounts, but not as a hedge against future price increases 5. 6. Dependent demand items are typically final products demanded by an external customer Component parts or materials used in the production process to produce a final product are referred to as dependent demand items. 7. The ability to meet internal or external customer demand in a timely, efficien manner is referred to as the level of customer service. 8. A primary objective of supply chain management is to provide as high a lev customer service in terms of on-time delivery as possible. 9. 10. As the level of inventory increases to provide better customer service both inventory costs and quality-related customer service costs increase.

Explanation / Answer

Ans

1. True

2. True

3. False. Inventory includes items for meeting internal as well as external demands.

4. True

5. True, But still it depends upon the cost of holding that huge inventory and the speed with which it turns. It should be decided by weighing the price advantage gained against the cost incurred in holding the inventory for the period till it turns over. It is not wise to do this as a hedge against the risk of future price rise, because the price rise is uncertain but cost to hold the huge inventory is certain to happen.

6.False : The dependent demand items may be needed to assemble a final or intermediary product from a number of independant demand items, which is not necessarily meant for an external customer.

7. True

8. False. The level of customer service is the extent to which, the standards of service meet the expectations of the customer.

9. True

10.False. The increasing inventory cost will lead to lower incidents of deficiencies in customer service, and reduce the quality related customer service costs.

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