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Question 132 - CSCP discussion

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A company that has consistently achieved a high level of on-time delivery performance has decided to reduce its inventory level significantly. Which of the following outcomes is the most likely effect of that decision on the company's on time delivery performance?

A.
There will be no effect.
Answers
A.
There will be no effect.
B.
It will decline and then stabilize at a lower level.
Answers
B.
It will decline and then stabilize at a lower level.
C.
It will improve and then stabilize at a higher level.
Answers
C.
It will improve and then stabilize at a higher level.
D.
It will decline until sales erode.
Answers
D.
It will decline until sales erode.
Suggested answer: B

Explanation:

On-Time Delivery Performance: A high level of on-time delivery performance indicates that the company has effectively managed its inventory to meet customer demand consistently.

Reducing Inventory Levels: Significantly reducing inventory levels can initially disrupt the company's ability to meet delivery schedules, as there is less buffer stock available to accommodate variations in demand or supply chain disruptions.

Short-Term Impact: In the short term, the reduction in inventory is likely to lead to a decline in on-time delivery performance as the company adjusts to the new inventory levels and attempts to optimize its supply chain processes.

Long-Term Stabilization: Over time, the company may stabilize at a lower level of on-time delivery performance if it successfully implements measures to improve efficiency and accuracy in demand forecasting, production planning, and supplier coordination. However, achieving the previous high level of performance with lower inventory levels is challenging.

Christopher, M. (2016). Logistics & Supply Chain Management. Pearson UK.

Silver, E. A., Pyke, D. F., & Thomas, D. J. (2016). Inventory and Production Management in Supply Chains. CRC Press.

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asked 16/09/2024
Kwame Kankam-Boadu
34 questions
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