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Question 498 - CSCP discussion

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Which of the following actions is most likely to reduce inventory carrying costs?

A.
Utilize ABC classification.
Answers
A.
Utilize ABC classification.
B.
Standardize the items in inventory
Answers
B.
Standardize the items in inventory
C.
Set minimum inventory levels.
Answers
C.
Set minimum inventory levels.
D.
Initiate a vendor-managed inventory (VMI) program.
Answers
D.
Initiate a vendor-managed inventory (VMI) program.
Suggested answer: D

Explanation:

Improved Inventory Accuracy: Suppliers monitor inventory levels and ensure timely replenishment, reducing the likelihood of overstocking or stockouts.

Reduced Safety Stock: With better visibility and coordination, the need for high safety stock levels is diminished.

Enhanced Supply Chain Efficiency: Suppliers can optimize their production and delivery schedules based on actual demand, leading to more efficient use of resources and lower overall inventory levels.

Lower Administrative Costs: The automated process reduces the administrative burden associated with inventory management.

Waller, M., Johnson, M. E., & Davis, T. (1999). 'Vendor-Managed Inventory in the Retail Supply Chain.' Journal of Business Logistics, 20(1), 183-203.

Disney, S. M., & Towill, D. R. (2003). 'Vendor-managed inventory and bullwhip reduction in a two-level supply chain.' International Journal of Operations & Production Management, 23(6), 625-651.

asked 16/09/2024
Igor Vasiliev
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