Certified Supply Chain Professional (CSCP) Practice Exam

Which strategy helps balance inventory levels with customer service requirements?

1. Just-In-Time (JIT) inventory

2. Safety stock accumulation

3. Consignment inventory

4. Periodic review system

The correct answer is: Just-In-Time (JIT) inventory

The Just-In-Time (JIT) inventory strategy is designed to minimize inventory levels while ensuring that materials and products are available precisely when they are needed in the production process or for customer orders. This approach helps in balancing inventory levels with customer service requirements by reducing excess stock and associated holding costs. By relying on timely deliveries from suppliers and aligning production schedules with customer demand, JIT facilitates a leaner inventory system that helps to enhance responsiveness to customer needs. When executed properly, JIT can lead to improvement in service levels since companies can adjust more quickly to changes in demand without the burden of excessive inventory. The other strategies mentioned do not directly focus on the balance between inventory levels and customer service. Safety stock accumulation can provide a buffer against variability in demand or supply but may lead to higher inventory levels that do not necessarily enhance responsiveness. Consignment inventory involves goods that suppliers own until they are sold but does not inherently address the balance between inventory investment and customer service. A periodic review system involves regular checks of inventory levels but often leads to excess stock if the timing does not align with actual demand fluctuations. Thus, while each strategy has its merits, JIT specifically targets the balance between minimal inventory and effective customer service.