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Inventory Management: Types and Benefits

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Inventory Management: Types and Benefits

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Questions and Answers

What is the primary goal of inventory management?

To increase inventory storage capacity

To reduce insurance premiums for inventory

To optimize inventory levels and prevent stockouts or overstocking (correct)

To minimize inventory costs

What is a potential risk of holding a large inventory?

Improved cash flow

Increased sales

Spoilage, theft, or damage (correct)

Higher profit margins

Why is inventory management important for businesses of any size?

To ensure that inventory is accurately valued on the balance sheet

To prevent stockouts or overstocking and maintain a competitive edge (correct)

To improve customer satisfaction

To reduce inventory costs

What is a common method used by small businesses to determine reorder points and quantities?

Using spreadsheet formulas Signup and view all the answers

What is the primary benefit of effective inventory management?

Improved ability to respond to changes in demand Signup and view all the answers

What type of software is commonly used by larger businesses for inventory management?

Specialized ERP software Signup and view all the answers

What type of inventory management strategy is used by companies that deal with perishable goods or time-sensitive products?

Just-in-time (JIT) manufacturing Signup and view all the answers

What is the main advantage of using just-in-time (JIT) manufacturing?

Reduced storage costs Signup and view all the answers

What is the purpose of physically counting or measuring inventory?

To put inventory on a balance sheet Signup and view all the answers

What type of companies do not have physical inventory and rely on service process management?

Financial services firms Signup and view all the answers

What is the main difference between JIT and MRP inventory management methods?

JIT is focused on reducing waste, while MRP is focused on reducing costs Signup and view all the answers

What is the name of the company that contributed the most to the development of JIT manufacturing?

Toyota Motor (TM) Signup and view all the answers