Which arrangement reduces the need for extensive internal stockholding?

Which arrangement reduces the need for extensive internal stockholding?

• A. Long supplier qualification cycles
• B. Just-in-time deliveries from prime suppliers.
• C. Overstocking safety stock
• D. Large annual orders from many suppliers

Answer: (B)

Reducing the amount of internal stock hinges on coordinating purchases with actual consumption so materials arrive exactly when they’re needed. Just-in-time deliveries from prime suppliers achieve this by aligning replenishment with the production or service schedule, so items are received regularly in small quantities and kept to a minimum. With materials flowing in as required, you don’t need to hold large safety stocks or finished goods, which lowers both warehouse space needs and capital tied up in inventory. This setup works best when supplier performance and logistics are highly reliable, and demand forecasting is solid, because any disruption can create gaps if there isn’t buffer stock. The other options tend to increase the amount you keep: lengthy supplier qualification cycles can lengthen lead times and necessitate more buffering; keeping safety stock or placing large annual orders from many suppliers raises on-hand inventory and storage needs.

Reducing the amount of internal stock hinges on coordinating purchases with actual consumption so materials arrive exactly when they’re needed. Just-in-time deliveries from prime suppliers achieve this by aligning replenishment with the production or service schedule, so items are received regularly in small quantities and kept to a minimum. With materials flowing in as required, you don’t need to hold large safety stocks or finished goods, which lowers both warehouse space needs and capital tied up in inventory. This setup works best when supplier performance and logistics are highly reliable, and demand forecasting is solid, because any disruption can create gaps if there isn’t buffer stock. The other options tend to increase the amount you keep: lengthy supplier qualification cycles can lengthen lead times and necessitate more buffering; keeping safety stock or placing large annual orders from many suppliers raises on-hand inventory and storage needs.