Question

A reduction in inventory and safety stock because of the merging of uncertain and variable demands from the customers is called?

1) Demand forecasting
2) Inventory optimization
3) Supply chain management
4) Customer segmentation

Answer 1

The merging of uncertain and variable demands that leads to a reduction in inventory and safety stock is referred to as Inventory optimization. It seeks to manage stock levels efficiently to meet customer demands while minimizing costs. Thus, the option 4 is the correct answer.

Step-by-step explanation:

A reduction in inventory and safety stock because of the merging of uncertain and variable demands from customers is called Inventory optimization. Inventory optimization is a method that seeks to balance investment in inventory with service level goals, managing and reducing the overall stock levels while still meeting customer demands. It makes use of algorithms and analytics to better forecast demand, thus reducing the need for large safety stocks and consequentially cutting down on holding costs. It is important to understand supply and demand shifts because they can cause changes in equilibrium price and quantity, which in turn affect inventory levels.