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Which planning strategy has the greatest inventory risk? a) Just-in-Time (JIT)

b) Safety Stock
c) Economic Order Quantity (EOQ)
d) Batch Production

User Adriandz
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1 Answer

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Final answer:

Safety stock has the greatest inventory risk as it deliberately keeps additional inventory on hand as a buffer against unexpected increases in demand or supply chain disruptions.

Step-by-step explanation:

The planning strategy that has the greatest inventory risk is Safety Stock. Safety stock refers to the extra inventory that a company holds in order to protect against unexpected increases in demand or supply chain disruptions. It serves as a buffer to ensure that the company can continue to fulfill customer orders even during these uncertainties.



Unlike other planning strategies like Just-in-Time (JIT) or Economic Order Quantity (EOQ) that aim to minimize inventory levels, safety stock deliberately keeps additional inventory on hand. This means that there is a higher risk of holding excess inventory if demand doesn't meet expectations or if there are fluctuations in supply.



For example, let's say a company uses JIT strategy and has no safety stock. If there is a sudden spike in demand or a delay in the supply of raw materials, the company will face the risk of stockouts and being unable to meet customer demand. On the other hand, if a company maintains a high level of safety stock, it may incur extra costs for carrying the excess inventory.

User Adesurirey
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