Question

A clothing retailer has been striving to reduce the costs of its inventory, but many of its customers are switching to competitors because they do not want to wait for the retailer to order the items. this retailer is experiencing _____.

A. customer satisfaction
B. stock-out costs
C. production concerns
D. holding costs
E. just-in-time inventory

Answer 1

The retailer is experiencing stock-out costs, which leads to lost sales and customers going to competitors due to a lack of inventory.

Step-by-step explanation:

The clothing retailer in question is experiencing stock-out costs. These occur when a business does not have enough inventory to meet customer demand, leading to potential loss of sales and customers switching to competitors. Implementing a just-in-time inventory system, where inventory is delivered as it is needed for production or sales, can reduce holding costs but may result in stock-outs if not managed carefully.

Conversely, economies of scale achieved by larger production or storage facilities can lower per-unit costs and help prevent stock-outs by ensuring ample supply. This indicates that the retailer is facing stock-outs, resulting in lost sales and dissatisfied customers. The retailer should aim to improve its inventory management and reduce the occurrence of stock-outs to retain its customers and improve customer satisfaction.