Question

The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new inventory control system. The current system is inadequate because it results in stockouts that interrupt production and excess stocks of some materials that result in markdowns and high carrying costs. The new system, which will focus on reducing or completely eliminating carrying costs, will employ

a. a just-in-time inventory system.
b. the economic order quantity.
c. a reorder point.
d. materials requirements planning.

Answer 1

Answer: a. a just-in-time inventory system.

Explanation: The new system, which will focus on reducing or completely eliminating carrying costs, will employ a just-in-time inventory system which is defined as the inventory management approach that attempts to minimize, if not eliminate, carrying and stockout costs. This serves to improve efficiency, while reducing significantly, wastes in the production process, and minimize inventory carrying costs as it only receives production inputs only as needed in the production process.