Questions: Which technique of controlling inventory costs involves maintaining some quantity of goods as a buffer to utilize in times of emergency? A. the ABC classification B. the economic order quantity method C. the just-in-time system D. the safety stock concept

Which technique of controlling inventory costs involves maintaining some quantity of goods as a buffer to utilize in times of emergency?
A. the ABC classification
B. the economic order quantity method
C. the just-in-time system
D. the safety stock concept

Transcript text: Which technique of controlling inventory costs involves maintaining some quantity of goods as a buffer to utilize in times of emergency? A. the ABC classification B. the economic order quantity method C. the just-in-time system D. the safety stock concept

Solution

The answer is D: the safety stock concept.

Explanation for each option:

A. The ABC classification: This method involves categorizing inventory into three categories (A, B, and C) based on their importance and value. It does not specifically involve maintaining a buffer stock for emergencies.

B. The economic order quantity (EOQ) method: This is a mathematical model used to determine the optimal order quantity that minimizes total inventory costs, including ordering and holding costs. It does not focus on maintaining a buffer stock.

C. The just-in-time (JIT) system: This inventory management strategy aims to reduce inventory levels by receiving goods only as they are needed in the production process, which minimizes holding costs. It does not involve maintaining a buffer stock.

D. The safety stock concept: This technique involves keeping extra inventory on hand to protect against uncertainties in demand or supply, serving as a buffer during emergencies or unexpected situations.

Summary: The safety stock concept is the technique that involves maintaining a buffer of inventory to use in emergencies.

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