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A manager is concerned about ongoing theft and the cost of storing raw materials - HSC - SSCE Business Studies - Question 11 - 2020 - Paper 1
Question 11
A manager is concerned about ongoing theft and the cost of storing raw materials. Which inventory management strategy would best address the manager’s concerns? A.... show full transcript
Worked Solution & Example Answer:A manager is concerned about ongoing theft and the cost of storing raw materials - HSC - SSCE Business Studies - Question 11 - 2020 - Paper 1
Step 1
Which inventory management strategy would best address the manager’s concerns?
Answer
The most suitable inventory management strategy in this context is Just-in-time (JIT). This approach minimizes inventory levels by ordering raw materials only as they are needed in the production process.
Explanation:
- Reduction of Inventory Costs: By implementing JIT, the manager can significantly reduce the costs associated with storing raw materials, as materials are received only when necessary.
- Minimizing Theft Risk: Since JIT maintains lower inventory on-site, it naturally reduces the opportunity for theft, addressing the manager's concern about ongoing theft.
- Efficiency in Operations: Additionally, JIT can enhance operational efficiency by reducing waste and ensuring that capital is not tied up in excess inventory, which is particularly beneficial in industries where materials can become outdated or spoiled.
Thus, the answer is A. Just-in-time.