Operations Management
2nd Edition
ISBN: 9781260484687
Author: CACHON, Gerard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 10, Problem 1CQ
It is costly to hold inventory, but inventory can also be useful in a process because
- a. adding inventory to a process will shorten the average time a unit spends in a process.
- b. adding inventory to a process can help reduce situations in which sales are lost due to uncertain demand.
- c. adding inventory to a process is likely to increase quality.
- d. adding inventory to a process will increase the profit margin of the item.
Expert Solution & Answer
Summary Introduction
To determine: The advantage of using inventory.
Explanation of Solution
Determine the advantage of using inventory:
Even though holding inventory costs for the firm, it will be useful for the company to avoid stock-outs. Adding inventory helps the firm to manage the situation in which the products go out-of-stock due to uncertain demand. It might lead to loss of sales. Adding inventory helps to avoid this.
Hence, option (b) is correct and options (a), (c), and (d) are incorrect.
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Chapter 10 Solutions
Operations Management
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