Which of the following situations is an example of inventory being held as a way to balance supply and demand?

Which of the following situations is an example of inventory being held as a way to balance supply and demand?
A . A manufacturer holds inventory of key components to maintain a level production schedule.
B . A manufacturer of seasonal products builds finished-goods inventory before the peak selling period.
C . A distributor maintains safety stock of slow-moving items at a central distribution center.
D . A retailer stocks a variety of sizes and colors of a fast-selling item to avoid losing sales.

View Answer

Answer: B

Explanation:

Holding inventory as a way to balance supply and demand involves stockpiling products in anticipation of future demand. For seasonal products, manufacturers often build up inventory before the peak selling period to ensure they can meet the increased demand during that time. This approach helps maintain a consistent production schedule and avoids potential stockouts or production bottlenecks during high-demand periods. By doing so, manufacturers can better align their supply capabilities with market demand fluctuations.

Reference: Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation. Pearson. Cachon, G., & Terwiesch, C. (2013). Matching Supply with Demand: An Introduction to Operations Management. McGraw-Hill Education.