Which of the following systems would be the most cost-efficient for inventory management of a low value item?

Which of the following systems would be the most cost-efficient for inventory management of a low value item?
A . Order point
B . Material requirements planning (MRP)
C . Periodic review
D . Economic order quantity (EOQ)

View Answer

Answer: C

Explanation:

Periodic review is a system that determines the order quantity and reorder point for an item based on the inventory position at fixed intervals. This system is suitable for inventory management of low value items, as it reduces the ordering and holding costs, simplifies the ordering process, and allows for grouping orders. Therefore, option C is correct. Option A is incorrect because order point is a system that triggers an order when the inventory level falls below a predetermined level. This system requires continuous monitoring of inventory levels, which may not be cost-efficient for low value items. Option B is incorrect because material requirements planning (MRP) is a system that calculates the requirements for components and materials based on the demand for end items. This system is more appropriate for items with dependent demand, rather than independent demand. Option D is incorrect because economic order quantity (EOQ) is a system that determines the optimal order quantity that minimizes the total ordering and holding costs. This system assumes constant and known demand and lead time, which may not be realistic for some items.

References: CPIM Part 2 Exam Content Manual, Version 8.0, Section E: Plan and Manage Inventory, Subsection E.2: Inventory Management Methods, p. 53.