Which of the following types of operational strategies typically would result in the lowest inventory cost?

Which of the following types of operational strategies typically would result in the lowest inventory cost?
A . Mixed-model
B . Level
C . Chase
D . Hybrid

View Answer

Answer: C

Explanation:

A chase operational strategy is one that adjusts production to match the demand pattern. This means that the inventory level is kept low, as the output is synchronized with the demand. This reduces the inventory cost, as there is less need for holding, ordering, and carrying inventory. A chase strategy also minimizes the risk of obsolescence, spoilage, or excess inventory.

A level operational strategy is one that maintains a constant output rate, production rate, or workforce level. This means that the inventory level fluctuates, as the output may not match the demand. This increases the inventory cost, as there is more need for holding, ordering, and carrying inventory. A level strategy also increases the risk of stockouts, overstocking, or waste.

A mixed-model operational strategy is one that produces several products with the same resources. This means that the inventory level varies, as the output depends on the product mix and the demand. This may increase or decrease the inventory cost, depending on the product characteristics, demand variability, and resource utilization. A mixed-model strategy also requires more flexibility and coordination in production planning and scheduling.

A hybrid operational strategy is one that combines elements of chase and level strategies. This means that the inventory level is balanced, as the output is partly adjusted to the demand and partly kept constant. This may increase or decrease the inventory cost, depending on the degree of adjustment and constancy. A hybrid strategy also requires more trade-offs and compromises in production decision making.

Reference: APICS Exam Handbook, page 12

CPIM Part 1 Study Guide, page 19

CPIM Part 2 Study Guide, page 17