APICS Certified Supply Chain Professional (CSCP) — Question 415

A company produces to stock and sells its products to distributors. The factor that most likely will contribute to the risk of loss in inventory investment is the:

Answer options

• A. accuracy of demand forecasts.
• B. replenishment lead time.
• C. level of product quality.
• D. variability in supply.

Correct answer: A

Explanation

The accuracy of demand forecasts is crucial because inaccurate predictions can lead to overproduction or stockouts, both of which can result in financial losses. The other options, while important, do not directly influence the financial risk associated with inventory investment as much as demand forecasting does.