APICS Certified Supply Chain Professional (CSCP) — Question 458

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

Answer options

• 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.

Correct answer: A

Explanation

Option A is correct because it describes how a manufacturer keeps inventory of essential components to ensure consistent production. The other options focus on different inventory strategies, such as preparing for peak demand (B), ensuring availability of slow-moving items (C), and offering variety to prevent lost sales (D), which do not primarily aim to balance supply and demand.