Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 16

Which of the following is a characteristic of just-in-time inventory management systems?

Answer options

• A. Users determine the optimal level of safety stocks.
• B. They are applicable only to large organizations.
• C. They do not really increase overall economic efficiency because they merely shift inventory levels further up the supply chain.
• D. They rely heavily on high quality materials.

Correct answer: D

Explanation

The correct answer is D because just-in-time inventory management systems require high-quality materials to minimize waste and ensure timely production. Option A is incorrect as just-in-time systems typically minimize safety stock levels. Option B is false since these systems can be applied to organizations of all sizes. Option C is misleading because just-in-time practices can improve overall economic efficiency by reducing excess inventory.