Chapter 6, Problem 1SSQ

To determine

Identify the method followed by manufacturing firms to minimize inventories

Answer to Problem 1SSQ

b. Just-in-time

Explanation of Solution

Justification for incorrect option:

a. The quick response method is used by the manufacturers and retailers to communicate the inventory need to the supplier. Thus, this method does not minimize the inventory level. Hence, it is an incorrect option.

c. Just-in-case is an inventory management system under which the manufactures keeps buffers of inventory for unforeseen situation. This method increases the stock of inventory. Hence, it is an incorrect option.

d. Specific identification method identifies the cost of each item in ending inventory by separating purchases. This method is used to record the flow of inventory. Hence, it is an incorrect option.

Justification for correct option:

b. Just-in-time is a system of managing inventory by reducing the storing and moving inventory costs. It involves raw material purchase planning and careful management to stimulate a faster delivery of goods and attains customer satisfaction. Under this method inventory is ordered at the point of requirement. Hence, it is a correct option.

Conclusion

Therefore, the correct answer is option b.