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What is the goal of inventory management?
ATo hold the largest possible stock at all times
BTo hold no stock of any kind at any time
CTo buy only from the single cheapest supplier
DTo cut ordering and holding costs while meeting demand
Answer & Solution
Correct answer: D. To cut ordering and holding costs while meeting demand
1. Two costs pull in opposite directions, the cost of ordering and the cost of holding.
2. The goal is to keep both of those down.
3. At the same time enough stock must remain on hand for production and sales to continue.
4. Options A and B each sacrifice one side of that balance entirely, which is why neither states the goal.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 10 "Achieving World-Class Operations Management", section Inventory Management: Not Just Parts_
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