Explain the concept of "just-in-time inventory."

Explain the concept of "just-in-time inventory."

• A. A strategy that maximizes storage costs by ordering large quantities of products.
• B. A strategy that minimizes inventory levels by ordering just before a product is needed.
• C. Ordering products only when demanded by customers.
• D. Keeping inventory levels unchanged throughout the year.

Answer: (B)

The concept of "just-in-time inventory" focuses on minimizing inventory levels by ordering products just before they are needed for production or sale. This approach reduces the need for large storage spaces, lowers holding costs, and helps in preventing overstock and obsolescence of products. By timing the orders to coincide closely with demand, businesses can efficiently manage their resources and cash flow, resulting in lower inventory costs and improved responsiveness to market changes. This method is particularly effective in industries where products have a limited shelf life or where rapid inventory turnover is critical, such as in perishable goods or fashion retail.

The concept of "just-in-time inventory" focuses on minimizing inventory levels by ordering products just before they are needed for production or sale. This approach reduces the need for large storage spaces, lowers holding costs, and helps in preventing overstock and obsolescence of products. By timing the orders to coincide closely with demand, businesses can efficiently manage their resources and cash flow, resulting in lower inventory costs and improved responsiveness to market changes. This method is particularly effective in industries where products have a limited shelf life or where rapid inventory turnover is critical, such as in perishable goods or fashion retail.