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    Question

    A company shifts from monthly bulk purchases of raw

    material to frequent small deliveries that arrive exactly when needed for production. The main objective of this practice is to:
    A Increase safety stock Correct Answer Incorrect Answer
    B Reduce supplier dependency Correct Answer Incorrect Answer
    C Eliminate inventory holding and carrying cost Correct Answer Incorrect Answer
    D Increase production batch size Correct Answer Incorrect Answer
    E Standardise product design Correct Answer Incorrect Answer

    Solution

    This practice describes Just-in-Time (JIT) inventory management. By receiving frequent, small deliveries exactly when needed, a company minimizes the amount of stock sitting in a warehouse. This significantly reduces or eliminates: 

    • Warehousing costs: Rent, utilities, and labor required for storage.
    • Financial costs: Capital tied up in inventory (opportunity cost).
    • Risk costs: Potential for stock to become obsolete, damaged, or stolen while in storage

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