Certified Supply Chain Professional (CSCP) Practice Exam

How do companies typically react to demand for functional products?

1. By following customer orders closely

2. With high variability in production

3. With long-term forecasting and stability

4. By reducing inventory levels significantly

The correct answer is: With long-term forecasting and stability

Companies that focus on functional products typically react to demand by emphasizing long-term forecasting and stability. Functional products have predictable demand patterns and often exhibit steady sales over time. This predictability allows companies to develop strategies that ensure they can meet customer needs without excessive fluctuations in production and inventory levels. By prioritizing long-term forecasting, companies can better align their production and supply chain processes with anticipated demand, thereby achieving efficiency and reducing the costs associated with overproduction or stockouts. This strategic approach results in a stable supply chain environment, enabling organizations to optimize resources and maintain consistent availability of functional products in the market. Additionally, while reducing inventory levels, closely following customer orders, or having high variability in production might be strategies appropriate for other types of products, they do not fit the stable demand characteristics typically seen in functional products. Thus, the focus on long-term forecasting reflects a deliberate and effective response to the needs of the market for these types of products.