Certified Supply Chain Professional (CSCP) Practice Exam

What occurs when there is inadequate capacity?

1. Demand will surpass supply, leading to stockouts

2. Production levels will be stable

3. Supply and demand will be in balance

4. Inventory levels will increase

The correct answer is: Demand will surpass supply, leading to stockouts

When there is inadequate capacity, demand surpassing supply is a common result. This situation leads to stockouts, which means that the inventory available is insufficient to meet customer demand. As consumers place orders for products that cannot be fulfilled due to limited capacity, it creates a gap where available inventory runs low or is depleted entirely. In contrast, stable production levels typically indicate that capacity aligns with demand; thus, inadequate capacity wouldn't allow for such stability. If supply and demand were in balance, there wouldn't be any concern regarding inadequate capacity at all. Finally, inventory levels would not increase under conditions of inadequate capacity; instead, they would decrease as demand outpaces the ability to supply products. Therefore, recognizing that inadequate capacity can directly lead to demand exceeding what can be supplied is critical for efficient supply chain management.