Certified Supply Chain Professional (CSCP) Practice Exam

Which inventory management approach allows each stage to operate independently?

1. Centralized planning

2. Decentralized planning

3. Just-in-time planning

4. Demand forecasting

The correct answer is: Decentralized planning

The inventory management approach that allows each stage to operate independently is decentralized planning. This method enables different segments of the supply chain to make their own decisions regarding inventory levels, production schedules, and other operational aspects. Each stage can adapt its processes based on local demand, lead times, and specific circumstances without needing to coordinate excessively with other parts of the supply chain. Decentralized planning can lead to more agile responses to changes in demand or supply disruptions, as each entity can take actions that are most relevant to their specific situation. This fosters a level of autonomy that can be beneficial in dynamic environments where quick adjustments are necessary. Centralized planning, on the other hand, involves making inventory and operational decisions from a single point, which often results in less flexibility for individual stages. Just-in-time planning focuses on maintaining minimal inventory levels, which may require tighter coordination between stages. Demand forecasting is about predicting future demand and does not directly indicate how independent the stages can operate.