Certified Supply Chain Professional (CSCP) Practice Exam

Which statement is true regarding inventory location in planning?

1. It is standardized across all industries

2. It is determined based on transportation costs

3. It must consider both customer proximity and storage costs

4. It relies solely on supplier capabilities

The correct answer is: It must consider both customer proximity and storage costs

The statement regarding inventory location in planning that highlights the necessity of considering both customer proximity and storage costs reflects an important balance in supply chain management. When determining where to place inventory, organizations must evaluate how close they are to their customers to ensure timely delivery and enhance service levels. Proximity can significantly impact lead times and the overall customer experience. At the same time, storage costs play a critical role in this decision-making process. Businesses need to be mindful of the expenses associated with holding inventory, including warehousing costs, utilities, labor, and risks like obsolescence and spoilage. A strategic inventory location is one that optimizes these two factors: it should be near enough to customers to meet service expectations while also keeping storage costs manageable. This approach aids businesses in reinforcing efficiency within their supply chain, leading to cost savings and improved service, which are essential for maintaining competitive advantage.