Certified Supply Chain Professional (CSCP) Practice Exam

Why is keeping inventory moving crucial in supply chain management?

1. It enhances product durability

2. It reduces inventory costs

3. It increases lead times

4. It complicates order fulfillment

The correct answer is: It reduces inventory costs

Keeping inventory moving is crucial in supply chain management primarily because it reduces inventory costs. When inventory is stagnant, it incurs various carrying costs, including storage fees, insurance, and taxes. By ensuring that products move efficiently through the supply chain, businesses can minimize these costs and improve their cash flow, ultimately leading to better profitability. Additionally, moving inventory more quickly also helps to prevent issues such as obsolescence or spoilage, especially in industries dealing with perishable goods or fast-changing consumer trends. When products are sold and replaced regularly, companies can maintain a fresher inventory. While enhancing product durability and increasing lead times may seem appealing, they do not effectively contribute to cost reduction. Instead, keeping inventory in motion aims to streamline processes, optimize storage, and create a more responsive supply chain that meets customer demand without excess costs. Additionally, complicating order fulfillment would generally be detrimental to supply chain efficiency, while the goal is to simplify and speed up those processes.