Question

What is the fundamental balance that inventory control seeks to achieve?

Options

• A balance between advertising and word-of-mouth promotion

• A balance between product design and packaging quality

• A balance between cost (capital tied up in stock) and customer satisfaction (customer service)

• A balance between order processing speed and transportation cost

Answer 1

Higher inventory improves customer service but ties up more capital. Inventory control therefore requires a balance between cost (capital tied up in stock) and the level of customer satisfaction or service provided.