ACCA Applied Knowledge · Business and Technology · The relationship between accounting and other business functions
A retailer moves from holding large inventories to a just-in-time purchasing approach with a small number of suppliers. Which of the following is the most significant risk introduced for the purchasing function?
The key risk is greater dependence on a few suppliers: with minimal inventory buffers, any late or failed delivery can stop operations. JIT reduces holding costs and usually strengthens supplier relationships, so those options describe benefits rather than risks.
- AGreater dependence on suppliers, so a late or failed delivery can halt operationsCorrect
- BHigher inventory holding costs due to increased storage
- CReduced ability to form close relationships with suppliers
Explanation
JIT cuts inventory so there is little buffer; reliance on few suppliers means supply failures quickly disrupt operations. Holding costs fall under JIT, and JIT normally encourages closer supplier relationships, so the other options are wrong.
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