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CA Intermediate · Financial Management and Strategic Management · Management of Inventory

Which of the following best describes the Just-in-Time (JIT) approach to inventory management?

JIT is an approach in which materials arrive just when production needs them, so inventory is kept at a minimum. It reduces carrying costs and waste and depends on dependable suppliers, unlike traditional systems that hold large buffer stocks.

  1. AHolding large buffer stocks to avoid stock-outs
  2. BReceiving materials only as they are needed in production, keeping inventory minimalCorrect
  3. COrdering only items classified as A in ABC analysis
  4. DOrdering quantities fixed by the maximum storage capacity

Explanation

JIT aims to cut inventory holding by timing deliveries to production needs, relying on reliable suppliers and short lead times. Large buffer stocks are the opposite of JIT.

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