Certified Supply Chain Professional (CSCP) Practice Exam

In centralized inventory planning, what is the primary behavior of inventory?

1. Each supply chain stage determines its inventory

2. Inventory is pushed out to later stages in the supply chain

3. Inventory is minimized at each stage of supply

4. Inventory levels are dictated by external suppliers

The correct answer is: Inventory is pushed out to later stages in the supply chain

In centralized inventory planning, the primary behavior of inventory is that it is pushed out to later stages in the supply chain. This approach involves making decisions at a central location that encompasses the entire supply chain, aiming to optimize inventory across all stages rather than at individual points. When inventory is pushed out to later stages, it allows for a more coordinated and strategic distribution of stock, reducing the risk of excess inventory at any single stage and balancing the flow based on demand at subsequent stages. This method can enhance overall efficiency and service levels, as central planning takes into account the entire supply chain network, reducing redundancy and improving responsiveness to fluctuations in demand. Other options do not accurately describe centralized inventory behavior. For example, if inventory is minimized at each stage, it might imply a decentralized approach where each stage manages its inventory independently, which contradicts the concept of central control. Similarly, if inventory levels were dictated by external suppliers, it would indicate a reactive rather than strategic approach, misaligning with the proactive nature of centralized inventory planning.