Certified Supply Chain Professional (CSCP) Practice Exam

What can happen if an organization does not manage demand effectively?

1. Increased customer loyalty

2. Under-utilization of resources

3. Higher profit margins

4. More successful product launches

The correct answer is: Under-utilization of resources

Effective demand management is critical for organizations to align their supply capabilities with market needs. When an organization does not manage demand effectively, one of the likely outcomes is under-utilization of resources. This situation often arises when the demand for products or services is not accurately forecasted. If the organization overestimates demand, it may produce more inventory than is needed, leading to excess stock that occupies space and utilizes labor and materials without generating sales. Conversely, if demand is underestimated, the organization might not allocate enough resources to meet customer needs, resulting in lost sales and dissatisfied customers. Moreover, under-utilization can result from a mismatch between production schedules and actual demand, where facilities, equipment, and labor are not fully utilized. This inefficiency not only affects immediate operations but can also have long-term impacts on profitability and overall business sustainability, as fixed costs remain constant despite lower output levels. Thus, managing demand effectively is essential for resource optimization, cost control, and ensuring customer satisfaction.