Certified Professional Public Buyer (CPPB) Practice Test

What type of inventory management is required for the furniture systems supplier to maintain safety stock levels?

1. First in, first out

2. Min/max levels

3. Last in, first out

4. Just in time

The correct answer is: Min/max levels

Maintaining safety stock levels is crucial for managing inventory effectively, especially in the context of a furniture systems supplier. The min/max inventory management approach is designed specifically for this purpose. This method involves establishing minimum and maximum inventory levels for products to ensure that stock levels remain adequate to meet demand without overstocking. The minimum level acts as a safety net, providing a buffer against uncertainties in demand or supply chain disruptions. When the inventory level drops to the minimum threshold, it triggers a reorder to replenish stock back to the maximum level. This approach allows the supplier to balance inventory holding costs with service levels, ensuring that products are available when needed without excessive overstock. In contrast, first in, first out and last in, first out primarily focus on the order in which inventory is used or sold rather than on setting levels for safety stock. Just in time inventory, while efficient in reducing waste and holding costs, does not include the concept of safety stock as it relies on precise timing of supply deliveries to meet demand without additional buffer stock. Therefore, the min/max levels strategy is the most effective for managing safety stock in this context.