AGA Exam CGFM Topic 4 Question 67 Discussion

What Is Efficient Inventory Management?

Efficient inventory management ensures that an organization has the right amount of inventory at the right time to meet operational needs without overstocking or understocking.

Proper inventory management minimizes disruptions to operations, including work stoppages due to lack of necessary materials or supplies.

Why Is Fewer Instances of Work Stoppage the Correct Answer?

Efficient inventory management ensures that required inventory is available when needed, reducing the risk of work delays or stoppages caused by inventory shortages.

Why Other Options Are Incorrect:

A . A low inventory turnover ratio: A low turnover ratio often indicates overstocking or slow-moving inventory, which is not a sign of efficiency.

B . High write-offs of obsolete inventory: Efficient management reduces obsolete inventory, leading to fewer write-offs, not more.

D . High total asset turnover: While efficient inventory management may contribute to overall asset efficiency, it does not directly result in a high total asset turnover ratio.

Reference and Documents:

GAO Guide on Inventory Management: Emphasizes the role of inventory management in avoiding operational disruptions.

Best Practices for Inventory Management (AGA): Highlights reduced work stoppages as a key benefit of effective inventory control.