Discuss CIPS L4M7 Exam Topic 12 Question 63

The managing director requires action to be taken to improve the organization's profitability and has asked for suggestions to enable this to be achieved. The procurement manager has said that a just-in-time (JIT) system should be introduced. Would such a system improve profitability?

AYes, because it would reduce stock holding costs

BNo, because it would increase buffer stock

CNo, because it would increase stock holding costs

DYes, because it would reduce stock turn rates

Suggested Answer: A

Just-in-Time (JIT) inventory management minimizes stock levels by synchronizing orders with production schedules, which:

Reduces holding costs: Less inventory means lower costs for storage and management.

Increases cash flow: Reduced stock levels free up working capital.

Whole-life asset management supports JIT as a cost-saving measure, focusing on maintaining lean inventories while meeting production needs.

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17 comments · newest first

Minna 11 months ago

Not sure about that, JIT can be risky if demand spikes.

Alyce 11 months ago

Definitely agree, less stock means less waste!

Celestina 11 months ago

Wait, wouldn't that mean we risk running out of stock?

Lenita 11 months ago

I think it might actually raise costs with more deliveries.

Pansy 11 months ago

JIT can cut down on storage costs!

Belen 12 months ago

I feel confused about the stock turn rates mentioned in option D; I thought JIT was supposed to improve that, not reduce it.

Luisa 12 months ago

I practiced a similar question, and I think reducing stock holding costs is a key benefit of JIT, so I would lean towards option A.

Chanel 1 year ago

I'm not entirely sure, but I thought JIT could lead to increased buffer stock in some cases, which might contradict its purpose.

Leontine 1 year ago

I remember studying JIT systems and how they can lower stock holding costs, so I think option A makes sense.

Novella 1 year ago

I remember learning about JIT in class, and I believe it's supposed to improve efficiency and reduce waste. So I'm thinking option A is the right answer, but I'll double-check my notes just to be sure.

Irma 1 year ago

Okay, let me see. A JIT system is supposed to reduce inventory, which could lower costs. But it might also increase buffer stock, which could offset the savings. I think I'll go with option B for now.

Micah 1 year ago

Hmm, I'm a bit unsure about this one. The question mentions that the procurement manager suggested a JIT system, but I'm not sure if that would actually increase profitability. I'll have to think it through carefully.

Adolph 1 year ago

I'm pretty confident that a JIT system would improve profitability by reducing stock holding costs, so I'm leaning towards option A.

Arlen 1 year ago

Yes, but overall it would still reduce costs and improve efficiency.

Janey 1 year ago

But wouldn't it increase buffer stock as well?

Keshia 1 year ago

I agree with Glory, it would reduce stock holding costs.

Glory 1 year ago

I think a JIT system would definitely improve profitability.

CIPS L4M7 Exam - Topic 12 Question 63 Discussion