What are the two questions answered by a basic Inventory Policy?

What are the two questions answered by a basic Inventory Policy?

• A. What should I order? How should I store it?
• B. How much should I order? When should I order it?
• C. How often should I order? What price should I pay?
• D. What quantity should I sell? When should I sell it?

Answer: (B)

The basic Inventory Policy primarily focuses on determining the optimal order quantity and the timing of those orders to effectively manage inventory levels. By addressing "How much should I order?" the policy helps ensure adequate stock is available to meet demand without overstocking, which can lead to increased holding costs and potential waste of resources. The second component, "When should I order it?" is equally vital, as it establishes the timing of orders to replenish inventory just before it runs low, thus preventing stockouts and maintaining service levels. Together, these two questions form the foundational elements of inventory management, allowing businesses to balance cost efficiency and customer satisfaction. Other options, while relevant to broader inventory management considerations, do not encapsulate the quintessential inquiries central to establishing a basic inventory policy.

The basic Inventory Policy primarily focuses on determining the optimal order quantity and the timing of those orders to effectively manage inventory levels. By addressing "How much should I order?" the policy helps ensure adequate stock is available to meet demand without overstocking, which can lead to increased holding costs and potential waste of resources. The second component, "When should I order it?" is equally vital, as it establishes the timing of orders to replenish inventory just before it runs low, thus preventing stockouts and maintaining service levels.

Together, these two questions form the foundational elements of inventory management, allowing businesses to balance cost efficiency and customer satisfaction. Other options, while relevant to broader inventory management considerations, do not encapsulate the quintessential inquiries central to establishing a basic inventory policy.