CPIM Practice Exam

What element should be prioritized to ensure a high customer service level in an inventory system?

1. Lead time management

2. Safety stock

3. Order frequency

4. Carrying cost

The correct answer is: Safety stock

To ensure a high customer service level in an inventory system, prioritizing safety stock is essential. Safety stock acts as a buffer against uncertainties in demand and supply, enabling a company to meet customer orders even when unexpected increases in demand occur or when there's a disruption in supply. By maintaining an adequate level of safety stock, a business can avoid stockouts and fulfillment delays, thus enhancing its service level. While lead time management, order frequency, and carrying cost are important elements in inventory management, they do not directly contribute to maintaining service levels in the same way that safety stock does. Effective lead time management can help reduce the time items are in transit or waiting to be processed, which can contribute to overall efficiency but is not a direct safeguard against stockouts. Order frequency helps in determining how often stock is replenished but does not inherently improve service levels if safety stock is not considered. Lastly, carrying cost pertains to the total cost of holding inventory, which, while important for cost control, does not directly influence whether products are available to fulfill customer orders when needed. In summary, safety stock is prioritized in inventory systems to encapsulate the need for flexibility and responsiveness to customer demand fluctuations, thus playing a critical role in ensuring high customer service levels.