CPIM Practice Exam

What inventory strategy is characterized by ordering up to a certain maximum level?

1. Fixed order quantity

2. Economic order quantity

3. Mix-max system

4. Lot-for-lot

The correct answer is: Mix-max system

The inventory strategy characterized by ordering up to a certain maximum level is known as the min-max system. This approach involves setting a minimum inventory level (the point at which a reorder is triggered) and a maximum inventory level, which dictates the order quantity needed to replenish stock back to the maximum level. When the inventory falls to the minimum level, a new order is placed that increases the inventory back to the specified maximum, ensuring that there is enough stock on hand to meet demand while avoiding excessive overstocking. This method allows businesses to maintain control over their inventory levels, ensuring that they can meet customer demand without tying up excessive capital in inventory. It is particularly useful in environments where demand can fluctuate, as it provides a systematic way to manage stock levels based on pre-defined thresholds, making inventory management more predictable and efficient.