CPIM Practice Exam

Which inventory rule is often applied to C items in ABC classification?

1. Order frequently to minimize carrying cost.

2. Ensure that forecast errors are tracked and followed up on quickly.

3. Order in small quantities.

4. Keep ample safety stocks.

The correct answer is: Keep ample safety stocks.

The focus of inventory management for C items in ABC classification typically involves maintaining adequate safety stocks. C items represent the least valuable inventory compared to A and B items, but they often comprise a large percentage of the total inventory volume. Because of their lower value, the approach to managing these items often emphasizes ensuring that there is enough stock on hand to meet demand without excess investment. By keeping ample safety stocks for C items, a business can safeguard against variability in demand or supply chain disruptions while minimizing the risk of stockouts, which could lead to lost sales or customer dissatisfaction. This strategy is effective because it balances the lower carrying costs associated with C items while ensuring that customer service levels remain high. Other strategies listed, such as frequently ordering or ordering in small quantities, may be more applicable to higher-value A items where more careful planning and management of inventory are warranted due to their higher significance in terms of cost and impact on the bottom line. Therefore, maintaining adequately safety stocks is the recognized rule when managing C items in inventory.