Which of the following best describes excess inventory?

Which of the following best describes excess inventory?

• A. Inventory that is optimal for production
• B. Inventory that meets customer demand
• C. Inventory that exceeds customer demand
• D. Inventory that is immediately sold

Answer: (C)

Excess inventory is best described as inventory that exceeds customer demand. This situation arises when a company's stock levels surpass what's necessary to meet current sales and distribution needs. Holding excess inventory can lead to several challenges, such as increased holding costs, potential obsolescence, and tying up capital that could be used in other areas of the business. Understanding this concept is crucial in supply chain management as it emphasizes the importance of aligning inventory levels with actual customer demand to maximize efficiency and minimize waste. In contrast, options describing inventory that is optimal for production or that meets customer demand point to desirable inventory levels, while inventory that is immediately sold does not encompass the notion of excess at all. Thus, the distinction lies in recognizing how excess inventory deviates from what is needed to effectively satisfy market demands.

Excess inventory is best described as inventory that exceeds customer demand. This situation arises when a company's stock levels surpass what's necessary to meet current sales and distribution needs. Holding excess inventory can lead to several challenges, such as increased holding costs, potential obsolescence, and tying up capital that could be used in other areas of the business.

Understanding this concept is crucial in supply chain management as it emphasizes the importance of aligning inventory levels with actual customer demand to maximize efficiency and minimize waste. In contrast, options describing inventory that is optimal for production or that meets customer demand point to desirable inventory levels, while inventory that is immediately sold does not encompass the notion of excess at all. Thus, the distinction lies in recognizing how excess inventory deviates from what is needed to effectively satisfy market demands.