ISM Exam INTE Topic 1 Question 14 Discussion

Actual exam question for ISM's Supply Management Integration exam

Question #: 14
Topic #: 1

[All Supply Management Integration Questions]

PQR, Inc. produces office supplies for big box retailers. This is a highly competitive market and the requirement for maintaining a continuous inventory of product for retailers is a high priority for PQR. Recently, the firm experienced shipping delays from overseas suppliers. Which of the costs associated with shortages would be MOST critical for PQR?

AIdle workers

BProduction downtime

CExpedited shipping

DLost sales

Show Suggested Answer

Suggested Answer: D

In a highly competitive market like office supplies, the most critical cost associated with shortag-es is typically lost sales. If PQR, Inc. experiences shipping delays and cannot maintain continuous inventory, customers are likely to turn to competitors to meet their needs. This can result in im-mediate lost sales and potentially long-term loss of customer loyalty. The cost of lost sales often outweighs other costs like idle workers or production downtime because it directly affects revenue and market share. Reference:

* Chopra, S., & Meindl, P. (2015). Supply Chain Management: Strategy, Planning, and Op-eration. Pearson.

* Christopher, M. (2016). Logistics & Supply Chain Management. Pearson UK.

by Hortencia at Sep 15, 2024, 04:47 AM

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1 months ago

I think the most critical cost for PQR would be lost sales.

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