A company manufactures and sells a small kitchen appliance. The company’s custom

Question

A company manufactures and sells a small kitchen appliance.   The company’s customers are wholesale distributors who resell the product to retailers. There is no seasonality related to the sale of the product. The company’s manufacturing activities are all conducted domestically and all raw materials are purchased domestically. Analysis of its inventory reveals that the company’s Days Sales in Inventory is at 144 days. The company believes that 60 days of safety stock is adequate. How would you characterize the firm’s inventory management?

Explanation / Answer

C. The inventory management is not efficient as it is very high I. E. 144 days. As the safety stock of 60 days is sufficient to avoid loss of sale. Better inventory management would reduce the needless tieing up of capital.

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