ITPEC IP April 2019 Question 91
ITPEC IP April 2019 — Question 91 of 100
Build-to-order production starts after an order is received, so immediate shipment is difficult but excess finished-goods inventory is avoided. Production corresponds to actual demand rather than a forecast, reducing the risk of unsold completed products.
Answer (a)
Why not others:
- forecast accuracy and optimal finished-goods stock are central concerns of build-to-stock production
- losing orders because finished inventory is insufficient is a build-to-stock risk
- producing to a plan based on order forecasts also describes build-to-stock
Key rule: Build-to-order trades longer delivery lead time for lower finished-goods inventory and less forecast risk.
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