ITPEC IP October 2022 Question 87
ITPEC IP October 2022 — Question 87 of 100
Build-to-order starts production after an order, so shipment takes time but excess finished-goods inventory is avoided. Actual demand triggers production, reducing dependence on forecasts and the risk of unsold products, although the customer must wait for manufacturing.
Answer (a)
Why not others:
- forecast accuracy and optimal finished-product inventory are central concerns of build-to-stock
- insufficient finished-product inventory is not the defining risk when production begins from actual orders
- producing to a forecast-based plan describes build-to-stock
Key rule: Build-to-order trades immediate shipment for low finished-goods inventory and lower overproduction risk.
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