CPIM Practice Exam

Which inventory control method consolidates decision-making for the entire company?

1. Decentralized inventory control

2. Centralized inventory control

3. Multi-echelon inventory control

4. Lean inventory control

The correct answer is: Centralized inventory control

The correct choice of centralized inventory control is grounded in its approach of consolidating decision-making across the entire organization. In a centralized inventory control system, decisions regarding inventory levels, ordering processes, and storage are managed from a single point or department, typically leading to a more cohesive strategy aligned with overall business goals. This allows the organization to optimize inventory levels, reduce excess stock, and streamline operations by implementing uniform policies that can enhance efficiency and reduce costs. Centralized inventory control is particularly beneficial for larger organizations that operate across multiple locations or divisions. By consolidating decision-making, companies can gain better visibility into inventory, improve forecasting accuracy, and leverage buying power to negotiate better terms with suppliers. This holistic view fosters better alignment and coordination between different parts of the organization, leading to improved supply chain performance. In contrast, decentralized inventory control disperses decision-making authority across various departments or locations, which can lead to inconsistencies and inefficiencies. Multi-echelon inventory control focuses on optimizing inventory across multiple levels of the supply chain, while lean inventory control emphasizes reducing waste and optimizing inventory levels without necessarily centralizing decision-making.