ACCA Financial Management (F9) Certification Practice Exam

What process seeks to obtain goods from suppliers at the latest possible time to reduce inventory costs?

1. Just-in-time procurement

2. Bulk purchasing

3. Drop shipping

4. Consignment stock

The correct answer is: Just-in-time procurement

The process that seeks to obtain goods from suppliers at the latest possible time to reduce inventory costs is known as just-in-time procurement. This strategy aligns closely with inventory management techniques aimed at minimizing holding costs and improving efficiency. In just-in-time procurement, goods are ordered and received only as they are needed in the production process, rather than being stored in inventory for extended periods. This approach helps businesses reduce excess stock, lower warehousing costs, and minimize the risk of obsolescence. By timing the delivery of products to coincide with manufacturing or sales, organizations can optimize cash flow and resources more effectively. In contrast, the other methods mentioned involve different strategies that do not primarily focus on timing goods to minimize inventory costs. Bulk purchasing, for example, is aimed at obtaining goods in large quantities for discounts, which may increase inventory levels rather than reduce them. Drop shipping involves shipping products directly from the supplier to the customer, often used in e-commerce, but does not specifically target inventory reduction. Consignment stock refers to goods provided by a supplier to a retailer who pays for them only when sold. This can alleviate some inventory costs but does not inherently focus on timing like just-in-time procurement does. Therefore, just-in-time procurement is the methodology that effectively achieves