ACCA Financial Management (F9) Certification Practice Exam

Which term refers to the strategy of producing goods only as they are ordered?

1. Just-in-time production

2. Make-to-stock production

3. Lean manufacturing

4. Batch production

The correct answer is: Just-in-time production

The term that refers to the strategy of producing goods only as they are ordered is known as just-in-time production. This production strategy emphasizes minimizing inventory levels by aligning production schedules with customer demand. The core idea is to produce goods exactly when they are needed in the right amounts, reducing waste and carrying costs associated with excess inventory. This approach can enhance efficiency and responsiveness to customer needs. In contrast, make-to-stock production involves producing goods based on forecasted demand and stocking them in advance, which can lead to excess inventory if demand is overestimated. Lean manufacturing focuses on minimizing waste while maximizing productivity but is broader than just production strategies. Batch production refers to producing items in groups or batches rather than continuously or in one-off production runs, which is not aligned with the principles of just-in-time production.