Inventory IV

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     For an online retailer, inventory represents a major source of cost. Every item of inventory represents an item that has not been sold and which therefore represents unrealized gains. Moreover, the greater the inventory a retailer must hold the anticipation of filling customer orders, the greater the amount of money it must have invested in something that cannot be used for other purposes. Two tenets of inventory management are to turn over inventory as quickly as possible and to hold the minimum amount of inventory necessary to fulfill tomorrow's orders efficiently. Those two challenges are related. If lower levels of inventory are needed, then less inventory will be on hand and it will be turned over more quickly. In competing with another online retailer, however, a company will be inclined to hold inventory of as many items as exist. If a particular type of item is not in stock at one retailer, a customer will turn to a competing retailer. Holding all of the possible stock items in stock adds to inventory cost. A solution to this issue has been previously for a company to have one central, monster-sized warehouse. Centralizing inventory allows a company to hold the widest possible range of items at the lowest necessary levels. But since customers also value speed of delivery time, the "monster warehouse model" has a flaw in that it involves shipping from a location which may not be as close to a customer's location as otherwise and which therefore would be vulnerable to a competitor who can deliver faster.
     These considerations highlight the importance of information about consumer demand. At the basic level, knowing what items sell helps brick-and-mortar retailers determine what items to stock. In competitive online retail, companies with good data can stock minimum sufficient inventory levels. Even more significant, a national retailer that can forecast demand for specific items by region can move from the monster warehouse model to a system of regional warehouses, decreasing shipping time without increasing inventory costs.

The passage LEAST supports the inference that one or more elements of an online retailer's business would be adversely affected by

Review: Inventory IV


Explanation 

In this question, four statements are true, or rather, four elements are thing that we know from the passage will adversely hurt one of these businesses. The last one may be plausibly adverse, but we'll have no support that it's adverse. Questions with "least" or "except" tend to be time-consuming, since we tend to have to evaluate every answer choice thoroughly, which tends to involve checking the passage. Let's check the answers and see whether anything seems out of place. Some of these choices express points that we have already covered. The point of the passage is that inventory represents a cost, which supports (A), and that it can be reduced by increasing turnover, which supports (E). And we've seen that failing to have a particular item can hurt, so (C) is supported. We are down to (B) and (D). Choice (B) is supported, because it can be drawn as a conclusion from (A), (E), and (C) together: companies want to hold low levels and turn them over, but then they risk running out of inventory, if levels are too low. That leaves (D). We can confirm that (D) is not supported by the paragraph. The paragraph indicates that it can be costly to deliver slower than a competitor, but it doesn't express a need to deliver faster; on par may be good enough, according to the passage.

The correct answer is (D).


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