What inventory management practices help avoid stockouts and overstock?

• A. Purchase as needed without tracking levels.
• B. Ignore cycle counts.
• C. Establish min/max levels, reorder points, par levels, and conduct regular cycle counts.
• D. Keep maximum quantities for all items regardless of usage.

Answer: (C)

Efficient inventory management relies on defining stock thresholds and regularly verifying actual quantities to prevent shortages and excess. Setting minimum and maximum levels establishes a safe range for each item—min keeps you from running out, max prevents overstock and tying up capital or space. A reorder point signals when to trigger replenishment, accounting for lead time so items arrive before the current stock is exhausted. Par levels provide a standard target quantity for items used consistently, helping standardize purchasing and avoid under- or over-ordering. Regular cycle counts compare what’s on the shelves with what the records say, catching discrepancies early and keeping data accurate. Put together, these practices give you visibility, control, and timely replenishment, reducing both stockouts and overstock.

Options that skip tracking or counts fall short: purchasing as needed without tracking levels loses visibility and can lead to stockouts or overstock; ignoring cycle counts allows data to drift and hides shortages or excess; keeping maximum quantities for all items regardless of usage wastes space and money. Therefore, the best approach is to establish min/max levels, reorder points, par levels, and conduct regular cycle counts.