Which inventory management technique focuses on customer demand?

The correct choice highlights the Just-in-Time (JIT) inventory management technique, which is specifically designed to align inventory levels with customer demand. This method minimizes the holding costs associated with excess inventory by ensuring that materials and products arrive only as they are needed in the production process or for sale. By closely monitoring customer purchasing patterns and scheduling production accordingly, companies can reduce waste and improve their cash flow.

Just-in-Time inventory systems often rely on strong relationships with suppliers, as they may need to respond quickly to changing demands. This strategy can lead to increased efficiency, lower costs, and a more responsive supply chain, ultimately enhancing customer satisfaction by making sure products are available when needed.

Other inventory management techniques, while useful in their own right, do not specifically focus on aligning inventories directly with customer demand. For instance, safety stock is a buffer against unexpected fluctuations in demand or supply chain disruptions, but it does not actively manage inventory levels based on demand signals. FIFO and LIFO are inventory valuation methods that dictate the order in which inventory is sold and have no inherent mechanism for adjusting inventory levels based on customer demand.