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The company is a local retailer that specializes in milk sales and works with a few local milk producers. The company serves its local community
The company is a local retailer that specializes in milk sales and works with a few local milk producers. The company serves its local community and has quite predictable and steady demand. On reviewing the company's financial statements, you note that inventory days decreased from 10 days in 2022 to 8 days in 2023. Inventory days for the previous five years averaged around 10 days. Management explained that last year they negotiated a new delivery schedule with their suppliers, and now each supplier delivers twice a week instead of once a week. This year, the business adopted a new inventory management system that automatically places an order with the supplier once inventory reaches a certain level, and now the suppliers deliver based on their needs. What is your conclusion about whether the trend in inventory days is likely to continue next year in 2024? A) inventory days in 2024 will likely remain at 2023 levels B) inventory days will likely decrease in 2024 C) inventory days will likely increase in 2024.
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