The top 2 primary functions of inventory are (1) To meet customer demand, and (2) To buffer against uncertainty in demand and/or supply.

• A. True
• B. False
• C. It Depends on Context
• D. Not a Primary Function

Answer: (A)

Inventory exists to keep the supply chain responsive. The first reason is to meet customer demand: by having goods available, you can fulfill orders promptly, maintain high service levels, and reduce stockouts. The second reason is to buffer against uncertainty: demand and supply can vary, lead times can stretch, and disruptions can occur, so carrying safety stock provides a cushion that helps keep operations running smoothly.

While there are other reasons inventory can be held (like taking advantage of bulk discounts or smoothing production, depending on the situation), those two—meeting demand and absorbing variability—are the fundamental, ongoing purposes. So the statement is correct.