Question

Phantom inventory is created when:

A. Physical stock is greater than system inventory records

B. Actual physical stock perfectly matches system inventory records because of the use of RFID (radio frequency ID location) chips in products.

C. Physical stock does not match system inventory records

D. All of the above cause phantom inventory

Answer 1

Correct Answer - C - Physical Stock does not match system inventory records

Explanation -

Phantom Inventory is one of the most dreaded havocs in the supply chain of any company. It is created when there is a discrepancy among the physical stock and the system inventory records. It could have been caused by theft, data entry errors, breakage and deliberate fraud. If the Phantom inventory is not focussed upon, it may result in lost sales, inaccurate assessments of sales performance, reduced accuracy in demand forecasts, accounting issues and restatements.