MB-920 Describe Dynamics 365 Supply Chain Management Practice Question
Which TWO features in Dynamics 365 Supply Chain Management help reduce inventory carrying costs?
⚠ Common exam trap
Test-takers frequently confuse operational features like RFID tracking or intercompany planning with cost-reduction strategies, assuming any technology that improves visibility automatically reduces carrying costs, when in fact only VMI and demand forecasting directly target inventory levels and holding expenses.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Vendor-managed inventory
Vendor-managed inventory (VMI) shifts the responsibility for inventory replenishment to the supplier, allowing the supplier to monitor stock levels and trigger replenishment based on agreed targets. This reduces the need for the buying organization to hold safety stock, directly lowering inventory carrying costs such as storage, insurance, and obsolescence. Demand forecasting uses historical data and predictive analytics to align inventory levels with expected customer demand, minimizing overstock and stockouts, which also reduces carrying costs.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Vendor-managed inventory
Why this is correct
VMI shifts inventory ownership to suppliers, reducing carrying costs.
- ✗
Intercompany planning
Why it's wrong here
Intercompany planning optimizes internal supply but does not directly reduce carrying costs.
- ✗
Product variants
Why it's wrong here
Product variants increase complexity, not reduce carrying costs.
- ✗
RFID tracking
Why it's wrong here
RFID tracking improves accuracy but does not directly reduce carrying costs.
- ✓
Demand forecasting
Why this is correct
Demand forecasting reduces excess inventory by aligning stock with demand.
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