What do the terms 'pushing' and 'pulling' inventory refer to?

The terms 'pushing' and 'pulling' inventory are integral to understanding inventory management and supply chain strategies. Pushing refers to producing items based on forecasted demand, meaning that goods are manufactured before they are actually needed in the market. This approach is driven by predictions and assumptions about future sales and can lead to excess inventory if forecasts are inaccurate.

On the other hand, pulling inventory means producing items as actual demand arises. In this model, production and inventory are driven by real-time customer orders, which helps reduce the risk of overstock and minimizes waste. This method allows companies to respond more flexibly to customer needs and fluctuations in demand.

This understanding of pushing and pulling provides insight into how businesses can optimize their inventory management strategies. Therefore, option A accurately captures the fundamental definitions of these concepts, highlighting the distinction between demand-driven production and forecast-based production.