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# For an online retailer, inventory represents a major source of cost. E

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Re: For an online retailer, inventory represents a major source of cost. E [#permalink]
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Official Explanation

2. The passage suggests that which of the following is true of a centralized warehouse model?

Difficulty Level: 700

Explanation

This question asks about the centralized model, which is the "monster" warehouse model. In this question, again, "suggests" could be "directly states" or "strongly implies." What's true of the warehouse model?

Choice (A) encourages us to consider how much opinion is in the passage, something we probably should have considered earlier. The passage is fairly low on the opinion; a bit of the author's passion edges in when he discusses the importance of information, but otherwise the passage is largely factual. The author is not decisive in calling one inventory model better than another. If and once you are convinced of this, answer choices (A), (C), and (D) are out as expressing too strong a judgment. We have reason to believe that the author might actually prefer the regional model discussed at the end of the passage under certain conditions (with superior information), but even on that he is not decisive. Next, choice (B) is a distortion of the truth; it's close to what the passage says, but (B) says at the highest necessary levels, not the lowest possible levels.

The correct answer is (E).

Hope it helps

lnm87
How option B is wrong for Q2...!!?
Can anyone explain.
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Re: For an online retailer, inventory represents a major source of cost. E [#permalink]
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Quote:
1. The passage suggests that in order for an online retailer to compete effectively with other online retailers, it must

A. turn over its inventory more quickly than its direct competitors, while holding the minimum amount necessary
B. maintain the lowest possible inventory costs without sacrificing a wide range of inventory
C. hold an inventory diverse enough to keep from losing customers to competitors
D. hold an inventory of higher-quality items than direct competitors
E. make deliveries faster than competitors do, whether from a centralized or regional warehouse system

Path to answer of Question 1:
This is one of those questions where referring to the passage is very important. Does the passage DIRECTLY mention how an online retailer can compete effectively with other retailers?

In competing with another online retailer... this sentence in the message is a DIRECT mention of the subject of this question.

What does this sentence say?
To compete, a company will, most likely, end up holding as much inventory as required.

Let's evaluate the options in this light:

A. Reject A. This is mentioned to solve the issue of inventory management. This is NOT mentioned along the lines of how an online retailer can compete with another retailer.

Remember - we need to decide only as per the passage and not the grand ways of the business world.

B. Reject B for 2 reasons.

Reason-1: This is not mentioned in the context of how an online retailer can compete with another retailer.

Reason-2: First part of the option (maintain the lowest possible inventory costs) seems correct. Second part of the option (without sacrificing a wide range of inventory) is incorrect: more inventory = high inventory cost, this is counter to the first part of the option.

C. Keep. This option is directly aligned with what is mentioned in the passage.

D. Cannot infer. No information in the passage about high-quality items.

E. Reject E. This is not mentioned in the context of how an online retailer can compete with another retailer.

C is the answer.

Quote:
2. The passage suggests that which of the following is true of a centralized warehouse model?

A. It was a useful model for a time to keep inventory models low, but it is now obsolete, due to the increased delivery time of shipping from one central location.
B. It allows a company to hold the widest possible range of items at the highest necessary inventory levels.
C. It is the only currently feasible inventory warehouse system that strikes a balance between inventory levels, inventory diversity, and delivery time.
D. It is most suitable for online retailers facing high levels of competition.
E. It can be used to lower standing inventory levels, but it is not necessarily the most advantageous inventory model that can be used.

Path to answer of Question 2:
A. Keep for now. However, 'obsolete' is questionable.

B. False. It allows a company to hold the widest possible range of items at the LOWEST necessary inventory levels.

C. False. Delivery time may not be faster - this is mentioned as a flaw in the last line of the 1st para.

D. Cannot infer. No info in passage.

E. Keep. Used to lower standing inventory levels = True; Not necessarily the most advantageous model that can be used = True because regional warehouses are suggested in the second para to overcome the delivery time flaw.

Therefore, All of option E is correct AS PER THE PASSAGE as compared to only one half of option A.
By POE, A is out. E is the answer.

Quote:
3. In the context of the passage as a whole, the second paragraph serves primarily to

A. draw a further conclusion based on the information presented in the first paragraph
B. refute objections to the argument presented in the first paragraph
C. evaluate alternatives introduced in the first paragraph
D. point out one potential pitfalls of adopting the advice presented in the first paragraph
E. present information that undermines the conclusion drawn in the first paragraph

Path to answer of Question 3:

A. Keep for now. Conclusion of the first para = inventory management is a key issue for online retailers. The online retailer with the best inventory management is the winner.
Conclusion of the second para = how good data is key to managing the inventory of an online retailer.

B. Cannot infer. There is no refutation in the passage.

C. Cannot infer. There are no alternatives in the first para. Thus, how is the second para able to evaluate something (the alternatives) that does not exist.

D. Cannot infer. There is no advice presented in the 1st para. Thus, how is the second para pointing out a pitfall in something (the advice) that does not exist?

E. False. Conclusion of the first para = inventory management is a key issue for online retailers. The online retailer with the best inventory management is the winner.
Conclusion of the second para = how good data is key to managing the inventory of an online retailer.
Therefore, the second para provides a method to solve the issue pointed out in the first para.

Therefore, A is the winner.

Quote:
4. The passage LEAST supports the inference that one or more elements of an online retailer's business would be adversely affected by

A. stocking inventory at levels that are higher than the minimum needed
B. stocking inventory at levels that are lower than the minimum needed
C. failing to stock a particular item that a customer may seek out
D. failing to deliver faster than the industry's average delivery time
E. failing to turn over inventory quickly

Path to answer of Question 4:
I thought I understood the question BUT, in reality, I did not understand the question in my first reading.

What the question is asking is: Which of these will help support an online retailer's business?
OR Which of these options increase the business of an online retailer and are least supported by the passage?

Interesting, trap question!

Interpretation of question:
Which of these statements are LEAST (LOWEST LEVEL OF SUPPORT) supported by the passage?

A. stocking inventory at levels that are higher than the minimum needed = this enables the retailer to win the customer; even though at a higher cost.

Does the passage support it least? Not really. The passage mentions this to be an advantage to prevent loss of customers = there is support.

Therefore, A is not the answer.

B. stocking inventory at levels that are lower than the minimum needed

The passage supports this by directly mentioning - If lower levels of inventory are needed, then less inventory will be on hand and it will be turned over more quickly..

Therefore, B is not the answer.

C. failing to stock a particular item that a customer may seek out

The passage supports this by directly mentioning - If a particular type of item is not in stock at one retailer, a customer will turn to a competing retailer.

Therefore, C is not the answer.

D. failing to deliver faster than the industry's average delivery time

The passage mentions - But since customers also value speed of delivery time
This implies that the failing to deliver slower is not supported by the passage.

Therefore, keep D.

E. failing to turn over inventory quickly

The passage mentions -
turn over inventory as quickly as possible.
If lower levels of inventory are needed, then less inventory will be on hand and it will be turned over more quickly.
Therefore, failing to turn over inventory quickly will adversely affect the retailer.
Thus, this is supported by the passage. E is out (we are looking for what is LEAST supported by the passage).

D is the answer.

Quote:
5. The primary purpose of the passage is to

A. describe various factors involved in managing inventory in online retailing
B. show that online retailers frequently gain a competitive advantage from a system of regional warehouses
C. argue that online retailers often fail because of inadequate inventory management practices
D. suggest that online retail is likely to be dominated by firms that use centralized monster warehouses
E. explain how information about consumer demand is the most important factor in managing inventory in online retail

Path to answer of Question 5.
A. Keep A. A large part of the passage is about the various factors in inventory management.

B. Reject B. This is mentioned in the passage but is not the main (overall) purpose of the passage.

C. Reject C. There is no debate or argument.

D. Reject D. There is no suggestion in favor of any type of retailer.

E. Keep E. This is directly mentioned in the passage. It seems that the passage led to the 'information about consumer demand'.

Between A and E: Option A fits the definition of primary purpose because the problem of inventory management led to the solution in the form of "importance of information (or good data) about customer demand".
Option E only mentions a tiny aspect of the overall passage. Clearly, the passage is not just about "importance of information".

Therefore, E is out. A is the answer.

SandeepS030489: Thank you for sending me this question. I learned a lot from this question.
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Re: For an online retailer, inventory represents a major source of cost. E [#permalink]
Can I get an answer to how in quetion no 5 option A is correct and E is incorrect
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Re: For an online retailer, inventory represents a major source of cost. E [#permalink]
RawatPrakhar
Can I get an answer to how in quetion no 5 option A is correct and E is incorrect

Welcome to GMAT Club!

Official Explanation

5. The primary purpose of the passage is to

Difficulty Level: 650-700

Explanation

What is the purpose of the passage? Let's employ a substantial amount of willpower and summarize it ourselves before looking at the answer choices. The author describes the importance of inventory to these businesses, various factors that affect inventory cost, and how these considerations impact competitiveness as an online retailer. Our summary doesn't have to be perfect; even a mediocre summary tends to work better than nothing. On to the answer choices. What matches our prediction? (A) is in the ballpark of our prediction. (B) involves too strong a judgment... as do (C), (D) and (E). Again, a sense of total weight and location of opinion in the passage goes a long way.

The correct answer is (A).
Re: For an online retailer, inventory represents a major source of cost. E [#permalink]
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