Which concept focuses on balancing the inventory levels based on demand and supply?

The concept of balancing inventory levels based on demand and supply is most accurately represented by the min-max inventory system. This approach involves setting a minimum stock level and a maximum stock level for each item in inventory. When the inventory level falls to the minimum threshold, a reorder is triggered to replenish stock up to the maximum level. This method ensures that there is enough inventory to meet demand without the risk of overstocking or understocking.

By utilizing the min-max system, businesses can effectively manage their inventory levels in response to fluctuations in demand while controlling costs. This is particularly important in environments where demand can be unpredictable, as it helps maintain a balance that aligns supply closely with actual consumption.

In contrast, the other options, while related to inventory management, do not emphasize the balancing aspect specific to demand and supply. Par stock establishes a uniform level of inventory but does not account specifically for demand variability. The fixed order quantity method emphasizes ordering a specific quantity whenever stock falls below a certain level, without necessarily considering the maximum level. The ABC inventory categorization is focused on prioritizing items based on their importance or value, rather than directly managing inventory levels in relation to demand and supply.