CBM CBM Supply Chain & Operations Management 1 — Questions and Answers
Question 1: Which inventory management method assumes the most recently purchased items are sold first?
- Last In, First Out (LIFO) (Correct answer)
- First In, First Out (FIFO)
- Weighted Average Cost
- Specific Identification
Correct answer: Last In, First Out (LIFO)
LIFO assumes the most recently acquired inventory is sold first, which in a rising-price environment results in lower taxable income in the US.
Question 2: What is the primary goal of Just-In-Time (JIT) inventory management?
- To minimize inventory holding costs by receiving goods only as they are needed in production (Correct answer)
- To maintain large safety stock to prevent stockouts
- To negotiate the longest possible payment terms with suppliers
- To consolidate all suppliers into a single vendor
Correct answer: To minimize inventory holding costs by receiving goods only as they are needed in production
JIT aims to reduce waste and carrying costs by synchronizing production schedules with supplier deliveries so inventory arrives precisely when needed.
Question 3: Which supply chain risk is directly caused by small fluctuations in consumer demand being amplified into large swings in upstream orders?
- Bullwhip Effect (Correct answer)
- Supply Chain Disruption
- Demand Cannibalization
- Inventory Shrinkage
Correct answer: Bullwhip Effect
The Bullwhip Effect describes how minor demand variability at the retail level gets progressively magnified as orders move upstream through distributors, manufacturers, and suppliers.
Question 4: A company wants to reduce the time between receiving a customer order and delivering the product. Which metric directly measures this?
- Order-to-Delivery Cycle Time (Correct answer)
- Inventory Turnover Ratio
- Fill Rate
- Days Sales Outstanding
Correct answer: Order-to-Delivery Cycle Time
Order-to-Delivery Cycle Time measures the total elapsed time from order receipt to customer delivery, directly reflecting supply chain responsiveness.
Question 5: What does 'vertical integration' mean in the context of supply chain strategy?
- A company controls multiple stages of its supply chain, from raw materials to distribution (Correct answer)
- A company outsources all non-core supply chain functions
- A company forms alliances with competitors to share logistics costs
- A company uses technology to automate warehouse operations
Correct answer: A company controls multiple stages of its supply chain, from raw materials to distribution
Vertical integration occurs when a company acquires or controls upstream suppliers or downstream distributors to gain greater control over its supply chain and reduce dependency on external parties.
Question 6: Which forecasting method calculates demand forecasts by weighting recent data more heavily than older data?
- Exponential Smoothing (Correct answer)
- Simple Moving Average
- Regression Analysis
- Delphi Method
Correct answer: Exponential Smoothing
Exponential smoothing applies a smoothing constant that gives progressively less weight to older observations, making it more responsive to recent demand changes.
CBM CBM Supply Chain & Operations Management 1
Which inventory management method assumes the most recently purchased items are sold first?