Inventory Management & Supply Chain Flashcards

Which document is used to formally authorize a supplier to ship goods to a buyer?

Answer: Purchase order

A purchase order (PO) is the buyer's formal authorization instructing a supplier to deliver specified goods at an agreed price.

Safety stock is primarily held to:

Answer: Buffer against demand variability and supply uncertainty

Safety stock acts as a buffer inventory to protect against unexpected surges in demand or delays in supply delivery.

In food manufacturing, 'yield management' within inventory refers to:

Answer: Accounting for the difference between raw material input and usable output

Yield management tracks trim loss, cooking loss, and other reductions from raw ingredient to final usable product.

A Certificate of Analysis (COA) from a food ingredient supplier primarily documents:

Answer: Product specifications and test results confirming quality compliance

A COA certifies that a batch meets specified quality and safety parameters, including analytical test results.

Which supply chain strategy involves maintaining production at a steady rate and using inventory to absorb demand fluctuations?

Answer: Level production strategy

A level production strategy keeps output constant, building inventory during slow periods to meet higher demand later.

An ABC analysis of food inventory classifies items primarily based on:

Answer: Annual consumption value

ABC analysis ranks inventory by annual consumption value: A items are highest value (requiring tightest control), C items are lowest.

Which term describes the financial cost of holding inventory, including storage, spoilage, insurance, and opportunity cost?

Answer: Carrying cost

Carrying cost (also called holding cost) encompasses all expenses associated with storing and maintaining inventory over time.