CCS Inventory Management & Supply Chain 3 — Questions and Answers
Question 1: Which document is used to formally authorize a supplier to ship goods to a buyer?
- Bill of lading
- Purchase order (Correct answer)
- Receiving report
- Debit memo
Correct answer: Purchase order
A purchase order (PO) is the buyer's formal authorization instructing a supplier to deliver specified goods at an agreed price.
Question 2: Safety stock is primarily held to:
- Reduce carrying costs
- Buffer against demand variability and supply uncertainty (Correct answer)
- Lower the reorder point
- Eliminate the need for forecasting
Correct 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.
Question 3: In food manufacturing, 'yield management' within inventory refers to:
- Scheduling production shifts to meet peak demand
- Accounting for the difference between raw material input and usable output (Correct answer)
- Negotiating better supplier pricing
- Tracking expiration dates on finished goods
Correct 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.
Question 4: A Certificate of Analysis (COA) from a food ingredient supplier primarily documents:
- Supplier's financial solvency
- Product specifications and test results confirming quality compliance (Correct answer)
- Delivery schedule and freight costs
- Country of origin for customs purposes
Correct 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.
Question 5: Which supply chain strategy involves maintaining production at a steady rate and using inventory to absorb demand fluctuations?
- Chase strategy
- Level production strategy (Correct answer)
- Lean strategy
- Agile strategy
Correct answer: Level production strategy
A level production strategy keeps output constant, building inventory during slow periods to meet higher demand later.
Question 6: An ABC analysis of food inventory classifies items primarily based on:
- Perishability and shelf life
- Annual consumption value (Correct answer)
- Supplier reliability scores
- Physical storage requirements
Correct answer: Annual consumption value
ABC analysis ranks inventory by annual consumption value: A items are highest value (requiring tightest control), C items are lowest.
Question 7: Which term describes the financial cost of holding inventory, including storage, spoilage, insurance, and opportunity cost?
- Ordering cost
- Carrying cost (Correct answer)
- Stockout cost
- Setup cost
Correct answer: Carrying cost
Carrying cost (also called holding cost) encompasses all expenses associated with storing and maintaining inventory over time.
CCS Inventory Management & Supply Chain 3
Which document is used to formally authorize a supplier to ship goods to a buyer?