Inventory Control & Stock Replenishment Flashcards

A company uses a continuous review system. When the inventory level drops to the reorder point, which action is triggered?

Answer: A fixed-quantity order is placed

In a continuous review (Q) system, a fixed order quantity is placed whenever inventory drops to the reorder point.

What does the term 'cycle stock' refer to in inventory management?

Answer: The portion of inventory that depletes and is replenished through regular ordering

Cycle stock is the working inventory that is regularly consumed and replenished as part of normal ordering cycles.

Which replenishment method uses a min-max system where an order is triggered when stock falls below the minimum level?

Answer: Min-max (s, S) system

The min-max or (s, S) system places an order up to the maximum level whenever stock falls to or below the minimum (reorder) level.

A retailer has average daily sales of 50 units, a lead time of 6 days, and safety stock of 80 units. What is the reorder point?

Answer: 380 units

Reorder point = (average daily demand × lead time) + safety stock = (50 × 6) + 80 = 380 units.

In ABC analysis, which category typically represents the smallest percentage of items but the highest percentage of total inventory value?

Answer: A items

A items (roughly 10-20% of SKUs) typically account for 70-80% of total inventory value and receive the most control.

What is the primary purpose of a two-bin inventory replenishment system?

Answer: To provide a visual trigger for reordering when the first bin is empty

The two-bin system uses an empty first bin as a visual reorder signal, with the second bin providing stock during the replenishment lead time.

Vendor-Managed Inventory (VMI) shifts responsibility for replenishment decisions to whom?

Answer: The supplier or vendor

In VMI, the supplier monitors the buyer's inventory levels and takes responsibility for making replenishment decisions.