Practice Test Geeks(CIM) Certified Inventory Manager Practice Test
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Inventory Performance Metrics & KPIs Flashcards

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  1. Inventory velocity in the context of KPIs refers to which of the following?

    Answer: The speed at which inventory moves through the supply chain from receipt to sale

    Inventory velocity measures how quickly inventory flows from receipt through the supply chain to the end customer, with higher velocity indicating more efficient inventory utilization.

  2. An obsolescence rate KPI is most important for which type of inventory management decision?

    Answer: Determining write-down policies and identifying products approaching end-of-life

    Obsolescence rate tracks the percentage of inventory that becomes unsalable due to expiration, technological change, or market shifts, informing write-down policies and purchasing decisions.

  3. What does a high Coefficient of Variation (CV) in demand indicate for inventory planning purposes?

    Answer: Demand is highly variable and unpredictable, requiring higher safety stock

    A high CV (standard deviation divided by mean demand) indicates greater demand volatility, which requires larger safety stock buffers to maintain target service levels.

  4. Supplier on-time delivery rate is classified as which type of inventory performance metric?

    Answer: Input metric measuring upstream supply chain reliability

    Supplier on-time delivery rate is an input (upstream) metric because it measures the reliability of inbound supply, which directly affects a company's ability to maintain inventory levels.

  5. Which benchmark range is most commonly cited for carrying costs as a percentage of inventory value in US operations?

    Answer: 20% to 30% annually

    Industry benchmarks consistently place annual inventory carrying costs at 20–30% of inventory value, covering capital cost, storage, insurance, taxes, and obsolescence.

  6. The Inventory-to-Sales Ratio measures which relationship?

    Answer: The value of inventory on hand relative to the value of monthly sales

    The Inventory-to-Sales Ratio compares the dollar value of inventory held to monthly sales, with a rising ratio indicating potential overstock and a falling ratio signaling potential stockout risk.

  7. Return on Inventory Investment (ROII) is best described as which of the following?

    Answer: Net profit generated per dollar of average inventory investment

    Return on Inventory Investment (ROII) measures how effectively inventory investment generates profit, calculated as net profit divided by average inventory value, linking operational performance to financial outcomes.