CIM Inventory Control & Stock Replenishment 2 — Questions and Answers
Question 1: A company uses a continuous review system. When the inventory level drops to the reorder point, which action is triggered?
- A fixed-time review is scheduled
- A fixed-quantity order is placed (Correct answer)
- A variable-quantity order is placed based on current demand
- The safety stock is immediately consumed
Correct 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.
Question 2: What does the term 'cycle stock' refer to in inventory management?
- Stock held to buffer against demand uncertainty
- Inventory that rotates through seasonal cycles
- The portion of inventory that depletes and is replenished through regular ordering (Correct answer)
- Stock reserved for long-term strategic purposes
Correct 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.
Question 3: Which replenishment method uses a min-max system where an order is triggered when stock falls below the minimum level?
- Two-bin system
- Periodic review system
- Min-max (s, S) system (Correct answer)
- Kanban pull system
Correct 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.
Question 4: 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?
- 300 units
- 380 units (Correct answer)
- 130 units
- 430 units
Correct answer: 380 units
Reorder point = (average daily demand × lead time) + safety stock = (50 × 6) + 80 = 380 units.
Question 5: In ABC analysis, which category typically represents the smallest percentage of items but the highest percentage of total inventory value?
- C items
- B items
- A items (Correct answer)
- D items
Correct answer: A items
A items (roughly 10-20% of SKUs) typically account for 70-80% of total inventory value and receive the most control.
Question 6: What is the primary purpose of a two-bin inventory replenishment system?
- To separate defective and good inventory
- To provide a visual trigger for reordering when the first bin is empty (Correct answer)
- To calculate economic order quantities automatically
- To segregate fast-moving and slow-moving items
Correct 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.
Question 7: Vendor-Managed Inventory (VMI) shifts responsibility for replenishment decisions to whom?
- The retailer's purchasing department
- A third-party logistics provider
- The supplier or vendor (Correct answer)
- An automated ERP system
Correct answer: The supplier or vendor
In VMI, the supplier monitors the buyer's inventory levels and takes responsibility for making replenishment decisions.
CIM Inventory Control & Stock Replenishment 2
A company uses a continuous review system.
When the inventory level drops to the reorder point, which action is triggered?