CIM Inventory Performance Metrics & KPIs 2 — Questions and Answers
Question 1: What does the Perfect Order Rate KPI measure?
- The percentage of orders delivered complete, on time, undamaged, and with correct documentation (Correct answer)
- The percentage of orders that required no supplier negotiation to fulfill
- The ratio of orders shipped same-day versus orders shipped within 48 hours
- The percentage of purchase orders matching the supplier's original quote exactly
Correct answer: The percentage of orders delivered complete, on time, undamaged, and with correct documentation
Perfect Order Rate measures the share of orders that meet all four criteria: on-time delivery, complete quantity, no damage, and accurate paperwork, serving as a comprehensive supply chain KPI.
Question 2: Inventory accuracy is typically measured by comparing which two figures?
- System (book) inventory records versus physical count results (Correct answer)
- Supplier invoice quantities versus receiving dock quantities
- Warehouse capacity versus current on-hand stock levels
- Forecasted demand versus actual sales for each SKU
Correct answer: System (book) inventory records versus physical count results
Inventory accuracy compares recorded (book) quantities in the inventory management system to actual physical counts, revealing discrepancies caused by theft, damage, or data entry errors.
Question 3: A shrinkage rate of 3% means which of the following for an inventory manager?
- 3% of inventory value is lost due to theft, damage, or administrative error (Correct answer)
- 3% of items are overstocked beyond the optimal reorder level
- 3% of supplier deliveries arrive with incorrect quantities
- 3% of orders are returned by customers each month
Correct answer: 3% of inventory value is lost due to theft, damage, or administrative error
Shrinkage rate measures inventory losses as a percentage of total inventory value, encompassing theft, spoilage, damage, and data entry errors.
Question 4: Which metric is most useful for identifying slow-moving or dead stock in an inventory portfolio?
- Inventory turnover by SKU compared to category benchmarks (Correct answer)
- Gross Margin Return on Investment across all product lines
- Order fill rate segmented by product category
- Days Payable Outstanding across supplier accounts
Correct answer: Inventory turnover by SKU compared to category benchmarks
Comparing per-SKU inventory turnover to category or industry benchmarks quickly identifies items that are moving significantly slower than expected, indicating dead or slow-moving stock.
Question 5: What is the key difference between service level and fill rate as inventory KPIs?
- Service level measures the probability of no stockout during a cycle; fill rate measures the proportion of demand met from stock (Correct answer)
- Service level measures order accuracy; fill rate measures on-time delivery performance
- Service level is a supplier metric; fill rate is a customer-facing metric
- Service level applies to safety stock calculations; fill rate applies to reorder point calculations
Correct answer: Service level measures the probability of no stockout during a cycle; fill rate measures the proportion of demand met from stock
Service level (cycle service level) is the probability that inventory does not stock out during a replenishment cycle, while fill rate is the fraction of total demand satisfied directly from available inventory.
Question 6: Weeks of Supply (WOS) is calculated as which of the following?
- On-hand inventory divided by average weekly demand (Correct answer)
- Annual demand divided by average on-hand inventory
- Safety stock divided by average daily demand
- On-hand inventory multiplied by average weekly sales velocity
Correct answer: On-hand inventory divided by average weekly demand
Weeks of Supply = On-Hand Inventory ÷ Average Weekly Demand, indicating how many weeks of sales the current stock can support before a stockout occurs.
Question 7: What does a backorder rate KPI help an inventory manager evaluate?
- The frequency at which customer orders cannot be fulfilled from current stock (Correct answer)
- The percentage of purchase orders delayed beyond the agreed lead time
- The proportion of returned goods requiring a supplier credit memo
- The rate at which inventory is transferred between warehouse locations
Correct answer: The frequency at which customer orders cannot be fulfilled from current stock
Backorder rate tracks the percentage of orders that cannot be fulfilled immediately from on-hand stock and must be placed on backorder, reflecting inventory planning gaps.
CIM Inventory Performance Metrics & KPIs 2
What does the Perfect Order Rate KPI measure?