Inventory Control Flashcards

What is 'shrinkage' in inventory management?

Answer: Inventory loss due to theft, damage, administrative error, or spoilage

Shrinkage refers to the unexplained reduction in inventory from the book balance, caused by theft, damage, errors, or spoilage.

Which type of inventory consists of raw materials that have begun processing but are not yet finished goods?

Answer: Work-in-process (WIP) inventory

Work-in-process inventory includes materials that are mid-production and have not yet become completed, sellable products.

A warehouse receives 200 units but the purchase order was for 250 units. What should the receiver do?

Answer: Note the shortage on the receiving report and notify the purchasing department

Short shipments should be documented on the receiving report and communicated to purchasing so the discrepancy can be resolved with the supplier.

What is the purpose of a 'reorder point' (ROP) in inventory management?

Answer: To define the inventory level at which a new order should be placed

The reorder point is the inventory threshold that triggers a replenishment order, calculated to cover demand during the lead time.

Which inventory metric measures the percentage of customer orders fulfilled completely from available stock without backorders?

Answer: Fill rate

Fill rate is the percentage of demand satisfied immediately from on-hand inventory without requiring backorders or lost sales.

What does 'days of supply' (DOS) indicate in inventory planning?

Answer: How many days current inventory levels will last at the current rate of demand

Days of supply measures how long current inventory will last given the current consumption rate before a stockout occurs.

A company stores items that have different expiration dates. Which inventory method should be used to ensure oldest stock is used first?

Answer: FIFO

FIFO (First In, First Out) ensures that the oldest inventory is used or sold first, which is critical for perishable or date-sensitive goods.