COP Supply Chain Fundamentals 2 — Questions and Answers
Question 1: What is safety stock?
- Inventory reserved for fire-safety compliance
- Extra inventory held as a buffer against unexpected demand spikes or supply delays (Correct answer)
- Goods set aside for quality inspection
- Products stored in a separate secure location
Correct answer: Extra inventory held as a buffer against unexpected demand spikes or supply delays
Safety stock is a calculated buffer inventory maintained to reduce the risk of stockouts caused by demand variability or supplier lead time uncertainty.
Question 2: What is EDI (Electronic Data Interchange) used for in supply chain?
- Processing credit card payments
- Automating the electronic exchange of business documents like POs, invoices, and ASNs between trading partners (Correct answer)
- Encrypting customer data in transit
- Managing employee schedules in the distribution center
Correct answer: Automating the electronic exchange of business documents like POs, invoices, and ASNs between trading partners
EDI standardizes the format of business documents and enables them to flow automatically between systems, eliminating manual data entry and accelerating transactions.
Question 3: What is a blanket purchase order?
- A PO that covers multiple product categories in a single document
- A long-term agreement authorizing repeated purchases from a supplier up to a set quantity or dollar amount (Correct answer)
- An emergency PO issued outside the normal approval process
- A PO used exclusively for raw materials
Correct answer: A long-term agreement authorizing repeated purchases from a supplier up to a set quantity or dollar amount
A blanket PO establishes pre-negotiated terms for recurring purchases, streamlining reordering and reducing the administrative burden of issuing individual POs.
Question 4: In supply chain, 'stockout' refers to:
- Removing obsolete inventory from the warehouse
- A situation where demand for an item exceeds available inventory, preventing fulfillment (Correct answer)
- Moving inventory to an offsite storage location
- Writing off damaged goods
Correct answer: A situation where demand for an item exceeds available inventory, preventing fulfillment
A stockout occurs when inventory is depleted and orders cannot be filled, leading to lost sales, backorders, or cancelled orders.
Question 5: What is a 3PL (Third-Party Logistics) provider?
- A company that manufactures goods for other brands
- An outsourced company that manages warehousing, transportation, and/or fulfillment on behalf of another business (Correct answer)
- A technology vendor providing supply chain software
- A customs broker for international shipments
Correct answer: An outsourced company that manages warehousing, transportation, and/or fulfillment on behalf of another business
A 3PL handles logistics operations—storage, picking, packing, and shipping—allowing businesses to scale without owning their own warehouse infrastructure.
Question 6: What does 'just-in-time' (JIT) inventory mean?
- Delivering products to customers within 24 hours
- Receiving goods from suppliers only as they are needed in the production or fulfillment process (Correct answer)
- Ordering inventory at the last possible moment before a stockout
- Issuing purchase orders automatically when stock falls below reorder point
Correct answer: Receiving goods from suppliers only as they are needed in the production or fulfillment process
JIT minimizes inventory holding costs by synchronizing supply deliveries with actual demand or production schedules.
COP Supply Chain Fundamentals 2
What is safety stock?