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Inventory Planning & Control Strategies Flashcards

7 cards from real CPIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Inventory Planning & Control Strategies flashcards as text

  1. A company uses a continuous review system with a reorder point of 400 units. If current on-hand inventory is 350 units and there is an open purchase order for 200 units, what is the inventory position?

    Answer: 550 units

    Inventory position = On-hand + On-order − Backorders = 350 + 200 − 0 = 550 units, which is above the reorder point so no order is needed.

  2. Which technique calculates safety stock based on the desired service level and the standard deviation of demand during lead time?

    Answer: Statistical safety stock calculation

    Statistical safety stock uses a service factor (Z-score) multiplied by the standard deviation of demand during lead time to achieve a target service level.

  3. In the context of CPIM, what does 'cycle stock' refer to?

    Answer: Inventory that results from ordering in batches rather than one unit at a time

    Cycle stock is the portion of inventory that results from replenishing in lots or batches; it cycles between a maximum (just after receipt) and near-zero (just before replenishment).

  4. A firm wants to reduce inventory investment without harming service levels. Which action would BEST achieve this?

    Answer: Implement ABC analysis and reduce safety stock on C items

    Applying ABC analysis allows targeted safety stock reductions on low-value C items, reducing total investment while protecting service on high-value A items.

  5. What is the effect of increasing lead time variability on safety stock requirements, assuming demand variability is constant?

    Answer: Safety stock increases

    Greater lead time variability increases the uncertainty of demand during lead time, requiring higher safety stock to maintain the same service level.

  6. Which inventory valuation method typically results in the lowest ending inventory value during periods of rising prices?

    Answer: LIFO (Last In, First Out)

    LIFO assigns the most recent (higher) costs to cost of goods sold, leaving older (lower) costs in ending inventory, resulting in the lowest ending inventory value when prices rise.

  7. A just-in-time approach to inventory management primarily aims to:

    Answer: Eliminate waste by receiving materials only when needed for production

    JIT aims to receive inventory exactly when needed for production, minimizing holding costs and waste while requiring reliable suppliers and stable demand.