CPIM Inventory Management 5

Question 1

A company implements cross-docking in its distribution network. What is the primary inventory benefit?

Accepted Answer

Elimination or reduction of storage time, reducing inventory holding costs

Answer

Cross-docking transfers inbound goods directly to outbound transportation with minimal storage, reducing inventory holding time and costs.

Question 2

What is the 'bullwhip effect' and how does it impact inventory levels upstream in the supply chain?

Accepted Answer

Small demand fluctuations amplify as they move upstream, causing excessive upstream inventory

Answer

The bullwhip effect causes demand variability to amplify upstream, leading suppliers to hold excessive inventory to buffer against perceived demand spikes.

Question 3

Which approach to inventory valuation assigns an average unit cost to all items of the same type regardless of purchase date?

Accepted Answer

Weighted average cost

Answer

Weighted average cost calculates a blended average of all unit costs, applying this single average cost to all issues and ending inventory.

Question 4

In CPIM, what distinguishes 'independent demand' from 'dependent demand' for inventory purposes?

Accepted Answer

Independent demand is forecasted; dependent demand is calculated from parent item demand

Answer

Independent demand (finished goods) must be forecasted because it comes from external customers; dependent demand (components) is calculated using BOM explosion from parent item requirements.

Question 5

What is the primary risk of using a consignment inventory arrangement for a buyer?

Accepted Answer

The buyer may become dependent on a single supplier with limited negotiating power

Answer

Consignment arrangements can create supplier dependency, as the buyer may lack alternative sources when the supplier controls replenishment and pricing.

(CPIM) Certified in Planning and Inventory Management Practice Test

(CPIM) Certified in Planning and Inventory Management Practice Test

CPIM Inventory Management 5