CPIM Inventory Planning & Control Strategies 3

Question 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?

Accepted Answer

550 units

Answer

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

Question 2

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

Accepted Answer

Statistical safety stock calculation

Answer

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.

Question 3

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

Accepted Answer

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

Answer

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).

Question 4

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

Accepted Answer

Implement ABC analysis and reduce safety stock on C items

Answer

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

Question 5

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

Accepted Answer

Safety stock increases

Answer

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

(CPIM) Certified in Planning and Inventory Management Practice Test

(CPIM) Certified in Planning and Inventory Management Practice Test

CPIM Inventory Planning & Control Strategies 3