CPIM Inventory Planning & Control Strategies 5

Question 1

A retailer experiences significantly higher demand in Q4 due to the holiday season. Which inventory strategy should be used to prepare?

Accepted Answer

Build anticipation inventory in advance of the demand peak

Answer

Anticipation inventory is built ahead of a predictable demand surge (seasonal or promotional) when current production or supply capacity cannot meet peak demand alone.

Question 2

What is the 'bullwhip effect' in supply chain inventory management?

Accepted Answer

The amplification of demand variability as orders move upstream through the supply chain

Answer

The bullwhip effect describes how small fluctuations in end-customer demand are magnified into large swings in orders further up the supply chain, causing excess inventory and costs.

Question 3

Which technique aggregates individual SKU forecasts into a product family or group forecast to improve overall planning accuracy?

Accepted Answer

Hierarchical forecasting

Answer

Hierarchical forecasting develops forecasts at multiple levels (family, subfamily, SKU), leveraging the greater statistical accuracy of aggregate forecasts before disaggregating to item level.

Question 4

In an MRP system, what is 'gross requirements'?

Accepted Answer

The total demand for an item from all sources before considering available inventory

Answer

Gross requirements represent the total planned demand for a component from all parent items in the bill of materials, before netting against available inventory.

Question 5

A company reduces its order quantity from 500 to 250 units. Assuming demand is constant, what happens to average cycle stock?

Accepted Answer

Average cycle stock is halved

Answer

Average cycle stock equals Q/2; halving the order quantity from 500 to 250 halves the average cycle stock from 250 to 125 units.

(CPIM) Certified in Planning and Inventory Management Practice Test

(CPIM) Certified in Planning and Inventory Management Practice Test

CPIM Inventory Planning & Control Strategies 5