Inventory Control & Demand Planning Flashcards

Which demand forecasting method assigns greater weight to more recent data points?

Answer: Exponential smoothing

Exponential smoothing applies a smoothing factor (alpha) that gives progressively less weight to older observations.

A company's safety stock formula accounts for which two primary variables?

Answer: Demand variability and lead time variability

Safety stock is calculated based on variability in both demand and lead time to buffer against stockouts.

What is the primary purpose of ABC inventory classification?

Answer: To prioritize management attention based on item value

ABC analysis segments inventory so that high-value 'A' items receive the most rigorous control and attention.

In a periodic review inventory system, what is fixed?

Answer: The review interval

In a periodic review (P) system, inventory is checked at fixed time intervals and order quantities vary to bring stock to a target level.

Which metric measures the percentage of customer orders fulfilled completely from available stock?

Answer: Fill rate

Fill rate measures the proportion of demand satisfied immediately from on-hand inventory without backorders or lost sales.

Collaborative Planning, Forecasting, and Replenishment (CPFR) is designed to improve which aspect of supply chain management?

Answer: Demand forecast accuracy through supplier-retailer collaboration

CPFR aligns trading partners around a shared forecast to reduce the bullwhip effect and improve supply chain efficiency.

What does a negative inventory position indicate in a continuous review system?

Answer: Backorders exceeding on-hand inventory plus on-order quantity

Inventory position equals on-hand plus on-order minus backorders; a negative value means demand commitments exceed all available supply.