CPL Inventory Control & Demand Planning 2 — Questions and Answers
Question 1: Which demand forecasting method assigns greater weight to more recent data points?
- Simple moving average
- Exponential smoothing (Correct answer)
- Regression analysis
- Delphi method
Correct answer: Exponential smoothing
Exponential smoothing applies a smoothing factor (alpha) that gives progressively less weight to older observations.
Question 2: A company's safety stock formula accounts for which two primary variables?
- Lead time and order quantity
- Demand variability and lead time variability (Correct answer)
- Carrying cost and ordering cost
- Service level and unit cost
Correct answer: Demand variability and lead time variability
Safety stock is calculated based on variability in both demand and lead time to buffer against stockouts.
Question 3: What is the primary purpose of ABC inventory classification?
- To determine reorder points for all items
- To prioritize management attention based on item value (Correct answer)
- To calculate economic order quantities
- To identify obsolete inventory
Correct 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.
Question 4: In a periodic review inventory system, what is fixed?
- The order quantity
- The reorder point
- The review interval (Correct answer)
- The safety stock level
Correct 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.
Question 5: Which metric measures the percentage of customer orders fulfilled completely from available stock?
- Inventory turnover ratio
- Fill rate (Correct answer)
- Days of supply
- Gross margin return on investment
Correct answer: Fill rate
Fill rate measures the proportion of demand satisfied immediately from on-hand inventory without backorders or lost sales.
Question 6: Collaborative Planning, Forecasting, and Replenishment (CPFR) is designed to improve which aspect of supply chain management?
- Warehouse layout efficiency
- Demand forecast accuracy through supplier-retailer collaboration (Correct answer)
- Transportation route optimization
- Quality control processes
Correct 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.
Question 7: What does a negative inventory position indicate in a continuous review system?
- Excess stock requiring immediate markdown
- Backorders exceeding on-hand inventory plus on-order quantity (Correct answer)
- Items with negative carrying costs
- Inventory shrinkage exceeding physical count
Correct 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.
CPL Inventory Control & Demand Planning 2
Which demand forecasting method assigns greater weight to more recent data points?