CPP CPP Inventory & Logistics Management 2 — Questions and Answers
Question 1: What is a 'stockout' in inventory management?
- Excess inventory that has exceeded its shelf life
- A situation where inventory is depleted and customer demand cannot be fulfilled (Correct answer)
- The act of removing expired products from active storage
- Transferring surplus stock between warehouse locations
Correct answer: A situation where inventory is depleted and customer demand cannot be fulfilled
A stockout occurs when available inventory reaches zero and incoming orders or demand cannot be fulfilled, potentially resulting in lost sales.
Question 2: What is the primary purpose of a Warehouse Management System (WMS)?
- To negotiate pricing terms with suppliers
- To optimize warehouse operations including inventory tracking, receiving, storage, and order fulfillment (Correct answer)
- To manage the overall procurement budget
- To track supplier delivery performance metrics
Correct answer: To optimize warehouse operations including inventory tracking, receiving, storage, and order fulfillment
A WMS is software that manages and optimizes all warehouse activities including inventory tracking, space utilization, labor management, and order fulfillment.
Question 3: What is 'cross-docking' in logistics?
- Moving inventory between geographically separate warehouse locations
- Transferring goods directly from inbound transportation to outbound transportation with minimal or no storage time (Correct answer)
- Shipping goods across international borders using intermodal transport
- Using multiple carriers for different legs of a single shipment
Correct answer: Transferring goods directly from inbound transportation to outbound transportation with minimal or no storage time
Cross-docking moves products directly from receiving docks to outbound shipping docks, virtually eliminating warehousing time and reducing handling costs.
Question 4: What does 'lead time' mean in procurement and logistics?
- The total elapsed time from placing a purchase order to receiving the goods (Correct answer)
- The time required to fully negotiate a supplier contract
- The inspection time needed after goods are received
- The time that elapses between invoice receipt and payment
Correct answer: The total elapsed time from placing a purchase order to receiving the goods
Lead time is the total time from when a purchase order is issued until the ordered goods are received and available for use.
Question 5: What is the core principle of 'just-in-time' (JIT) inventory?
- Ordering large quantities in advance to guarantee continuous availability
- Receiving goods as close as possible to when they are actually needed to minimize holding costs (Correct answer)
- Maintaining maximum safety stock levels at all warehouse locations
- Scheduling supplier deliveries on a fixed weekly basis regardless of actual demand
Correct answer: Receiving goods as close as possible to when they are actually needed to minimize holding costs
JIT is an inventory strategy where materials arrive precisely when needed, minimizing storage costs, waste, and working capital tied up in stock.
Question 6: What is 'inventory shrinkage'?
- A reduction in inventory value due to supplier price decreases
- Inventory loss caused by theft, damage, miscounting, or administrative errors (Correct answer)
- A deliberate reduction of stock levels to meet budget targets
- Packaging redesign that reduces the physical size of a product
Correct answer: Inventory loss caused by theft, damage, miscounting, or administrative errors
Inventory shrinkage is the gap between recorded inventory and actual on-hand inventory, caused by theft, damage, vendor fraud, or clerical errors.
CPP CPP Inventory & Logistics Management 2
What is a 'stockout' in inventory management?