CPP CPP Inventory & Logistics Management 1

Question 1

What is the Economic Order Quantity (EOQ)?

Accepted Answer

The optimal order size that minimizes total inventory costs by balancing ordering and holding costs

Answer

EOQ is the formula-derived order quantity that minimizes the combined costs of placing orders and holding inventory.

Question 2

What is 'safety stock' in inventory management?

Accepted Answer

Extra inventory held as a buffer against demand variability or supply delays

Answer

Safety stock is buffer inventory maintained above expected demand to prevent stockouts caused by unexpected demand surges or supply chain delays.

Question 3

What does 'ABC analysis' categorize in inventory management?

Accepted Answer

Inventory items by value and usage frequency to prioritize management efforts

Answer

ABC analysis classifies inventory into three groups—A (high value), B (medium value), C (low value)—to focus control and attention where it delivers the most benefit.

Question 4

What is the 'reorder point' in inventory management?

Accepted Answer

The inventory level at which a new purchase order should be placed to avoid a stockout

Answer

The reorder point is the on-hand inventory level that triggers a new order, calculated from lead time demand plus safety stock.

Question 5

What does FIFO stand for in inventory valuation?

Accepted Answer

First In, First Out

Answer

FIFO (First In, First Out) is an inventory costing method where the oldest units purchased are assumed to be the first ones sold or used.

CPP - Certified Procurement Professional Practice Test

CPP - Certified Procurement Professional Practice Test

CPP CPP Inventory & Logistics Management 1