Inventory Management Flashcards
7 cards from real CPSM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Inventory Management flashcards as text
Under vendor-managed inventory (VMI), who is responsible for replenishment decisions?
Answer: The supplier
In VMI, the supplier monitors the buyer's inventory levels and decides when and how much to replenish.
Which measure expresses the probability that all customer demand during a replenishment cycle will be filled from available stock?
Answer: Cycle service level
Cycle service level is the probability of not stocking out during a single replenishment cycle.
A 'two-bin' replenishment system is a practical implementation of which inventory control approach?
Answer: Continuous review (Q system)
The two-bin system triggers a fixed replenishment order when the first bin is emptied, embodying the continuous review Q-system logic.
Which carrying cost component represents the opportunity cost of funds tied up in inventory?
Answer: Capital (interest) cost
Capital cost reflects the return foregone by investing money in inventory rather than in other opportunities.
What is the primary advantage of cross-docking in a distribution network?
Answer: Eliminates or minimizes storage time by transferring goods directly from inbound to outbound
Cross-docking transfers products from receiving docks directly to shipping docks, reducing or eliminating warehouse storage time.
Which analysis technique categorizes inventory items by their value of usage to prioritize management effort?
Answer: ABC analysis
ABC analysis ranks items by annual dollar usage: A items are high-value (~80% of spend), B items are medium, and C items are low.
A company increases its order quantity but keeps demand constant. What happens to average cycle stock?
Answer: Increases
Average cycle stock equals Q/2; as the order quantity (Q) increases, average cycle stock rises proportionally.