CWLP Inventory Management & Control 5 — Questions and Answers
Question 1: What is 'consignment inventory' in a supply chain context?
- Inventory purchased outright and stored at the buyer's facility
- Supplier-owned inventory stored at the buyer's location, paid for only upon use or sale (Correct answer)
- Inventory that has been damaged and returned to the supplier
- Seasonal stock held at third-party logistics providers
Correct answer: Supplier-owned inventory stored at the buyer's location, paid for only upon use or sale
Consignment inventory remains the supplier's property until the buyer uses or sells it, reducing the buyer's carrying cost and financial risk.
Question 2: Which inventory management practice involves suppliers monitoring stock levels and triggering replenishment orders on behalf of the buyer?
- Just-in-Time (JIT)
- Vendor-Managed Inventory (VMI) (Correct answer)
- Collaborative Planning, Forecasting and Replenishment (CPFR)
- Drop shipping
Correct answer: Vendor-Managed Inventory (VMI)
VMI shifts replenishment responsibility to the supplier, who monitors inventory levels and initiates orders to maintain agreed stock levels.
Question 3: A warehouse records 4,800 units in its system but a physical count finds only 4,608. What is the inventory accuracy rate?
- 90.4%
- 92.0%
- 96.0% (Correct answer)
- 98.0%
Correct answer: 96.0%
Inventory accuracy = (4,608 ÷ 4,800) × 100 = 96.0%, meaning 96% of recorded inventory matches the physical count.
Question 4: Which storage strategy assigns incoming inventory to the nearest available location rather than a dedicated fixed slot?
- Fixed location storage
- Random (chaotic) storage (Correct answer)
- Zone picking storage
- Dedicated slotting
Correct answer: Random (chaotic) storage
Random or chaotic storage assigns products to any open location, maximizing space utilization but requiring a WMS to track item positions.
Question 5: In lot traceability, a lot number primarily enables a warehouse to:
- Calculate EOQ for that product
- Track and recall specific production batches if a quality issue arises (Correct answer)
- Determine the reorder point for that SKU
- Assign ABC classification to the item
Correct answer: Track and recall specific production batches if a quality issue arises
Lot numbers link products to specific production or receipt batches, enabling targeted recalls and quality issue isolation.
Question 6: The 'bullwhip effect' in inventory management describes:
- Rapid inventory depletion caused by sudden demand spikes at retail
- Amplification of demand variability as orders move upstream through the supply chain (Correct answer)
- Oscillating warehouse temperatures damaging perishable goods
- Excess safety stock accumulation at distribution centers
Correct answer: Amplification of demand variability as orders move upstream through the supply chain
The bullwhip effect occurs when small fluctuations in end-customer demand cause progressively larger swings in orders placed by upstream supply chain partners.
Question 7: What does FEFO (First Expired, First Out) prioritize in warehouse picking operations?
- Picking from the farthest storage location first to improve travel efficiency
- Shipping items with the earliest expiration dates before those with later dates (Correct answer)
- Issuing inventory received first regardless of expiration date
- Selecting the lowest-cost units for shipment to maximize margin
Correct answer: Shipping items with the earliest expiration dates before those with later dates
FEFO ensures items closest to their expiration date are shipped first, reducing waste and compliance risk in perishable or pharmaceutical operations.
CWLP Inventory Management & Control 5
What is 'consignment inventory' in a supply chain context?