ERP Materials 5 — Questions and Answers
Question 1: What is 'vendor managed inventory (VMI)' in the context of ERP materials management?
- A process where the buyer manually reorders from pre-approved vendors
- An arrangement where the supplier monitors stock levels and replenishes inventory automatically (Correct answer)
- A vendor-owned warehouse built on the buyer's premises
- A consignment inventory valuation method
Correct answer: An arrangement where the supplier monitors stock levels and replenishes inventory automatically
In VMI, the supplier takes responsibility for monitoring inventory levels at the customer's location and triggering replenishment, often enabled by ERP data sharing.
Question 2: Which ERP feature prevents a purchase order from being processed for payment if the received quantity significantly differs from the invoiced quantity?
- Budget availability check
- Quantity tolerance check in three-way match (Correct answer)
- Vendor credit limit enforcement
- Material master field validation
Correct answer: Quantity tolerance check in three-way match
Three-way match compares PO, goods receipt, and invoice quantities, and tolerance limits flag or block invoices where the received quantity deviates beyond the allowed variance.
Question 3: What is 'dead stock' in inventory management?
- Inventory that has been written off as worthless
- Stock that has not moved in a defined period and is unlikely to be used or sold (Correct answer)
- Materials damaged during warehouse handling
- Finished goods awaiting quality inspection release
Correct answer: Stock that has not moved in a defined period and is unlikely to be used or sold
Dead stock refers to inventory items that have had no movement (no receipts or issues) for a defined time period and represent tied-up capital with low utilization.
Question 4: In ERP production planning, what is a 'bill of materials (BOM)'?
- A vendor invoice for raw materials
- A structured list of components and quantities required to produce a finished product (Correct answer)
- A warehouse packing slip for outbound shipments
- A financial budget for material purchases
Correct answer: A structured list of components and quantities required to produce a finished product
A BOM defines every component, subassembly, and raw material—along with required quantities—needed to manufacture one unit of a finished or semi-finished product.
Question 5: What does 'back-flushing' mean in ERP materials management?
- Reversing a goods receipt when materials are returned
- Automatically posting material consumption when production output is confirmed, without manual goods issues (Correct answer)
- Flushing obsolete records from the material master
- Sending excess raw materials back to the stockroom after production
Correct answer: Automatically posting material consumption when production output is confirmed, without manual goods issues
Back-flushing (also called post-deduct or auto-goods-issue) automatically deducts component quantities from inventory at the time production output is confirmed.
Question 6: Which ERP functionality allows a company to evaluate vendors based on quality, delivery performance, and price compliance over time?
- Vendor invoice reconciliation
- Vendor evaluation (supplier scorecard) module (Correct answer)
- Accounts payable aging report
- Procurement spend dashboard
Correct answer: Vendor evaluation (supplier scorecard) module
Vendor evaluation modules score suppliers across weighted criteria such as on-time delivery, invoice accuracy, and material quality to support sourcing decisions.
Question 7: What is a 'split valuation' in ERP inventory management?
- Dividing inventory costs equally across multiple cost centers
- Maintaining separate stock and valuation data for different categories of the same material (e.g., new vs. refurbished) (Correct answer)
- Splitting a purchase order across multiple vendors simultaneously
- Allocating material costs between two fiscal years
Correct answer: Maintaining separate stock and valuation data for different categories of the same material (e.g., new vs. refurbished)
Split valuation allows a single material to carry different prices and stock balances based on a defined category (valuation type) such as origin, batch status, or condition.
ERP Materials 5
What is 'vendor managed inventory (VMI)' in the context of ERP materials management?