ERP MRP, Procurement & Inventory Modules 3 — Questions and Answers
Question 1: What is the 'planning horizon' in MRP?
- The maximum inventory level before obsolescence triggers
- The farthest future date for which MRP generates planned orders (Correct answer)
- The lead time for the longest-lead component
- The time between MRP regeneration runs
Correct answer: The farthest future date for which MRP generates planned orders
The planning horizon is the total time span into the future that MRP covers when generating planned orders and material requirements.
Question 2: A three-way match in accounts payable compares which three documents?
- RFQ, Purchase Order, and Goods Receipt
- Purchase Order, Goods Receipt, and Vendor Invoice (Correct answer)
- Vendor Quote, Contract, and Payment
- Sales Order, Delivery Note, and Customer Invoice
Correct answer: Purchase Order, Goods Receipt, and Vendor Invoice
The three-way match validates that the PO, goods receipt, and vendor invoice agree on quantities, prices, and terms before approving payment.
Question 3: In inventory valuation, which costing method assigns the most recent purchase cost to items sold?
- FIFO (First In, First Out)
- LIFO (Last In, First Out) (Correct answer)
- Weighted Average Cost
- Standard Costing
Correct answer: LIFO (Last In, First Out)
LIFO assumes the last items purchased are the first sold, so cost of goods sold reflects the most recent purchase prices.
Question 4: What does 'available-to-promise (ATP)' functionality in an ERP system tell you?
- The maximum discount you can offer a customer
- The quantity of a product that can be committed to a new customer order based on supply and demand (Correct answer)
- Whether a vendor can deliver by a requested date
- The amount of inventory reserved for safety stock
Correct answer: The quantity of a product that can be committed to a new customer order based on supply and demand
ATP calculates uncommitted inventory plus planned receipts minus existing demand to determine what quantity can be promised for new orders.
Question 5: Which inventory control technique classifies items into three tiers based on annual consumption value?
- XYZ analysis
- ABC analysis (Correct answer)
- VED analysis
- FSN analysis
Correct answer: ABC analysis
ABC analysis categorizes inventory so that A-items (high value) receive tighter controls, while C-items (low value) are managed with less oversight.
Question 6: In MRP, a 'firm planned order' differs from a regular planned order because it:
- Is automatically rescheduled by MRP during each regeneration run
- Is frozen and not changed by MRP unless manually overridden by a planner (Correct answer)
- Has been converted into an actual production order
- Requires vendor confirmation before it appears in the schedule
Correct answer: Is frozen and not changed by MRP unless manually overridden by a planner
A firm planned order is manually locked by a planner so that MRP does not automatically reschedule or delete it during replanning.
Question 7: What is 'vendor-managed inventory (VMI)'?
- The buyer monitors vendor stock levels and issues replenishment orders
- The vendor monitors the buyer's inventory levels and is responsible for replenishment (Correct answer)
- A shared ERP portal where both parties edit inventory records
- An arrangement where the vendor owns all inventory in the buyer's warehouse indefinitely
Correct answer: The vendor monitors the buyer's inventory levels and is responsible for replenishment
In VMI, the vendor has access to the buyer's inventory data and takes responsibility for maintaining agreed stock levels at the buyer's location.
ERP MRP, Procurement & Inventory Modules 3
What is the 'planning horizon' in MRP?