ERP Supply Chain and Inventory Management 3

Question 1

A manufacturer calculates its Economic Order Quantity (EOQ). Which cost components are balanced in the EOQ formula?

Accepted Answer

Ordering cost and holding cost

Answer

EOQ minimizes total inventory cost by finding the order quantity at which ordering cost and holding (carrying) cost are equal.

Question 2

In an ERP system, which process converts planned orders into actual purchase orders or production orders?

Accepted Answer

Firming planned orders

Answer

Firming a planned order converts an MRP-generated planned order into an actual purchase order or work order that can be executed.

Question 3

What does Days Inventory Outstanding (DIO) measure?

Accepted Answer

Average number of days a company holds inventory before selling it

Answer

DIO (also called Days in Inventory) measures how many days on average a company holds inventory before it is sold or consumed.

Question 4

Which supply chain strategy is characterized by manufacturing products to a forecast before customer orders are received?

Accepted Answer

Make-to-Stock

Answer

Make-to-Stock (MTS) produces goods against a demand forecast so finished goods are available immediately when customer orders arrive.

Question 5

A company experiences frequent stockouts despite having high inventory levels. Which root cause is MOST likely?

Accepted Answer

Poor forecast accuracy driving misaligned inventory mix

Answer

High overall inventory with frequent stockouts typically indicates a mismatch in inventory mix caused by inaccurate demand forecasting for specific SKUs.

(ERP) Enterprise Resource Planning Certified Practice Test

(ERP) Enterprise Resource Planning Certified Practice Test

ERP Supply Chain and Inventory Management 3