MRP Inventory Control & Supply Chain Management 4 โ Questions and Answers
Question 1: A company has average inventory of $500,000 and COGS of $3,000,000. What are the days of supply (DOS)?
- 30 days
- 45 days
- 60 days (Correct answer)
- 90 days
Correct answer: 60 days
DOS = (Average Inventory / COGS) ร 365 = ($500,000 / $3,000,000) ร 365 โ 60.8 days.
Question 2: In MRP systems, what is the 'planning horizon'?
- The maximum warehouse storage capacity
- The time period covered by the production and procurement plan (Correct answer)
- The lead time from the furthest supplier
- The duration of the fiscal year
Correct answer: The time period covered by the production and procurement plan
The planning horizon is the total future time period that the MRP plan covers, typically set to encompass the longest cumulative lead time plus buffer.
Question 3: Which supply chain model uses a 'pull' system where production is triggered only by actual customer demand?
- Make-to-stock (MTS)
- Engineer-to-order (ETO)
- Make-to-order (MTO) (Correct answer)
- Assemble-to-forecast (ATF)
Correct answer: Make-to-order (MTO)
Make-to-order uses a pull system where manufacturing begins only after a confirmed customer order, avoiding finished goods inventory buildup.
Question 4: What is 'collaborative planning, forecasting, and replenishment' (CPFR) designed to achieve?
- Automate warehouse picking operations
- Improve supply chain performance through buyer-supplier data sharing (Correct answer)
- Standardize product packaging across suppliers
- Reduce transportation costs through carrier consolidation
Correct answer: Improve supply chain performance through buyer-supplier data sharing
CPFR enables trading partners to jointly develop forecasts and replenishment plans by sharing sales data, promotional plans, and inventory information.
Question 5: A product has a 30-day average lead time with a standard deviation of 5 days, and average daily demand is 100 units. At a 95% service level (z=1.645), what is the approximate safety stock?
- 164 units
- 492 units
- 822 units (Correct answer)
- 246 units
Correct answer: 822 units
Safety stock = z ร ฯ_LT ร d = 1.645 ร 5 ร 100 = 822.5 โ 822 units, accounting only for lead time variability.
Question 6: Which concept describes the total time from raw material procurement to delivery of finished goods to the end customer?
- Cycle time
- Cash-to-cash cycle time
- Supply chain throughput time (Correct answer)
- Order-to-cash cycle
Correct answer: Supply chain throughput time
Supply chain throughput time (or total pipeline lead time) spans the entire chain from raw material sourcing through manufacturing to final customer delivery.
Question 7: In inventory management, what distinguishes 'independent demand' from 'dependent demand'?
- Independent demand is forecasted; dependent demand is calculated from a bill of materials (Correct answer)
- Independent demand applies only to finished goods; dependent demand applies only to raw materials
- Independent demand has no variability; dependent demand is always uncertain
- Independent demand is managed with MRP; dependent demand uses reorder points
Correct answer: Independent demand is forecasted; dependent demand is calculated from a bill of materials
Independent demand (finished goods) must be forecasted from external sources, while dependent demand (components/subassemblies) is derived mathematically from the parent item's production plan via BOM explosion.
MRP Inventory Control & Supply Chain Management 4
A company has average inventory of $500,000 and COGS of $3,000,000.
What are the days of supply (DOS)?