MRP Inventory Control & Supply Chain Management 5 — Questions and Answers
Question 1: What is the primary function of a 'cross-docking' facility in supply chain logistics?
- Long-term storage of seasonal inventory
- Transfer of inbound shipments directly to outbound transportation with minimal storage (Correct answer)
- Inspection and rework of defective goods
- Consolidation of multiple suppliers' invoices
Correct answer: Transfer of inbound shipments directly to outbound transportation with minimal storage
Cross-docking transfers products from inbound trucks directly to outbound trucks, bypassing storage and reducing handling time and warehouse costs.
Question 2: Which inventory control technique involves counting a small subset of inventory items each day on a rotating schedule throughout the year?
- Annual physical inventory
- Cycle counting (Correct answer)
- Spot checking
- Statistical sampling
Correct answer: Cycle counting
Cycle counting divides inventory into segments and counts a portion each day, providing ongoing accuracy verification without shutting down operations for a full count.
Question 3: A manufacturer uses a two-bin inventory system for a low-value fastener. What triggers a replenishment order in this system?
- When total quantity falls below 50% of maximum
- When the first bin is emptied and the second bin begins to be used (Correct answer)
- When the monthly usage exceeds forecast by 10%
- When a scheduled review date arrives
Correct answer: When the first bin is emptied and the second bin begins to be used
In a two-bin system, the first bin holds cycle stock and the second holds safety/reorder stock; emptying the first bin signals the need to reorder.
Question 4: Which supply chain disruption response strategy involves maintaining relationships with pre-qualified backup suppliers who are not regularly used?
- Dual sourcing
- Supply base rationalization
- Supplier pre-qualification with dormant capacity (Correct answer)
- Spot market purchasing
Correct answer: Supplier pre-qualification with dormant capacity
Maintaining pre-qualified backup suppliers provides a ready alternative source that can be activated quickly during primary supplier disruptions without qualification delays.
Question 5: In the context of MRP, what is a 'firm planned order' (FPO)?
- A purchase order sent to a supplier
- A planned order manually frozen to prevent automatic rescheduling by the MRP system (Correct answer)
- An order confirmed by the customer
- A standing order that repeats automatically each period
Correct answer: A planned order manually frozen to prevent automatic rescheduling by the MRP system
A firm planned order is locked by a planner to protect it from automatic changes by the MRP system, useful when the planner has commitments or special conditions to honor.
Question 6: What is 'shrinkage' in the context of retail inventory management?
- Reduction in product size due to storage conditions
- Inventory loss due to theft, damage, or administrative errors (Correct answer)
- Seasonal demand reduction
- Obsolescence write-down of slow-moving stock
Correct answer: Inventory loss due to theft, damage, or administrative errors
Inventory shrinkage is the difference between recorded book inventory and actual physical inventory, caused by shoplifting, employee theft, vendor fraud, or administrative errors.
Question 7: A company ships goods using Incoterms 'FOB Destination.' Who bears the risk of loss during transit?
- The buyer, from the moment goods leave the seller's dock
- The freight carrier, for the entire journey
- The seller, until goods are delivered to the buyer's named destination (Correct answer)
- A shared liability between buyer and seller
Correct answer: The seller, until goods are delivered to the buyer's named destination
Under FOB Destination, the seller retains title and risk of loss until the goods are delivered to and accepted at the buyer's specified destination.
MRP Inventory Control & Supply Chain Management 5
What is the primary function of a 'cross-docking' facility in supply chain logistics?