FREE GLP Inventory Control & Warehousing Questions and Answers

Question 1

What is the primary goal of inventory control?

Accepted Answer

To balance inventory levels efficiently

Answer

The primary goal of inventory control is to optimize the amount of stock a business holds, ensuring there's enough product to meet customer demand without incurring excessive holding costs or risking obsolescence. This involves balancing the costs of ordering and holding inventory against the costs of stockouts and lost sales. Effective inventory control minimizes waste, improves cash flow, and maximizes profitability.

Question 2

What is FIFO in inventory management?

Accepted Answer

Selling oldest stock first

Answer

FIFO, or First-In, First-Out, is an inventory management method where the oldest inventory items (those purchased or produced first) are sold or used first. This approach is particularly important for perishable goods or products with limited shelf lives to minimize spoilage and obsolescence. It also helps in maintaining accurate inventory valuation and cost of goods sold, reflecting the natural flow of goods.

Question 3

What is a safety stock?

Accepted Answer

Buffer stock to avoid shortages

Answer

Safety stock is an extra quantity of inventory held to prevent stockouts caused by unexpected fluctuations in demand or supply chain disruptions, such as delays in delivery from suppliers. It acts as a buffer, ensuring that a business can continue to meet customer orders even when unforeseen events occur. Maintaining an appropriate safety stock level is crucial for maintaining customer satisfaction, avoiding lost sales, and ensuring operational continuity.

Question 4

What does ABC analysis do?

Accepted Answer

Classifies inventory by value

Answer

ABC analysis is an inventory categorization technique that classifies inventory items into three categories (A, B, and C) based on their annual consumption value. 'A' items are high-value, low-volume goods, 'B' items are moderate-value, moderate-volume, and 'C' items are low-value, high-volume. This method helps businesses prioritize inventory management efforts, focusing more attention and control on the most valuable items to optimize stock levels and reduce costs.

Question 5

What is cycle counting?

Accepted Answer

Regular partial inventory counts

Answer

Cycle counting is an inventory auditing procedure where a small, specific portion of inventory is counted on a regular, rotating basis, rather than performing a single annual physical inventory count. This method helps to identify and correct inventory discrepancies continuously, improving accuracy and reducing the need for disruptive full-scale counts. It ensures that inventory records remain precise and up-to-date, leading to better inventory management decisions.

GLP - Global Logistics Professional Practice Test

GLP - Global Logistics Professional Practice Test

FREE GLP Inventory Control & Warehousing Questions and Answers