Supply Chain and Logistics Inventory Management 2

Question 1

What is a reorder point (ROP)?

Accepted Answer

The inventory level at which a new order should be placed

Answer

The reorder point is the inventory level that triggers a new purchase order, calculated using lead time and average demand.

Question 2

Which inventory system continuously tracks stock levels and triggers orders when needed?

Accepted Answer

Continuous review system

Answer

A continuous review (Q) system monitors inventory in real time and places orders whenever stock falls to the reorder point.

Question 3

What is the carrying cost of inventory?

Accepted Answer

Total cost of holding inventory over a period

Answer

Carrying cost includes storage, insurance, obsolescence, taxes, and capital opportunity costs associated with holding inventory.

Question 4

Which approach keeps inventory levels extremely low by receiving goods only as they are needed?

Accepted Answer

Just-in-Time (JIT)

Answer

Just-in-Time inventory reduces waste and holding costs by timing deliveries to match production or sales demand precisely.

Question 5

What does the term 'shrinkage' refer to in retail inventory?

Accepted Answer

Inventory loss due to theft, damage, or administrative error

Answer

Shrinkage is the difference between recorded inventory and actual physical inventory, caused by theft, spoilage, or counting errors.

Supply Chain and Logistics Practice Test