Supply Chain and Logistics Inventory Management 1

Question 1

What does EOQ stand for in inventory management?

Accepted Answer

Economic Order Quantity

Answer

EOQ (Economic Order Quantity) is the ideal order quantity that minimizes total inventory holding and ordering costs.

Question 2

Which inventory method assumes the first items purchased are the first items sold?

Accepted Answer

FIFO

Answer

FIFO (First In, First Out) assumes inventory purchased earliest is sold first, commonly used for perishable goods.

Question 3

What is safety stock used for in inventory management?

Accepted Answer

Buffer against demand variability and supply delays

Answer

Safety stock is extra inventory held to protect against unexpected spikes in demand or delays in replenishment.

Question 4

Which metric measures how many times inventory is sold and replaced over a period?

Accepted Answer

Inventory turnover

Answer

Inventory turnover ratio equals cost of goods sold divided by average inventory, indicating how efficiently stock is managed.

Question 5

What is the primary goal of ABC analysis in inventory control?

Accepted Answer

Prioritize inventory items by value and volume

Answer

ABC analysis classifies inventory into A (high value), B (moderate), and C (low value) categories to focus management effort.

Supply Chain and Logistics Practice Test