Supply Chain Management Inventory Management 3

Question 1

What is the primary goal of a Just-in-Time (JIT) inventory system?

Accepted Answer

Minimize inventory by receiving goods only as they are needed in production

Answer

JIT aims to reduce inventory holding costs by scheduling material arrivals to coincide precisely with production or customer demand.

Question 2

Which metric measures the number of days a company holds inventory before it is sold?

Accepted Answer

Days Inventory Outstanding (DIO)

Answer

Days Inventory Outstanding (DIO) = (Average Inventory ÷ COGS) × Number of Days, indicating how long inventory is held before being sold.

Question 3

A retailer notices that demand for a product spikes dramatically right before holidays due to consumer buying patterns. This phenomenon is an example of:

Accepted Answer

Seasonal demand variability

Answer

Seasonal demand variability refers to predictable fluctuations in demand tied to calendar periods such as holidays or seasons.

Question 4

Which inventory model is most appropriate when demand is variable and replenishment lead times are uncertain?

Accepted Answer

Fixed-order quantity model with safety stock

Answer

A fixed-order quantity model with safety stock accounts for demand and lead time variability by maintaining a buffer to prevent stockouts.

Question 5

What is 'consignment inventory'?

Accepted Answer

Inventory owned by the supplier but stored at the buyer's location until sold

Answer

In a consignment arrangement, the supplier retains ownership of goods stored at the buyer's location; the buyer pays only when items are sold or used.

Supply Chain Management Practice Test

Supply Chain Management Practice Test

Supply Chain Management Inventory Management 3