Supply Chain Management Inventory Management 5 — Questions and Answers
Question 1: Which KPI measures the percentage of customer orders that are fulfilled completely from available stock without backorders?
- Inventory Accuracy Rate
- Fill Rate (Correct answer)
- Order Cycle Time
- Perfect Order Rate
Correct answer: Fill Rate
Fill rate measures the proportion of orders or order lines that can be satisfied immediately from on-hand inventory without causing a stockout or backorder.
Question 2: In supply chain management, 'postponement' as an inventory strategy refers to:
- Delaying payment to suppliers to improve cash flow
- Deferring product customization or differentiation until closer to actual customer demand (Correct answer)
- Holding off on reordering until stock reaches zero
- Postponing annual inventory audits to reduce operational disruption
Correct answer: Deferring product customization or differentiation until closer to actual customer demand
Postponement delays value-adding activities (assembly, labeling, customization) until actual demand is known, reducing the risk of holding finished goods that may not match demand.
Question 3: A manufacturer uses Material Requirements Planning (MRP). Which input does MRP primarily use to calculate net material requirements?
- Reorder point and safety stock levels
- Bill of Materials (BOM), master production schedule, and current inventory records (Correct answer)
- Supplier lead times and economic order quantities
- Historical sales data and seasonal indices
Correct answer: Bill of Materials (BOM), master production schedule, and current inventory records
MRP uses the Master Production Schedule (MPS), Bill of Materials (BOM), and Inventory Records to calculate when and how much material to order.
Question 4: What is the primary risk associated with single-sourcing a critical inventory item?
- Higher administrative costs from managing fewer suppliers
- Increased supply disruption vulnerability if the sole supplier fails (Correct answer)
- Reduced negotiating power over pricing
- Difficulty achieving volume discounts
Correct answer: Increased supply disruption vulnerability if the sole supplier fails
Relying on a single supplier creates concentration risk — any disruption to that supplier's operations (natural disaster, financial failure, capacity issues) can halt supply entirely.
Question 5: Which of the following describes 'cross-docking' and its impact on inventory?
- Moving goods from receiving directly to outbound shipping with minimal or no storage time (Correct answer)
- Storing inventory across multiple warehouse locations to reduce risk
- Crossing international borders with bonded inventory to defer duties
- Sharing warehouse space between multiple companies to reduce costs
Correct answer: Moving goods from receiving directly to outbound shipping with minimal or no storage time
Cross-docking transfers inbound shipments directly to outbound vehicles, virtually eliminating storage time and reducing inventory holding costs.
Question 6: A company implements an RFID-based inventory tracking system. The PRIMARY operational benefit is:
- Elimination of all inventory holding costs
- Real-time visibility into inventory location and quantity without manual scanning (Correct answer)
- Automatic replenishment orders sent to all suppliers
- Reduction of minimum order quantities from suppliers
Correct answer: Real-time visibility into inventory location and quantity without manual scanning
RFID enables automatic, real-time tracking of inventory movement and quantity, dramatically improving accuracy and visibility compared to manual barcode scanning.
Question 7: In inventory management, 'pipeline inventory' refers to:
- Stock stored in underground or enclosed warehouse facilities
- Inventory that is in transit between locations in the supply chain (Correct answer)
- Products waiting in queue for quality inspection
- Raw materials flowing through a manufacturing production line
Correct answer: Inventory that is in transit between locations in the supply chain
Pipeline inventory (also called in-transit inventory) consists of goods that have been ordered and shipped but not yet received at the destination.
Supply Chain Management Inventory Management 5
Which KPI measures the percentage of customer orders that are fulfilled completely from available stock without backorders?