Midterm Review Inventory Control & Material Management

1. Welcome to class. We will
begin shortly

2. Midterm Review

3. Inventory can be defined as goods that
are either inputs for production,
finished products, or products that are
in the process of being made.

4. Replenishment planning shouldn’t
consider the anticipated lead time for
each order.
False

5. To calculate an item fill rate, you need to
know how many units of inventory were
ordered by you as the purchaser, and how
many units were ordered by your
customers.
True

6. What is radio frequency identification?
Microchip technology that can track
inventory

7. The economic order quantity model
seeks to ensure that the right amount
of inventory is ordered per batch

8. Principal types of forecasts are: inventory
carrying, ordering and setup, expected
stockout, and in-transit inventory.
False

9. What does the economic order quantity
calculate?
The optimal level of inventory to order
from suppliers to minimize ordering costs

10. Independent demand is related to the
demand for other items too.
False

11. Which of the following is NOT an
example of an automated inventory
control system?
Physically counting inventory on hand

12. Related to the importance of Inventory,
the key to every organization's success is
right product, right place, right time, and
right quantity.

13. Without a proper replenishment plan,
organizations may put their business at
risk.
True

14. The objective of inventory management is
to strike a balance between inventory
investment and customer service
True

15. All of the following are benefits of a just-
in-time (JIT) system EXCEPT:
Inventory arrives just as it is needed.
It reduces the potential for spoilage.
It improves a company's cash flow
It ensures the company never runs out of
product

16. Principal types of demand are: cycle stock,
work-in-process, inventory in transit,
safety stock, seasonal stock, and
anticipatory stock.
False

17. Among different types of costs
associated with inventory, the costs of
obtaining purchase approvals are
related to right place

18. A reorder point (ROP) is a specific level at
which your stock needs to be replenished.
In other words, it tells you when to place
an order so you won’t run out of stock
True

19. Inventory management has no impact on
any of the organization’s functions, sales,
marketing, operations, procurement,
finance, and accounting.
False

20. Among different types of costs associated
with inventory, the opportunity cost of the
investment tied up in inventory is a(n)
carrying cost

21. A demand forecast helps you determine
how much inventory you should keep in
your supply chain to meet your customer
demand
True

22. The purchase-order lead time is the
________.
time between placing an order and its
delivery

23. Safety stock: The amount of extra
stock, if any, that you keep in your
inventory to help avoid stockouts
True

24. Which of the following statements is true
of just-in-time (JIT) purchasing?
In JIT purchasing, raw materials (or goods)
are purchased so that products are
delivered just as needed for production or
sales.

25. Quantity Discount is also known as
“volume discount.”
True

26. When demand exceeds supply the
organization will incur losses of sales
due to unavailability of the products.
True

27. Demand forecasting is not a counting
system that can be utilized when
counting inventory.

28. Too much or too less stock can hamper
your organization’s growth.
True

29. Seasonal inventory is not manufactured
during the pre-season to ensure that
enough of the product is available during
the peak season.
False

30. A company needs to generate the
forecast for every product in business
True

31. In a pull inventory management
approach, production doesn’t start on
receipt of a customer order
False

32. EOQ is the quantity that minimizes
Total Ordering Cost

33. When one of the costs increases, firms
respond by increasing other costs that
are traded off against them
True

34. Cost of not carrying sufficient
inventory is known as
Stock-out Cost

35. EOQ assumes that demand, ordering,
and holding costs all remain constant
over time.
True

36. Inventory control models assume that
demand for an item is
either independent of or dependent on
the demand for other items.

37. Organizations doesn’t hold safety stock or
buffer stock to minimize the possibility of a
stockout and costs of lost sales.
False

38. Item fill rates are a simple way of
measuring product stock against
customer orders.
True

39. Extra units that are held in inventory to
reduce stockouts are called
safety stock

40. To calculate the EOQ for inventory you
must know the setup costs, demand
rate, and holding costs.
True

41. The objective of inventory
management is to
strike a balance between inventory
investment and customer service.

42. Demand can be forecasted with a
variety of methods
True

43. Inventory Control Systems are ..........
Periodic Inventory System and
Perpetual Inventory Systems

44. In a push inventory management
approach, the customer demand is
forecasted, and companies produce to the
forecasted demand
True

45. Demand forecasting and inventory
planning go hand in hand
True

46. The fill rate is defined as the
percentage of product demand
fulfilled from the future inventory.
False

47. Lost sales are defined as missed sales
when you were out of stock of a
product when the customer wanted it.
True

48. Managing the flow of materials in a supply
chain network with entities such as
suppliers, manufacturers, distributors,
retailers, and end customers is the essence
of supply chain management
True

49. The just-in-time (JIT) inventory system is a
management strategy that maximizes
inventory and increases efficiency.
False

50. Inventory is the goods available for
sale, raw materials available to
produce goods
True

51. Four major components of Inventory
carrying costs incurred by inventory at rest
and waiting to be used: Capital cost,
Storage space cost, Inventory service cost,
and Inventory risk cost.
True

52. Suppliers’ uses of VMI to push excess
inventory to a customer distribution
center at the end of the month in order to
meet monthly sales quotas, resulting in
the customer holding extra inventory,
adding costs to its operations.
True