Certified Supply Chain Professional CSCP Practice Certified Supply Chain Professional (CSCP) Internal Operations and Inventory 1 — Questions and Answers
Question 1: A distribution center uses a continuous review inventory system. Which of the following formulas correctly calculates the safety stock when demand variability is the primary source of uncertainty?
- Safety Stock = Average Demand × Lead Time
- Safety Stock = Z × σ_demand × √Lead Time (Correct answer)
- Safety Stock = Reorder Point − Average Demand during Lead Time
- Safety Stock = Economic Order Quantity ÷ 2
Correct answer: Safety Stock = Z × σ_demand × √Lead Time
Safety stock in a continuous review system with variable demand is calculated as the Z-score (service level factor) multiplied by the standard deviation of demand multiplied by the square root of lead time. This formula accounts for demand variability over the replenishment lead time period.
Question 2: A company runs a periodic review inventory system with a review period of 4 weeks and a lead time of 2 weeks. What is the effective replenishment cycle that must be covered when placing a replenishment order?
- 2 weeks (lead time only)
- 4 weeks (review period only)
- 6 weeks (review period plus lead time) (Correct answer)
- 8 weeks (two review periods)
Correct answer: 6 weeks (review period plus lead time)
In a periodic review system, each order placed must cover inventory needs for the entire review period plus the lead time, because the next review will not occur until the review period ends. Therefore the effective cycle is 4 + 2 = 6 weeks.
Question 3: Which of the following best describes a Type I service level (also called the cycle service level) in inventory management?
- The percentage of total annual demand fulfilled without a stockout
- The probability that no stockout occurs during a single replenishment cycle (Correct answer)
- The ratio of units shipped on time to total units ordered
- The average number of days an item is out of stock per year
Correct answer: The probability that no stockout occurs during a single replenishment cycle
Type I service level (cycle service level) measures the probability that inventory on hand will be sufficient to meet all demand during a single replenishment cycle—i.e., the probability of not experiencing a stockout in any given cycle. It differs from Type II (fill rate), which measures the fraction of demand met from stock.
Question 4: In rough-cut capacity planning (RCCP), planners compare the master production schedule against which of the following?
- Detailed shop-floor machine schedules
- Available-to-promise quantities in finished goods
- Key or critical resource capacities using bill of resources (Correct answer)
- Purchase order lead times from suppliers
Correct answer: Key or critical resource capacities using bill of resources
RCCP validates the MPS by comparing planned production quantities against critical resource capacities using a bill of resources (or resource profile). It is a high-level check performed before material requirements planning to ensure the MPS is feasible without detailed routing analysis.
Question 5: A warehouse manager notices that a small percentage of SKUs accounts for the majority of annual inventory value. Which inventory classification technique should be applied to prioritize management attention?
- Just-in-time (JIT) analysis
- ABC classification (Correct answer)
- Economic order quantity (EOQ) modeling
- Vendor-managed inventory (VMI)
Correct answer: ABC classification
ABC classification ranks SKUs by annual usage value (unit cost × annual volume). Typically, A items (roughly 10–20% of SKUs) represent 70–80% of total inventory value and receive the tightest control, while B and C items receive progressively less oversight. This directly addresses the Pareto principle observation described.
Question 6: A manufacturer wants to reduce work-in-process (WIP) inventory on the shop floor. According to Little's Law, which of the following actions will directly achieve this goal, assuming throughput remains constant?
- Increase batch sizes to reduce changeover frequency
- Reduce the average cycle time items spend in the production system (Correct answer)
- Add buffer inventory between workstations
- Switch from a pull system to a push system
Correct answer: Reduce the average cycle time items spend in the production system
Little's Law states that WIP = Throughput × Cycle Time. If throughput is held constant, the only way to reduce WIP is to reduce the average cycle time (the time each unit spends in the system). Increasing batch sizes or adding buffers would increase cycle time and therefore increase WIP.
Certified Supply Chain Professional CSCP Practice Certified Supply Chain Professional (CSCP) Internal Operations and Inventory 1
A distribution center uses a continuous review inventory system.
Which of the following formulas correctly calculates the safety stock when demand variability is the primary source of uncertainty?