Manufacturing and Production Supply Chain Management 1 — Questions and Answers
Question 1: What does EOQ stand for in inventory management?
- End-of-Quarter order
- Economic Order Quantity (Correct answer)
- Estimated Output Quality
- Emergency Order Queue
Correct answer: Economic Order Quantity
Economic Order Quantity is the optimal order size that minimizes total inventory holding and ordering costs.
Question 2: Safety stock in supply chain management is maintained to:
- Reduce warehouse space
- Buffer against demand variability and supply uncertainty (Correct answer)
- Increase supplier leverage
- Lower unit purchase price
Correct answer: Buffer against demand variability and supply uncertainty
Safety stock is extra inventory kept to prevent stockouts caused by unpredictable demand spikes or supply delays.
Question 3: The 'bullwhip effect' in supply chains refers to:
- A safety hazard from overhead cranes
- Amplification of demand variability as orders move upstream through the supply chain (Correct answer)
- A method for fast supplier delivery
- A technique for forecasting seasonal demand
Correct answer: Amplification of demand variability as orders move upstream through the supply chain
The bullwhip effect describes how small fluctuations in end-customer demand become progressively larger variability upstream.
Question 4: Just-in-Time (JIT) inventory management aims to:
- Stock large quantities to prevent any shortage
- Receive materials only as they are needed in the production process (Correct answer)
- Automate purchasing decisions
- Maintain a 90-day safety stock
Correct answer: Receive materials only as they are needed in the production process
JIT reduces inventory waste by synchronizing material deliveries with production needs, minimizing carrying costs.
Question 5: What is a vendor-managed inventory (VMI) arrangement?
- The customer manages their own inventory levels
- The supplier monitors and replenishes the customer's inventory automatically (Correct answer)
- A third-party logistics firm manages all inventory
- An ERP system that automates purchase orders
Correct answer: The supplier monitors and replenishes the customer's inventory automatically
In VMI, the supplier takes responsibility for maintaining agreed inventory levels at the customer's location.
Question 6: ABC inventory classification categorizes items based on:
- Alphabetical order of SKU names
- Annual consumption value to prioritize control efforts (Correct answer)
- Size and weight of items
- Supplier location and lead time
Correct answer: Annual consumption value to prioritize control efforts
ABC analysis divides inventory into A (high value), B (moderate value), and C (low value) items to focus management effort.
Manufacturing and Production Supply Chain Management 1
What does EOQ stand for in inventory management?