Inventory, Logistics & Supply Chain Management Flashcards
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Read the first 7 Inventory, Logistics & Supply Chain Management flashcards as text
A company uses a periodic review inventory system. What is the primary characteristic of this system?
Answer: Inventory is checked and orders placed at fixed time intervals
In a periodic review system, inventory levels are checked at set intervals (e.g., weekly or monthly) and orders are placed to bring stock up to a target level.
Which supply chain risk mitigation strategy involves holding extra inventory to buffer against demand or supply variability?
Answer: Safety stock
Safety stock is buffer inventory held above average demand to protect against variability in demand or supplier lead times.
In logistics, what does 'freight consolidation' primarily achieve?
Answer: Combining smaller shipments into one larger load to reduce per-unit shipping costs
Freight consolidation combines multiple small shipments into a single larger shipment, reducing cost per unit by achieving better carrier rates.
A purchasing practitioner discovers that a supplier's on-time delivery rate has dropped from 95% to 78%. Which metric best quantifies the downstream impact on the buyer's inventory?
Answer: Required safety stock increase
Lower supplier reliability increases lead time variability, which directly drives up the safety stock needed to maintain the same service level.
Which of the following best describes 'postponement' as a supply chain strategy?
Answer: Deferring product customization until closer to the customer order to reduce finished goods inventory
Postponement delays differentiation (e.g., labeling, configuration) to the latest possible point, reducing the risk of holding obsolete finished inventory.
A company's total landed cost analysis for an overseas supplier should include which of the following costs NOT typically present with a domestic supplier?
Answer: Import duties, customs brokerage fees, and longer carrying costs due to transit time
Total landed cost for overseas sourcing must include import duties, customs brokerage, ocean/air freight, insurance, and the increased inventory carrying cost from extended lead times.
In supply chain management, 'bullwhip effect' refers to what phenomenon?
Answer: Increasing demand variability as orders move upstream from retailer to manufacturer
The bullwhip effect describes how small demand fluctuations at the retail level are amplified into larger swings in orders as they move up the supply chain.