Inventory, Logistics & Supply Chain Management Flashcards

A supply chain disruption causes a key supplier to halt production for 30 days. Which business continuity strategy would have best mitigated this specific risk before it occurred?

Answer: Pre-qualifying and contracting with an alternative supplier for the same component

Pre-qualifying an alternate supplier before a disruption occurs provides an immediately activatable backup, the most effective mitigation for single-source supply risk.

What is the primary purpose of a Bill of Lading (BOL) in logistics?

Answer: A legal contract between shipper and carrier detailing shipment contents, terms, and title transfer

A Bill of Lading serves as a receipt for goods, a contract of carriage, and a document of title that governs the legal relationship between shipper and carrier.

Which demand forecasting method is most appropriate when historical sales data shows a consistent upward or downward trend?

Answer: Trend-adjusted exponential smoothing

Trend-adjusted exponential smoothing (double exponential smoothing) accounts for both the current level and the direction of change, making it suitable for trended demand patterns.

A company ships goods FOB Destination. Who bears the risk of loss while the goods are in transit?

Answer: The seller, until the goods arrive at the buyer's designated destination

Under FOB Destination, title and risk of loss transfer to the buyer only when the goods arrive at the destination, so the seller bears transit risk.

Collaborative Planning, Forecasting and Replenishment (CPFR) primarily benefits the supply chain by:

Answer: Sharing demand data and forecasts between trading partners to reduce variability and improve replenishment accuracy

CPFR creates a shared demand and replenishment plan between buyer and supplier, reducing the bullwhip effect and improving service levels for both parties.

Which cost category is NOT typically included in inventory carrying (holding) costs?

Answer: The purchase price paid to the supplier per unit

The purchase price per unit is an acquisition cost, not a carrying cost; carrying costs include storage, insurance, taxes, capital cost, obsolescence, and shrinkage.

A purchasing practitioner negotiates consignment inventory terms with a supplier. What is the key financial benefit to the buyer?

Answer: The buyer does not pay for inventory until it is consumed, improving cash flow and reducing financial risk

Under consignment, the supplier retains ownership until goods are used, so the buyer avoids tying up working capital and bears no financial risk for unsold inventory.