Practice Test Geeks(CPIM) Certified in Planning and Inventory Management Practice Test
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Inventory Management Flashcards

7 cards from real CPIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Inventory Management flashcards as text

  1. A company implements cross-docking in its distribution network. What is the primary inventory benefit?

    Answer: Elimination or reduction of storage time, reducing inventory holding costs

    Cross-docking transfers inbound goods directly to outbound transportation with minimal storage, reducing inventory holding time and costs.

  2. What is the 'bullwhip effect' and how does it impact inventory levels upstream in the supply chain?

    Answer: Small demand fluctuations amplify as they move upstream, causing excessive upstream inventory

    The bullwhip effect causes demand variability to amplify upstream, leading suppliers to hold excessive inventory to buffer against perceived demand spikes.

  3. Which approach to inventory valuation assigns an average unit cost to all items of the same type regardless of purchase date?

    Answer: Weighted average cost

    Weighted average cost calculates a blended average of all unit costs, applying this single average cost to all issues and ending inventory.

  4. In CPIM, what distinguishes 'independent demand' from 'dependent demand' for inventory purposes?

    Answer: Independent demand is forecasted; dependent demand is calculated from parent item demand

    Independent demand (finished goods) must be forecasted because it comes from external customers; dependent demand (components) is calculated using BOM explosion from parent item requirements.

  5. What is the primary risk of using a consignment inventory arrangement for a buyer?

    Answer: The buyer may become dependent on a single supplier with limited negotiating power

    Consignment arrangements can create supplier dependency, as the buyer may lack alternative sources when the supplier controls replenishment and pricing.

  6. How does Just-in-Time (JIT) inventory philosophy impact safety stock levels?

    Answer: JIT aims to minimize or eliminate safety stock by improving process reliability

    JIT philosophy views safety stock as waste (muda) and focuses on eliminating the variability that makes safety stock necessary rather than buffering against it.

  7. Which formula correctly calculates the total annual inventory cost in the EOQ model?

    Answer: Total cost = (D/Q × S) + (Q/2 × H)

    Total annual inventory cost = Annual ordering cost (D/Q × S) + Annual holding cost (Q/2 × H), where D=demand, Q=order qty, S=order cost, H=holding cost per unit.