Inventory Control Systems: A Comprehensive Guide for Supply Chain Management

Question 1

What is a potential drawback of using a perpetual inventory system?

Accepted Answer

Higher storage expenses

Answer

Accurate inventory records

Answer

Reduced inventory loss

Answer

Enhanced customer satisfaction

Question 2

What is a potential drawback of a perpetual inventory system?

Accepted Answer

Increased labor expenses

Answer

Accurate inventory records

Answer

Up-to-date inventory tracking

Question 3

Which of the following is NOT an advantage of a perpetual inventory system?

Accepted Answer

Reduced inventory holding costs

Answer

Up-to-date and accurate inventory records

Answer

Elimination of physical inventory counts

Answer

Faster order fulfillment

Question 4

What is the primary purpose of a periodic inventory system?

Accepted Answer

To reconcile physical inventory counts with inventory records

Answer

To provide continuous monitoring of inventory levels

Answer

To automate inventory management processes

Answer

To minimize inventory holding costs

Question 5

What is the purpose of safety stock in an inventory control system?

Accepted Answer

To buffer against unexpected fluctuations in demand

Answer

To ensure uninterrupted production

Answer

To minimize inventory holding costs

Answer

To increase inventory turnover

Question 6

Which of the following inventory control methods uses statistical forecasting to predict future demand?

Accepted Answer

Material Requirements Planning (MRP)

Answer

Economic Order Quantity (EOQ)

Answer

Just-in-time (JIT)

Answer

Safety stock

Question 7

What is the fundamental goal of inventory management?

Accepted Answer

To optimize inventory levels to meet customer demand while minimizing costs

Answer

To maximize inventory turnover

Answer

To reduce lead times

Answer

To increase inventory holding costs

Question 8

What is the primary distinction between FIFO and LIFO inventory valuation methods?

Accepted Answer

FIFO assumes that the oldest inventory is sold first, while LIFO assumes that the newest inventory is sold first

Answer

FIFO results in higher cost of goods sold in inflationary periods than LIFO

Answer

LIFO provides a more accurate representation of current inventory costs

Answer

FIFO and LIFO result in the same profit calculation

Question 9

What is the primary function of a Warehouse Management System (WMS) in inventory management?

Accepted Answer

To automate inventory tracking, replenishment, and warehouse operations

Answer

To provide real-time visibility into inventory levels

Answer

To generate reports and analytics

Answer

To integrate with other enterprise systems

Question 10

The fundamental difference between periodic and perpetual inventory systems lies in:

Accepted Answer

Continuous inventory updates in perpetual systems, while periodic systems update inventory only at specific intervals.

Answer

Periodic systems use physical inventory counts, while perpetual systems rely on ongoing transactions.

Answer

Perpetual systems record cost of goods sold continuously, while periodic systems record it only at the end of a period.

Answer

Periodic systems require more frequent physical inventory counts than perpetual systems.

Question 11

Excluding which factor, the Economic Order Quantity (EOQ) formula considers the following parameters:

Accepted Answer

Safety stock levels

Answer

Annual demand for the item to be ordered

Answer

Unit cost of the item

Answer

Interest rate on borrowed funds

Question 12

Which inventory management method involves holding additional inventory as a buffer against unexpected demand fluctuations?

Accepted Answer

Safety stock

Answer

Just-in-time inventory

Answer

Consignment inventory

Answer

Vendor-managed inventory

Question 13

The primary purpose of cycle counting in inventory management is to:

Accepted Answer

Verify the accuracy of inventory records through periodic physical counts

Answer

Reduce inventory shrinkage by identifying discrepancies

Answer

Identify slow-moving items to optimize inventory levels

Answer

Determine the optimal reorder point for each item

Question 14

The primary function of safety stock in inventory management is to:

Accepted Answer

Protect against potential stockouts caused by unexpected demand surges or supply chain disruptions

Answer

Reduce the risk of inventory shortages and improve customer service levels

Answer

Minimize inventory carrying costs by keeping inventory levels as low as possible

Answer

Identify obsolete or slow-moving items for potential disposal

Question 15

What is the primary goal of inventory management?

Accepted Answer

To maintain optimal inventory levels that meet customer demand without excessive storage costs

Answer

To minimize inventory levels while reducing carrying costs

Answer

To maximize inventory levels to ensure high customer service

Answer

To eliminate inventory waste and improve production efficiency

Question 16

Which of the following is NOT a technology commonly used in automated inventory systems?

Accepted Answer

Physical inventory counts

Answer

Barcode scanners

Answer

RFID tags

Answer

Inventory management software

Question 17

What is the primary distinction between a Safety Stock and a Reorder Point?

Accepted Answer

Safety Stock is the minimum inventory level to buffer against demand fluctuations, while Reorder Point is the level at which a new order is placed.

Answer

Reorder Point is the minimum inventory level to buffer against demand fluctuations, while Safety Stock is the level at which a new order is placed.

Answer

They serve the same purpose and are interchangeable terms.

Answer

Safety Stock is maintained at the warehouse, while Reorder Point is maintained at the retail store.

Question 18

What is the purpose of the Economic Order Quantity (EOQ) model?

Accepted Answer

To determine the optimal order quantity to minimize total inventory costs

Answer

To calculate the optimal safety stock level

Answer

To establish the reorder point

Answer

To forecast future demand

Question 19

Which of the following inventory costing methods is atypical?

Accepted Answer

Replacement Cost

Answer

First-in, First-out (FIFO)

Answer

Last-in, First-out (LIFO)

Answer

Weighted Average Cost

Question 20

What is the function of a Safety Factor in inventory management?

Accepted Answer

To account for uncertainties in demand and lead times

Answer

To reduce the probability of stockouts

Answer

To increase inventory turnover

Answer

To improve customer service

Question 21

What is a key advantage of using a periodic inventory system?

Accepted Answer

Lower implementation costs compared to perpetual systems

Answer

More accurate inventory balances

Answer

Easier tracking of inventory movements

Answer

Reduced need for physical inventory counts

Question 22

Which of the following is NOT a type of inventory control system?

Accepted Answer

Manual

Answer

Perpetual

Answer

Periodic

Answer

Automated

Question 23

What is the main purpose of a reorder point in inventory management?

Accepted Answer

To trigger an order when inventory reaches a certain level

Answer

To determine the optimal order quantity

Answer

To calculate the safety stock level

Answer

To track inventory usage

Question 24

What is the main purpose of cycle counting?

Accepted Answer

To verify inventory accuracy

Answer

To reduce inventory carrying costs

Answer

To improve customer service

Answer

To prevent stockouts

Question 25

Which of the following is NOT a key performance indicator (KPI) for inventory management?

Accepted Answer

Gross profit margin

Answer

Inventory turnover ratio

Answer

Inventory carrying costs

Answer

Customer service level

Question 26

What is the purpose of safety stock in inventory management?

Accepted Answer

To reduce the risk of stockouts

Answer

To improve inventory turnover

Answer

To decrease inventory carrying costs

Answer

To increase customer service levels

Question 27

Which of the following is NOT a benefit of a perpetual inventory system?

Accepted Answer

Provides higher storage costs

Answer

Enables real-time inventory tracking

Answer

Minimizes the risk of inventory shrinkage

Answer

Enhances customer service levels

Question 28

Which inventory control system utilizes sensors and RFID technology to track inventory levels in real-time?

Accepted Answer

Automated

Answer

Perpetual

Answer

Periodic

Answer

Manual

Question 29

Which of the following is NOT an advantage of implementing a just-in-time (JIT) inventory system?

Accepted Answer

Increased lead times

Answer

Reduced inventory carrying costs

Answer

Enhanced product quality

Answer

Improved customer responsiveness

Question 30

How do inventory holding costs affect inventory management?

Accepted Answer

Increase carrying costs

Answer

Decrease storage space

Answer

Improve customer service

Answer

Increase demand

Question 31

In a perpetual inventory system, inventory balances are:

Accepted Answer

Updated in real-time

Answer

Updated periodically

Answer

Estimated based on historical data

Answer

Not tracked at all

Question 32

Which of the following is NOT an advantage of using an automated inventory control system?

Accepted Answer

Improved supplier collaboration

Answer

Increased accuracy

Answer

Reduced labor costs

Answer

Enhanced decision-making

Question 33

The minimum inventory level that should be maintained to prevent stockouts is called the:

Accepted Answer

Safety stock

Answer

Reorder point

Answer

Buffer stock

Answer

Economic order quantity

Question 34

Which of the following inventory control techniques involves prioritizing inventory based on its value and demand?

Accepted Answer

ABC analysis

Answer

Cycle counting

Answer

JIT inventory

Answer

Kanban system

Question 35

The primary difference between a physical inventory and a cycle count is:

Accepted Answer

The frequency at which the inventory is counted

Answer

The amount of inventory being counted

Answer

The accuracy of the inventory count

Answer

The cost of conducting the inventory count

Question 36

Which inventory control system continuously updates inventory records as transactions occur?

Accepted Answer

Perpetual inventory system

Answer

Automated inventory system

Answer

Periodic inventory system

Answer

Manual inventory system

Question 37

What is a primary advantage of a periodic inventory system?

Accepted Answer

Lower operating costs and simplicity

Answer

Higher accuracy and real-time tracking

Answer

Elimination of errors and fraud

Answer

Integration with other systems and automation

Question 38

Which type of automated inventory system employs radio frequency identification (RFID) technology?

Accepted Answer

RFID inventory system

Answer

Automated storage and retrieval system (AS/RS)

Answer

Smart inventory system

Answer

Barcode inventory system

Question 39

What is the primary goal of inventory control systems?

Accepted Answer

Optimizing inventory levels to minimize costs and improve efficiency

Answer

Maintaining accurate inventory records

Answer

Preventing theft and fraud

Question 40

What is a key distinction between perpetual and periodic inventory systems?

Accepted Answer

Frequency of inventory updates

Answer

Cost of implementation

Answer

Method of inventory counting

Answer

Type of software used

Question 41

Which inventory control technique is specifically designed to minimize the risk of stockouts?

Accepted Answer

Safety stock

Answer

Economic order quantity (EOQ)

Answer

Just-in-time (JIT) inventory

Answer

First-in, First-out (FIFO) method

Question 42

What is the primary objective of the economic order quantity (EOQ) model?

Accepted Answer

Determining the optimal order quantity that minimizes inventory holding and ordering costs

Answer

Calculating the safety stock level

Answer

Managing inventory levels based on demand forecasts

Question 43

What is NOT an advantage of a perpetual inventory system?

Accepted Answer

It eliminates the need for physical inventory counts.

Answer

It maintains up-to-date inventory records.

Answer

It provides real-time inventory visibility.

Answer

It generally improves inventory accuracy.

Question 44

Which statement best describes a key characteristic of a periodic inventory system?

Accepted Answer

Physical inventory counts are conducted at specific intervals.

Answer

It relies on automated systems to update inventory records.

Answer

It uses technology to track inventory levels in real-time.

Answer

It maintains a continuous record of inventory transactions.

Question 45

Automated inventory control systems often utilize which technology?

Accepted Answer

Sensors and RFID tags

Answer

Manual data entry with spreadsheets

Answer

Visual inspections and paper-based records

Answer

Periodic physical inventory counts

Question 46

What is the primary purpose of an inventory control system?

Accepted Answer

To maintain optimal inventory levels to meet demand efficiently

Answer

To guarantee the prevention of stockouts and overstocking

Answer

To completely eliminate the need for safety stock

Answer

To maximize the amount of inventory on hand at all times

Question 47

Which inventory control technique aims to reduce the negative impact of demand variability?

Accepted Answer

Safety stock

Answer

Materials Requirements Planning (MRP)

Answer

Just-in-time (JIT)

Answer

Vendor Managed Inventory (VMI)

Question 48

In inventory management, the reorder point is defined as:

Accepted Answer

The inventory level that triggers an order to replenish stock

Answer

The absolute maximum inventory level allowed in storage

Answer

The average inventory level maintained over a period

Answer

The estimated inventory level at a specific future date

Question 49

What is a key benefit of using a cloud-based inventory control system?

Accepted Answer

Real-time inventory visibility across multiple locations

Answer

Guaranteed lower hardware and maintenance costs

Answer

Complete automation of all warehouse operations

Answer

Complete elimination of the need for software upgrades

Question 50

The Economic Order Quantity (EOQ) is best defined as:

Accepted Answer

The order quantity that minimizes the total cost of inventory management

Answer

The quantity of safety stock needed to cover potential disruptions

Answer

The specific quantity of goods ordered at each reorder point

Answer

A fixed quantity that ensures a constant level of inventory

Question 51

What is the primary function of safety stock in an inventory control system?

Accepted Answer

It acts as a buffer to protect against unexpected demand or supply fluctuations

Answer

It represents the absolute minimum inventory level to satisfy demand

Answer

It helps determine the optimal order quantity for each replenishment

Answer

It defines the absolute maximum inventory level allowed in the system

Question 52

What is a common challenge associated with implementing an automated inventory control system?

Accepted Answer

High upfront investment costs for software and implementation

Answer

Significantly reduced labor requirements for inventory management

Answer

Seamless and easy integration with existing legacy systems

Answer

Guaranteed and immediate improvement in accuracy and efficiency