Inventory Optimization Strategies: Master Just-in-Time (JIT) and Vendor-Managed Inventory (VMI)

Question 1

Vendor-managed inventory (VMI) is distinguished by which characteristic?

Accepted Answer

The supplier manages inventory levels on behalf of the buyer

Answer

The buyer bears exclusive responsibility for inventory management

Answer

Both the supplier and buyer share inventory management responsibilities

Answer

The buyer is obligated to purchase all inventory from the designated supplier

Question 2

Which of the following illustrates an application of JIT inventory strategy?

Accepted Answer

Implementing a kanban system to coordinate production

Answer

Maintaining a buffer stock of inventory

Answer

Ordering substantial quantities of inventory to secure bulk discounts

Answer

Retaining excess inventory to address unforeseen demand

Question 3

What is the primary objective of inventory optimization?

Accepted Answer

Minimizing overall inventory expenses

Answer

Maximizing inventory turnover rate

Answer

Ensuring sufficient inventory to meet customer demand

Answer

Shortening lead times for inventory replenishment

Question 4

According to the Vendor-Managed Inventory (VMI) concept, which party is responsible for managing the retailer's inventory?

Accepted Answer

The vendor

Answer

The retailer

Answer

A third-party logistics provider

Answer

The manufacturer

Question 5

Which of the following industries is most likely to benefit from the implementation of Vendor-Managed Inventory (VMI)?

Accepted Answer

Retail

Answer

Manufacturing

Answer

Healthcare

Answer

Construction

Question 6

What is a key benefit of using a Just-in-Time (JIT) inventory system?

Accepted Answer

Reduced storage and holding costs

Answer

Longer production lead times

Answer

Higher safety stock levels

Question 7

What is the core principle of Just-in-Time (JIT) inventory management?

Accepted Answer

Produce only what is needed, when it is needed.

Answer

Maintain a large safety stock of inventory.

Answer

Use complex inventory forecasting methods.

Answer

Allow for extended lead times in ordering.

Question 8

Which method is commonly used to minimize setup times in the context of inventory optimization?

Accepted Answer

Single-minute exchange of dies (SMED).

Answer

Statistical process control (SPC).

Answer

Total quality management (TQM).

Answer

Lean manufacturing.

Question 9

What is the primary purpose of holding safety stock in inventory management?

Accepted Answer

To mitigate against uncertainties in demand.

Answer

To ensure uninterrupted production.

Answer

To reduce the cost of holding inventory.

Answer

To improve customer satisfaction.

Question 10

Which inventory valuation method assumes that the most recently purchased items are the first to be sold?

Accepted Answer

First-in, first-out (FIFO).

Answer

Last-in, first-out (LIFO).

Answer

Weighted average cost.

Answer

Specific identification.

Question 11

What is the primary purpose of a cycle count in inventory management?

Accepted Answer

To verify the accuracy of inventory records.

Answer

To determine the optimal inventory levels.

Answer

To identify potential theft or shrinkage.

Answer

To forecast future demand.

Question 12

What is the primary objective of inventory optimization in business operations?

Accepted Answer

Reduce total inventory costs

Answer

Increase customer responsiveness

Answer

Improve production efficiency

Answer

Minimize waste and redundancy

Question 13

What is the primary difference between periodic and perpetual inventory systems?

Accepted Answer

Periodic systems update inventory records continuously, while perpetual systems update them regularly.

Answer

Periodic systems are more accurate than perpetual systems.

Answer

Perpetual systems are more common in large businesses, while periodic systems are more common in small businesses.

Answer

Periodic systems require more staff time to maintain than perpetual systems.

Question 14

Vendor-managed inventory (VMI) is a strategy where:

Accepted Answer

The supplier manages the inventory levels of the buyer

Answer

The buyer manages the inventory levels of the supplier

Answer

Both the buyer and supplier jointly manage inventory levels

Answer

Inventory is managed by a third-party logistics provider

Question 15

Which of the following is NOT a benefit of implementing Vendor Managed Inventory (VMI)?

Accepted Answer

Deteriorated customer service levels

Answer

Improved supplier relationships

Answer

Reduced inventory carrying costs

Answer

Increased flexibility and responsiveness

Question 16

How do inventory optimization strategies like JIT and VMI improve a business's operational efficiency?

Accepted Answer

By reducing waste and storage costs

Answer

By increasing customer satisfaction

Answer

By expanding production capacity

Answer

By eliminating the need for safety stock

Question 17

Which of the following is a key advantage of implementing a Just-in-Time (JIT) inventory system?

Accepted Answer

Reduced inventory holding costs

Answer

Improved product quality

Answer

Enhanced supplier relationships

Answer

Increased administrative expenses

Question 18

What is the primary purpose of safety stock in inventory management?

Accepted Answer

To mitigate risks associated with demand or supply fluctuations

Answer

To ensure sufficient stock for high-demand items

Answer

To minimize inventory holding costs

Answer

To enhance inventory turnover ratios

Question 19

Which of the following inventory control techniques is based on predicted demand?

Accepted Answer

Material requirements planning (MRP)

Answer

Min-max inventory control

Answer

Fixed-order quantity (FOQ)

Answer

Economic order quantity (EOQ)

Question 20

Select the most significant benefit of just-in-time (JIT) inventory optimization.:

Accepted Answer

Reduced inventory carrying costs

Answer

Improved cash flow

Answer

Increased customer satisfaction

Answer

Enhanced supply chain visibility

Question 21

Vendor-managed inventory (VMI) involves:

Accepted Answer

The supplier managing inventory levels at the customer's warehouse

Answer

The customer managing inventory levels at the supplier's warehouse

Answer

A shared responsibility for managing inventory levels

Answer

Outsourcing inventory management to a third-party logistics provider

Question 22

Differentiate between inventory optimization and inventory control:

Accepted Answer

Inventory optimization focuses on long-term planning, while inventory control focuses on day-to-day operations.

Answer

Inventory optimization is concerned only with reducing inventory levels, while inventory control encompasses a broader range of activities.

Answer

Inventory optimization is a subset of inventory control.

Answer

There is no difference between inventory optimization and inventory control.

Question 23

Which industry is most likely to benefit from JIT inventory optimization?

Accepted Answer

Manufacturing

Answer

Retail

Answer

Healthcare

Answer

Education

Question 24

Which of the following is a core principle of the Just-in-Time (JIT) inventory optimization strategy?

Accepted Answer

Minimizing inventory levels to optimize holding costs and reduce waste

Answer

Maximizing inventory levels to ensure continuous product availability

Answer

Using demand forecasting to predict future inventory needs

Question 25

Which inventory optimization technique involves holding only the essential inventory necessary to meet immediate demand?

Accepted Answer

Lean Inventory

Answer

Safety Stock

Answer

Periodic Inventory

Answer

Perpetual Inventory

Question 26

What is the primary purpose of safety stock in inventory optimization?

Accepted Answer

To provide a buffer against unexpected fluctuations in demand or supply, reducing the risk of stockouts

Answer

To improve customer service by ensuring availability of products

Answer

To increase inventory turnover and reduce holding costs

Question 27

What is the primary objective of inventory optimization?

Accepted Answer

To strike a balance between minimizing inventory holding costs and maintaining desired customer service levels

Answer

To eliminate all inventory to reduce costs

Answer

To maximize inventory turnover at all times

Question 28

Which of the following is a key performance indicator (KPI) for evaluating the effectiveness of inventory optimization?

Accepted Answer

Inventory turnover ratio, which measures how efficiently inventory is being used

Answer

Return on assets, which measures the profitability of a company's assets

Answer

Days sales outstanding, which measures the average time it takes to collect payment from customers

Answer

Gross profit margin, which measures the profitability of a company's sales

Question 29

What is the key distinction between inventory optimization and inventory management?

Accepted Answer

Inventory optimization involves strategic decision-making and long-term planning, while inventory management focuses on day-to-day operational tasks

Answer

Inventory management is solely concerned with stock levels

Answer

Inventory optimization is only applicable to large businesses

Question 30

Which of the following is a primary benefit of implementing a just-in-time (JIT) inventory system?

Accepted Answer

Reduced inventory carrying costs

Answer

Extended production lead times

Answer

Reduced customer satisfaction

Answer

Increased levels of waste

Question 31

In a vendor-managed inventory (VMI) system, who has the primary responsibility for managing inventory levels?

Accepted Answer

The supplier

Answer

A third-party logistics provider

Answer

The customer

Answer

The transportation company

Question 32

What is the primary objective of inventory optimization?

Accepted Answer

To minimize total inventory-related costs

Answer

To reduce production lead times

Answer

To increase sales revenue

Question 33

Which inventory costing method assumes the oldest items in inventory are sold first?

Accepted Answer

FIFO

Answer

Weighted average

Answer

Specific identification

Answer

LIFO

Question 34

What is the primary purpose of a safety stock?

Accepted Answer

To buffer against unexpected demand or supply fluctuations

Answer

To increase average inventory levels

Answer

To reduce inventory holding costs

Question 35

Which of the following is a potential challenge associated with VMI?

Accepted Answer

Loss of direct control over inventory decisions

Answer

Enhanced customer service

Answer

Improved supplier relationships

Answer

Reduced inventory costs

Question 36

What is the key difference between independent and dependent demand in inventory management?

Accepted Answer

Independent demand is not influenced by other inventory items, while dependent demand is

Answer

Independent demand is probabilistic, while dependent demand is deterministic

Answer

Independent demand is for raw materials, while dependent demand is for finished goods

Question 37

Which of the following is a key component of an effective inventory control system?

Accepted Answer

Accurate and up-to-date inventory records

Answer

Low inventory turnover

Answer

High inventory carrying costs

Answer

Infrequent inventory audits

Question 38

What is a potential consequence of overstocking inventory?

Accepted Answer

Increased holding costs and potential waste

Answer

Faster delivery times

Answer

Reduced supplier relationships

Answer

Improved customer satisfaction

Question 39

What is the primary goal of a company implementing Just-In-Time (JIT) inventory management?

Accepted Answer

Minimizing inventory holding costs by receiving materials only when needed for production.

Answer

Maximizing inventory levels to ensure a large buffer for unexpected demand fluctuations.

Answer

Increasing reliance on long-term contracts with suppliers to secure stable prices.

Question 40

Which of the following is NOT a typical benefit of implementing Vendor-Managed Inventory (VMI)?

Accepted Answer

Increased control over inventory levels for the buying company.

Answer

Improved supply chain visibility and collaboration.

Answer

Reduced inventory holding costs for the buying company.

Question 41

Why do companies use safety stock for their inventory?

Accepted Answer

To mitigate the risk of stockouts due to unexpected demand fluctuations.

Answer

To take advantage of bulk discounts from suppliers.

Answer

To maximize inventory levels for potential future price increases.

Question 42

The Economic Order Quantity (EOQ) model is used to determine:

Accepted Answer

The optimal order quantity that minimizes total inventory costs.

Answer

The best supplier for a particular product.

Answer

The most efficient inventory management software.

Question 43

How is a company's inventory turnover rate calculated?

Accepted Answer

By dividing the cost of goods sold by the average inventory value.

Answer

By multiplying the number of units sold by the average inventory cost.

Answer

By subtracting the ending inventory from the beginning inventory.

Question 44

Which of the following is an example of a demand-driven inventory management strategy?

Accepted Answer

MRP (Material Requirements Planning)

Answer

LIFO (Last-In, First-Out) inventory valuation method.

Answer

FIFO (First-In, First-Out) inventory valuation method.

Answer

ABC Inventory Analysis.

Question 45

What does a Kanban system for inventory management rely on?

Accepted Answer

Visual signals to trigger replenishment orders when inventory levels fall below a certain point.

Answer

A centralized inventory management system.

Answer

Maintaining a fixed inventory level for all products.

Question 46

What is the primary objective of ABC Inventory Analysis?

Accepted Answer

Prioritizing inventory control efforts on high-value items that have the biggest impact on costs.

Answer

Identifying the most popular products with the highest demand.

Answer

Predicting future demand based on historical sales data.

Question 47

A company is experiencing frequent stockouts of a crucial component. Which inventory optimization strategy could be most effective in resolving this issue?

Accepted Answer

Increasing safety stock for the component.

Answer

Using a LIFO inventory valuation method.

Answer

Implementing a JIT inventory system for the component.

Question 48

A manufacturing company aims to reduce its lead times for procuring raw materials. Which inventory optimization strategy could potentially help achieve this goal?

Accepted Answer

Developing stronger relationships with key suppliers to ensure timely deliveries.

Answer

Increasing the order quantity for raw materials.

Answer

Adopting a FIFO inventory valuation method.

Question 49

Which of the following is a primary goal of inventory optimization?

Accepted Answer

Reduce inventory levels to the minimum required while ensuring customer demand fulfillment

Answer

Maximize the utilization of storage space

Answer

Lower the frequency of inventory audits

Question 50

Which inventory optimization strategy involves the supplier managing the inventory at the customer's location?

Accepted Answer

Vendor-managed inventory (VMI)

Answer

Materials requirement planning (MRP)

Answer

Safety stock

Answer

Just-in-time (JIT)

Question 51

What is a key advantage of implementing just-in-time (JIT)?

Accepted Answer

Significant reduction in waste and carrying costs

Answer

Extended lead times

Answer

Increased reorder frequency

Answer

Higher inventory holding costs

Question 52

The safety stock level primarily depends on:

Accepted Answer

Expected lead time, demand variability, and desired service level

Answer

Demand variability only

Answer

Lead time only

Question 53

Which of the following can contribute to inventory obsolescence?

Accepted Answer

Advancements in technology

Answer

Higher demand

Answer

Shorter lead times

Answer

Increased storage space

Question 54

The economic order quantity (EOQ) formula assumes:

Accepted Answer

Constant and known demand

Answer

Holding costs being higher than ordering costs

Answer

No stockouts allowed

Answer

Variable lead time

Question 55

A disadvantage of using a traditional fixed-order interval inventory system is:

Accepted Answer

Potential overstocking or understocking

Answer

Ease of implementation

Answer

Provides real-time inventory data

Answer

Applicability to all inventory types

Question 56

The bullwhip effect refers to:

Accepted Answer

Amplification of demand variability as it moves upstream in the supply chain

Answer

Random fluctuations in inventory levels

Answer

Impact of seasonality on inventory

Question 57

Which technique can effectively reduce inventory waste?

Accepted Answer

ABC analysis

Answer

LIFO

Answer

VED analysis

Answer

FIFO

Question 58

RFID technology is used to:

Accepted Answer

Enhance inventory accuracy and minimize stockouts

Answer

Forecast demand

Answer

Optimize reorder points

Answer

Calculate safety stock levels