- 1. Inventory theory is a fundamental concept in supply chain management that deals with the optimization of inventory levels within an organization. The main objective of inventory theory is to strike a balance between meeting customer demand and minimizing the costs associated with holding excess inventory. By carefully managing inventory levels, businesses can ensure timely fulfillment of customer orders while simultaneously reducing carrying costs and avoiding stockouts. Inventory theory involves various models and techniques, such as economic order quantity (EOQ), just-in-time (JIT) inventory systems, and safety stock analysis, to effectively manage the flow of goods and materials through the supply chain. Through the application of inventory theory, organizations can improve operational efficiency, enhance customer satisfaction, and ultimately achieve a competitive advantage in the marketplace.
What is the goal of inventory theory?
A) Ignore inventory management
B) Maximize the total cost of inventory
C) Minimize the total cost of inventory
D) Maintain unlimited inventory levels
- 2. What does EOQ stand for in inventory theory?
A) Effective Order Quantity
B) Extremely Overstocked Quantity
C) Economic Order Quantity
D) Optimal Order Query
- 3. What is the main purpose of safety stock in inventory management?
A) To increase overall inventory costs
B) To ignore inventory levels
C) To expedite order processing
D) To protect against demand variability
- 4. Lead time in inventory refers to:
A) The time goods are held in inventory
B) The time between placing an order and receiving it
C) The time to place an order
D) The time to review inventory levels
- 5. What is the formula for calculating reorder point in inventory management?
A) Ordering cost + Stockout cost
B) Holding cost + Shortage cost
C) Lead time demand + Safety stock
D) Economic order quantity + Demand rate
- 6. What is the purpose of demand forecasting in inventory management?
A) To estimate future demand and plan inventory levels
B) To ignore inventory needs
C) To increase ordering costs
D) To expedite stockouts
- 7. Which inventory classification typically includes high-value items with low demand?
A) X items
B) B items
C) A items
D) C items
- 8. What is the main disadvantage of holding excess inventory?
A) Increased holding costs
B) Reduced shortages
C) Higher service levels
D) Faster order processing
- 9. Which cost decreases as order quantity increases in the EOQ model?
A) Shortage cost
B) Stockout cost
C) Ordering cost
D) Holding cost
- 10. What is the purpose of the Economic Order Quantity (EOQ) model?
A) To ignore inventory levels
B) To maximize total inventory costs
C) To maintain unlimited inventory levels
D) To minimize total inventory costs
- 11. How does increasing lead time affect the reorder point?
A) Has no effect on the reorder point
B) Increases the reorder point
C) Doubles the reorder point
D) Decreases the reorder point
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