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Questions and Answers
What is a primary benefit of employing DRP in inventory management?
What is a primary benefit of employing DRP in inventory management?
Which factor is NOT considered in the Demand-Driven Planning (DRP) process?
Which factor is NOT considered in the Demand-Driven Planning (DRP) process?
What is the main goal of Just-In-Time (JIT) inventory management?
What is the main goal of Just-In-Time (JIT) inventory management?
Which of the following is a key principle of JIT?
Which of the following is a key principle of JIT?
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Which benefit is associated with JIT methodology?
Which benefit is associated with JIT methodology?
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What is a primary reason for carrying inventory in an organization?
What is a primary reason for carrying inventory in an organization?
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Which characteristic of inventory makes it a risky investment?
Which characteristic of inventory makes it a risky investment?
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In a supply chain, which entity faces long-term risks associated with inventory?
In a supply chain, which entity faces long-term risks associated with inventory?
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What role does inventory play in customer service?
What role does inventory play in customer service?
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Which of the following is NOT a reason for maintaining inventory?
Which of the following is NOT a reason for maintaining inventory?
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Why might a wholesaler experience increased risk in managing inventory?
Why might a wholesaler experience increased risk in managing inventory?
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What is one of the key reasons inventory is crucial for manufacturing organizations?
What is one of the key reasons inventory is crucial for manufacturing organizations?
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How does inventory help in addressing uncertainties in demand and supply?
How does inventory help in addressing uncertainties in demand and supply?
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What is the primary reason for companies to focus on resource optimization in inventory management?
What is the primary reason for companies to focus on resource optimization in inventory management?
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Which type of inventory is specifically associated with partially finished products in production?
Which type of inventory is specifically associated with partially finished products in production?
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How does advanced information technology contribute to inventory management?
How does advanced information technology contribute to inventory management?
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What characterizes items classified as 'A' in ABC analysis?
What characterizes items classified as 'A' in ABC analysis?
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What is a key feature of perpetual inventory control?
What is a key feature of perpetual inventory control?
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Which type of inventory is maintained to cushion against unpredictable demand fluctuations?
Which type of inventory is maintained to cushion against unpredictable demand fluctuations?
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What does the term 'Let-size inventories' refer to?
What does the term 'Let-size inventories' refer to?
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Which inventory type consists of completed products that are ready for sale?
Which inventory type consists of completed products that are ready for sale?
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What characteristic of C items in inventory management is true?
What characteristic of C items in inventory management is true?
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Which classification in VED analysis is NOT accurately described?
Which classification in VED analysis is NOT accurately described?
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In SAP analysis, how are items categorized regarding supply limitations?
In SAP analysis, how are items categorized regarding supply limitations?
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What is a primary benefit of using the Economic Order Quantity (EOQ) model?
What is a primary benefit of using the Economic Order Quantity (EOQ) model?
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Which of the following assumptions is NOT included in the EOQ formula?
Which of the following assumptions is NOT included in the EOQ formula?
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What is the main goal of Materials Requirement Planning (MRP)?
What is the main goal of Materials Requirement Planning (MRP)?
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How does Distribution Requirement Planning (DRP) differ from MRP?
How does Distribution Requirement Planning (DRP) differ from MRP?
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Which type of item in SDE Classification is described as requiring imports?
Which type of item in SDE Classification is described as requiring imports?
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Study Notes
Inventory Management
- Inventory refers to goods, materials, or assets held for future use, sale, or processing
- Common in various sectors (businesses, hospitals, farms, governments)
Inventory Components
- Physical goods on hand at a specific time
- Detailed list of physical assets
- Quantity of items available
- Financial value of the stock
Inventory Types
- Raw materials
- In-process items
- Finished goods
- Packaging
- Tools, equipment, spare parts (for future demand/distribution)
Reasons for Holding Inventory
- Meeting production needs
- Supporting operations
- Customer service needs
- Hedging against future expectations
Inventory Characteristics
- Irreversible investment (funds cannot be repurposed)
- Risks: theft, obsolescence, depreciation
Inventory Risks by Role in Supply Chain
- Manufacturer: Long-term risks from raw materials to finished goods, risks transferring inventory between warehouses
- Wholesaler: Multiple product lines, bulk buying, selling in lots, seasonal items lead to risks stocking well in advance
The Need for Inventory Control
- Essential for manufacturing organizations to match production with customer demands
- Ensures raw materials, components, and parts are available
- Provides spare parts, lubricants, and maintenance supplies
- Improves customer satisfaction and competitive advantage
Inventory Management Techniques
- ABC Analysis: Classifies items based on inventory cost (A - high, B - moderate, C - low)
- VED Analysis: Classifies items as Vital, Essential, or Desirable based on operational importance
- SAP Analysis: Categorizes items based on supply limitations (Scarce, Available, Plenty)
- FSN Analysis: Categorizes items as fast-moving, slow-moving, or normal-moving
- SDE Classification: Classifies items based on availability (Scarce, Difficult to obtain, Easily available)
Inventory Planning Models
- Economic Order Quantity (EOQ): A fundamental formula to minimize total inventory costs (ordering costs + holding costs)
EOQ Formula
- EOQ = √(2DS/H)
- D = Annual demand
- S = Ordering cost per order
- H = Holding cost per unit per year
Material Requirements Planning (MRP)
- System that schedules production and raw material purchases based on finished goods needs
- Considers production schedules, system structure, and current inventory levels
Distribution Requirements Planning (DRP)
- Coordinates inventory across multiple distribution stages
- Driven by customer demand, unlike MRP which is production-driven.
Just-In-Time (JIT) Inventory
- Minimizes inventory levels, reduces storage costs
- Produces or acquires goods only when needed
- Aimed to align production with customer demand
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Description
This quiz covers the essential components of inventory management, including types, characteristics, and reasons for holding inventory. It also addresses various risks associated with inventory in different sectors like manufacturing and wholesaling.