- 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) Maintain unlimited inventory levels
B) Minimize the total cost of inventory
C) Ignore inventory management
D) Maximize the total cost of inventory
- 2. What does EOQ stand for in inventory theory?
A) Optimal Order Query
B) Effective Order Quantity
C) Economic Order Quantity
D) Extremely Overstocked Quantity
- 3. What is the main purpose of safety stock in inventory management?
A) To ignore inventory levels
B) To protect against demand variability
C) To expedite order processing
D) To increase overall inventory costs
- 4. Lead time in inventory refers to:
A) The time to place an order
B) The time goods are held in inventory
C) The time to review inventory levels
D) The time between placing an order and receiving it
- 5. What is the formula for calculating reorder point in inventory management?
A) Holding cost + Shortage cost
B) Economic order quantity + Demand rate
C) Lead time demand + Safety stock
D) Ordering cost + Stockout cost
- 6. What is the purpose of demand forecasting in inventory management?
A) To increase ordering costs
B) To ignore inventory needs
C) To expedite stockouts
D) To estimate future demand and plan inventory levels
- 7. Which cost decreases as order quantity increases in the EOQ model?
A) Holding cost
B) Stockout cost
C) Shortage cost
D) Ordering cost
- 8. What is the purpose of the Economic Order Quantity (EOQ) model?
A) To ignore inventory levels
B) To minimize total inventory costs
C) To maximize total inventory costs
D) To maintain unlimited inventory levels
- 9. How does increasing lead time affect the reorder point?
A) Decreases the reorder point
B) Increases the reorder point
C) Has no effect on the reorder point
D) Doubles the reorder point
- 10. What is the main disadvantage of holding excess inventory?
A) Reduced shortages
B) Increased holding costs
C) Faster order processing
D) Higher service levels
- 11. Which inventory classification typically includes high-value items with low demand?
A) B items
B) X items
C) C items
D) A items
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