CSCP FREE Certified Supply Chain Professional (CSCP) Internal Operations and Inventory Questions and Answers 2 — Questions and Answers
Question 1: A manufacturing company uses a fixed-order-quantity system. When the inventory position drops to 500 units and the reorder point is 500 units, what action should the inventory manager take?
- Place an order for the economic order quantity (Correct answer)
- Wait until inventory reaches zero before ordering
- Increase the safety stock level
- Reduce the lead time with the supplier
Correct answer: Place an order for the economic order quantity
In a fixed-order-quantity system, an order for the predetermined economic order quantity is placed whenever inventory position reaches the reorder point.
Question 2: Which of the following best describes the purpose of a master production schedule (MPS) in internal operations?
- To determine the specific quantities and timing of end items to be produced (Correct answer)
- To track daily employee attendance and productivity
- To manage supplier contracts and payment terms
- To calculate transportation costs for finished goods
Correct answer: To determine the specific quantities and timing of end items to be produced
The MPS translates the aggregate production plan into a specific schedule of end items, specifying what to produce, in what quantities, and when.
Question 3: A company is evaluating its inventory carrying costs. Which cost component typically represents the largest portion of carrying costs?
- Cost of capital tied up in inventory (Correct answer)
- Warehouse rental fees
- Insurance premiums on stored goods
- Inventory shrinkage and obsolescence
Correct answer: Cost of capital tied up in inventory
The opportunity cost of capital invested in inventory is generally the largest component of carrying costs, often accounting for 50% or more of total holding costs.
Question 4: In the context of capacity planning, what does the term 'demonstrated capacity' refer to?
- The proven capacity calculated from actual historical performance data (Correct answer)
- The maximum theoretical output under ideal conditions
- The capacity planned based on future demand forecasts
- The capacity available after subtracting scheduled maintenance
Correct answer: The proven capacity calculated from actual historical performance data
Demonstrated capacity is calculated from actual output data and historical performance records, making it the most reliable measure of what a work center can realistically produce.
Question 5: What is the primary benefit of implementing a vendor-managed inventory (VMI) program for internal operations?
- Reduced stockout risk while lowering the buyer's inventory management burden (Correct answer)
- Elimination of all carrying costs for the buyer
- Transfer of product ownership to the vendor until point of sale
- Guaranteed lowest purchase prices from the vendor
Correct answer: Reduced stockout risk while lowering the buyer's inventory management burden
VMI shifts replenishment responsibility to the supplier, who monitors inventory levels and makes restocking decisions, reducing stockouts while freeing the buyer from day-to-day inventory management tasks.
Question 6: A production facility uses the theory of constraints (TOC) approach. Which action should be prioritized first when managing a bottleneck resource?
- Exploit the constraint by maximizing its utilization and throughput (Correct answer)
- Purchase additional equipment to eliminate the bottleneck
- Outsource all work currently processed at the bottleneck
- Reduce demand to match the bottleneck's current capacity
Correct answer: Exploit the constraint by maximizing its utilization and throughput
TOC's five focusing steps begin with exploiting the constraint, meaning you maximize the output of the bottleneck resource before investing in additional capacity.
