Inventory Management
Midterm Exam
Course Introduction
Inventory Management introduces students to the principles, strategies, and techniques involved in efficiently managing inventory within various types of organizations. The course explores key concepts such as demand forecasting, inventory control models, order quantity determination, safety stock calculation, and the role of technology in inventory systems. By examining topics like just-in-time (JIT), economic order quantity (EOQ), and ABC analysis, students learn how to balance supply with demand, minimize costs, and improve overall operational efficiency. Real-world case studies and practical applications enable participants to develop problem-solving skills necessary for optimizing inventory in manufacturing, retail, and service environments.
Recommended Textbook
Supply Management 8th Edition by David N. Burt
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22 Chapters
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Chapter 1: The Progression to Professional Supply Management
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Sample Questions
Q1) Which statement about SM is not true?
A) SM spans company borders
B) SM focuses on optimization of the supply chain
C) SM requires change from upper management
D) SM requires continuous improvement
E) SM relies on mathematical models
Answer: E
Q2) Which action is not necessary in implementing SM?
A) Senior management must recognize supply management's critical nature to the firm
B) Senior management must support the required transformation of supply management to world class
C) Firms must know where they are in relation to where they want to be
D) Firms must benchmark best-in-class practices and develop metrics
E) Firms must force their suppliers into world-class compliance
Answer: E
Q3) Strategic sourcing starts with the analysis of the supply market.
A)True
B)False
Answer: False
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Chapter 2: Organizational Issues
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Sample Questions
Q1) Cross function teams are often the key step in a firms evolution to supply chain management.
A)True
B)False
Answer: True
Q2) Aside from the benefits of synergy,cross functional teams provides input from all affected functions.
A)True
B)False
Answer: True
Q3) The materials management organization structure is now obsolete.
A)True
B)False Answer: False
Q4) E-commerce has strengthened the case for decentralization of purchasing.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Supply Management: an Organization Spanning Activity
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Sample Questions
Q1) Efforts to improve should cease at an organization's internal functions and not span over the supply chain.
A)True
B)False
Answer: False
Q2) The best way to insure interface with key business functions is:
A) Policy Statements
B) Directives from upper management
C) Cross functional teams
D) Use of meetings
E) Monthly conferences
Answer: C
Q3) Efforts to improve do not cease at an organization's internal functions,but should span over the supply chain as well.
A)True
B)False
Answer: True
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Page 5
Chapter 4: A Portfolio of Relationships
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Sample Questions
Q1) Which of the following is a situation wherein an alliance may be appropriate?
A) Demand is Stable
B) No Partnership/Alliance-Capable Supplier for the Item
C) No Partnership/Alliance-Capable Supplier in the Geographic Area
D) Rapid Technological Change
E) Mismatch of Clock Speed
Q2) During the late 1980's and early 1990's,"partnerships" became popular.The authors of the textbook argue that there are problems with the term partner.One of the problems given in the text was that the implications of the term "partner" were not well understood.
A)True
B)False
Q3) "Greater price competition through the Internet is the new imperative," declares Michael Dell.
A)True
B)False
Q4) Power is at the heart of all business relationships.
A)True
B)False
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6
Chapter 5: New Product Development
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Sample Questions
Q1) Value engineering is focused on the production stage.
A)True
B)False
Q2) Early Supply Management Involvement requires policy development that only affects supply management.
A)True
B)False
Q3) Which of the following is not associated with the development phase of the design process?
A) Development of prototypes
B) Design reviews
C) Qualification testing
D) Failure analysis
E) Value analysis
Q4) Value engineering is a systematic study of every element of cost in a material,item of equipment,service or construction project to ensure that every element of cost fulfills a necessary function and at the lowest possible total cost.
A)True
B)False
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Chapter 6: Purchasing Descriptions and Specifications
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Sample Questions
Q1) In the Unreasonable Tolerances Example, do you agree with the senior design engineer's definition of quality?
Q2) Which of the following is a simple specification based on the categorization given in the textbook?
A) Samples
B) Commercial Standards
C) Design Specifications
D) Engineering Drawings
E) Material and Method-of-Manufacture
Q3) Complex or detailed specifications are descriptions that tell the seller exactly what the buyer wants to purchase. As such, they are easier to develop than simple specifications.
A)True
B)False
Q4) Why is the standardization treated as a philosophy in some companies and supply chains rather than a procedure?
Q5) What were the reasons that Eli Whitney appeared to be behind on his contract?
Q6) In what way does specification by brand name potentially eliminate the competition?
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Chapter 7: Managing for Quality
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Sample Questions
Q1) Which of the following points is not true about Joseph Juran?
A) Juran is the author of the Quality Control Handbook
B) Juran believes that upper management should establish specific goals to be reached
C) Juran espoused the philosophy of zero defects
D) Juran believes that upper management should establish plans for reaching goals
E) Juran believes upper management should base rewards on results achieved
Q2) Which of the following is not true of the costs of quality?
A) Prevention costs are costs to prevent poor quality in products or services
B) Maintenance is a prevention cost
C) Downtime is an appraisal cost
D) Inspection is an appraisal cost
E) Appraisal costs are costs associated with assuring conformance
Q3) Quality management is a minor component of supply management's responsibility. A)True B)False
Q4) Quality management is a major component of supply management's responsibility. A)True
B)False
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Chapter 8: The Procurement of Equipment
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Sample Questions
Q1) When proposals for capital equipment are received,the sourcing team must tabulate and run comparisons for a total profitability analysis.The key input in this analysis is:
A) Delivery time
B) Maintenance
C) Labor
D) TCO
E) Pay off time
Q2) When buying used equipment,most often the old adage of _________ applies.
A) Read the fine print in the contract
B) Make sure there is a full warranty
C) Check for spare tooling
D) Caveat Emptor
E) Make sure all the manuals for the equipment are available
Q3) Prior to purchasing used equipment,a buyer should check the reputation of the supplier,inspect the equipment,conduct destructive testing and determine the age.
A)True
B)False
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Chapter 9: Purchasing Services
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Sample Questions
Q1) In writing an effective S.O.W.as given in the textbook,brevity should be used by utilizing as many abbreviations as possible and not including procedures and or extraneous statements.
A)True
B)False
Q2) The conventional method and the owner as a contractor are alternative methods of purchasing construction services as presented in the textbook.
A)True
B)False
Q3) Satisfaction is built into service products rather than added as an afterthought.
A)True
B)False
Q4) The Constraint-Based Method is one methods of purchasing construction services as presented in the textbook.
A)True
B)False
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Chapter 10: Outsourcing
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Sample Questions
Q1) Cost of materials has continued to increase in many industries,which means that the make or buy outsourcing decision must be reinvestigated from time to time for even stable demand products.
A)True
B)False
Q2) Which of the following is a consideration that favors making a product?
A) Limited production facilities
B) Cost considerations dictate that it is less expensive to buy
C) Desire to maintain a stable work force in a period of reduction of sales
D) Small-volume requirements
E) Suppliers' specialized know-how
Q3) As technology has advanced most manufacturing firms have become much more specialized.
A)True
B)False
Q4) Outsourcing all non-critical activities is a trend where the idea is to achieve significant cost leverage.
A)True B)False
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Chapter 11: Sourcing
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Sample Questions
Q1) A local source is defined by the textbook as a source headquartered within the country and has facilities in multiple regions throughout the country.
A)True B)False
Q2) The negotiation process is far more likely than the bidding process to lead to a complete understanding of all issues of the procurement.
A)True B)False
Q3) The strategic sourcing plan should be developed in an environment that does not include any functional area representatives.
A)True
B)False
Q4) Two benefits of supply base reduction cited by John Deere are: reduced need to leverage suppliers and lower prices from suppliers.
A)True B)False
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Chapter 12: Global Supply Management
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Sample Questions
Q1) Assists are used in aiding the production outside of the buying firm's country and are provided by the supplying firm.
A)True
B)False
Q2) Which of the following is not true of hedging?
A) Used to minimize market risk
B) Requires dedicated professional hedging managers
C) Requires organized commodity exchange
D) Can be used to address the risk of buying in dollars
E) Can be used to protect the dollar value of future foreign currency cash flow
Q3) Substituting intermediaries with direct procurement usually results in lowest purchase price,but direct procurement requires extra cost beyond price.
A)True
B)False
Q4) Foreign governments never impose countertrade requirements.
A)True
B)False
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Chapter 13: Total Cost of Ownership
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Sample Questions
Q1) TCO analysis may include the study of all but one of the following issues.Which issue does not belong in the TCO analysis?
A) Structure of foreign and domestic tariffs/duties/taxes
B) Foreign political/economic stability
C) Foreign exchange risk
D) Foreign language syntax
E) Language/communication requirements
Q2) Supply managers must shift their focus in procuring materials,services and equipment from total cost to price.
A)True
B)False
Q3) Supply managers must shift their focus in procuring materials,services and equipment from price to total cost.
A)True
B)False
Q4) A major problem in TCO analysis of manufacturers is accurate allocation of manufacturing overhead.
A)True
B)False
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Chapter 14: Price and Cost Analysis
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Sample Questions
Q1) Which of the following is not a category of discounts?
A) Trade Discounts
B) Quantity Discounts
C) Credit Card Discounts
D) Seasonal Discounts
E) Cash Discounts
Q2) Cost analysis is generally most useful when purchasing nonstandard items and services than standard items and services.
A)True
B)False
Q3) Cost Analysis should be employed even if a price analysis has allowed the buyer to reach the conclusion that a price is fair and reasonable.
A)True
B)False
Q4) The purpose of cost analysis is to arrive at a price that is fair and reasonable from the perspective of the buying firm.
A)True
B)False
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Page 16
Chapter 15: Methods of Compensation
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Sample Questions
Q1) A supplier that is under an FFP contract may end up losing money and request relief.Which of the following reasons is why the customer will allow changing the price?
A) Customer did not contributed to the loss
B) Customer does not need the items
C) Customer assumes no other suppliers are available
D) Supplier has facilities that are not unique
E) There is plenty of time to find a new supplier
Q2) Which is not one of the rules given in the textbook for selecting indexes for price adjustment clauses?
A) Use broad indexes
B) Develop a weighted index for materials in a product
C) Select labor rate indexes by type and location
D) Define energy indexes by fuel type and location
E) Analyze the past history of each index versus actual price change of the item being indexed
Q3) Contract schedule risk is the risk associated with material and labor cost increases and possible schedule slippages.
A)True
B)False
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Chapter 16: Negotiation
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Sample Questions
Q1) The objectives of a negotiation with a supplier include considerations such as: quality,a fair and reasonable price and on-time performance.
A)True
B)False
Q2) Which of the following is not a general guideline when creating and organizing negotiation teams for sourcing supplies from suppliers?
A) The team should be composed of cross-functional members
B) The design engineer should serve as leader of the team
C) An overall strategy is required
D) Roles should be defined
E) Mock negotiations are needed to prepare for the negotiation
Q3) Determinates of the seller's bargaining strength include: how badly the seller wants the contract,how certain he or she feels of getting it,and how much time is available to reach agreement on suitable terms.
A)True
B)False
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Chapter 17: Contract Formation and Legal Issues
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Sample Questions
Q1) The law gives a patent holder the exclusive right to manufacture,sell,and use the patented device for a specified number of years.A buying firm who engages in any of these activities during the period of patent protection,without permission from the patent holder,is guilty of patent infringement and can be sued for damages by the patent holder.
A)True
B)False
Q2) A mistake in drawing up a contract usually must be made by both parties for the contract to be voided.
A)True
B)False
Q3) Supply managers need not possess and utilize knowledge of legal issues and considerations,but need to know where to find someone who has knowledge of legal issues and considerations.
A)True
B)False
Q4) A buyer operates under two types of authority: true authority and inherent authority.
A)True
B)False
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Chapter 18: Contact and Relationship Management
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Sample Questions
Q1) Some of the common approaches that buying firms use to punish suppliers are: not awarding future business,downgrading a supplier and billing the supplier for failures.Litigation and assessing punitive damages are not common approaches due to the severity of the punishment.
A)True
B)False
Q2) A typical cost ratio expresses the cost as a percent of the total dollar purchase from that supplier.
A)True
B)False
Q3) Assume that for one supplier: quality cost ratio = 2%,delivery cost ratio = 2%,service cost ratio = -1%,and the price = $72.25.Using the cost ratio plan what is the adjusted price using the cost ration plan for evaluating the supplier?
A) $70.05
B) $68.75
C) $73.32
D) $72.25
E) $74.42
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Chapter 19: Ethics and Social Responsibilities
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Sample Questions
Q1) The Principles of Supply Management Practice as created by the Institute for Supply Management are: loyalty to your organization,justice to those with whom you deal and faith in your profession.
A)True
B)False
Q2) Sharp Practices are evasive and indirect misrepresentations that are actual fraud.
A)True
B)False
Q3) Sharp Practices are evasive and indirect misrepresentations that are just short of actual fraud.
A)True
B)False
Q4) Supply management's involvement in employer-sponsored programs of personal purchases that are not business related is not only ethically okay,but it is a typical perk of being a supply professional.
A)True
B)False
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Chapter 20: Production and Inventory Control
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Sample Questions
Q1) Materials Requirement Planning (MRP)uses the Master Planning Schedule (MPS)to "explode" the product Bill of Material (BOM)to calculate the required number of parts needed.
A)True
B)False
Q2) The difference between MRP and MRP II is:
A) MRP is closed loop
B) MRP II is the advanced version of MRP
C) MRP II can be used to adjust schedule changes
D) MRP II is a closed loop and primarily converts operating production plans into financial data
E) MRP is the "umbrella" system for MRP II
Q3) Acquisition costs are the indirect costs of ordering materials. A)True
B)False
Q4) The MRP inventory/open order netting function is used to develop "planned order releases".
A)True
B)False
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Chapter 21: Demand Management and Logistics
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Sample Questions
Q1) Logistics is the part of the supply chain process that plans,implements,and controls the efficient,effective flow and storage of goods,services,and related information from point of origin to point of consumption with the purpose of conforming to customer requirements.
A)True
B)False
Q2) Marketing professionals play the key role in the success of supply chain management in the management of transportation,storage,and warehousing activities.
A)True
B)False
Q3) Which of the following is not a typical logistics manager activity?
A) Traffic and Transportation
B) Warehousing and Storage
C) Industrial Packaging
D) Materials Handling
E) Information Technology Management
Q4) Logistics can be defined as synonymous with the term SCM.
A)True
B)False
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Chapter 22: Implementing Value Network Management
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Sample Questions
Q1) The new supply management team at Megatronics understood the fact that the costs savings of a TCO approach are easily measurable and instantly known.
A)True
B)False
Q2) Which of the following is not one of the 12 Golden Rules of Value Network Managment?
A) Do not engage in reengineering
B) Involve supply management and external suppliers in the earliest stages of new product development.
C) Develop and manage appropriate supply alliances.
D) Identify, verify, track, and control savings.
E) Foster an environment of collaboration.
Q3) The Progression to VNM should include all of the following activities and approaches except one.Which one should not be included?
A) Develop and manage alliances and networks
B) Price based competition
C) Virtually defect free materials and services
D) Leverage supplier technology
E) Integrated supply strategy
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Page 24