Master Inventory Control Under Uncertainty: 50+ Essential MCQs
What is the primary goal of inventory control under uncertainty?
A) Minimize inventory cost
B) Achieve optimal stock levels to meet unpredictable demand
C) Maximize stock levels
D) Eliminate all uncertainty in supply chain
Answer: B
Which inventory model is most suitable for managing uncertainty in demand?
A) EOQ Model
B) Newsvendor Model
C) Continuous Review Model
D) Fixed Order Interval Model
Answer: B
What does the term "safety stock" refer to in inventory management?
A) The stock reserved for emergencies
B) The minimum inventory required for daily operations
C) Buffer stock to account for variability in demand or supply
D) Overstock to avoid backorders
Answer: C
Service Level Parameters in Inventory
What does the service level in inventory management measure?
A) Customer satisfaction level
B) The probability of not facing a stockout
C) Inventory turnover ratio
D) Supplier lead time efficiency
Answer: B
A 95% service level corresponds to which of the following probabilities?
A) 0.95
B) 0.05
C) 0.50
D) 1.00
Answer: A
In a periodic review system, the service level is defined as the probability that...
A) Inventory will meet demand during the lead time
B) There will be no demand variability
C) Demand during a replenishment cycle will not exceed supply
D) Stockouts will occur during peak periods
Answer: C
Independent Demand Inventory Management
Independent demand in inventory management refers to...
A) Demand for components based on product production
B) Demand not directly tied to other products
C) Derived demand for raw materials
D) Fixed demand over time
Answer: B
Which inventory system is most applicable for managing independent demand?
A) MRP (Material Requirements Planning)
B) EOQ (Economic Order Quantity)
C) JIT (Just-In-Time)
D) ABC Analysis
Answer: B
Which of the following techniques is best suited for forecasting independent demand?
A) Linear regression
B) Exponential smoothing
C) Trend analysis
D) All of the above
Answer: D
Section 1: Inventory Control Under Uncertainty (50 MCQs)
What factor directly influences the safety stock level in inventory control?
A) Holding cost
B) Lead time variability
C) Supplier reliability
D) Product pricing
Answer: B
Which of the following inventory models handles demand uncertainty for single-period products?
A) Continuous Review Model
B) Newsvendor Model
C) EOQ Model
D) ABC Analysis
Answer: B
A higher standard deviation in demand forecast will result in...
A) Increased safety stock
B) Lower safety stock
C) No impact on safety stock
D) Reduced lead time
Answer: A
What is the primary trade-off in inventory control under uncertainty?
A) Cost of stockouts vs. holding costs
B) Lead time vs. service level
C) Safety stock vs. replenishment frequency
D) Supplier reliability vs. stock levels
Answer: A
Reorder point (ROP) is determined by which of the following formulas under uncertainty?
A) ROP = (Average demand × Lead time) + Safety stock
B) ROP = Lead time × Safety stock
C) ROP = Average demand ÷ Lead time
D) ROP = Safety stock – Lead time
Answer: A
Section 2: Service Level Parameters in Inventory (30 MCQs)
What does a 99% service level mean in practical terms?
A) Stockouts occur 1% of the time
B) Demand is fully met 99% of the time
C) 1% of inventory is excess stock
D) 99% of suppliers deliver on time
Answer: A
Which of these is NOT a measure of service level?
A) Cycle service level
B) Fill rate
C) Stock turnover ratio
D) Probability of stockout
Answer: C
Cycle service level focuses on...
A) Availability of inventory during the reorder cycle
B) The percentage of order quantity fulfilled
C) Cost minimization in inventory systems
D) Demand predictability
Answer: A
What is the relationship between safety stock and service level?
A) Directly proportional
B) Inversely proportional
C) No relation
D) Safety stock increases only at higher service levels
Answer: A
In a continuous review inventory system, the service level affects...
A) Replenishment intervals
B) Stockout probability
C) Inventory turnover
D) Lead time variability
Answer: B
Section 3: Independent Demand Inventory Management (20 MCQs)
Independent demand is often characterized by...
A) High predictability
B) Random variation
C) Dependency on production schedules
D) Fixed quantities
Answer: B
Which inventory model is best suited for managing independent demand items?
A) ABC Analysis
B) Economic Order Quantity (EOQ)
C) Material Requirements Planning (MRP)
D) Just-In-Time (JIT)
Answer: B
In independent demand systems, demand forecasting is primarily used to...
A) Predict component requirements
B) Align production schedules
C) Estimate reorder quantities and timing
D) Manage lead time variability
Answer: C
Which of the following is NOT a common forecasting method for independent demand?
A) Delphi method
B) Exponential smoothing
C) Historical sales trend analysis
D) ABC classification
Answer: D
The EOQ model assumes that demand is...
A) Independent and constant
B) Dependent and variable
C) Seasonally adjusted
D) Backlogged during stockouts
Answer: A
Inventory Control Under Uncertainty (Additional MCQs)
Which of the following is true about the Newsvendor Model in inventory management?
A) It minimizes both stockout and holding costs
B) It is suitable for products with long shelf lives
C) It addresses single-period inventory decisions
D) It ignores demand variability
Answer: C
What is the primary assumption of inventory control models dealing with uncertainty?
A) Demand and supply are always known
B) Variability exists in demand, supply, or both
C) Lead time is constant
D) Safety stock is unnecessary
Answer: B
Which inventory control approach uses historical data to address uncertainty?
A) Predictive analytics
B) Stochastic models
C) Simulation techniques
D) All of the above
Answer: D
What does the Z-score represent in inventory management?
A) The reorder quantity
B) The service level multiplier for safety stock
C) The demand variability factor
D) The economic order quantity
Answer: B
When lead time uncertainty increases, safety stock should...
A) Decrease
B) Remain unchanged
C) Increase proportionally
D) Be eliminated
Answer: C
Service Level Parameters in Inventory (Additional MCQs)
Fill rate in inventory management measures...
A) The percentage of demand fulfilled from stock
B) The inventory holding cost
C) The safety stock requirement
D) The probability of a stockout
Answer: A
Which parameter directly affects the calculation of safety stock in a periodic review system?
A) Average daily demand
B) Review period and lead time
C) Standard deviation of demand
D) All of the above
Answer: D
Which type of service level accounts for customer satisfaction?
A) Cycle service level
B) Fill rate
C) Lead time efficiency
D) Stockout rate
Answer: B
What happens to the required safety stock as service level increases?
A) It decreases exponentially
B) It increases non-linearly
C) It remains the same
D) It is unaffected by service level
Answer: B
If the reorder interval increases, how is the service level typically impacted?
A) Service level decreases
B) Service level remains constant
C) Service level increases
D) Service level becomes zero
Answer: A
Independent Demand Inventory Management (Additional MCQs)
What distinguishes independent demand from dependent demand?
A) Independent demand is unpredictable
B) Independent demand arises from market conditions
C) Independent demand depends on production schedules
D) Independent demand is linked to components of finished goods
Answer: B
Which of the following best predicts independent demand?
A) Material requirements planning
B) Trend analysis and historical data
C) Supplier lead time variability
D) Component bill of materials
Answer: B
The primary objective of managing independent demand inventory is to...
A) Align with production schedules
B) Ensure customer demands are met without delays
C) Minimize component inventory
D) Reduce safety stock to zero
Answer: B
Which inventory policy is most effective for items with independent demand?
A) Fixed-period system
B) Fixed-quantity system
C) Demand-driven replenishment
D) Continuous review system
Answer: D
Which factor is least relevant for forecasting independent demand?
A) Market trends
B) Historical sales data
C) Bill of materials
D) Seasonal patterns
Answer: C
Inventory Control Under Uncertainty (More MCQs)
Which factor most commonly causes demand uncertainty in inventory management?
A) Predictable seasonal changes
B) Supplier reliability
C) Fluctuations in customer preferences
D) Consistent lead times
Answer: C
In a stochastic inventory model, the probability of stockout can be reduced by...
A) Decreasing order quantities
B) Increasing safety stock
C) Shortening the review period
D) Using deterministic demand
Answer: B
Which inventory model focuses on balancing overstock and understock costs?
A) Continuous Review
B) Newsvendor Model
C) Economic Order Quantity
D) ABC Analysis
Answer: B
The primary objective of adding safety stock in inventory systems is to...
A) Reduce holding costs
B) Increase service levels
C) Minimize lead times
D) Reduce demand variability
Answer: B
A system using reorder point (ROP) methodology will place an order when...
A) The safety stock level is reached
B) Demand exceeds forecast
C) Inventory drops to a predetermined level
D) Stockouts occur
Answer: C
Service Level Parameters in Inventory (More MCQs)
What is the main purpose of setting a target service level in inventory management?
A) To minimize total costs
B) To balance stockouts and holding costs
C) To maximize supplier reliability
D) To reduce order frequency
Answer: B
Cycle service level is primarily concerned with...
A) Avoiding backorders during a cycle
B) Minimizing total inventory costs
C) Calculating safety stock requirements
D) Reducing lead time variability
Answer: A
Which formula correctly defines the relationship between safety stock, service level, and standard deviation?
A) Safety Stock = Z × Standard Deviation × √Lead Time
B) Safety Stock = Z × Average Demand × Lead Time
C) Safety Stock = Standard Deviation ÷ Service Level
D) Safety Stock = Lead Time × Z × Fill Rate
Answer: A
In inventory management, "stockout" refers to...
A) Excess inventory in storage
B) A temporary unavailability of inventory
C) Overproduction of goods
D) A mismatch in demand and supply forecasts
Answer: B
Which service level parameter is most relevant for ensuring customer satisfaction?
A) Reorder point
B) Fill rate
C) Cycle service level
D) Safety stock
Answer: B
Independent Demand Inventory Management (More MCQs)
Which technique is commonly used to forecast independent demand?
A) Exponential smoothing
B) Linear regression analysis
C) Moving average
D) All of the above
Answer: D
The Economic Order Quantity (EOQ) model assumes which of the following?
A) Demand is random
B) Demand is constant and known
C) Lead time is highly variable
D) Orders arrive in multiple batches
Answer: B
Which inventory policy is particularly suitable for managing independent demand items?
A) Min-max system
B) Kanban system
C) Just-In-Time (JIT)
D) Fixed-order quantity system
Answer: D
For independent demand items, what is the main driver of reorder point (ROP)?
A) Dependent demand forecast
B) Lead time and demand variability
C) Inventory turnover ratio
D) Average order size
Answer: B
In independent demand systems, inventory turnover is a measure of...
A) Supplier reliability
B) Inventory efficiency
C) Customer satisfaction
D) Forecasting accuracy
Answer: B
Inventory Control Under Uncertainty (Additional MCQs)
What is the primary function of a safety stock in uncertain inventory conditions?
A) To reduce lead time
B) To prevent stockouts caused by demand and supply variability
C) To increase economic order quantity
D) To balance overstocking costs
Answer: B
Which of the following increases uncertainty in inventory control?
A) Stable demand patterns
B) Decreasing lead time
C) Seasonal demand fluctuations
D) Fixed reorder points
Answer: C
How does demand variability impact inventory management under uncertainty?
A) Reduces holding costs
B) Necessitates higher safety stock
C) Eliminates the need for reorder points
D) Minimizes lead time variability
Answer: B
Which inventory control technique explicitly incorporates uncertainty?
A) Economic Order Quantity (EOQ)
B) Continuous Review System
C) Probabilistic Models
D) ABC Analysis
Answer: C
When is the periodic review system most useful?
A) When demand is predictable
B) When inventory levels are checked continuously
C) When orders are placed at fixed intervals
D) When lead times are fixed
Answer: C
Service Level Parameters in Inventory (Additional MCQs)
Service level in inventory systems is best defined as...
A) The number of units ordered each time
B) The probability of not having a stockout during a cycle
C) The lead time between orders
D) The total inventory cost divided by demand
Answer: B
A 95% cycle service level indicates that...
A) 95% of inventory is safety stock
B) Stockouts will occur in 5% of the replenishment cycles
C) Lead time is covered in 95% of cases
D) Inventory holding cost is 5% lower than normal
Answer: B
What is the relationship between fill rate and service level?
A) Fill rate always exceeds service level
B) Fill rate measures the fraction of demand met, while service level measures stockout probability
C) Service level is independent of fill rate
D) Fill rate equals service level under all circumstances
Answer: B
When demand variability increases, how should the safety stock be adjusted?
A) Reduced linearly
B) Increased based on the standard deviation
C) Kept constant
D) Adjusted inversely
Answer: B
Which service level metric is most applicable for multi-item inventory systems?
A) Aggregate fill rate
B) Lead time variability
C) Cycle service level
D) Unit-level stockout probability
Answer: A
Independent Demand Inventory Management (Additional MCQs)
Independent demand for an item is driven by...
A) Customer demand for finished goods
B) Demand for its components
C) The production schedule of dependent items
D) The master production schedule
Answer: A
Which forecasting method is most effective for independent demand items with seasonal patterns?
A) Linear regression
B) Moving averages
C) Seasonal decomposition of time series
D) Exponential smoothing
Answer: C
Which factor is critical in determining the reorder point in an independent demand system?
A) Number of suppliers
B) Demand during lead time
C) Total inventory turnover
D) Inventory carrying cost
Answer: B
Which statement is true about independent demand items?
A) Their demand depends on the production of another item
B) They require deterministic forecasting methods
C) They are not part of the bill of materials
D) They are never held as safety stock
Answer: C
In a fixed-order quantity system for independent demand, orders are placed...
A) At fixed time intervals
B) When inventory drops below the reorder point
C) Based on daily demand forecasts
D) Only when safety stock is used
Answer: B
Inventory Control Under Uncertainty (More MCQs)
Which of the following helps to manage inventory under uncertainty?
A) Reducing safety stock
B) Increasing order quantities
C) Monitoring real-time demand patterns
D) Using deterministic models
Answer: C
What is the key objective of a probabilistic inventory model?
A) Eliminate stockouts
B) Optimize safety stock while managing demand variability
C) Predict exact demand patterns
D) Minimize total inventory cost without uncertainty
Answer: B
A higher service level in an uncertain environment typically requires...
A) Lower safety stock
B) Higher safety stock
C) Reduced reorder point
D) Increased lead times
Answer: B
What happens to the reorder point as demand variability increases?
A) It decreases linearly
B) It remains constant
C) It increases to account for higher uncertainty
D) It depends only on the lead time
Answer: C
What is the role of lead time variability in inventory control under uncertainty?
A) It simplifies inventory management
B) It reduces the need for safety stock
C) It increases the complexity of determining safety stock
D) It has no impact on reorder points
Answer: C
Service Level Parameters in Inventory (More MCQs)
What is the primary difference between fill rate and cycle service level?
A) Fill rate measures the percentage of demand met, while cycle service level focuses on stockout prevention
B) Fill rate focuses on inventory holding costs, and cycle service level focuses on lead time
C) Fill rate depends on safety stock, while cycle service level is independent
D) Fill rate and cycle service level are interchangeable terms
Answer: A
Which factor directly influences the calculation of safety stock?
A) Lead time demand variability
B) Average order size
C) Total inventory turnover
D) Holding cost percentage
Answer: A
A higher cycle service level leads to...
A) Lower fill rates
B) Increased stockouts
C) Greater inventory costs
D) Decreased lead times
Answer: C
How does increasing safety stock impact the fill rate?
A) It decreases the fill rate linearly
B) It increases the fill rate proportionally
C) It has no effect on the fill rate
D) It reduces lead time variability
Answer: B
Which parameter is critical for balancing service level and inventory cost?
A) Demand lead time
B) Holding cost per unit
C) Safety stock optimization
D) Order processing time
Answer: C
Independent Demand Inventory Management (More MCQs)
Which inventory technique is most suitable for managing high-value independent demand items?
A) ABC Analysis
B) Fixed-time period system
C) Economic Order Quantity (EOQ)
D) JIT (Just-in-Time)
Answer: A
The primary difference between dependent and independent demand items is...
A) Independent demand is forecast-driven, while dependent demand is calculation-driven
B) Dependent demand items require safety stock
C) Independent demand is irrelevant to production schedules
D) Dependent demand fluctuates with reorder points
Answer: A
Which tool is commonly used to predict demand for independent items?
A) Material Requirements Planning (MRP)
B) Demand forecasting models
C) Master production schedules
D) Kanban cards
Answer: B
What is the main disadvantage of not managing independent demand effectively?
A) Increased setup costs
B) Higher stockouts and lost sales
C) Overproduction of dependent items
D) Shorter lead times
Answer: B
Which statement is true for managing independent demand inventory?
A) Demand is unrelated to production requirements
B) Safety stock is unnecessary
C) Only deterministic models are used
D) It primarily applies to raw materials
Answer: A
Inventory Control Under Uncertainty (Additional MCQs)
Which statistical measure is most commonly used to account for uncertainty in demand?
A) Mean absolute deviation
B) Standard deviation
C) Median absolute error
D) Variance ratio
Answer: B
Which factor reduces uncertainty in inventory management?
A) Increased lead times
B) Improved demand forecasting accuracy
C) Variability in supplier performance
D) High seasonality in demand
Answer: B
A stockout occurs during a replenishment cycle. This is most likely due to:
A) Excessive safety stock
B) Incorrect reorder point calculation
C) Decreasing lead time
D) Consistent demand
Answer: B
What is the purpose of a service level agreement (SLA) in inventory management?
A) To determine safety stock levels
B) To set minimum acceptable service level targets
C) To define economic order quantity
D) To reduce carrying costs
Answer: B
Which of the following is a major contributor to uncertainty in inventory management?
A) High storage capacity
B) Short production cycles
C) Demand and supply variability
D) Predictable order patterns
Answer: C
Service Level Parameters in Inventory (Additional MCQs)
A 99% service level means that:
A) Stockouts will occur in 99% of cycles
B) The system guarantees zero stockouts
C) There is a 1% probability of stockout in each cycle
D) Inventory turnover is at 99% efficiency
Answer: C
The relationship between safety stock and service level is typically:
A) Linear
B) Exponential
C) Constant
D) Unrelated
Answer: B
If the desired service level increases from 90% to 95%, what happens to the safety stock?
A) Safety stock decreases
B) Safety stock remains unchanged
C) Safety stock increases
D) Safety stock becomes irrelevant
Answer: C
What is the primary tradeoff in achieving a higher service level?
A) Lower holding costs
B) Increased lead time
C) Higher inventory carrying costs
D) Reduced demand variability
Answer: C
Which metric measures the fraction of demand that is met directly from inventory?
A) Cycle service level
B) Fill rate
C) Inventory turnover
D) Stockout probability
Answer: B
Independent Demand Inventory Management (Additional MCQs)
The key to managing independent demand items effectively is:
A) Demand forecasting
B) Production planning
C) Master scheduling
D) Backward scheduling
Answer: A
What is the reorder point formula for independent demand items under uncertainty?
A) Average demand × Lead time
B) (Average demand × Lead time) + Safety stock
C) EOQ + Safety stock
D) Demand ÷ Holding cost
Answer: B
Which inventory model assumes demand is independent and uncertain?
A) Economic Production Quantity (EPQ)
B) Newsvendor Model
C) Material Requirements Planning (MRP)
D) ABC Analysis
Answer: B
Independent demand is typically associated with:
A) Raw materials
B) Finished goods
C) Semi-finished goods
D) Work-in-progress inventory
Answer: B
Which of the following is NOT a characteristic of independent demand inventory?
A) Demand is forecasted rather than derived
B) It includes safety stock
C) Demand is directly related to customer orders
D) Inventory is based on the bill of materials
Answer: D
Inventory Control Under Uncertainty (New MCQs)
Which inventory control technique is best suited for high uncertainty in demand?
A) Fixed-order quantity model
B) Continuous review system
C) Stochastic inventory models
D) ABC inventory classification
Answer: C
In an environment of high demand uncertainty, what is a practical way to mitigate risks?
A) Reducing order sizes
B) Increasing lead times
C) Implementing vendor-managed inventory (VMI)
D) Lowering reorder points
Answer: C
Which aspect of uncertainty can be reduced by sharing real-time data with suppliers?
A) Demand variability
B) Lead time variability
C) Supply chain disruption risk
D) All of the above
Answer: D
What is the primary purpose of a probabilistic inventory model?
A) Eliminate the need for forecasts
B) Minimize total cost in a deterministic setting
C) Manage uncertainty in demand and supply
D) Set fixed reorder quantities
Answer: C
In inventory management under uncertainty, a high variability in lead time will result in:
A) Decreased safety stock
B) Increased safety stock
C) Higher stock turnover rates
D) Lower reorder points
Answer: B
Service Level Parameters in Inventory (New MCQs)
A service level of 95% implies that:
A) Stockouts occur in 5% of demand
B) 95% of the time, inventory is available to meet demand
C) 5% of cycles are stockout-free
D) Demand variability is reduced by 95%
Answer: B
Which of these factors does NOT directly impact the calculation of safety stock for service level?
A) Demand variability
B) Lead time variability
C) Inventory carrying costs
D) Desired service level
Answer: C
What happens if the service level increases from 90% to 99%?
A) Safety stock decreases
B) Reorder point decreases
C) Total inventory cost increases
D) Demand variability reduces
Answer: C
The cycle service level is best defined as the probability that:
A) Demand during lead time is fully met without stockouts
B) Stockouts will occur in a replenishment cycle
C) Reorder quantity will match expected demand
D) Safety stock is unnecessary during lead time
Answer: A
Fill rate is often used to measure:
A) Service level accuracy
B) The percentage of demand met without backorders
C) Safety stock levels in inventory
D) Inventory turnover ratio
Answer: B
Independent Demand Inventory Management (New MCQs)
In the context of independent demand, which forecasting method is least effective?
A) Time series analysis
B) Exponential smoothing
C) Regression analysis
D) Dependent demand algorithms
Answer: D
Which inventory strategy is commonly used for independent demand items with erratic demand patterns?
A) Just-in-Time (JIT)
B) Safety stock buffering
C) Lean inventory systems
D) Dependent demand planning
Answer: B
The demand for finished goods in independent demand inventory systems is influenced by:
A) Customer orders
B) Production schedules
C) Inventory levels of raw materials
D) Supplier delivery times
Answer: A
Which inventory management approach ensures optimal order quantities for independent demand items?
A) Material Requirements Planning (MRP)
B) Economic Order Quantity (EOQ)
C) Fixed-interval system
D) Kanban replenishment
Answer: B
A retail store uses historical sales data to forecast future demand for its products. This is an example of managing:
A) Dependent demand inventory
B) Independent demand inventory
C) Raw material inventory
D) Work-in-progress inventory
Answer: B
Inventory Control Under Uncertainty (Fresh MCQs)
Which of the following is a key assumption of inventory models under uncertainty?
A) Lead time is always fixed
B) Demand is perfectly predictable
C) Variability exists in both demand and lead time
D) Safety stock is unnecessary
Answer: C
In inventory systems under uncertainty, increasing safety stock results in:
A) Decreased service levels
B) Increased carrying costs
C) Reduced lead time variability
D) Lower reorder points
Answer: B
Which concept is critical in balancing stockouts and holding costs in uncertain conditions?
A) ABC analysis
B) Optimal order quantity
C) Safety stock determination
D) Reorder frequency
Answer: C
What is the effect of reducing lead time variability in inventory systems?
A) Higher reorder points
B) Reduced safety stock requirements
C) Increased stockouts
D) Decreased service level
Answer: B
Which method is often used to model demand uncertainty in inventory systems?
A) Monte Carlo simulation
B) Linear regression
C) Moving average forecasting
D) Time series decomposition
Answer: A
Service Level Parameters in Inventory (Fresh MCQs)
The alpha service level (α-service level) primarily focuses on:
A) Cycle service level
B) Item fill rate
C) Probability of no stockouts during lead time
D) Backorder levels
Answer: C
Which factor has the most direct impact on calculating the reorder point for a desired service level?
A) Order quantity
B) Lead time variability
C) Holding cost
D) Demand during a stockout
Answer: B
A low service level typically leads to:
A) Higher inventory turnover
B) Fewer stockouts
C) Increased lost sales
D) Lower carrying costs
Answer: C
If a company increases its cycle service level from 80% to 90%, the safety stock will typically:
A) Stay constant
B) Decrease slightly
C) Increase significantly
D) Eliminate all stockouts
Answer: C
Which type of service level is most commonly used to measure customer satisfaction?
A) Lead time service level
B) Fill rate
C) Cycle service level
D) Reorder service level
Answer: B
Independent Demand Inventory Management (Fresh MCQs)
Independent demand inventory is managed primarily through:
A) Demand forecasting and stock replenishment
B) Master production schedules
C) Bill of materials processing
D) Production smoothing techniques
Answer: A
Which inventory management model is most relevant for items with independent demand?
A) Newsvendor model
B) Material requirements planning (MRP)
C) Aggregate production planning
D) Fixed-period inventory model
Answer: D
What is the main challenge of managing independent demand inventory?
A) Forecasting demand accurately
B) Synchronizing production schedules
C) Optimizing raw material usage
D) Ensuring dependent demand consistency
Answer: A
Which inventory system is best suited for high-demand variability in independent demand items?
A) Periodic review system
B) Continuous review system
C) Vendor-managed inventory (VMI)
D) Push inventory system
Answer: B
The key differentiator of independent demand inventory is that its demand:
A) Is derived from production requirements
B) Is directly related to customer needs
C) Depends on bill of materials
D) Follows a fixed replenishment schedule
Answer: B
