WGU D470 Competency 3• Questions With Detailed
Answers
Reasons to hold Inventory Accurate Answer:- o Minimize production
costs.
o Accommodate variations in demand.
o Account for variable lead times.
o Buying costs.
o Utilize quantity discounts.
o To account for seasonal fluctuations.
o Allow for price fluctuations.
o Aid production and distribution operations to run more smoothly.
o Provide customers with immediate service.
o Work-in-progress.
Excess Inventory Accurate Answer:- Excess inventory can be
minimized by using the ABC analysis method:
o 'A' lines = fast movers (approximately 20%)
o 'B' lines = medium movers (approximately 30%)
o 'C' lines = slow movers
o 'D' lines = obsolete/dead stock (C+D representing approximately 50%)
Types of Stock Accurate Answer:- · The main categories of stock types
in supply chain companies are:
o Raw material, component and packaging stocks
o In-process stocks
o Finished products
o Pipeline stocks
o General stores
o Spare parts
· Other major classifications of stock types include:
o Cycle stock or working stock
o Safety stock
o Speculative stock
o Seasonal stock
ABC Analysis of Stock Accurate Answer:- o 'A' lines = fast movers
(approximately 20%)
, o 'B' lines = medium movers (approximately 30%)
o 'C' lines = slow movers
o 'D' lines = obsolete/dead stock (C+D representing approximately 50%)
Direct System vs Echelon System Accurate Answer:- o Direct systems
have a centralized inventory from which customers are supplied directly.
o Echelon systems involve the flow of products through a series of locations
from the point of origin to the final destination.
o Mixed systems (direct & echelon) are the most common.
Four principal elements of inventory-holding costs Accurate Answer:- o
Capital financing cost
o Service cost
o Storage cost
o Risk Cost
Inventory Replenishment Systems: Accurate Answer:- · Inventory
replenishment systems maintain a balance between the cost of holding stock
and the service requirement for customers.
· The two common types of inventory replenishment systems are:
o Periodic review system
o Fixed point reorder system
Periodic Review System Accurate Answer:- A periodic review system is
a method of inventory replenishment that involves checking the stock levels
of items at fixed intervals and ordering enough to meet the expected demand
until the next review. This system can help you reduce inventory costs, avoid
stockouts, and simplify ordering decisions.
Fixed Point Reorder System Accurate Answer:- This means that
whenever the inventory level reaches or falls below this value, a new order is
placed for a fixed quantity. The reorder point is usually calculated based on
the average demand and the lead time, which are the time between placing
and receiving an order.
Bullwhip or Forrester Effect Accurate Answer:- · Small changes in
demand are amplified as they move back through the supply chain. The
resulting surge in demand is known as the 'bullwhip' or Forrester effect as
each location adjusts to the demand increases.
Answers
Reasons to hold Inventory Accurate Answer:- o Minimize production
costs.
o Accommodate variations in demand.
o Account for variable lead times.
o Buying costs.
o Utilize quantity discounts.
o To account for seasonal fluctuations.
o Allow for price fluctuations.
o Aid production and distribution operations to run more smoothly.
o Provide customers with immediate service.
o Work-in-progress.
Excess Inventory Accurate Answer:- Excess inventory can be
minimized by using the ABC analysis method:
o 'A' lines = fast movers (approximately 20%)
o 'B' lines = medium movers (approximately 30%)
o 'C' lines = slow movers
o 'D' lines = obsolete/dead stock (C+D representing approximately 50%)
Types of Stock Accurate Answer:- · The main categories of stock types
in supply chain companies are:
o Raw material, component and packaging stocks
o In-process stocks
o Finished products
o Pipeline stocks
o General stores
o Spare parts
· Other major classifications of stock types include:
o Cycle stock or working stock
o Safety stock
o Speculative stock
o Seasonal stock
ABC Analysis of Stock Accurate Answer:- o 'A' lines = fast movers
(approximately 20%)
, o 'B' lines = medium movers (approximately 30%)
o 'C' lines = slow movers
o 'D' lines = obsolete/dead stock (C+D representing approximately 50%)
Direct System vs Echelon System Accurate Answer:- o Direct systems
have a centralized inventory from which customers are supplied directly.
o Echelon systems involve the flow of products through a series of locations
from the point of origin to the final destination.
o Mixed systems (direct & echelon) are the most common.
Four principal elements of inventory-holding costs Accurate Answer:- o
Capital financing cost
o Service cost
o Storage cost
o Risk Cost
Inventory Replenishment Systems: Accurate Answer:- · Inventory
replenishment systems maintain a balance between the cost of holding stock
and the service requirement for customers.
· The two common types of inventory replenishment systems are:
o Periodic review system
o Fixed point reorder system
Periodic Review System Accurate Answer:- A periodic review system is
a method of inventory replenishment that involves checking the stock levels
of items at fixed intervals and ordering enough to meet the expected demand
until the next review. This system can help you reduce inventory costs, avoid
stockouts, and simplify ordering decisions.
Fixed Point Reorder System Accurate Answer:- This means that
whenever the inventory level reaches or falls below this value, a new order is
placed for a fixed quantity. The reorder point is usually calculated based on
the average demand and the lead time, which are the time between placing
and receiving an order.
Bullwhip or Forrester Effect Accurate Answer:- · Small changes in
demand are amplified as they move back through the supply chain. The
resulting surge in demand is known as the 'bullwhip' or Forrester effect as
each location adjusts to the demand increases.
