Comprehensive Supply Chain Management Exam Bank:
200 MCQs with Answers & Explanations
1. When using the continuous review model, what dictates when an order is placed?
a. Economic Order Quantity
b. Reorder point
c. Review interval
d. Cycle stock
Answer: B
Explanation: In a continuous review inventory system, orders are triggered when
inventory drops to the reorder point, which ensures that stock is replenished before it runs
out.
2. If lead time increases, what should happen to the reorder point?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: C
Explanation: A longer lead time means inventory must cover more time before
replenishment arrives. Therefore, the reorder point should be increased to prevent
stockouts.
3. The Economic Order Quantity (EOQ) seeks to...
a. Minimize the setup cost and holding cost
b. Maximize the products in stock
c. Always avoid having a product out of stock
d. Order the correct amount to avoid stock outs
Answer: A
Explanation: EOQ calculates the order quantity that minimizes the sum of ordering/setup
costs and holding costs, balancing inventory efficiency and cost.
4. As the order quantity decreases, what happens to inventory holding cost?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: B
Explanation: Smaller order quantities mean less inventory on hand at any time, which
reduces holding costs proportionally.
5. As the order quantity decreases, what happens to setup cost?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: C
Explanation: More frequent orders caused by smaller order quantities increase the total
setup cost over time.
,6. As a customer increases service level to 99% from 97%, what will likely happen?
a. The customer will hold more cycle stock
b. The customer will increase safety stock
c. Demand during lead time must increase
d. The customer will decrease safety stock
Answer: B
Explanation: Higher service levels require more safety stock to reduce the probability of
stockouts and maintain reliability.
7. When demand and lead time are uncertain, the reorder point is made up of which of the
following?
a. Safety stock
b. Expected demand during the lead time
c. Economic Order Quantity
d. Holding cost
Answer: A, B
Explanation: The reorder point accounts for both expected demand during lead time and
safety stock to buffer against variability in demand and supply.
8. If a truck is late and no stockout actually occurred, which statement is accurate?
a. There was enough safety stock to cover the longer lead time
b. There was enough cycle stock to cover the longer lead time
c. The reorder point was adjusted because the truck was late
d. These two things are not simultaneously possible
Answer: A
Explanation: Safety stock is specifically held to cover variability in lead time or demand,
preventing stockouts even when shipments are delayed.
9. If the forecast of demand increases, what will happen to the reorder point?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: C
Explanation: Higher expected demand during lead time increases the amount of inventory
needed, raising the reorder point.
10. As lead time variability increases, what should happen to safety stock?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: C
Explanation: Increased lead time uncertainty requires higher safety stock to maintain the
desired service level and avoid stockouts.
11. Which is an alternate (instead of analytical) approach to determine demand and lead time
parameters?
a. Empirical
b. Estimated
c. Mathematical
d. Derived
Answer: A
, Explanation: Empirical methods rely on historical data and observed patterns rather than
theoretical calculations to determine inventory parameters.
12. Inventory holding cost is derived from which two factors?
a. Service level and inventory carrying cost %
b. Inventory carrying cost % and item cost
c. Item cost and setup cost
d. Inventory carrying cost % and setup cost
Answer: B
Explanation: Holding cost depends on the monetary value of inventory (item cost) and
the percentage cost of carrying inventory over time.
13. Which is a key factor when developing an inventory policy?
a. Margin %
b. Warehouse utilization
c. Labor cost
d. Forecast of demand or sales
Answer: D
Explanation: Forecasts of demand or sales determine how much inventory is required to
meet expected customer demand.
14. Which two basic questions does an inventory policy answer?
a. How much should be ordered?
b. Who should place the order?
c. When should an order be placed?
d. How much will the order cost?
Answer: A, C
Explanation: Inventory policies primarily define the quantity to order and the timing of
orders to maintain service levels efficiently.
15. For a customer with a 99% service level, in how many replenishment periods out of 100
is the customer willing to have a stockout?
a. 0
b. 1
c. 10
d. 100
Answer: B
Explanation: A 99% service level allows for a 1% chance of stockout, which translates to
1 period out of 100.
16. Which type of flexibility refers to the ability to scale output up and down without
significant penalty?
a. Variety flexibility
b. New product flexibility
c. Customization flexibility
d. Volume flexibility
Answer: D
Explanation: Volume flexibility allows a company to adjust production levels to meet
changing demand efficiently.
17. Which company is most likely to be historically considered a lean company?
a. Neiman Marcus
, b. Walmart
c. Dillard's
d. Apple
Answer: B
Explanation: Walmart is known for implementing lean principles such as inventory
minimization and efficient supply chain management.
18. Which is a key outcome of a lean strategy?
a. Increased transportation cost
b. Increased waste
c. Increase inventory cost
d. Reduced waste
Answer: D
Explanation: Lean focuses on reducing waste and improving efficiency across the supply
chain.
19. Which is a key outcome of an agile strategy?
a. Reduced waste
b. Increased cash flow
c. Satisfied customers
d. Reduced inventory
Answer: C
Explanation: Agile strategies prioritize responsiveness to customer needs and variability,
enhancing customer satisfaction.
20. Which supply chain strategy works best in high volume, low variety, and predictable
environments?
a. Just in time
b. Lean
c. Agile
d. Kanban
Answer: B
Explanation: Lean strategies are most effective where demand is predictable and volumes
are high, minimizing waste.
21. Which type of flexibility refers to the ability to manage transitions in production and
delivery across heterogeneous products?
a. New product flexibility
b. Volume flexibility
c. Variety flexibility
d. Customization flexibility
Answer: C
Explanation: Variety flexibility enables firms to handle multiple product types efficiently.
22. Which type of flexibility refers to taking core products and making changes to them?
a. Variety flexibility
b. Volume flexibility
c. Customization flexibility
d. New product flexibility
Answer: C
200 MCQs with Answers & Explanations
1. When using the continuous review model, what dictates when an order is placed?
a. Economic Order Quantity
b. Reorder point
c. Review interval
d. Cycle stock
Answer: B
Explanation: In a continuous review inventory system, orders are triggered when
inventory drops to the reorder point, which ensures that stock is replenished before it runs
out.
2. If lead time increases, what should happen to the reorder point?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: C
Explanation: A longer lead time means inventory must cover more time before
replenishment arrives. Therefore, the reorder point should be increased to prevent
stockouts.
3. The Economic Order Quantity (EOQ) seeks to...
a. Minimize the setup cost and holding cost
b. Maximize the products in stock
c. Always avoid having a product out of stock
d. Order the correct amount to avoid stock outs
Answer: A
Explanation: EOQ calculates the order quantity that minimizes the sum of ordering/setup
costs and holding costs, balancing inventory efficiency and cost.
4. As the order quantity decreases, what happens to inventory holding cost?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: B
Explanation: Smaller order quantities mean less inventory on hand at any time, which
reduces holding costs proportionally.
5. As the order quantity decreases, what happens to setup cost?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: C
Explanation: More frequent orders caused by smaller order quantities increase the total
setup cost over time.
,6. As a customer increases service level to 99% from 97%, what will likely happen?
a. The customer will hold more cycle stock
b. The customer will increase safety stock
c. Demand during lead time must increase
d. The customer will decrease safety stock
Answer: B
Explanation: Higher service levels require more safety stock to reduce the probability of
stockouts and maintain reliability.
7. When demand and lead time are uncertain, the reorder point is made up of which of the
following?
a. Safety stock
b. Expected demand during the lead time
c. Economic Order Quantity
d. Holding cost
Answer: A, B
Explanation: The reorder point accounts for both expected demand during lead time and
safety stock to buffer against variability in demand and supply.
8. If a truck is late and no stockout actually occurred, which statement is accurate?
a. There was enough safety stock to cover the longer lead time
b. There was enough cycle stock to cover the longer lead time
c. The reorder point was adjusted because the truck was late
d. These two things are not simultaneously possible
Answer: A
Explanation: Safety stock is specifically held to cover variability in lead time or demand,
preventing stockouts even when shipments are delayed.
9. If the forecast of demand increases, what will happen to the reorder point?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: C
Explanation: Higher expected demand during lead time increases the amount of inventory
needed, raising the reorder point.
10. As lead time variability increases, what should happen to safety stock?
a. It should stay the same
b. It should decrease
c. It should increase
Answer: C
Explanation: Increased lead time uncertainty requires higher safety stock to maintain the
desired service level and avoid stockouts.
11. Which is an alternate (instead of analytical) approach to determine demand and lead time
parameters?
a. Empirical
b. Estimated
c. Mathematical
d. Derived
Answer: A
, Explanation: Empirical methods rely on historical data and observed patterns rather than
theoretical calculations to determine inventory parameters.
12. Inventory holding cost is derived from which two factors?
a. Service level and inventory carrying cost %
b. Inventory carrying cost % and item cost
c. Item cost and setup cost
d. Inventory carrying cost % and setup cost
Answer: B
Explanation: Holding cost depends on the monetary value of inventory (item cost) and
the percentage cost of carrying inventory over time.
13. Which is a key factor when developing an inventory policy?
a. Margin %
b. Warehouse utilization
c. Labor cost
d. Forecast of demand or sales
Answer: D
Explanation: Forecasts of demand or sales determine how much inventory is required to
meet expected customer demand.
14. Which two basic questions does an inventory policy answer?
a. How much should be ordered?
b. Who should place the order?
c. When should an order be placed?
d. How much will the order cost?
Answer: A, C
Explanation: Inventory policies primarily define the quantity to order and the timing of
orders to maintain service levels efficiently.
15. For a customer with a 99% service level, in how many replenishment periods out of 100
is the customer willing to have a stockout?
a. 0
b. 1
c. 10
d. 100
Answer: B
Explanation: A 99% service level allows for a 1% chance of stockout, which translates to
1 period out of 100.
16. Which type of flexibility refers to the ability to scale output up and down without
significant penalty?
a. Variety flexibility
b. New product flexibility
c. Customization flexibility
d. Volume flexibility
Answer: D
Explanation: Volume flexibility allows a company to adjust production levels to meet
changing demand efficiently.
17. Which company is most likely to be historically considered a lean company?
a. Neiman Marcus
, b. Walmart
c. Dillard's
d. Apple
Answer: B
Explanation: Walmart is known for implementing lean principles such as inventory
minimization and efficient supply chain management.
18. Which is a key outcome of a lean strategy?
a. Increased transportation cost
b. Increased waste
c. Increase inventory cost
d. Reduced waste
Answer: D
Explanation: Lean focuses on reducing waste and improving efficiency across the supply
chain.
19. Which is a key outcome of an agile strategy?
a. Reduced waste
b. Increased cash flow
c. Satisfied customers
d. Reduced inventory
Answer: C
Explanation: Agile strategies prioritize responsiveness to customer needs and variability,
enhancing customer satisfaction.
20. Which supply chain strategy works best in high volume, low variety, and predictable
environments?
a. Just in time
b. Lean
c. Agile
d. Kanban
Answer: B
Explanation: Lean strategies are most effective where demand is predictable and volumes
are high, minimizing waste.
21. Which type of flexibility refers to the ability to manage transitions in production and
delivery across heterogeneous products?
a. New product flexibility
b. Volume flexibility
c. Variety flexibility
d. Customization flexibility
Answer: C
Explanation: Variety flexibility enables firms to handle multiple product types efficiently.
22. Which type of flexibility refers to taking core products and making changes to them?
a. Variety flexibility
b. Volume flexibility
c. Customization flexibility
d. New product flexibility
Answer: C
