L4 M7 LO2

Question 1

Categories that stock can be held by a business

Answer 1

Raw materials, opening stock, WIP, safety stock and finished goods
Obsolescent and redundant stock
Direct and indirect supplies
ABC classifications of stock

Question 2

Cycle counting

Answer 2

A cyclical process of counting inventory to check system to actual balances

Question 3

Just-in-time (JIT)

Answer 3

A philosophy used in manufacturing that is based on suppliers delivering goods at the point that they are needed. Aims to reduce inventory costs and reduce waste

Question 4

Book value

Answer 4

RBI’s notional value of stock as set down in company’s accounts. An estimate of value which may or may not be achieved or may be exceeded.

Question 5

Causes of obsolescence

Answer 5

Technological changes
Cultural change
Legislation

Question 6

Causes of redundancy

Answer 6

Poor forecasting of demand
Weak customer relationships
Over stocking
Change in internal policy
Too much variety

Question 7

Obsolescent stock

Answer 7

Usually finished goods, which is in good condition and satisfactory but demand is irreversibly falling towards zero

Question 8

Ways to avoid redundant or obsolete stock

Answer 8

Accurate forecasting
Good stock control
Good intern-departmental communication
JIT supply chains
Reduced batch sizes in production
Good sales and operating planning
Reduced variety

Question 9

MRO Inventory

Answer 9

Maintenance, repair and operations inventory, includes items such as cleaning equipment or office supplies

Question 10

Pareto principle

Answer 10

The theory that 80% of outcomes results from 20% of inputs

Question 11

ABC classifications
Managing Cat A stock

Answer 11

Most closely managed and controlled. Smallest in number of stock items (20%) but largest in value (80%)

Question 12

ABC Classifications
Managing Cat B stock

Answer 12

Require less attention with weekly or monthly checks. Medium value

Question 13

ABC classifications
Managing Cat C stock

Answer 13

Usually ordered as required with frequent orders in large batch sizes. Low value items.

Question 14

EDI

Answer 14

Electronic data interchange, computer to computer exchange of business documents in electronic format between business partners

Question 15

ERP

Answer 15

Enterprise resource planning, business process management software that uses a system of integrated applications to manage the business and automate many back office functions