SCM 300 EXAM 2024|ACTUAL EXAM QUESTIONS WITH IN-
DEPTH ANSWERS|EXPERT VERIFIED FOR GUARANTEED
PASS| LATEST UPDATE
Inventory and Risk - CORRECT ANSWER - carrying inventory can come at a hefty price, thus
there is risk. Not carrying inventory also comes at a risk, the risk of not having any inventory.
Demand Forecasting - CORRECT ANSWER - a predictive analysis and/or estimation of
consumer demand in a future period.
SKU (Stock Keeping Unit) - CORRECT ANSWER - a specific product or service's identification
code used to track inventory or catalog sales.
Independent Demand - CORRECT ANSWER - item: an item for which demand levels are not
directly impacted by the demand of another related item.
Dependent Demand - CORRECT ANSWER - An item for which demand levels are directly
impacted by the demand of another related item.
All 8 Inventory Classifications - CORRECT ANSWER - (1) Raw Materials: materials, parts, or
components that will be used to create an end item.
(2) Work-in-Process (WIP): items that have begun the manufacturing process but are not yet
completed.
(3) Finished Goods (FG): items that are completed and ready for shipment.
(4) Maintenance, Repair, and Operations (MRO): items that are not intended as part of the FG,
but are important to the daily operations of the company (e.g. desk, cleaning supplies).
(5) Market Inventory: inventory that is readily available on the shelf.
(6) Safety Stock (buffer stock): inventory kept to account for variation/uncertainty of demand.
(7) Anticipation Inventory: inventory that is created and stored for future use
(8) Pipeline Inventory: inventory in transit between two points. (Calculated as: Periodic demand
* Lead time = Pipeline Inventory)
,High Inventory - CORRECT ANSWER - higher level of customer service, quantity discounts
may be possible, fewer orders will need to be place, and greater security against unexpected
demand variability.
Low Inventory - CORRECT ANSWER - Less storage space required, lower chance of inventory
shrinkage, less inventory means less materials handling requirements, less money invested in
inventory.
All 4 Costs of Inventory - CORRECT ANSWER - (1) Cost to Purchase: the cost to purchase the
inventory.
(2) Holding cost: cost of holding the inventory.
(3) Order cost: cost associated w/ placing an order for inventory.
(4) Stockout cost: costs associated w/ not having enough inventory on hand to meet customer
demand.
Inventory Calculations - CORRECT ANSWER - • Q - lot size
• D - annual demand
• C - cost to purchase one unit of inventory
• H - cost to hold one unit of inventory for one year
• S - Cost to place a single order
• Avg inventory = Q/2
• Number of orders per year = D/Q
• Time between orders (weeks) = (Q/D)*52
• Annual cost to purchase inventory = DC
• Annual holding cost (AHC) = (Q/2)*H
• Annual Ordering Cost (AOC) = (D/Q)*S
TC Formula (Total Annual Cost of Inventory) - CORRECT ANSWER - the sum of buying,
holding, and ordering inventory.
,EOQ (Economic Order Quantity) - CORRECT ANSWER - - is the lot size (Q) that will
minimize total annual inventory cost (TC); therefore it is seen as the optimal lot size
SqrRt [ (2DS) / H ]
Reasons for Making - CORRECT ANSWER - (a) proprietary technology: others can't make it,
and company doesn't want to tell anyone else how to make it.
(b) No competent supplier,
(c) Better quality control,
(d) Idle Capacity: we have the machines and people to make it, why not use the idle capacity,
(e) Control: we want it faster, cheaper, and better.
Reasons for Buying - CORRECT ANSWER - (a) Insufficient capacity,
(b) Lack of expertise,
(c) No competent supplier: we know how to make it, but our suppliers could make it better,
(d) Better use of resources.
TCO (Total Cost of Ownership) - CORRECT ANSWER - cost of owning an item over the entire
lifetime of the item.
Vertical Integration - CORRECT ANSWER - act of a company taking on additional SC
responsibilities that were formerly done by outside parties.
Forward Integration - CORRECT ANSWER - formerly performed by downstream SC partners
Backward Integration - CORRECT ANSWER - formerly performed by upstream SC partners.
Steps in purchasing process (5 steps) - CORRECT ANSWER - (1) Requisition
(2) Supplier Selection
(3) Place Order
(4) Track Order
, (5) Receive Order.
MR, RFQ, PO (Purchasing Documents) - CORRECT ANSWER - -Material Requisition (MR):
doc. Used to initiate the purchasing process.
-Request for Quotation (RFQ): doc. asks the potential supplier to provide a detailed quote that
might include more than just a per unit price, like delivery date and payment terms.
-Purchasing Order (PO): doc that formally requests and order. A contract that states the terms and
conditions of the order.
E-procurement system - CORRECT ANSWER - Electronic procurement system that can aid in
submitting requests for materials, making material order, negotiation w/ supplier, tracking
shipments, and receiving shipments.
Centralized Purchasing - CORRECT ANSWER - all corporate employees send material
requisitions to a single purchasing department. The centralized department is responsible for all
purchasing decisions, including supplier choice, order size and payment terms.
Decentralized Purchasing - CORRECT ANSWER - material requisitions are sent to a
departmental purchasing department. Perhaps each office has the ability to make purchases of
their own.
Supplier base - CORRECT ANSWER - an established group of suppliers from which a company
makes most of its purchases.
Choosing a supplier - CORRECT ANSWER - (a) Consumer needs,
(b) Cost, Quality, Speed, and Flexibility,
(c) Technological capability,
(d) Location,
.
