Demand Forecasting and Inventory Management Quizzes - Test Your Knowledge

Question 1

Which of the following is not a key element of accurate demand forecasting?

Accepted Answer

Astrological predictions

Answer

Historical data analysis

Answer

Market research

Answer

Customer feedback

Question 2

A company uses time series analysis to predict demand. Which advantage does this method offer?

Accepted Answer

It incorporates historical trends and seasonality.

Answer

It requires minimal historical data.

Answer

It provides highly accurate long-term forecasts.

Answer

It is unaffected by external factors.

Question 3

Which inventory management technique aims to minimize total inventory costs while maintaining customer service levels?

Accepted Answer

Economic Order Quantity (EOQ)

Answer

ABC analysis

Answer

First-In, First-Out (FIFO)

Answer

Just-In-Time (JIT)

Question 4

Which factor is not considered in the Economic Order Quantity (EOQ) model?

Accepted Answer

Safety stock

Answer

Ordering cost

Answer

Holding cost

Answer

Lead time

Question 5

Which of the following techniques is primarily used to estimate future demand based on historical data and patterns?

Accepted Answer

Time series analysis

Answer

Regression analysis

Answer

Monte Carlo simulation

Answer

Scenario planning

Question 6

Which inventory classification method categorizes items based on their annual dollar usage value, helping prioritize inventory management efforts?

Accepted Answer

ABC analysis

Answer

VED analysis

Answer

FNSKU analysis

Answer

SKU analysis

Question 7

In inventory management, safety stock refers to:

Accepted Answer

The minimum inventory level maintained to mitigate the risk of stockouts

Answer

The maximum inventory level allowed for a given item

Answer

The average inventory level over a period of time

Answer

The inventory level at which a reorder is automatically triggered

Question 8

What is the fundamental difference between deterministic and stochastic demand forecasting?

Accepted Answer

Deterministic forecasts assume known demand, while stochastic forecasts account for uncertain demand.

Answer

Stochastic forecasts assume known demand, while deterministic forecasts account for uncertain demand.

Answer

Deterministic forecasts are more accurate than stochastic forecasts.

Answer

Stochastic forecasts are more accurate than deterministic forecasts.

Question 9

The bullwhip effect in supply chains refers to:

Accepted Answer

The tendency for small variations in demand at the retail level to amplify as they move upstream in the supply chain.

Answer

The tendency for demand to be overestimated at the retail level and underestimated at the production level.

Answer

The tendency for inventory levels to fluctuate dramatically as demand changes.

Answer

The tendency for lead times to increase as demand increases.

Question 10

Which inventory model balances the costs associated with holding inventory and placing orders?

Accepted Answer

Economic order quantity (EOQ) model

Answer

Fixed-time period model

Answer

Continuous review model

Answer

Periodic review model

Question 11

Which demand forecasting method relies on historical data to uncover patterns and trends for predicting future demand?

Accepted Answer

Time series analysis

Answer

Causal modeling

Answer

Regression analysis

Question 12

Which inventory model is based on the assumption that demand is constant?

Accepted Answer

Fixed-order quantity model

Answer

Fixed-time period model

Answer

Dynamic lot sizing model

Answer

Continuous review model

Question 13

To address frequent stockouts caused by demand fluctuations, which inventory management technique is most effective in minimizing inventory costs?

Accepted Answer

Safety stock

Answer

Economic Order Quantity (EOQ)

Answer

Reorder point

Question 14

Which ethical consideration is commonly taken into account in inventory management?

Accepted Answer

Minimizing waste and overproduction

Answer

Maximizing profits

Answer

Reducing storage space

Answer

Increasing sales volume

Question 15

Which of the following is a widely used technique for demand forecasting?

Accepted Answer

Time series analysis

Answer

Linear programming

Answer

Safety stock management

Answer

Inventory replenishment

Question 16

What is the fundamental aim of inventory management?

Accepted Answer

To strike a balance between minimizing inventory costs and satisfying customer demand.

Answer

To eliminate inventory altogether

Answer

To solely optimize inventory turnover

Question 17

Which inventory model is most appropriate for managing items with erratic demand patterns?

Accepted Answer

(s,S) inventory policy

Answer

Materials Requirement Planning (MRP) system

Answer

ABC analysis

Answer

Economic Order Quantity (EOQ) model

Question 18

Clearly differentiate between lead time and cycle time in the context of inventory management.

Accepted Answer

Lead time refers to the duration from order placement to receipt, while cycle time encompasses the time required to complete a full production cycle.

Answer

Lead time is shorter than cycle time.

Question 19

Identify the key factors that can influence the accuracy of demand forecasting.

Accepted Answer

Seasonality, economic trends, and customer behavior

Answer

Solely seasonality

Answer

Solely economic conditions

Question 20

Explain the concept of the 'bullwhip effect' in supply chains.

Accepted Answer

The tendency for demand variability to amplify as it moves upstream in the supply chain.

Answer

The tendency for demand variability to decrease as it moves upstream in the supply chain.

Answer

The tendency for inventory levels to increase as it moves upstream in the supply chain.

Question 21

Describe the primary advantage of maintaining safety stock.

Accepted Answer

Mitigates the risk of stockouts and ensures uninterrupted customer service.

Answer

Guarantees perfect inventory levels

Answer

Increases inventory carrying costs

Answer

Eliminates the need for demand forecasting

Question 22

What is the primary purpose of ABC analysis in inventory management?

Accepted Answer

To classify inventory items based on their annual usage value and prioritize management efforts accordingly.

Answer

To calculate the optimal reorder point for each inventory item

Answer

To forecast demand for specific inventory items

Question 23

Identify the key factors that should be considered when determining reorder points for inventory items.

Accepted Answer

Lead time, demand variability, and safety stock levels

Answer

Solely lead time

Answer

Solely demand variability

Question 24

What is the primary objective of an inventory optimization system?

Accepted Answer

To minimize total inventory costs while maintaining desired customer service levels.

Answer

To solely maximize inventory turnover

Answer

To completely eliminate inventory