Inventory Analytics Coursera Quiz Answers

Get Inventory Analytics Coursera Quiz Answers

Week 1: Inventory Basics

Q1. What can a company achieve with an effective inventory management?

Reduce cost by reducing excessive inventory and the waste associated with it
Increase revenue by improving product variety and availability
Speed up cash conversion cycle, and increase return on assets and asset turnover.

Q2. Why are the inventory changes of China and US highly correlated in the past 15 years?

China, after entering WTO in 2002, has become a major supplier to the US.
US and China are the two major economies in those years.

Q3. Why do US economic recessions highly coincide with significant and negative inventory changes
?

A significant and negative inventory change means a significant shortage, and thus demand cannot be satisfied.
A significant and negative inventory change implies a significant sales (and thus demand) decline.

Q4. To stand out in the retailing business, a company should do well simultaneously on

Price
Product variety
Delivery
Cash conversion cycle

Q5. For a US manufacturing firm, inventory management is important for

Raw materials and supplies
Half-finished products (or work-in-progress, WIP)
Finished goods

Week 2: Inventory turns and days

Q1. What is inventory turnover (or inventory turns)?

Annual COGS / Inventory investment
How many times inventory is sold and replaced in a year

Q2. What is inventory days (or days of supply, DOS)?

Number of business days in a year / inventory turns.
Average days for which an item is held in inventory.
The number of days of demand that you can satisfy by the inventory

Week 3: Why (or why not) hold inventory?

Q1. Why do companies hold inventory?

To ship products over a long distance pipeline stock
To take advantage of price discount
(offered by suppliers) – forward-buy stock
To take advantage of the scale economy cycle stock
To protect against uncertainty safety stock

Q2. The inventory holding cost rate (as a percentage of the product value) can be very different for different products. For example, the inventory cost rate of a computer can be much higher than that of a computer desk, why?

The inventory holding cost rate of a computer may be much higher than that of a computer desk due to a higher obsolescence cost.
Computers are more expensive than computer desks

Q3. What is the objective of inventory management?

Improve product availability and reduce shortage
Reduce excessive inventory and the waste associated with it

Q4. The CEO of Li and Fung, a Hong Kong based fashion apparel company, once said: “Inventory is the root of all evils”. Why did he say that?

Fashion apparel products have a short life-cycle of a few months, inventory that cannot be sold in the season is worthless.
The company designs and produces primarily for the US and EU markets and can hardly sell any left-over products in the local market.

Week 4: Managing inventory by class or type

Q1. How is managing the inventory of A items different from that of B items?

The inventory of A items should be monitored and replenished more frequently than B items.
It is more important for us to build a long-term relationship (via contract) with the suppliers of A items than B items.
We should prioritize the processing of A items in the purchasing department relative to that of the B items.

Q2. Why would it be more economical to outsource the inventory of C items despite its higher acquisition cost due to the suppliers’ inventory carrying cost?

The risk pooling effect: the supplier can pool the demand of rarely used items from different customers and effectively minimize the inventory cost.
The supplier or a third party can build a bigger warehouse and locate in more rural areas with a lower inventory carrying cost.

Q3. What are some of the popular ways to reduce inventory in practice?

Lead time (the time between order placement and order delivery) reduction
Quantitative models for demand forecasting and inventory control.
More attention to inventory management, e.g., tight management of usage rates, lead times and safety stock.
SKU rationalization (reduction)