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)

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