Certified Supply Chain Professional (CSCP) Practice Exam

What does fixed order quantity imply in inventory management?

1. It causes orders to be generated at fixed quantity or multiples of it

2. It allows for variable order sizes based on demand

3. It maintains a constant inventory without placing orders

4. It ensures that no inventory is stored beyond a certain limit

The correct answer is: It causes orders to be generated at fixed quantity or multiples of it

Fixed order quantity in inventory management signifies that a predetermined quantity of inventory is ordered each time an order is placed. This approach streamlines the ordering process, as it simplifies inventory control by consistently replenishing stock in specific amounts, leaving little room for variability in what is ordered. The nature of fixed order quantity is especially beneficial in managing stock levels, as it helps maintain product availability while also providing a clear structure for inventory management practices. This consistency allows businesses to better predict cash flow and inventory needs, reducing the risk of stockouts and overstock situations. The other options illustrate different inventory management strategies. Variable order sizes based on demand introduces variability that contradicts the fixed order concept. Maintaining a constant inventory without placing orders does not involve any ordering process at all, which conflicts with the concept of regular replenishment. Lastly, storing no inventory beyond a certain limit aligns more with the principles of inventory control techniques like Just-in-Time (JIT) but does not reflect the essence of fixed quantity ordering.