CPIM Practice Exam

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Prepare for the CPIM Exam. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

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In a fixed order quantity system, what triggers a new order?

When the inventory exceeds the maximum level
When the available stock falls to or below the reorder point
When the cumulative value reaches 50%
When the yearly usage is calculated

The correct answer is: When the available stock falls to or below the reorder point

In a fixed order quantity system, a new order is triggered when the available stock drops to or below the reorder point. This is essential for maintaining inventory levels and ensuring that stock is replenished before it runs out, thus avoiding interruptions in the supply chain. The reorder point is determined by analyzing factors such as lead time and average usage rate, which serve to provide a buffer against stockouts. This method emphasizes proactive inventory management by ensuring that orders are placed in a timely manner to meet anticipated demand. Utilizing this approach allows businesses to maintain efficiency and optimize their inventory levels, balancing the costs of ordering and holding stock.