CPIM Practice Exam

What defines the Order point in inventory control?

1. The total inventory available for purchase

2. A level that triggers stock replenishment action

3. The maximum stock level allowed on hand

4. The average demand forecast over a month

The correct answer is: A level that triggers stock replenishment action

The Order point in inventory control is defined as a specific inventory level that triggers a stock replenishment action. When inventory falls to this predetermined point, it signals the need to reorder stock to avoid running out of products. This systematic approach ensures that inventory levels are maintained to meet customer demand while minimizing excess stock. The other choices do not accurately capture the essence of the Order point. The total inventory available for purchase refers to the overall quantity of items on hand, which does not indicate the need for replenishment. The maximum stock level allowed on hand relates to the upper limit of inventory and is unrelated to when orders should be placed. Lastly, the average demand forecast over a month provides insights into expected consumption but does not dictate an actionable reorder point on its own. Thus, the correct understanding of the Order point is crucial for effective inventory management.