CPIM Practice Exam

What do we call inventories ordered in quantities greater than needed for immediate use?

1. Fluctuation inventory

2. Lot-size inventory

3. Transportation inventory

4. Scheduled receipts

The correct answer is: Lot-size inventory

The term for inventories ordered in quantities that exceed the amount needed for immediate use is lot-size inventory. This occurs as businesses often purchase or produce goods in bulk to take advantage of economies of scale, manage order costs, or fulfill minimum order requirements from suppliers. By ordering larger quantities than necessary, companies can reduce per-unit costs and ensure a buffer against fluctuations in demand or supply. Lot-size inventory takes into consideration the balancing act between having enough inventory to meet customer demand and avoiding excess inventory that ties up capital and increases holding costs. In this context, fluctuation inventory is typically related to variations in demand, while transportation inventory refers to goods that are in transit between locations. Scheduled receipts pertain to inventory that has been ordered and is expected to arrive at a specific time in the future. Therefore, the concept accurately describes the practice of ordering excess quantities as a strategic maneuver in inventory management, justifying why lot-size inventory is the correct answer.