CPIM Practice Exam

What does the sawtooth diagram illustrate in inventory management?

1. Seasonal demand trends

2. Order point/order quantity inventory system

3. Production scheduling efficiency

4. Raw material consumption rates

The correct answer is: Order point/order quantity inventory system

The sawtooth diagram is a graphical representation used in inventory management that effectively illustrates the relationship between inventory levels and reordering. It showcases how inventory levels fluctuate over time as stock is consumed and replenished. In this diagram, the horizontal axis typically represents time, while the vertical axis represents inventory levels. The "tooth" of the saw indicates the depletion of inventory, which occurs as products are utilized or sold. When inventory levels reach a predetermined reorder point, a new order is placed, and the inventory is replenished back to the maximum level, demonstrated by the upward spike in the diagram. This pattern continues, creating the characteristic sawtooth shape. This visualization is particularly beneficial for understanding the order point and order quantity system because it highlights the timing of inventory replenishment and helps managers determine optimal order quantities to maintain desired service levels, effectively balancing carrying costs and stock availability. The other options, while relevant to inventory management, do not specifically relate to the mechanics illustrated by the sawtooth diagram. For example, seasonal demand trends focus on forecasting demand variations over time, production scheduling efficiency pertains to optimizing manufacturing processes, and raw material consumption rates relate to the usage rates of inputs rather than the inventory system itself. Thus, the choice depicting the