Level 3 exam — Purchasing & Supply Chain

Exam — fresh questions

12 original questions to validate inventory management: functions and costs, valuation, reorder point, ABC/turnover and accuracy.
Answer everything, then click Check: your score and explanations will appear.

3.1 · Discrimination

1. Which stock function absorbs demand and lead-time variability?

Service stock Safety stock Speculative stock No stock

Safety stock covers demand and lead-time hazards; service stock covers average lead time, not its variability.

3.1 · Application

2. Your average stock is worth 100 000 €. At 20 % carrying, what does holding cost per year?

0 € 2 000 € 20 000 € 100 000 €

20 % × 100 000 € = 20 000 €/an (tied-up cash + warehousing + shrinkage), often invisible because scattered.

3.1 · Synthesis

3. Why is dogmatic zero stock risky?

It is always optimal Without a reliable chain, every disruption becomes a stockout and stockout cost exceeds the saving It increases sales It removes accounting

Zero stock only holds after reliability work (close/dependable suppliers, frequent deliveries). Otherwise you remove the buffer while keeping the potholes.

3.2 · Discrimination

4. Which valuation method is often banned (IFRS)?

FEFO FIFO WAC LIFO

LIFO (recent-price issues, old-price stock) is banned by many standards including IFRS; FIFO and WAC are accepted.

3.2 · Application

5. You value in WAC. How should you physically rotate cartons?

In physical FIFO (FEFO if dated) At random Do not rotate In physical LIFO

Valuation and rotation are independent: you can value in WAC and physically issue in FIFO (FEFO for dates).

3.2 · Synthesis

6. What is the FIFO vs WAC effect when prices rise?

FIFO is banned No effect FIFO shows more margin and better-valued stock, WAC smooths WAC always shows more margin

FIFO issues older, cheaper lots → higher margin and stock at recent prices; WAC averages and smooths. Allocation between periods changes.

3.3 · Discrimination

7. Reorder-point formula?

Average demand × average lead time (Average demand × average lead time) + safety stock Stock × price Demand + lead time

Reorder point = lead-time coverage + safety for hazards (demand, lead time) at the target service level.

3.3 · Application

8. Which service level is economically absurd except for vital criticality?

90 % 95 % 100 % 80 %

The last service points cost the most: targeting 100 % costs disproportionate stock, unless stockout is vital.

3.4 · Discrimination

9. What does ABC analysis say?

C items deserve the finest effort ABC is useless All SKUs have the same value ~20 % of SKUs make ~80 % of value: differentiated effort

Pareto: A (~20 % SKUs, ~80 % value) = close follow-up, C (~50 % SKUs, ~5 % value) = simple grouped management, crossing criticality.

3.4 · Application

10. A €3 C item stops your production if missing. How do you treat it?

Like an A: reinforced safety despite low value Remove it Do nothing Like a plain C

Criticality beats value: a vital C deserves A-level safety (safety stock, dual source).

3.5 · Discrimination

11. Which count catches errors close to their cause without stopping operations?

No count Random counting with no method The full annual count ABC-weighted cycle counting

Cycle counting counts continuously in small portions (A often, C 1x/year): a gap found comes from a recent, explainable error.

3.5 · Synthesis

12. How do you treat a stock gap sustainably?

Fix the figure AND treat the process cause (receiving, picking, entry) Ignore it Change software Fix only the system figure

Fixing the figure without the cause brings the gap back; treating the cause (slotting, scan, recorded movements) removes it.

What's next?

Score ≥ 80%: move on to Level 4 — V3 (warehousing, transport and flow management).
Score < 80%: re-read the explanations above — functions and costs, valuation, reorder point, ABC and accuracy — then retake the test.