Business Quiz: Inventory Management- III

Production control is not considered a function of physical distribution because it is primarily concerned with managing and controlling the production process, ensuring that it is efficient and meets the required standards. Physical distribution, on the other hand, focuses on the activities involved in getting the finished products to the customers, such as transportation, warehousing, and distribution inventory management. While production control may indirectly impact the physical distribution process by influencing production schedules and quantities, it is not directly involved in the physical movement and storage of products.

The answer states that about 20% of the items will usually account for about 80% of the total value. This is known as the Pareto principle or the 80/20 rule. It suggests that a small percentage of inputs or factors typically contribute to a large percentage of results or outcomes. In the context of inventory management, it implies that a small percentage of items will generate a significant portion of the total value, highlighting the importance of focusing on these high-value items for effective control and management.

Total line-haul costs will vary directly with the distance moved. This means that as the distance moved increases, the line-haul costs will also increase. This is because longer distances require more fuel, more time, and potentially more resources to transport the goods, resulting in higher costs. On the other hand, factors such as packaging, customer discounts, and perishability of the goods may affect the overall cost of transportation but do not have a direct relationship with the total line-haul costs.

The statement that the same SKU may be stored in several locations at the same time is the best statement regarding floating location systems. This means that instead of having a fixed location for each item, the system allows for flexibility and multiple storage locations for the same item. This can be beneficial in warehouses where there is limited space or where items need to be easily accessible in different areas. It allows for efficient inventory management and reduces the need for constant relocation of items.

The major objective of distribution inventory management is to provide the required level of customer service. This means ensuring that the right products are available in the right quantities at the right time to meet customer demand. By effectively managing inventory, businesses can avoid stockouts and delays in fulfilling customer orders, thereby enhancing customer satisfaction and loyalty. This objective takes precedence over minimizing costs or labor expenses, as customer service is crucial for maintaining a competitive edge in the market.

The answer "About 50% of the items usually account for 5% of the value" is the best statement because it highlights the Pareto Principle, also known as the 80/20 rule. This principle states that approximately 80% of the effects come from 20% of the causes. In inventory management, it means that a small percentage of items (around 20%) usually account for a large percentage (approximately 80%) of the value. Therefore, the statement correctly suggests that a significant portion (about 50%) of the items usually contribute very little (5%) to the total value, emphasizing the importance of focusing on managing the high-value items efficiently.

Regular shipments of cut flowers direct to a florist shop would most likely be shipped by truck. This is because cut flowers are delicate and perishable items that require careful handling and a controlled environment. Shipping them by truck allows for shorter transit times and more direct routes, minimizing the risk of damage or spoilage. Additionally, trucks provide the flexibility to make multiple stops and deliver the flowers directly to the florist shop, ensuring freshness and timely delivery.

Shop floor control is not an activity in a physical distribution system. Shop floor control refers to the management and coordination of activities on the production floor, such as scheduling, monitoring, and controlling the production process. It is not directly related to the distribution of products or the movement of goods from the manufacturing facility to the end customer.

Both statement A and B are true. Physical distribution plays a crucial role in bridging the gap between marketing and production. It involves activities such as transportation, warehousing, and inventory management, which are essential for ensuring that products reach customers efficiently. Additionally, physical distribution also contributes to creating customer demand by ensuring timely delivery, proper packaging, and effective handling of products, which can positively impact customer satisfaction and repeat purchases.

Consolidation refers to the process of combining multiple units into a larger unit in order to reduce the amount of handling required. This can be done to streamline operations, increase efficiency, and minimize costs associated with transportation and storage. By consolidating units, companies can optimize their resources and reduce the overall number of shipments or packages, resulting in less handling and improved logistics.