Inventory Manager

We have curated top Interview questions and answers on Inventory Management that will prepare you to prepare for a role in Inventory Management.

Q.1 When should a physical inventory be taken?
An inventory should be taken at least once a year. But if the items are perishable, seasonal or highly demanded then the inventory should be taken more often.
Q.2 What are the duties of an inventory manager?
When you are working as an inventory manager you are required to develop and implement an overall inventory management plan that includes materials procurement, inventory stock levels, and facility needs and personnel management. Also as an inventory manager, you are required to provide direction to staff members who handle inventory control and ensure any overstocking or shortages are handled efficiently.
Q.3 When should reorders be placed?
The re-order time for a product/ inventory majorly depends on the control system being used and its lead time. In case of fixed order quantities reorders should be placed when the safety stock is reached where in case of fixed period systems the reordering is done at set time periods. Also in just-in-time systems reordering is based on matching the demand with supply. Such that for just in time a close watch on inventory levels is required such that the reorders are placed before stock out of goods.
Q.4 Why is procurement considered as an important element of inventory control?
Procurement is considered as the backbone of inventory management. Such that the Inventory managers are required to create and maintain liaison with vendors and suppliers, and customers to make sure that supplies are obtained in time and further there are no shortages when the need arises.
Q.5 What must be recorded in a physical count of inventory?
The classification, location and number in stock of a good should be recorded, when conducting a physical inventory
Q.6 What should be the value of the material index if location should be nearer to the source of raw material?
The value of the material index should be greater than unity if the location is nearer to the source of raw material.
Q.7 What does items which have gone out of date because of new inventions, are called as?
The items which have gone out of date because of new inventions are called Obsolete items
Q.8 What does order quantity refers to?
Maximum quantities- actual quantities
Q.9 What is the purpose of ABC analysis ?
ABC analysis is an inventory management technique that determines the value of inventory items based on their importance to the business. ABC ranks items on demand, cost and risk data, and inventory mangers group items into classes based on those criteria
Q.10 What is the objective of XYZ analysis ?

Following are the objectives of XYZ Analysis.

1. to take out issued items value from stores

2. to take out received items value at any day

3. to take out surplus items value

Q.11 What is the basic assumption of the EOQ model?
The basic assumption of the EOQ model is that there is a point where stockholding costs are equal to ordering costs.
Q.12 Calculate the EOQ for an item with annual demand of 2,000 units, a cost per order of Rs. 75 and annual carrying cost of Rs. 7.50 per unit?

The formula for economic order quantity is:

EOQ = square root of: [2SD] / H.

S = Setup costs (per order, generally including shipping and handling)

D = Demand rate (quantity sold per year)

H = Holding costs (per year, per unit)


Answer = 200 units

Q.13 Calculate the usage in units if EOQ = 360 units, order costs are Rs. 5 per order, and carrying costs are Rs. 0.20 per unit?

EOQ = Sqrt ((2 x R x Ordering Cost )/ Carrying Cost) ; where R is the annual demand

360 = Sqrt ((2 x R x 5) / 0.20)

2,592 units

Q.14 What is the purpose of safety stock?
To control the likelihood of a stockout due to the variability of demand during lead time.
Q.15 What is the major advantage of fixed position layout?
The major advantages of fixed position layout are: 1. handling requirements for major unit are minimized 2. flexible with reference to the changes in product design 3. high adaptability to the variety of product and intermittent demand
Q.16 What processes should be followed for estimating the amount of stock an organization should have at a certain time in the future?
Working with historical data is suggested, since at the end of the day it is still the most accurate method. Unless you care for inventory levels in a volatile business field in which trends change each year, the behavior of consumers does not change much over the years. People prefer to buy certain things in spring, or in summer, spend most before Christmas, and so on. Of course, this depends on the business field, and a good inventory manager should always count with the current economic climate in their calculations.
Q.17 What are the types of inventories?

There are four types of inventories:

  • Raw materials
  • WIP
  • Finished goods
  • MRO.
Q.18 What is the basic purpose of an inventory system?
The basic purpose of an inventory system is to keep a proper record of stockroom supplies. Maintaining accurate inventory records is important for financial accounting, stock replenishment, customer order fulfillment and maintaining the ability to locate a specific item.
Q.19 What is an inventory sheet?
An inventory sheet is a checklist of inventory type, price per unit, amount that one has, and SKU or serial number.
Q.20 What is the inventory management software?
Inventory management software is a software system used for tracking inventory levels, sales, orders as well as deliveries.
Q.21 How is inventory calculated?

The general formula for the calculation of inventory is:

Beginning inventory + net purchases – COGS = ending inventory.

Q.22 Define forecasting.
Forecasting is a method that uses historical data as inputs for making informed estimates that are predictive in finding the direction of future trends.
Q.23 What are the inventory management methods?
The three popular inventory management methods are the push technique, the pull technique and the just-in-time technique.
Q.24 Define beginning inventory.
Beginning inventory is the nothing but the book value of the inventory of a company at the start of an accounting period.
Q.25 What does demand forecasting refer to?
Demand forecasting finds its use to predict independent demand from sales orders and dependent demand at any decoupling point for the orders of customers. Further, the enhanced demand forecast reduction rules offer an ideal solution for mass customization.
Q.26 What is quantitative forecasting?
Quantitative forecasting models are useful for forecasting future data as a function of past data. For example, informed opinion and judgment, market research, the Delphi method and historical life-cycle analogy.
Q.27 What is average inventory?
Average inventory, as the name suggests is the average value of an inventory within a specific time period, that can vary from the median value of the same data set.
Q.28 What is the purpose of an inventory tracker?
An inventory tracker is any inventory management software, or dashboard that allows you track real-time inventory levels of each SKU for better inventory control in your stores.
Q.29 Explain the EOQ model.
EOQ stands for Economic order quantity that is the ideal order quantity a company should purchase so as to minimize the inventory costs like holding costs, shortage costs, and order costs.
Q.30 Mention the types of forecasting models?

The three basic types of forecasting models are:

  • Time series analysis and projection
  • Qualitative techniques
  • Causal models.
Q.31 What do you mean by store management?
Store management ensures that all the activities that are involved in storekeeping and stock control are carried out efficiently and economically by the store personnel.
Q.32 What are the primary operations in stores?
The basic operations in a stores are: receiving goods, storing goods between receipt and issue and then issuing or despatching those goods.
Q.33 Mention the functions of a store.

The basic functions of a store are:

  • Collection, inspection and acceptance.
  • Feedback information to the materials control section
  • Stock control
  • Stores accounting Service information
  • Help in standardisation and variety reduction
Q.34 What are the objectives of purchasing?

1. Lowering costs

2. Improving quality

3. Managing relationships

4. Leveraging technology

5. Pursuing innovation

6. Reducing risk

Q.35 What resource types are available in Supply Chain Management ?
The resource types available in Supply Chain Management are vendor, machine, human resources, location, tool and facility.
Q.36 In a forecasting system, what is the first step?
The first step in the forecasting system is to tell the system to use the data set by setting the Data Set field.
Q.37 What are the types of production layouts?

The main three types of layout are

  • product or line layout
  • process layout and 
  • combination of product and line Layouts.
Q.38 What does service life cycle refer to?
The service life cycle refers to the process of identifying the stage in which a product or service is encountering at that time.
Q.39 Explain quarterly forecasting.
Quarterly forecasting is the analysis of expenses and revenue that is predicted to be produced or incurred in the future.
Q.40 What do you understand by codification of materials?
Codification of materials is referred to as the identification of materials. Hence, it deals with uniquely identifying each item in the inventory.
Q.41 Name some types of codification.
Alphabetical Codification Decimal Codification Mnemonic Codification Numerical Codification Combined Alphabetical & Numerical Codification
Q.42 Define the term variety reduction.
Variety reduction can be defined as a form of standardization that consists of the reduction of the number of types of products, materials or parts within a definite range to a lesser number which is relevant to meet the prevailing needs at a given time.
Q.43 Name the basic plant layouts.

The four basic types of layouts are

  • process,
  • hybrid,
  • product
  • fixed position.
Q.44 What do you mean by plant layout?
Well, plant layout is one of the most effective physical arrangement, either existing or in plans of industrial facilities including arrangement of machines, processing equipment and service departments in order to achieve greatest co-ordination and efficiency of men, materials, machines and methods in a plant.
Q.45 How do we calculate inventory activity analysis?
The activity ratio can be calculated by dividing the net sales by the working capital. This ratio helps in figuring out the net annual sales generated by an average amount of working capital during a year.
Q.46 What do you understand by the term working capital?
Working capital is basically the money available with any business for day-to-day operations. Working capital can be calculated by using the following formula: Working capital = Current Assets – Current Liabilities
Q.47 How is working capital calculated?
Working capital is calculated using the differences between current assets and current liabilities, conataining the following accounts: (+) Cash (+) Accounts Receivable (+) Inventory (-) Accounts Payable
Q.48 Explain JIT implementation.
JIT implementation helps in enhancing performance by lower level of inventory, reduced operations and inventory costs along with reduced unnecessary production which is a big challenge for the manufacturers to maintain the continuous flow processes.
Q.49 What are the techniques of JIT?
The Just-in-Time (JIT) approach to manufacturing is based on continuous production to meet daily requirements. Its goal is to produce only the required quantity for each day, avoiding large inventories associated with traditional manufacturing systems. Some of the popular techniques include - 

  • Pull manufacturing system
  • Kanban manufacturing system.
  • Continuous improvement (kaizen)
  • Total and comprehensive quality control (TQC)
  • Inventory management.
  • Preventive maintenance (TPM)
  • Cooperation and involvement.
Q.50 Define the term vendor evaluation.
Vendor evaluation is actually a business term that refers to the process of evaluating and approving new and old suppliers on a quantitive basis rather than a qualitative one.
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