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CLT practice questions

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Question 1Supply Chain Logistics: Foundational Knowledge (CLA)

Which inventory costing method assumes that the oldest units in stock are sold first?

  1. Specific identification
  2. LIFO
  3. FIFO Correct answer.
  4. Weighted average cost

Explanation

FIFO, or first-in first-out, treats the earliest acquired units as the ones leaving inventory, leaving newer costs on the balance sheet. LIFO does the reverse, while weighted average blends costs across all units.

Question 2Supply Chain Logistics: Foundational Knowledge (CLA)

In logistics, what does the term 'last mile' refer to?

  1. The last pallet loaded onto a outbound trailer
  2. The final invoice settlement in a freight contract
  3. The final inspection step before goods leave a factory
  4. The final leg of delivery from a hub to the end customer Correct answer.

Explanation

The last mile is the closing segment of the supply chain that moves goods from a distribution or hub point to the final delivery destination. It is typically the most fragmented and costly portion of the journey.

Question 3Supply Chain Logistics: Foundational Knowledge (CLA)

Which document typically serves as the carrier's receipt for goods and as evidence of the contract of carriage?

  1. Packing list
  2. Commercial invoice
  3. Purchase order
  4. Bill of lading Correct answer.

Explanation

A bill of lading is issued by the carrier and functions as a receipt, a contract of carriage, and in some forms a document of title. The other documents originate with the buyer or seller rather than the carrier.

Question 4Supply Chain Logistics: Foundational Knowledge (CLA)

Which Incoterm places the greatest obligation on the seller by requiring delivery at the named destination with duties paid?

  1. DDP Correct answer.
  2. CIF
  3. EXW
  4. FOB

Explanation

Delivered Duty Paid obliges the seller to deliver to the named place and clear import duties, making it the most seller-heavy term. EXW sits at the opposite extreme, with minimal seller responsibility.

Question 5Supply Chain Logistics: Foundational Knowledge (CLA)

What is the primary purpose of safety stock?

  1. To qualify for volume-based freight discounts
  2. To reduce the number of suppliers used
  3. To buffer against variability in demand and lead time Correct answer.
  4. To shorten the production cycle time

Explanation

Safety stock is held to absorb uncertainty in demand and supply timing so service levels can be maintained. It is a buffer against variability rather than a tool for procurement consolidation or discount capture.

Question 6Supply Chain Logistics: Foundational Knowledge (CLA)

A company counts every inventory item once per year on a single date. What is this practice called?

  1. Perpetual inventory
  2. ABC classification
  3. Periodic physical inventory Correct answer.
  4. Cycle counting

Explanation

A periodic physical inventory counts all items at one time, often annually. Cycle counting instead counts subsets on a rotating schedule throughout the year.

Question 7Supply Chain Logistics: Foundational Knowledge (CLA)

Which mode of transport is generally best suited for moving high-value, time-sensitive goods across long international distances?

  1. Inland barge
  2. Air freight Correct answer.
  3. Ocean container
  4. Rail freight

Explanation

Air freight offers the fastest transit for long distances, which justifies its higher cost for high-value or perishable goods. Ocean, rail, and barge are slower but cheaper per unit of weight.

Question 8Supply Chain Logistics: Foundational Knowledge (CLA)

What does the acronym SKU stand for in inventory management?

  1. Standard kit usage
  2. Stock keeping unit Correct answer.
  3. Supply key unit
  4. Shipment kind unit

Explanation

A stock keeping unit is a unique identifier for a distinct item at a specific location, used to track inventory precisely. The other expansions are not standard supply chain terms.

Question 9Supply Chain Logistics: Foundational Knowledge (CLA)

A retailer sells 1,200 units per year at a steady rate. If it orders in lots of 300 units, approximately how many orders are placed each year?

  1. 4 Correct answer.
  2. 2
  3. 12
  4. 6

Explanation

Annual demand divided by order quantity gives the number of orders: 1,200 divided by 300 equals 4. This assumes constant demand and no safety stock effects on ordering frequency.

Question 10Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following best describes cross-docking?

  1. Storing goods in a bonded warehouse until duties are paid
  2. Transferring inventory between retail stores
  3. Unloading inbound goods and reloading them for outbound shipment with minimal storage Correct answer.
  4. Consolidating returns for refurbishment

Explanation

Cross-docking moves goods from inbound to outbound vehicles with little or no put-away, reducing handling and storage time. It is a flow-through technique rather than a storage or returns process.

Question 11Supply Chain Logistics: Foundational Knowledge (CLA)

A firm's annual demand is 10,000 units, ordering cost is $50 per order, and holding cost is $4 per unit per year. Using the economic order quantity formula, what is the EOQ?

  1. 250 units
  2. 1,000 units
  3. 2,000 units
  4. 500 units Correct answer.

Explanation

EOQ equals the square root of (2 times annual demand times ordering cost divided by holding cost). That is the square root of (2 x 10,000 x 50 / 4), which is the square root of 250,000, or 500 units.

Question 12Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following is a key benefit of vendor-managed inventory (VMI)?

  1. Inventory ownership never transfers between parties
  2. The supplier monitors stock levels and replenishes based on shared demand data Correct answer.
  3. The buyer assumes responsibility for all replenishment decisions
  4. Orders are placed only after stockouts occur

Explanation

Under VMI the supplier takes responsibility for monitoring and replenishing the buyer's inventory using shared consumption data. This shifts replenishment decisions to the supplier while improving availability.

Question 13Supply Chain Logistics: Foundational Knowledge (CLA)

In ABC inventory classification, which group typically receives the tightest control and most frequent review?

  1. C items
  2. B items
  3. Items with the lowest annual usage value
  4. A items Correct answer.

Explanation

A items represent the highest annual usage value and therefore justify the most rigorous monitoring. C items are low value and are controlled more loosely.

Question 14Supply Chain Logistics: Foundational Knowledge (CLA)

A distribution center receives 40,000 units per month and ships 36,000 units per month. What is the approximate inventory growth per month?

  1. 2,000 units
  2. 76,000 units
  3. 1,111 units
  4. 4,000 units Correct answer.

Explanation

Net inventory change equals inbound minus outbound, so 40,000 minus 36,000 equals 4,000 units of growth per month. The other figures come from adding the flows or dividing by days.

Question 15Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following best describes the bullwhip effect?

  1. Inventory costs decline as orders move upstream
  2. Supplier count increases with demand stability
  3. Demand variability amplifies as orders move upstream in the supply chain Correct answer.
  4. Transportation costs rise with shorter lead times

Explanation

The bullwhip effect is the amplification of demand signals as they pass from downstream to upstream parties. Small changes in retail demand can produce large swings in orders to manufacturers.

Question 16Supply Chain Logistics: Foundational Knowledge (CLA)

What is the primary role of a freight forwarder?

  1. Arranging transport and documentation on behalf of shippers Correct answer.
  2. Operating the vessels that carry ocean cargo
  3. Manufacturing packaging for export goods
  4. Setting customs duty rates for imports

Explanation

A freight forwarder coordinates carriers, routes, and paperwork for shippers without necessarily owning assets. It acts as an intermediary that streamlines international movement.

Question 17Supply Chain Logistics: Foundational Knowledge (CLA)

Which metric measures the percentage of orders delivered complete and on time?

  1. Inventory turnover
  2. Fill rate
  3. Perfect order rate Correct answer.
  4. Order cycle time

Explanation

Perfect order rate captures orders delivered complete, on time, damage-free, and with correct documentation. It combines several service dimensions into a single measure.

Question 18Supply Chain Logistics: Foundational Knowledge (CLA)

A warehouse uses a slotting strategy that places fast-moving items near shipping doors. What is the main expected benefit?

  1. Fewer supplier deliveries
  2. Shorter customs clearance
  3. Lower inventory carrying cost
  4. Reduced travel time for picking Correct answer.

Explanation

Slotting fast movers close to outbound areas minimizes picker travel, which is often the largest labor component of order picking. It does not directly change inventory levels or customs processes.

Question 19Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following is a characteristic of a push-based supply chain?

  1. Production is triggered by actual customer orders
  2. Production is driven by forecasts and planned schedules Correct answer.
  3. Replenishment responds directly to point-of-sale data
  4. Inventory is minimized through real-time demand signals

Explanation

Push systems execute against forecasts and schedules, moving goods forward in anticipation of demand. Pull systems instead trigger activity from actual customer demand signals.

Question 20Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following best describes a 3PL provider?

  1. A government agency that regulates freight rates
  2. An external firm that performs logistics functions such as warehousing and transportation for a client Correct answer.
  3. A retailer that sells only through physical stores
  4. A manufacturer that owns its entire distribution fleet

Explanation

A third-party logistics provider delivers outsourced logistics services, allowing clients to avoid owning those capabilities. It is distinct from a company operating its own private fleet.

Question 21Supply Chain Logistics: Foundational Knowledge (CLA)

A product has annual demand of 24,000 units, and the company holds average inventory of 3,000 units. What is the inventory turnover ratio?

  1. 6
  2. 4
  3. 8 Correct answer.
  4. 12

Explanation

Inventory turnover equals annual demand divided by average inventory, so 24,000 divided by 3,000 equals 8. A higher ratio indicates stock is cycling through the system more quickly.

Question 22Supply Chain Logistics: Foundational Knowledge (CLA)

In a just-in-time system, which condition most directly supports reliable performance?

  1. Large safety stocks held at each workstation
  2. Stable and predictable demand with dependable suppliers Correct answer.
  3. Long production runs with infrequent changeovers
  4. Multiple layers of buffer inventory between stages

Explanation

JIT depends on smooth demand and reliable supply because it operates with minimal buffers. Variability in either demand or supply quickly exposes the system to stockouts.

Question 23Supply Chain Logistics: Foundational Knowledge (CLA)

A shipper faces demand with a standard deviation of 200 units per week and a lead time of 4 weeks. Assuming independent weekly demand and a safety factor of 1.65, what is the approximate safety stock?

  1. 330 units
  2. 1,320 units
  3. 660 units Correct answer.
  4. 800 units

Explanation

Safety stock equals the safety factor times the standard deviation of demand over the lead time. The lead-time standard deviation is 200 times the square root of 4, or 400, and 1.65 times 400 equals 660 units.

Question 24Supply Chain Logistics: Foundational Knowledge (CLA)

Which situation most clearly increases the risk of the bullwhip effect in a supply chain?

  1. Lead times are short and consistent across tiers
  2. All tiers share real-time point-of-sale data
  3. Each tier orders based on its immediate downstream orders rather than end-customer demand Correct answer.
  4. Ordering and pricing policies are stable over time

Explanation

Ordering from distorted downstream signals rather than true end demand causes variability to amplify upstream. Shared data, short lead times, and stable policies all dampen that amplification.

Question 25Supply Chain Logistics: Foundational Knowledge (CLA)

A company compares two carriers. Carrier A offers a lower rate but a 10-day transit; Carrier B charges more but delivers in 3 days. For a high-value item with a steep daily holding cost, which factor should dominate the total cost comparison?

  1. The transit time alone
  2. The freight rate alone
  3. The number of carrier touchpoints
  4. The sum of freight cost and inventory carrying cost during transit Correct answer.

Explanation

Total landed cost should combine freight charges with the carrying cost of inventory tied up during transit. A cheaper but slower carrier can cost more once in-transit holding costs are included.

Question 26Supply Chain Logistics: Foundational Knowledge (CLA)

Which document issued by a carrier serves as the receipt of goods and the basic contract of carriage for a shipment?

  1. Bill of lading Correct answer.
  2. Certificate of origin
  3. Packing list
  4. Commercial invoice

Explanation

The bill of lading is the carrier's receipt for the goods, evidences the contract of carriage, and can function as a document of title. The other documents support trade but do not define the carriage contract.

Question 27Supply Chain Logistics: Foundational Knowledge (CLA)

Which inventory cost category includes insurance, taxes, obsolescence, and the cost of capital tied up in stock?

  1. Setup cost
  2. Ordering cost
  3. Stockout cost
  4. Holding cost Correct answer.

Explanation

Holding (carrying) cost covers all expenses of keeping inventory, including capital, storage, insurance, taxes, and obsolescence. Ordering and setup costs arise from placing or preparing orders, and stockout cost arises when demand cannot be met.

Question 28Supply Chain Logistics: Foundational Knowledge (CLA)

What does the term 'lead time' refer to in a replenishment context?

  1. The interval between two consecutive demand forecasts
  2. The maximum duration a shipment may be held in customs
  3. The elapsed time between placing an order and receiving it Correct answer.
  4. The time a product remains in finished-goods storage

Explanation

Lead time is the total elapsed time from order placement to availability of the goods, including processing, transit, and receiving. It drives reorder points and safety stock calculations.

Question 29Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following is the primary purpose of a safety stock buffer?

  1. To qualify the firm for volume freight discounts
  2. To lower the average cycle stock held in a warehouse
  3. To absorb variability in demand and supply during lead time Correct answer.
  4. To reduce the number of purchase orders issued per year

Explanation

Safety stock protects against uncertainty in demand and lead time so that service levels are maintained. It is held in addition to cycle stock, which exists because of order quantities.

Question 30Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following is an example of a warehousing activity rather than a transportation activity?

  1. Consolidating less-than-truckload shipments into full truckloads
  2. Assigning tractors to over-the-road routes
  3. Selecting and packing items for customer orders Correct answer.
  4. Negotiating accessorial charges with a motor carrier

Explanation

Order picking and packing are core warehouse fulfillment activities performed inside a facility. The other choices involve moving goods between locations or managing carriers, which are transportation functions.

Question 31Supply Chain Logistics: Foundational Knowledge (CLA)

What is the primary function of a purchase order in the procurement process?

  1. To authorize a supplier to deliver specified goods at agreed terms Correct answer.
  2. To certify that goods meet import regulations
  3. To serve as the carrier's proof that goods were received
  4. To record the physical count of inventory on hand

Explanation

A purchase order is the buyer's formal offer to a supplier specifying items, quantities, prices, and terms. It becomes a binding contract when accepted by the supplier.

Question 32Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following best describes a reverse logistics process?

  1. Shipping finished goods from a plant to regional distribution centers
  2. Moving goods from the point of consumption back for returns, repair, or disposal Correct answer.
  3. Transporting raw materials from a supplier to a manufacturing plant
  4. Transferring inventory between two retail stores to balance stock

Explanation

Reverse logistics manages the flow of goods backward from the customer, covering returns, recalls, repairs, recycling, and disposal. The other options describe forward movement of goods toward the customer.

Question 33Supply Chain Logistics: Foundational Knowledge (CLA)

Which of the following is a characteristic of a distribution requirements planning (DRP) process?

  1. It plans replenishment of finished goods across a distribution network Correct answer.
  2. It schedules production of components on the factory floor
  3. It audits carrier invoices for freight payment accuracy
  4. It sets the price of goods sold through retail channels

Explanation

DRP takes demand at distribution points and time-phases replenishment orders back through the network to the supplying locations. It focuses on finished goods flow rather than component production scheduling.

Question 34Supply Chain Logistics: Foundational Knowledge (CLA)

A shipper moves 50,000 units per year. Average inventory is 5,000 units. Using the standard inventory turns formula, what is the annual inventory turnover?

  1. 5 turns
  2. 10 turns Correct answer.
  3. 25 turns
  4. 50 turns

Explanation

Inventory turnover equals annual cost of goods sold (or units sold) divided by average inventory. Here 50,000 divided by 5,000 equals 10 turns per year.

Question 35Supply Chain Logistics: Foundational Knowledge (CLA)

A firm's annual demand is 36,000 units, order cost is $40 per order, and holding cost is $8 per unit per year. What is the economic order quantity?

  1. 600 units Correct answer.
  2. 300 units
  3. 1,200 units
  4. 1,800 units

Explanation

EOQ equals the square root of (2 x annual demand x order cost / holding cost). That is the square root of (2 x 36,000 x 40 / 8), or the square root of 360,000, which is 600 units.

Question 36Supply Chain Logistics: Foundational Knowledge (CLA)

A company operates 250 days per year and uses 5,000 units annually with a constant daily demand. Lead time is 6 days. What reorder point is needed if no safety stock is held?

  1. 60 units
  2. 120 units Correct answer.
  3. 20 units
  4. 240 units

Explanation

Daily demand is 5,000 divided by 250, or 20 units per day. The reorder point equals daily demand times lead time, so 20 x 6 equals 120 units.

Question 37Supply Chain Logistics: Foundational Knowledge (CLA)

A warehouse has 12,000 pallet positions and an average of 9,600 pallets in storage. What is the approximate storage utilization?

  1. 85 percent
  2. 70 percent
  3. 90 percent
  4. 80 percent Correct answer.

Explanation

Utilization equals occupied positions divided by available positions, so 9,600 divided by 12,000 equals 0.80, or 80 percent.

Question 38Supply Chain Logistics: Foundational Knowledge (CLA)

A firm wants a 95 percent service level. If weekly demand is normally distributed with a standard deviation of 150 units and lead time is 4 weeks with independent weekly demand, what is the standard deviation of demand during lead time?

  1. 300 units Correct answer.
  2. 150 units
  3. 600 units
  4. 450 units

Explanation

For independent weekly demand, the lead-time standard deviation equals the weekly standard deviation times the square root of the lead time. That is 150 x 2, or 300 units.

Question 39Supply Chain Logistics: Foundational Knowledge (CLA)

A distribution center faces demand of 2,000 units per week with a standard deviation of 250 units. Lead time is 2 weeks with independent demand. Using a safety stock factor of 1.65 for 95 percent service, what safety stock is required?

  1. 412 units
  2. 583 units Correct answer.
  3. 825 units
  4. 1,650 units

Explanation

The lead-time standard deviation is 250 x the square root of 2, about 354 units. Multiplying by the 1.65 service factor gives roughly 583 units of safety stock.

Question 40Supply Chain Logistics: Foundational Knowledge (CLA)

A shipper's annual freight spend is $2,400,000 and annual weight shipped is 8,000,000 pounds. What is the cost per pound?

  1. $0.003
  2. $3.00
  3. $0.30 Correct answer.
  4. $0.03

Explanation

Cost per pound equals total freight spend divided by total pounds, so $2,400,000 divided by 8,000,000 equals $0.30 per pound.

Question 41Supply Chain Logistics: Foundational Knowledge (CLA)

A firm holds cycle stock of 400 units and safety stock of 150 units. What is its average total inventory if cycle stock averages half the order quantity and orders arrive just as stock reaches zero?

  1. 400 units
  2. 550 units
  3. 350 units Correct answer.
  4. 200 units

Explanation

Average total inventory is average cycle stock plus safety stock. With average cycle stock of 200 units and safety stock of 150 units, the total is 350 units.

Question 42Supply Chain Logistics: Foundational Knowledge (CLA)

A retailer observes that weekly demand variability grows as orders move upstream from retail to wholesale to manufacturer. Which phenomenon does this describe?

  1. Demand smoothing
  2. Cross-docking
  3. The bullwhip effect Correct answer.
  4. Postponement

Explanation

The bullwhip effect is the amplification of demand variability as orders pass up the supply chain. It is typically driven by forecasting errors, batch ordering, price promotions, and rationing.

Question 43Supply Chain Logistics: Foundational Knowledge (CLA)

Which combination of practices most directly reduces the bullwhip effect across a supply chain?

  1. Sharing point-of-sale data and shortening order cycles Correct answer.
  2. Increasing order batch sizes and running frequent promotions
  3. Using longer forecasting horizons with limited data sharing
  4. Adding more echelons between manufacturing and retail

Explanation

Bullwhip amplification is dampened when partners share end-customer demand data and order more frequently in smaller lots. Larger batches, promotions, extra echelons, and long forecasts all tend to amplify variability.

Question 44Supply Chain Logistics: Foundational Knowledge (CLA)

A company ships a product whose demand is highly unpredictable and whose value is high relative to its weight. Which supply chain design choice best fits these characteristics?

  1. Choose the slowest mode and maximize pipeline inventory
  2. Use a responsive, fast transport mode with postponement of final configuration Correct answer.
  3. Produce to forecast in large batches and hold stock centrally
  4. Standardize a single finished-goods variant and push it to all markets

Explanation

High-value, unpredictable products benefit from responsiveness and risk pooling, often through postponement and faster transport. Slow transport and large forecast-based batches increase obsolescence and mismatch risk.

Question 45Supply Chain Logistics: Foundational Knowledge (CLA)

In a periodic review inventory system, an order is placed at fixed intervals to raise inventory position to a target level. What is a key disadvantage compared with continuous review?

  1. It cannot be used with multiple stock-keeping units
  2. It requires real-time tracking of every transaction
  3. It needs a larger safety stock to cover the review period Correct answer.
  4. It eliminates the ability to combine orders for multiple items

Explanation

Because stock position is only checked at intervals, protection must cover both the review period and the lead time, requiring more safety stock. Periodic review does not require real-time tracking and often allows order consolidation.

Question 46Supply Chain Logistics: Foundational Knowledge (CLA)

A firm uses a continuous review system and wants to lower its safety stock without reducing service level. Which action most directly supports this goal?

  1. Adding another distribution echelon
  2. Increasing supplier lead time variability
  3. Reducing order quantity and increasing order frequency Correct answer.
  4. Extending the review interval

Explanation

Smaller, more frequent orders reduce cycle stock and can reduce exposure to demand swings, and shorter replenishment cycles lower required buffers. Greater lead-time variability, extra echelons, and longer review intervals all increase the safety stock needed.

Question 47Supply Chain Logistics: Foundational Knowledge (CLA)

A manufacturer's plant produces 1,000 units per day but can ship only 800 units per day to its distribution center. Which inventory position will grow at the plant, and why?

  1. Pipeline inventory, because transit time is lengthening
  2. Finished-goods inventory, because inflow exceeds outflow Correct answer.
  3. Raw-material inventory, because supplier lead times are rising
  4. Safety stock, because demand variability is increasing

Explanation

When production inflow exceeds outbound shipment outflow, finished-goods inventory accumulates at the plant. Pipeline inventory refers to goods in transit, and safety stock responds to variability rather than to a rate imbalance.

Question 48Supply Chain Logistics: Foundational Knowledge (CLA)

A firm compares consolidating two less-than-truckload shipments into one full truckload. Which cost trade-off should the analysis capture?

  1. Lower line-haul cost per unit versus potentially higher inventory and delay cost Correct answer.
  2. Lower warehousing cost versus higher order processing cost
  3. Higher transport cost versus lower inventory carrying cost
  4. Higher safety stock versus lower order quantity

Explanation

Consolidation reduces line-haul cost per unit but may delay some goods and increase inventory while waiting for the consolidated load. A correct trade-off analysis weighs the freight savings against added inventory and service costs.

Question 49Supply Chain Logistics: Foundational Knowledge (CLA)

A company's inventory turnover falls from 8 to 5 while sales remain constant. Which conclusion is most defensible?

  1. The company's cost of goods sold has increased sharply
  2. The company has shortened its supplier lead times
  3. The company has reduced its average inventory level
  4. The company is holding more average inventory relative to its sales Correct answer.

Explanation

With sales constant, a lower turnover ratio means average inventory has risen relative to cost of goods sold. Turnover equals cost of goods sold divided by average inventory, so a decline signals more inventory per unit of sales.

Question 50Supply Chain Logistics: Foundational Knowledge (CLA)

A firm must choose between holding inventory at a central warehouse or at five regional warehouses. Demand across regions is independent and each region faces the same variability. What is the main analytical effect of centralization on safety stock?

  1. Safety stock falls because independent variability pools and partially offsets Correct answer.
  2. Safety stock falls only if lead times also increase
  3. Safety stock is unchanged because total demand is identical
  4. Safety stock rises because total demand variability adds across regions

Explanation

When regional demands are independent, aggregating them pools variability, and the combined standard deviation is less than the sum of the individual standard deviations. Centralization therefore reduces the total safety stock needed for a given service level.