Certified Professional Public Buyer (CPPB) Practice Test

What inventory methodology should be used for O-rings with a shelf life of 2 years?

1. LIFO

2. FIFO

3. JIT

4. Procurement cards

The correct answer is: FIFO

The use of the FIFO (First-In, First-Out) inventory methodology is particularly well-suited for items like O-rings that have a shelf life of 2 years. This approach ensures that the oldest inventory items are utilized first, which is crucial for perishable items or any goods that have an expiration date or limited useful life. By using FIFO, organizations minimize the risk of having products go out of date before they are used. In the case of O-rings, which may degrade or lose functionality over time, employing FIFO will help maximize their operational effectiveness and reduce waste. Ensuring that items with the shortest shelf life are used first avoids potential issues related to storing older stock that may become unusable. In contrast, methods like LIFO (Last-In, First-Out) could lead to older O-rings remaining in inventory longer than they should, resulting in possible obsolescence or loss of quality. Other options like JIT (Just-In-Time) and procurement cards are more focused on purchasing and inventory management strategies but do not directly address the handling of perishable goods in terms of shelf life.