CPIM-PART-2 Certified in Planning and Inventory Management Dumps

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CPIM-PART-2 Certified in Planning and Inventory Management(Part 2) exam
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Certified in Planning and Inventory Management(Part 2) CPIM-PART-2 exam
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Full version: CPIM-PART-2 Exam Dumps Questions
1.The horizon for forecasts that are input to the sales and operations planning (S&O0P) process
should be long enough that:
A. cumulative forecast deviation approaches zero.
B. planned product launches can be incorporated.
C. required resources can be properly planned.
D. supply constraints can be resolved.
Answer: C
Explanation:
The horizon for forecasts that are input to the sales and operations planning (S&OP) process should
be long enough that required resources can be properly planned. The S&OP process is a cross-
functional process that aligns the demand and supply plans of an organization. The S&OP process
consists of several steps, such as data gathering, demand planning, supply planning, pre-S&OP
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meeting, executive S&OP meeting, and S&OP implementation. The output of the S&OP process is
the production plan, which is a statement of the resources needed to meet the aggregate demand
plan over a medium-term horizon. The production plan can be stated in different units of measure
depending on the type of manufacturing environment, such as hours, units, tons, or dollars. The
horizon for forecasts that are input to the S&OP process should be long enough that required
resources can be properly planned, meaning that the organization can anticipate and allocate the
necessary capacity, materials, labor, equipment, and facilities to meet the expected demand. The
horizon for forecasts should also match the lead time for acquiring or changing the resources, as well
as the planning cycle for updating the production plan.
Reference: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section
4.1: Develop Supply Plans, Subsection 4.1.2: Describe how to develop a production plan (page 36).
2.Safety capacity in lean environments is:
A. unnecessary waste to be reduced in the next kaizen event.
B. where take time is greater than cycle time.
C. provided by adding an additional shift.
D. employing additional workers in peak periods.
Answer: B
Explanation:
Safety capacity in lean environments is where take time is greater than cycle time. Take time is the
average time between the start of production of one unit and the start of production of the next unit1.
Cycle time is the average time it takes to complete one unit of a product or service2. Safety capacity
is the amount of capacity that is reserved to deal with unexpected events or fluctuations in demand or
supply3.
In lean environments, the goal is to minimize waste and maximize value by producing only what the
customer wants, when the customer wants it, and in the exact amount4. This means that the
production system should be synchronized with the customer demand, and the take time should
match the cycle time. However, in reality, there may be variations or uncertainties in the demand or
supply, such as changes in customer preferences, seasonal patterns, quality issues, equipment
breakdowns, or supplier delays. These variations or uncertainties can cause disruptions or
imbalances in the production system, leading to stockouts, overproduction, waiting, defects, or
rework5.
To cope with these variations or uncertainties, lean environments may use safety capacity as a buffer
or contingency plan. Safety capacity is where take time is greater than cycle time, meaning that the
production system has some extra capacity to produce more than what the customer currently
demands. This extra capacity can be used to absorb the variations or uncertainties and maintain a
smooth and stable production flow6. However, safety capacity should not be confused with excess
capacity, which is where take time is much greater than cycle time, meaning that the production
system has a lot of idle or underutilized resources. Excess capacity is a waste that should be
eliminated or reduced in lean environments7.
Therefore, safety capacity in lean environments is where take time is greater than cycle time.
Reference: 1: Take Time Definition 1 2: Cycle Time Definition 2 3: Safety Capacity Definition 3 4:
Lean Manufacturing Definition 4 5: The Seven Wastes of Lean 5 6: Capacity Planning Tools 6 7:
Excess Capacity
3.A statistical safety stock calculation would be appropriate for:
A. components used in multiple end items.
B. new products at time of introduction.
C. end items with stable demand.
D. supply-constrained raw materials.
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Answer: C
Explanation:
A statistical safety stock calculation is a method to determine the optimal amount of safety stock
based on the demand variability, the lead time variability, and the desired service level. A statistical
safety stock calculation would be appropriate for end items with stable demand, because these items
have a predictable demand pattern and a low coefficient of variation. For items with unstable or
unpredictable demand, such as components used in multiple end items, new products at time of
introduction, or supply-constrained raw materials, a statistical safety stock calculation may not be
accurate or reliable, and other methods such as judgmental or simulation-based approaches may be
preferred.
Reference: CPIM Part 2 Exam Content Manual, Domain 5: Plan and Manage Inventory, Section 5.4:
Inventory Management Techniques, p. 29.
4.The master production schedule (MPS) and final assembly schedule (FAS) are most closely linked
in which production strategy?
A. Make-to-stock (MTS)
B. Make-to-order (MTQ)
C. Assemble-to-order (ATO)
D. Engineer-to-order (ETO)
Answer: C
Explanation:
The master production schedule (MPS) and final assembly schedule (FAS) are most closely linked in
the assemble-to-order (ATO) production strategy. ATO is a production strategy that produces
customized products or services by assembling standardized components or modules according to
customer specifications. The MPS is a plan that specifies the quantity and timing of finished products
to be produced in a given period. The FAS is a plan that specifies the quantity and timing of final
assembly operations to be performed in a given period. In the ATO strategy, the MPS and FAS are
closely linked because the MPS determines the demand for the finished products, and the FAS
determines the demand for the components or modules. The MPS and FAS are synchronized to
ensure that the components or modules are available when needed for the final assembly, and that
the finished products are delivered on time to the customers.
The MPS and FAS are not closely linked in the other production strategies. Make-to-stock (MTS) is a
production strategy that produces standardized products or services in advance of customer demand,
and stores them in inventory until they are sold. The MPS is based on the forecasted demand, and
the FAS is not relevant for this strategy, as there is no customization involved. Make-to-order (MTO)
is a production strategy that produces customized products or services from raw materials or
components after receiving customer orders. The MPS is based on the actual customer orders, and
the FAS is not relevant for this strategy, as there is no assembly involved. Engineer-to-order (ETO) is
a production strategy that produces customized products orservices that require engineering design
or modification after receiving customer orders. The MPS is based on the actual customer orders, and
the FAS is not relevant for this strategy, as there is no standardization involved.
Reference: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section
4.1: Supply Planning Concepts, p. 23; Master Production Schedule; Final Assembly Schedule;
Assemble to order.
5.A process capability study would be necessary in a laboratory when:
A. A test results are consistently late.
B. frequent failures are occurring.
C. a new technician is hired.
D. hours of operation are to be extended.
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Answer: B
Explanation:
A process capability study is a method of evaluating how well a process can produce outputs that
meet the specifications or requirements. A process capability study involves collecting data from a
sample of the process output, calculating the process mean and standard deviation, and comparing
them with the specification limits1. A process capability study can help identify the sources and
causes of variation, measure the performance and quality of the process, and determine the potential
for improvement2.
A process capability study would be necessary in a laboratory when frequent failures are occurring.
Frequent failures indicate that the process is not capable of producing reliable and consistent results,
and that there may be some problems or defects in the process. A process capability study can help
diagnose the issues and suggest corrective actions to reduce or eliminate the failures. For example, a
laboratory that performs blood tests may conduct a process capability study to find out why some of
the test results are inaccurate or invalid, and what factors affect the accuracy and validity of the test
results.
The other options are not situations that would require a process capability study, because they are
either unrelated or irrelevant to the process performance or quality. A test results are consistently late
(A) is a problem of timeliness, not capability. A new technician is hired © is a change of personnel, not
process. Hours of operation are to be extended (D) is a change of schedule, not process.
Reference: Process Capability Analysis Cp, Cpk, Pp, Ppk - A Guide - 1factory What is Process
Capability? Capability Estimates & Studies | ASQ
6.To facilitate transportation efficiency and inventory management, companies frequently use:
A. automated storage/retrieval systems (AS/RS).
B. small lot sizes.
C. standardized containers.
D. contract carriers.
Answer: C
Explanation:
Standardized containers are containers that have uniform dimensions and specifications, such as
pallets, crates, boxes, etc. Standardized containers can facilitate transportation efficiency and
inventory management by reducing the handling time, increasing the loading capacity, improving the
space utilization, and simplifying the packaging and labeling processes. Standardized containers can
also enable the use of automated storage/retrieval systems (AS/RS) and other technologies that
require consistent dimensions and weights of the items.
Reference: CPIM Part 2 Exam Content Manual, Domain 7: Plan and Manage Distribution, Section
7.1: Distribution Network Design, p. 38.
7.Which of the following inventory management techniques is most responsive to changes in demand
levels?
A. Two-bin system
B. Periodic review system
C. Cycle counting
D. ABC classification
Answer: A
Explanation:
A two-bin system is a type of inventory management technique that uses two containers or bins to
store and replenish items. When the first bin is empty, the second bin is used to supply the demand
while the first bin is reordered. A two-bin system is most responsive to changes in demand levels
because it triggers replenishment orders based on actual consumption rather than fixed time intervals
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or reorder points. A two-bin system can reduce stockouts, improve service levels, and lower inventory
costs.
Reference: CPIM Exam Content Manual Version 7.0, Domain 5: Plan and Manage Inventory, Section
5.2: Implement Inventory Plans, Subsection 5.2.3: Describe how to implement inventory
replenishment techniques (page 46).
8.What priority control technique is most appropriate for a firm using a cellular production system?
A. Shortest processing time (SPT) rule
B. Distribution requirements planning (DRP)
C. Pull production activity control (PAC)
D. Push production activity control (PAC)
Answer: C
Explanation:
A priority control technique is a method of determining the sequence and timing of production orders
in a manufacturing system. A priority control technique can be either push or pull, depending on
whether the production orders are initiated by the upstream or downstream processes. A cellular
production system is a process of manufacturing that organizes the machines and workers into self-
contained cells that can produce different products efficiently and flexibly. A cellular production
system is usually based on the principles of lean manufacturing and group technology, which aim to
eliminate waste and improve quality.
A pull production activity control (PAC) is a priority control technique that is most appropriate for a firm
using a cellular production system. A pull PAC is a method of controlling the flow of materials and
work-in-progress in a manufacturing system by using signals from the downstream processes to
trigger the release of production orders from the upstream processes. A pull PAC helps to reduce
inventory, lead time, and overproduction, as well as to synchronize the production with the customer
demand. A pull PAC can be implemented using various techniques, such as kanban cards,
containers, or electronic signals.
A shortest processing time (SPT) rule is a priority control technique that assigns the highest priority to
the production order that has the shortest processing time at each workstation. An SPT rule helps to
minimize the average waiting time and flow time of the production orders, as well as to increase the
utilization of the machines and workers. However, an SPT rule does not consider the due dates or the
customer demand of the production orders, and may result in poor customer service or low delivery
performance.
A distribution requirements planning (DRP) is a priority control technique that determines the quantity
and timing of finished goods to be delivered to various distribution centers or customers. A DRP is
based on the forecasted demand, the inventory status, and the transportation lead time of the finished
goods. A DRP helps to optimize the inventory level, reduce stockouts, and improve customer service.
However, a DRP is not suitable for a cellular production system, as it does not control the flow of
materials and work-in-progress within the manufacturing system.
A push production activity control (PAC) is a priority control technique that initiates the production
orders based on the master production schedule or the forecasted demand from the upstream
processes. A push PAC releases the production orders in batches or lots, regardless of the capacity
or status of the downstream processes. A push PAC may result in high inventory, long lead time, and
overproduction, as well as low flexibility and responsiveness to customer demand. A push PAC is not
compatible with a cellular production system, as it contradicts the principles of lean manufacturing
and group technology.
Reference: CPIM Exam Content Manual Version 7.0, Domain 6: Plan, Manage, and Execute Detailed
Schedules, Section 6.1: Detailed Scheduling Concepts, p. 36; Cellular
manufacturing; [Production Activity Control].
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9.Which of the following tools shows process changes and random variation over time?
A. Check sheet
B. Control chart
C. Histogram
D. Pareto analysis
Answer: B
Explanation:
A control chart isa tool that shows process changes and random variation over time. A control chart
is a graph that plots data points over time and shows the mean and the upper and lower control limits
of the process. The mean is the average value of the data, and the control limits are the boundaries of
the normal variation of the process. A control chart can help monitor the stability and performance of
a process by detecting any unusual or non-random patterns in the data, such as trends, cycles, or
shifts. A control chart can also help identify the sources of variation in the process, whether they are
common causes (inherent to the process) or special causes (external factors). A control chart can be
used for both variable data (measured on a continuous scale) and attribute data (counted or
categorized).
A check sheet is a tool that collects and summarizes data in a structured way. A check sheet is a
simple form that records the frequency or occurrence of specific events or problems during a process.
A check sheet can help organize and analyze data by showing patterns, trends, or relationships
among the data. A check sheet can also help identify potential causes of problems or areas for
improvement.
A histogram is a tool that displays the distribution of data in a graphical way. A histogram is a type of
bar chart that shows how many times each value or range of values occurs in a data set. A histogram
can help describe and compare data by showing the shape, center, spread, and variation of the
distribution. A histogram can also help identify outliers, gaps, or clusters in the data.
A Pareto analysis is a tool that prioritizes problems or causes based on their frequency or impact. A
Pareto analysis is based on the Pareto principle, which states that 80 percent of the effects come
from 20 percent of the causes. A Pareto analysis uses a combination of a bar chart and a line graph
to show the relative importance of different factors in a process. The bars represent the frequency or
magnitude of each factor, and the line represents the cumulative percentage of the total effect. A
Pareto analysis can help focus on the most significant problems or causes and allocate resources
accordingly.
Reference: = Control Chart - Statistical Process Control Charts | ASQ, A Guide to Control Charts -
iSixSigma, 2 Tools to Understand Variation in Your Improvement Journey, Understanding variation |
Turas | Learn
10.The most appropriate production output reporting method for repetitive manufacturing is:
A. operation-by-operation.
B. count point.
C. job tickets.
D. backflush.
Answer: D
Explanation:
The most appropriate production output reporting method for repetitive manufacturing is backflush.
Repetitive manufacturing is a production system where the same or similar products are produced in
large quantities or in a continuous flow1. Backflush is a method of reporting output and consumption
of materials at the end of the production process, rather than at each operation or stage2. Backflush
can simplify and streamline the production output reporting process, as it eliminates the need for
tracking and recording each individual transaction or movement of materials and components.
Backflush can also reduce the paperwork, errors, and costs associated with production output
reporting2.
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The other options are not as appropriate as backflush for repetitive manufacturing. Operation-by-
operation is a method of reporting output and consumption of materials at each operation or stage of
the production process3. This method can provide more detailed and accurate information about the
production performance and costs, but it can also be more complex and time-consuming, as it
requires tracking and recording each individual transaction or movement of materials and
components. Count point is a method of reporting output and consumption of materials at selected
points or milestones in the production process4. This method can provide a balance between detail
and simplicity, but it can also introduce errors or discrepancies, as it requires estimating or
extrapolating the output and consumption of materials between the count points. Job tickets are
documents that record the time, materials, and costs associated with a specific job or order5. This
method can provide more flexibility and customization, but it can also be more suitable for job shop or
batch production systems, where different products are produced in small quantities or on demand.
Reference: Repetitive Manufacturing: Definition & Benefits; Backflush Costing: Definition & Example;
Operation by Operation Reporting - ERP Software Blog; Count Point Reporting - ERP Software Blog;
Job Ticket Definition.
11.Components of an organization's immediate industry and competitive environment include:
A. political factors.
B. interest rates.
C. substitute products.
D. sociocultural forces,
Answer: C
Explanation:
An organization’s immediate industry and competitive environment includes the factors that directly
affect its ability to compete and achieve its goals. These factors are often analyzed using Porter’s
Five Forces model, which identifies five competitive forces that shape the industry: threat of new
entrants, power of suppliers, power of buyers, threat of substitute products, and rivalry among existing
competitors1. Among these forces, substitute products are the most relevant component of the
immediate industry and competitive environment, as they represent the alternative solutions that
customers can choose instead of the organization’s products. Substitute products can reduce the
demand and profitability of the organization’s products, as well as increase the price sensitivity and
bargaining power of customers1.
The other options are not components of the immediate industry and competitive environment, but
rather components of the general or macro environment. The general or macro environment includes
the broader factors that affect all organizations in a society or a market, such as political, economic,
social, technological, environmental, and legal factors2. These factors are often analyzed using
PESTEL analysis, which helps organizations identify the opportunities and threats arising from the
external environment2. Among these factors, political factors include the government policies,
regulations, and stability that affect the organization’s operations and decisions2. Interest rates are
part of the economic factors that include the market conditions, growth, inflation, unemployment, and
exchange rates that affect the organization’s performance and profitability2. Sociocultural forces are
part of the social factors that include the demographics, values, beliefs, lifestyles, and preferences of
the customers and society that affect the organization’s demand and customer satisfaction2.
Reference: Competitive Environment: Definition, Examples & Factors - StudySmarter US; Industry
Analysis | Porter’s Five Forces | Competition.
12.Which of the following strategies can improve the effectiveness of a company's customer value
proposition and enhance its differentiation in the market?
A. Relocate high-cost activities to other geographic areas.
B. Outsource activities to outside vendors or contractors.
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C. Invest in productivity enhancing technological improvements.
D. Adopt best practices that improve product design.
Answer: D
Explanation:
A customer value proposition (CVP) is a statement that summarizes the benefits that a product or
service offers to a target customer segment1. A CVP can help a company differentiate itself from its
competitors by highlighting its unique value proposition (UVP), which is the main reason why
customers should choose its product or service over others2. A CVP can also help a company
communicate its value to its customers, increase customer satisfaction and loyalty, and improve its
market position3.
One of the strategies that can improvethe effectiveness of a CVP and enhance its differentiation in
the market is to adopt best practices that improve product design. Product design is the process of
creating a new product or service that solves a customer problem or fulfills a customer need4. By
improving product design, a company can create products or services that are more desirable,
feasible, and viable for its customers5.
Some of the best practices that can improve product design are:
Understanding the customer: conducting research and analysis to identify the customer segments,
their jobs, pains, and gains, and their expectations and preferences. This can help create products or
services that are tailored to the customer needs and wants, and deliver value that exceeds their
expectations.
Using the Value Proposition Canvas: a tool that helps design, test, create, and manage products and
services that customers actually want. The Value Proposition Canvas consists of two parts: the
Customer Profile, which describes the customer segment in terms of their jobs, pains, and gains; and
the Value Map, which describes how the product or service creates value for the customer by
addressing their jobs, relieving their pains, and creating their gains. The Value Proposition Canvas
can help align the product or service with the customer needs and wants, and create a fit between
them. Applying design thinking: a human-centered approach to innovation that integrates the needs of
people, the possibilities of technology, and the requirements of business. Design thinking involves five
phases: empathize, define, ideate, prototype, and test. Design thinking can help create products or
services that are desirable for the customers, feasible for the technology, and viable for the business.
Incorporating feedback loops: collecting and analyzing data from customers and stakeholders to
measure the performance and impact of the product or service. Feedback loops can help validate the
assumptions and hypotheses about the customer needs and wants, test the effectiveness of the value
proposition, and identify areas for improvement or innovation.
Therefore, by adopting best practices that improve product design, a company can create products or
services that deliver superior value to its customers, and differentiate itself from its competitors in the
market.
Reference: 1: Customer Value Proposition Definition 3 2: Unique Value Proposition Definition 4 3:
How to Write a Value Proposition (+ 6 Modern Examples) 5 4: Product Design Definition 5: What is
Product Design? : Customer Discovery: The Ultimate Guide : Value Proposition Canvas C Download
the Official Template 3: What is Design Thinking? : Feedback Loop Definition
13.A benefit of the ISO 9000 series of specifications is that:
A. suppliers are approved automatically for use by all purchasers.
B. purchasers may accept 130 certifications, minimizing additional surveys.
C. the need for supplemental surveys and supplier visits is eliminated.
D. the responsibility for supplier auditing and selection can be outsourced.
Answer: B
Explanation:
A benefit of the ISO 9000 series of specifications is that purchasers may accept ISO 9001
certifications, minimizing additional surveys. ISO 9001 is the standard within the ISO 9000 family that
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specifies the requirements for a quality management system (QMS) that an organization must fulfill to
demonstrate its ability to consistently provide products and services that meet customer and
regulatory requirements1. ISO 9001 certification is a third-party verification that an organization has
implemented and maintained a QMS that conforms to the ISO 9001 standard2. By obtaining ISO
9001 certification, an organization can provide objective evidence of its quality performance to its
customers, suppliers, regulators, and other stakeholders3. This can reduce the need for additional
audits or surveys by the purchasers, as they can rely on the ISO 9001 certification as a proof of
quality assurance4. This can save time, money, and resources for both the purchasers and the
suppliers, as well as improve their trust and confidence in each other5.
Reference: 1: ISO 9000 Vs. 9001 3 2: ISO 9000 Standard: Benefits, How to Achieve 4 3: The
Ultimate Guide to ISO 9000 5 4: ISO 9000 Certification Guide 1 5: ISO - Selection and use of the ISO
9000 family of standards 6
14.A part is sold as a service part, and it is also used as a component in another part.
Which of the following statements about the planning for this part is true?
A. Its low-level code is zero.
B. The material requirements for the part will be understated.
C. The service part demand can be included in the gross requirements.
D. It shouldn't have any safety stock.
Answer: C
Explanation:
A part that is sold as a service part and also used as a component in another part is called a dual-
sourced item. A dual-sourced item has two sources of demand: the external demand from the
customers who buy the service part, and the internal demand from the parent part that uses the
component. The planning for a dual-sourced item should include both sources of demand in the gross
requirements, so that the net requirements can be calculated correctly. The service part demand can
be included in the gross requirements by using a planning bill of material, which is a special bill of
material that shows the relationship between a parent item and its service parts. A planning bill of
material allows the system to explode the service part demand to the component level and generate
planned orders for both the service part and the component.
The other statements about the planning for this part are false. Its low-level code is not zero, because
it is not an independent item. It has a higher low-level code than its parent item, because it is a
component of another item. The material requirements for the part will not be understated, if both
sources of demand are included in the gross requirements. It should have some safety stock, to
protect against demand and supply uncertainties.
Reference: CPIM Part 2 Exam Content Manual, Domain 4: Plan and Manage Supply, Section 4.2:
Material Requirements Planning (MRP), p. 22-23.
15."We have observed the inventory system does not handle plastic parts well." What should be
added to the problem statement to make it more useful?
A. Measurements that help describe the problem
B. Guidance to which problem-solving tools should be used
C. Criteria for selecting the improvement team
D. Description of who is responsible for the problem
Answer: A
Explanation:
Measurements are quantitative or qualitative data that indicate the magnitude, frequency, or impact of
the problem. Measurements help to define the problem clearly, objectively, and specifically, as well as
to establish a baseline for improvement. Therefore, what should be added to the problem statement
to make it more useful is measurements that help describe the problem. For example, a more useful
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problem statement could be “We have observed that the inventory system causes 15% of plastic
parts to be damaged or misplaced every month, resulting in $10,000 of additional costs and 5% of
customer complaints.”
16.Which of the following actions best supports a company's strategic focus on delivery speed to
improve competitive advantage?
A. Maintaining high-capacity utilization
B. Developing flexible operations
C. Cross-training workers
D. Implementing rapid process improvements
Answer: B
Explanation:
Developing flexible operations is the best action that supports a company’s strategic focus on
delivery speed to improve competitive advantage. Flexible operations are the ability to adapt to
changes in customer demand, product mix, quality standards, and delivery schedules1. Flexible
operations can help a company achieve faster delivery speed by enabling it to respond quickly and
efficiently to fluctuations in the market, reduce lead times, optimizeresource utilization, and avoid
bottlenecks2. Flexible operations can also help a company gain a competitive edge by offering a
wider variety of products or services, different volumes or quantities, and varying delivery dates to
meet customer needs and expectations3.
Some examples of flexible operations are:
Volume flexibility: the ability to produce different quantities or volumes of output3
Delivery flexibility: the ability to change the timings or modes of delivery3
Product flexibility: the ability to produce different types or variants of products or services4
Process flexibility: the ability to use different methods or technologies to perform a process4
Resource flexibility: the ability to use different inputs or resources for a process4
Some strategies for developing flexible operations are:
Using modular design: designing products or services that consist of interchangeable components or
modules that can be easily assembled or disassembled5
Implementing automation: using machines or software to perform tasks that would otherwise require
human labor6
Adopting lean principles: eliminating waste and non-value-added activities from processes, such as
overproduction, inventory, defects, waiting, transportation, motion, and overprocessing7
Applying agile methods: using iterative and incremental approaches to deliver products or services
that meet changing customer requirements and feedback
Cross-training workers: training workers to perform multiple tasks or roles within a process or
organization Reference: 1: Operations Flexibility Definition 2 2: Why flexibility is critical when planning
an operations - KPMG 4 3: Performance Objectives - What Are the 5 Business Objectives? -
PeopleGoal 1 4: Competitive Priorities in Operations with Examples - StudiousGuy 5 5: Modular
Design Definition 6: Automation Definition 7: Lean Principles Definition: Agile Methodology Definition:
Cross-training Definition
17.Which of the following techniques would be most appropriate to use to develop a forecast?
A. Delphi method
B. Moving average
C. Exponential smoothing
D. Time series decomposition
Answer: C
Explanation:
Exponential smoothing is a forecasting technique that uses a weighted average of past and present
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data to predict future values. It is suitable for time series data that have a stable or slowly changing
trend and no significant seasonal variations. Exponential smoothing assigns more weight to the most
recent data, giving it a higher influence on the forecast. This makes it more responsive to changes in
demand patterns than other techniques, such as moving average or time series decomposition, which
use fixed weights or historical data. The Delphi method is a qualitative technique that involves a panel
of experts who provide their opinions and feedback on a topic through multiple rounds of surveys. It is
not based on historical data or mathematical formulas, but rather on human judgment and consensus.
Therefore, it is not appropriate for developing a forecast.
Reference: CPIM Part 2 Exam Content Manual, Version 7.0, Domain 3: Plan and Manage Demand,
Section A: Demand Management, Subsection 2: Forecasting Techniques and Methods, p. 14-15.
18.In a make-to-stock (MTS) environment, which of the following actions would improve the trade-off
between the cost of inventory and the level of customer service?
A. Improving estimates of customer demand
B. Eliminating raw material stockouts
C. Decreasing the frozen time zone
D. Reducing manufacturing overtime
Answer: A
Explanation:
In a make-to-stock (MTS) environment, improving estimates of customer demand would improve the
trade-off between the cost of inventory and the level of customer service. MTS is a production
strategy that manufactures products in anticipation of customer demand, based on forecasts. The
main challenge of MTS is to balance the inventory costs and the customer service levels. Inventory
costs include holding costs, ordering costs, and obsolescence costs. Customer service levels
measure the ability to meet customer demand without delay or stockout. A trade-off exists between
these two objectives, as higher inventory levels can increase customer service levels but also
increase inventory costs, and vice versa.
Improving estimates of customer demand can help reduce the trade-off between inventory costs and
customer service levels, as it can lead to more accurate production planning and inventory
management. By forecasting demand more accurately, a company can avoid overproduction or
underproduction, which can result in excess inventory or stockouts, respectively. By producing the
right amount of products at the right time, a company can lower its inventory costs and increase its
customer service levels.
Eliminating raw material stockouts would not improve the trade-off between inventory costs and
customer service levels in a MTS environment, as it would not affect the finished goods inventory or
the customer demand. Raw material stockouts are a supply issue that can disrupt the production
process and cause delays or shortages in the finished goods. However, they do not directly impact
the inventory costs or the customer service levels of the finished goods, which are determined by the
demand forecasts and the production plans.
Decreasing the frozen time zone would not improve the trade-off between inventory costs and
customer service levels in a MTS environment, as it would increase the variability and uncertainty in
the production process. The frozen time zone is the period of time in which no changes can be made
to the production schedule, as it is considered fixed and final. Decreasing the frozen time zone would
allow more flexibility and responsiveness to changes in demand or supply, but it would also increase
the risk of errors, disruptions, or inefficiencies in the production process. This could result in higher
production costs, lower quality, or longer lead times, which could negatively affect the inventory costs
and the customer service levels.
Reducing manufacturing overtime would not improve the trade-off between inventory costs and
customer service levels in a MTS environment, as it would reduce the production capacity and output.
Manufacturing overtime is a way of increasing the production capacity and output by extending the
working hours of the production resources, such as labor or equipment. Reducing manufacturing
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overtime would lower the production costs, but it would also lower the production output. This could
result in insufficient inventory to meet customer demand, which could lower the customer service
levels. Reference: = Make-to-Stock (MTS) Definition, Make-to-Stock (MTS) vs Make-to-Order (MTO) |
TradeGecko, Value Creation: Assessing the Cost-Service Trade-off
19.The planned channels of inventory disbursement from one or more sources to field warehouses
are known as:
A. A supply chain community.
B. interplant demand.
C. a bill of distribution.
D. logistics data interchange (LDI).
Answer: C
Explanation:
A bill of distribution is a document that specifies the planned channels of inventory disbursement from
one or more sources to field warehouses. A bill of distribution is similar to a bill of materials, but it
applies to the distribution stage rather than the production stage. A bill of distribution helps to optimize
the inventory level, reduce transportation costs, and improve customer service. A bill of distribution
considers the factors such as demand patterns, lead times, costs, and capacities of the sources and
warehouses.
The other options are not documents that specify the planned channels of inventory disbursement
from one or more sources to field warehouses. A supply chain community is a network of
organizations that collaborate and coordinate their activities to deliver products or services to
customers. A supply chain community includes suppliers, manufacturers, distributors,retailers, and
customers. A supply chain community helps to improve the visibility, efficiency, and responsiveness
of the supply chain. Interplant demand is the demand for a product or component that is generated by
another plant within the same organization. Interplant demand is usually transferred through internal
orders or shipments. Interplant demand helps to balance the capacity and resources among different
plants. Logistics data interchange (LDI) is a system that enables the exchange of information and
documents among different parties involved in the logistics process. LDI uses electronic data
interchange (EDI) or other technologies to transmit data such as orders, invoices, shipment notices,
and tracking information. LDI helps to improve the accuracy, speed, and security of the logistics
transactions.
Reference: CPIM Exam Content Manual Version 7.0, Domain 7: Plan and Manage Distribution,
Section 7.1: Distribution Planning Concepts, p. 40; Bill of Distribution; Supply Chain
Community.
20.Product X sells for $20 each, and it has a variable cost of $5 per unit. The company sells 10,000
units per year and has a fixed cost of $120,000.
What is the break-even point in units for Product X?
A. 6,000
B. 8,000
C. 10,000
D. 24,000
Answer: B
Explanation:
The break-even point is the level of sales or output where the total revenue equals the total cost, and
the profit is zero. The break-even point can be calculated in units or in dollars. To calculate the break-
even point in units, the following formula can be used: Break-even point in units = Fixed cost / (Selling
price per unit - Variable cost per unit)
In this case, the fixed cost is $120,000, the selling price per unit is $20, and the variable cost per unit
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is $5. Plugging these values into the formula, we get: Break-even point in units = 120,000 / (20 - 5) =
120,000 / 15 = 8,000
Therefore, the break-even point in units for Product X is 8,000. This means that the company needs
to sell 8,000 units of Product X to cover its fixed and variable costs and make no profit or loss.
Reference: CPIM Exam Content Manual Version 7.0, Domain 8: Manage Quality, Continuous
Improvement, and Technology, Section 8.1: Develop Quality and Continuous Improvement Plans,
Subsection 8.1.2: Describe how to develop a business case for quality and continuous improvement
initiatives (page 74).
21.A planner has chosen to increase the order point for a raw material.
Which of the following costs is most likely to increase?
A. Carrying
B. Ordering
C. Landed
D. Product
Answer: A
Explanation:
Carrying cost is the cost of holding inventory over a period of time. Carrying cost includes the cost of
storage, insurance, taxes, obsolescence, spoilage, and opportunity cost of capital. Carrying cost is
usually expressed as a percentage of the inventory value per year. An order point is the level of
inventory that triggers a replenishment order. An order point is calculated based on the demand rate,
the lead time, and the safety stock. An order point is used to maintain a balance between inventory
availability and inventory cost. A planner who chooses to increase the order point for a raw material is
most likely to increase the carrying cost, as a higher order point means a higher average inventory
level, which in turn means a higher carrying cost. Increasing the order point may reduce the risk of
stockouts and improve customer service, but it also increases the inventory investment and its
associated costs.
The other options are not likely to increase as a result of increasing the order point. Ordering cost is
the cost of placing and receiving an order. Ordering cost includes the cost of processing,
transportation, inspection, and setup. Ordering cost is usually expressed as a fixed amount per order.
Ordering cost is not affected by the order point, but by the order quantity and the number of orders.
Landed cost is the total cost of delivering a product or service to the customer. Landed cost includes
the cost of production, transportation, taxes, duties, and fees. Landed cost is usually expressed as a
percentage of the product or service value. Landed cost is not affected by the order point, but by the
sourcing, pricing, and logistics decisions. Product cost is the total cost of producing a product or
service. Product cost includes the cost of materials, labor, and overhead. Product cost is usually
expressed as a variable amount per unit. Product cost is not affected by the order point, but by the
production methods, techniques, and efficiency.
Reference: CPIM Exam Content Manual Version 7.0, Domain 5: Plan and Manage Inventory, Section
5.1: Inventory Management Concepts, p. 30; Order Point; Carrying Cost.
22.An analysis was done on a group of parts that showed a missed delivery resulting in lost sales on
other product lines many times greater than the value of the initial lost sale. As a result, the company
launched an initiative to increase the fill rate on these parts to 100%. Currently, they have raised the
fill rate to 99%.
As they continue the initiative, what effects are most likely expected?
A. Operating costs and service level will both increase at the same rate.
B. Operating costs will increase slower than service level,
C. Operating costs will increase faster than service level.
D. Neither operating costs nor service level will increase.
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Answer: C
Explanation:
Fill rate is the percentage of customer orders that are fulfilled without running out of inventory or
placing backorders1. Fill rate is an important measure of customer service and inventory
management efficiency. A high fill rate indicates that the company can meet customer demand in a
timely and accurate manner, while a low fill rate suggests that the company is struggling to satisfy
customer expectations.
Operating costs are the expenses associated with running a business, such as rent, utilities, wages,
transportation, etc2. Operating costs are influenced by various factors, such as production volume,
inventory level, technology, and quality. A high operating cost means that the company spends more
money to produce and deliver its products or services, while a low operating cost means that the
company spends less money to do so.
Service level is the measure of how well a company delivers its products or services to its customers,
based on criteria such as availability, timeliness, quality, and satisfaction3. Service level is affected by
various factors, such as demand variability, supply reliability, capacity utilization, and customer
feedback. A high service level means that the company meets or exceeds customer expectations,
while a low service level means that the company fails or falls short of customer expectations.
As the company continues its initiative to increase the fill rate on these parts to 100%, it is most likely
that operating costs will increase faster than service level. This is because increasing the fill rate
requires increasing the inventory level, which in turn increases the carrying costs, such as
warehousing, insurance, taxes, and obsolescence4. Moreover, increasing the fill rate also requires
reducing the variability and uncertainty in demand and supply, which may involve investing in more
advanced technology, improving quality control, enhancing supplier relationships, or implementing
demand management techniques5. These actions can also increase the operating costs of the
company.
However, increasing the fill rate does not necessarily increase the service level at the same rate. This
is because service level depends not only on fill rate, but also on other factors, such as delivery
speed, order accuracy, product quality, and customer satisfaction6. Therefore, increasing the fill rate
may not be enough to improve the service level significantly. In fact, there may be a point of
diminishing returns, where increasing the fill rate beyond a certain level doesnot result in a
proportional increase in service level. For example, increasing the fill rate from 95% to 99% may have
a noticeable impact on service level, but increasing it from 99% to 100% may have a negligible impact
on service level.
23.The results from responding to uncertainty in the supply chain by exaggerating lead times and
increasing lot sizes is called:
A. bullwhip effect.
B. supply and demand.
C. process train.
D. forward integration.
Answer: A
Explanation:
The results from responding to uncertainty in the supply chain by exaggerating lead times and
increasing lot sizes is called the bullwhip effect. The bullwhip effect is a phenomenon that occurs
when small changes in demand at the downstream end of the supply chain (such as retailers or
customers) cause larger and larger fluctuations in demand at the upstream end of the supply chain
(such as wholesalers, distributors, or manufacturers). The bullwhip effect can create inefficiencies,
waste, and costs in the supply chain, as well as reduce customer satisfaction and profitability.
One of the causes of the bullwhip effect is the response to uncertainty in the supply chain by
exaggerating lead times and increasing lot sizes. Lead time is the time between placing an order and
receiving it from a supplier. Lot size is the quantity of units ordered or produced at a time. When there
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is uncertainty or variability in demand or supply, such as due to seasonality, promotions, disruptions,
or forecasting errors, some supply chain members may try to cope by exaggerating lead times and
increasing lot sizes. For example, a retailer may increase its safety stock or reorder point to avoid
stockouts or delays, or a manufacturer may produce more than needed to take advantage of
economies of scale or discounts. However, these actions can have unintended consequences, as
they can distort the demand information and amplify the demand variability along the supply chain.
This can result in excess inventory, low inventory turnover, high holding costs, poor service levels,
lost sales, obsolete products, or capacity issues.
To prevent or reduce the bullwhip effect caused by responding to uncertainty in the supply chain by
exaggerating lead times and increasing lot sizes, some possible solutions are:
Improving communication and collaboration among supply chain members to share accurate and
timely demand information and forecasts.
Reducing lead times and lot sizes by using lean production techniques, just-in-time inventory
systems, or quick response methods.
Implementing vendor-managed inventory (VMI) systems, where suppliers are responsible for
managing and replenishing the inventory of their customers based on their actual consumption data.
Adopting advanced technologies, such as radio-frequency identification (RFID), artificial intelligence
(AI), or blockchain, to enhance visibility, traceability, and coordination in the supply chain.
Reference: = Bullwhip Effect: Meaning, Example, Impact - Investopedia, Bullwhip Effect - What Is It,
Causes, Supply Chain, Examples, Bullwhip Effect: Example, Causes, and Impact on Supply Chain
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