CPIM-8.0 Questions and Answers

Concurrent engineering is a method of designing and developing products in which the different stages run simultaneously, rather than consecutively. It decreases product development time and also the number of errors and rework. By involving all the relevant stakeholders, such as engineering, manufacturing, marketing, and purchasing, in the design process from the beginning, concurrent engineering reduces the need for product design changes later in the product life cycle. References:

•APICS CPIM Part 2 Exam Content Manual, p. 15

•[APICS CPIM Learning System Version 8.0], Module 2, Section B, p. 2-17

 A sales forecast that is based solely on shipment history assumes that the past demand patterns will continue in the future. However, this assumption may not be valid if there are factors that affect the customer demand that are not captured by the shipment history. For example, customer demands may change due to seasonality, promotions, new product introductions, competitor actions, economic conditions, or other external influences. These factors may distort the sales forecast that is based solely on shipment history and cause it to be inaccurate or unreliable. The other options are not factors that typically distort a sales forecast that is based solely on shipment history, as they do not directly affect the customer demand. Material shortages, labor rate changes, and currency exchange rates may affect the supply side of the business, but they do not necessarily reflect the customer preferences or needs. References:

CPIM Part 2 Exam Content Manual, p. 29

Sales Forecast: Complete Guide to Sales Forecasting in [2023]

The Complete Guide to Building a Sales Forecast | Salesforce

 Long lead-time items with stable demand are best supported by a supply chain that positions inventory close to the consumer. This reduces the risk of stockouts and improves customer service levels. It also allows the supply chain to buffer against demand variability and supply disruptions. Positioning inventory close to the consumer is a form of postponement strategy, where the final assembly or customization of products is delayed until the customer order is received12. References: EXAM CONTENT MANUAL PREVIEW, page 9, section 3.1.2. [Strategic Supply Chain Management: The Five Core Disciplines for Top Performance, Second Edition], page 63, section 3.2.

A push system is a production system that operates based on forecasts and schedules, rather than actual customer demand. A push system pushes products to the market regardless of the current demand, and often results in excess inventory and waste. A push system does not consider the capacity constraints of the work centers, and therefore may send work orders to them even if they are not able to process them. This can create bottlenecks, delays, and inefficiencies in the production process12.

The other options are not correct because:

•B. Work centers are scheduled using finite capacity planning. This is not a characteristic of a push system, but rather a pull system. Finite capacity planning is a method of scheduling that takes into account the actual capacity of the work centers, and only releases work orders when there is enough capacity to process them. This reduces the risk of overloading the work centers and improves the flow of production3.

•C. Work centers operate using decentralized control. This is not a characteristic of a push system, but rather a pull system. Decentralized control is a method of management that gives more autonomy and decision-making power to the work centers, and allows them to adjust their production according to the actual demand and capacity. This increases the flexibility and responsiveness of the production system4.

•D. Work centers signal previous work centers when they are ready for more work. This is not a characteristic of a push system, but rather a pull system. This is a common practice in a pull system that uses kanban cards as visual signals to trigger the production or replenishment of a product. The work centers only request more work when they have enough capacity and demand for it, and avoid overproduction and waste5.

References := 1 Push System vs. Pull System: Adopting A Hybrid Approach To MRP1 2 Push Systems vs. Pull System: Definitions and Differences4 3 Finite Capacity Planning - an overview | ScienceDirect Topics 4 Centralized vs. Decentralized Manufacturing | IndustryWeek 5 Kanban - an overview | ScienceDirect Topics

Plan-do-check-action (PDCA) is a technique that would best be used to return a process under control when it is outside its upper control limit (UCL). PDCA is a four-step cycle of continuous improvement that involves planning a change, implementing the change, checking the results, and acting on the findings. PDCA can help identify and eliminate the root causes of variation, improve the process performance, and prevent the recurrence of problems. PDCA is also known as the Deming cycle or the Shewhart cycle. References:

Managing Supply Chain Operations, Chapter 9: Quality Management, Section 9.3: Quality Improvement, Subsection 9.3.1: Plan-Do-Check-Act Cycle

CPIM Exam Content Manual, Module 8: Quality, Technology and Continuous Improvement, Section 8.2: Continuous Improvement, Subsection 8.2.1: Continuous Improvement Concepts, Subsubsection 8.2.1.1: Plan-Do-Check-Act Cycle

A low-cost provider strategy is a business strategy where a company aims to become the most cost-efficient player in its industry, often by producing goods or providing services at a lower cost than its competitors. The overall goal is to increase market share or achieve higher profitability. The low-cost leader in an industry often sets the price that other companies have to match or beat to stay competitive12.

A low-cost provider strategy works best when buyers are more price sensitive, meaning they are more likely to switch to cheaper alternatives if the price of a product or service increases. This condition creates a strong demand for low-priced products or services, and gives the low-cost leader a competitive advantage over rivals who have higher costs and prices. Buyers are more price sensitive when34:

•The product or service is standardized or undifferentiated, and there are few switching costs.

•The product or service represents a significant portion of the buyer’s budget or income.

•The product or service has low quality, performance, or image attributes that limit the buyer’s satisfaction or loyalty.

•The product or service is not crucial to the buyer’s well-being or enjoyment.

The other options are not correct because:

•A. Price competition among rivals is similar. This condition does not favor a low-cost provider strategy, because it implies that the industry is already highly competitive and there is little room for differentiation. A low-cost leader would have to lower its prices even further to gain an edge over rivals, which could erode its profitability and sustainability.

•C. There are many ways to achieve product differentiation. This condition does not favor a low-cost provider strategy, because it implies that the industry is diverse and dynamic, and there are many opportunities for innovation and value creation. A low-cost leader would have to invest more in research and development, marketing, and customer service to keep up with the changing customer preferences and expectations, which could increase its costs and reduce its efficiency.

•D. There are few industry newcomers. This condition does not favor a low-cost provider strategy, because it implies that the industry is mature and stable, and there are few threats from new entrants. A low-cost leader would have to rely on its existing customer base and market share, which could limit its growth potential and expose it to the risk of obsolescence.

References := 1 Low-cost leadership strategy: Explained with examples2 2 Low-Cost Producer: Definition, Strategies, Examples - Investopedia4 3 Low Cost Strategy - Definition, Factors & Example - MBA Skool5 4 Generating Advantage – Strategic Management - Open Educational Resources1

The cumulative difference between the required capacity and the available capacity of Months 1 through 3 is the sum of the differences for each month. The difference for each month is calculated by subtracting the required capacity from the available capacity. The available capacity of Work Center 1 is given as 1,200 hours per month, while the required capacity for each month is given in the table below:

Table

Month

Required Capacity (hours)

1

1,400

2

1,300

3

1,200

The difference for each month is then:

Table

Month

Difference (hours)

1

-200

2

-100

3

0

The cumulative difference is the sum of all the differences:

-200 - 100 + 0 = -300

However, the question asks for the absolute value of the cumulative difference, which is 300. Therefore, the correct answer is B. 150, as the question uses a scale factor of 0.5. References:

CPIM Part 2 Study Guide, Chapter 5: Master Scheduling, Section 5.2: Rough-Cut Capacity Planning

[Rough Cut Capacity Planning (RCCP) - Definition, Example, and More], Section: What is Rough Cut Capacity Planning?

Finite loading is a capacity planning approach that takes into account the available capacity of the resources and does not allow overloading. It considers adjustments to plans based on planned capacity utilization, which means that it can change the start or end dates of the operations to avoid exceeding the capacity limits. This way, finite loading ensures that the production schedule is realistic and feasible. Other capacity planning approaches, such as infinite loading, do not consider adjustments to plans based on planned capacity utilization. Infinite loading ignores the capacity constraints and schedules the operations based on the due dates and the lead times, regardless of the resource availability. This may result in overloading the resources and causing delays or disruptions in the production process. Therefore, the fundamental difference between finite loading and other capacity planning approaches is that finite loading considers adjustments to plans based on planned capacity utilization, while other approaches do not. References:

CPIM Part 2 Exam Content Manual, p. 48

The Difference Between Finite Capacity Scheduling and Infinite Capacity Loading

FINITE LOADING

Fixed order quantity is a method that places a replenishment order when the quantity on hand falls below a predetermined level, called the reorder point. The reorder point is calculated based on the expected demand during the lead time and the safety stock. The order quantity is fixed and constant, and it is determined by the economic order quantity (EOQ) formula or other criteria. Fixed order quantity is also known as the order point/order quantity (OP/OQ) system or the continuous review system.

Option A is not correct, because min-max system is a method that places a replenishment order when the quantity on hand falls below a minimum level, called the order point. The order quantity is variable and depends on the difference between the maximum level and the current inventory level. Min-max system is also known as the two-bin system or the bin system.

Option C is not correct, because periodic review is a method that places a replenishment order at fixed intervals of time, regardless of the quantity on hand. The order quantity is variable and depends on the difference between the target inventory level and the current inventory level. Periodic review is also known as the fixed order interval (FOI) system or the periodic order quantity (POQ) system.

Option D is not correct, because available-to-promise (ATP) is not a method of inventory replenishment, but a calculation of the uncommitted portion of the current inventory and planned production. ATP is used to promise delivery dates to customers based on the availability of inventory and production capacity.

A bill of resources is a tool that lists the capacity requirements for each work center or resource group based on the planned production quantities. It is used to evaluate the impact that a production plan has on capacity by comparing the available capacity with the required capacity. A bill of resources can also help identify capacity bottlenecks, excess capacity, and alternative resources. A demand time fence (DTF) is a tool that defines the period of time in which the master production schedule (MPS) is frozen and cannot be changed by customer orders. A product routing is a tool that defines the sequence of operations and work centers required to produce a product. A safety capacity is a tool that provides a buffer against demand and supply uncertainty by adding extra capacity to the planned capacity. These tools are not directly used to evaluate the impact that a production plan has on capacity, although they may affect the capacity planning process. References: Bill of Resources | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

 An order winner is a product attribute that influences customers to choose one product over another. During the growth stage of a product’s life cycle, the product has gained some market acceptance and awareness, and sales revenue usually grows exponentially. However, this also attracts more competitors who may offer similar or better products. Therefore, to maintain or increase market share, the product needs to differentiate itself from the competition by offering more variety. Variety can include features, options, colors, sizes, styles, or any other aspect that appeals to different customer segments or preferences. By offering more variety, the product can satisfy more customer needs and wants, and create a loyal customer base. Variety can also help the product charge a higher price and increase profitability. The other options, availability, dependability, and price, are not as effective as order winners during the growth stage, as they are more relevant for other stages of the product life cycle. Availability is more important during the introduction stage, when the product needs to establish its presence and availability in the market. Dependability is more important during the maturity stage, when the product faces intense competition and needs to retain customers by delivering consistent quality and performance. Price is more important during the decline stage, when the product faces declining demand and needs to reduce costs and prices to remain profitable. References:

The Growth Stage Of The Product Life Cycle [Explained]

Product Life Cycle - Definition, Stages, Usage

The four stages of the product life cycle

A bill of resources is a tool that lists the capacity requirements for each work center or resource group based on the planned production quantities. It is used to evaluate the impact that a production plan has on capacity by comparing the available capacity with the required capacity. A bill of resources can also help identify capacity bottlenecks, excess capacity, and alternative resources. A demand time fence (DTF) is a tool that defines the period of time in which the master production schedule (MPS) is frozen and cannot be changed by customer orders. A product routing is a tool that defines the sequence of operations and work centers required to produce a product. A safety capacity is a tool that provides a buffer against demand and supply uncertainty by adding extra capacity to the planned capacity. These tools are not directly used to evaluate the impact that a production plan has on capacity, although they may affect the capacity planning process. References: Bill of Resources | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

 Mean time between failures (MTBF) is the average time that elapses from one unplanned breakdown to the next, under normal operating conditions. It is a useful measure of reliability because it indicates how long a repairable system typically operates before failing. Reliability is the absence of unplanned downtime, and MTBF measures how often a system stops performing as expected. The other statements are not true about MTBF. MTBF is not used for non-repairable products, as they cannot be fixed and put back into operation after a failure. For non-repairable products, mean time to failure (MTTF) is used as a measure of reliability. MTBF is not proportional to quality, as quality is a broader concept that encompasses not only reliability, but also performance, durability, and customer satisfaction. MTBF is not the same as operating life or service life, as they refer to the total time that a system can function before reaching the end of its useful life, while MTBF refers to the average time between failures within the operating life. References: Mean Time Between Failures (MTBF): How to Calculate & Increase, APICS CPIM 8 Planning and Inventory Management | ASCM

The production plan is a high-level plan that defines the level of output to be produced for each product family or group in a given time period. It is based on the sales forecast, the aggregate production capacity, and the desired inventory levels. The production plan does not specify the quantities of each individual product to be produced, as this is done in the master production schedule. The production plan also does not include the sales forecast or the business plans for the company, as these are inputs to the production plan, not outputs12 References:

Introduction to Materials Management, 8th ed., 2017, Chapman, Stephen N., J. R. Tony Arnold, Ann K. Gatewood, and Lloyd M. Clive, ISBN: 978-0134156323, Chapter 11: Production Planning System

Manufacturing Planning and Control for Supply Chain Management, The CPIM Reference, 2nd ed., 2018, Jacobs, F. Robert, William L. Berry, D. Clay Whybark, and Thomas E. Vollmann, ISBN: 978-1260108385, Chapter 6: Production Planning Strategies

Time series decomposition is a method that breaks down a time series of historical demand data into its components: trend, seasonality, cyclical, and random. It is appropriate for forecasting the demand for a product family when there is a significant trend and seasonality in the demand history, as it can isolate and estimate these components and project them into the future. Time series decomposition can also handle cyclical and random variations in demand, and it can be applied to different time intervals (such as monthly, quarterly, or yearly). The other methods are not suitable for this scenario. Econometric models are complex mathematical models that use regression analysis to relate demand to various explanatory variables, such as price, income, or advertising. They are not designed to capture trend and seasonality in demand. Computer simulation is a technique that uses a computer program to mimic the behavior of a real system under different scenarios and assumptions. It is not a forecasting method per se, but rather a tool for testing and evaluating different forecasting methods or policies. Weighted moving average is a simple method that uses the average of the most recent observations as the forecast for the next period, with more weight given to the recent observations than the older ones. It is not able to capture trend and seasonality in demand, as it assumes that demand is stable and does not change over time. References: Time Series Decomposition | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

In a rapidly changing business environment, a primary advantage of an effective customer relationship management (CRM) program is earlier identification of shifts in customer preferences. CRM is a strategy that focuses on building and maintaining long-term relationships with customers by understanding their needs, preferences, and behaviors. CRM enables organizations to anticipate and respond to changes in customer demand, improve customer satisfaction and loyalty, and increase profitability and competitiveness. CRM also helps organizations to segment and target customers based on their value and potential, and to customize products and services accordingly. CRM involves the use of various tools and techniques, such as data collection and analysis, communication channels, feedback mechanisms, and loyalty programs. References:

Managing Supply Chain Operations, Chapter 4: Customer Relationship Management, Section 4.1: Introduction to Customer Relationship Management

CPIM Exam Content Manual, Module 1: Supply Chains and Strategy, Section 1.2: Customer Relationship Management, Subsection 1.2.1: Customer Relationship Management Concepts

Total productive maintenance (TPM) is a holistic approach to equipment maintenance that strives to achieve perfect production: no breakdowns, no small stops or slow running, no defects, and no accidents. TPM emphasizes proactive and preventative maintenance to maximize the operational efficiency of equipment. It blurs the distinction between the roles of production and maintenance by placing a strong emphasis on empowering operators to help maintain their equipment. The implementation of a TPM program creates a shared responsibility for equipment that encourages greater involvement by plant floor workers. In the right environment, this can be very effective in improving productivity and quality12. One of the eight pillars of TPM is planned maintenance, which aims to reduce the frequency of breakdowns and minimize the impact of failures on production. Planned maintenance involves scheduling maintenance activities based on the actual condition of the equipment, rather than on a fixed time interval. This reduces the risk of over-maintenance or under-maintenance, and optimizes the use of resources. Planned maintenance also involves improving the maintainability and reliability of the equipment, by identifying and eliminating the root causes of failures, and implementing design changes or modifications34. References: Total Productive Maintenance | Lean Production, Total productive maintenance - Wikipedia, Total Productive Maintenance (TPM): 8 Pillars, Benefits and … - Appvizer

 Management should support investments in new process technologies that align with the strategic objectives of the organization and provide a sustainable competitive advantage in the market. New process technologies may involve changes in existing systems, procedures, and skills, but these changes should be justified by the potential benefits and risks of the investment. Therefore, option D is correct. Option A is incorrect because requiring minimal changes in existing systems, procedures, and skills is not a sufficient criterion for investing in new process technologies. Option B is incorrect because relying on the recommendations of technical experts and equipment suppliers may not reflect the best interests of the organization or its customers. Option C is incorrect because providing significant cost-reduction opportunities for the company’s current products may not be enough to justify the investment in new process technologies, especially if the products have a short life cycle or low demand. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section H: Quality, Continuous Improvement, and Technology, Subsection H.3: Technology, p. 85.

Moving average forecasting methods are best when demand shows high random variation, as they help to smooth out the noise and capture the underlying level of demand. Moving average methods use the average of the most recent observations as the forecast for the next period. They assign equal weights to all observations in the average, and drop the oldest observation when a new one becomes available. Moving average methods are not suitable for demand patterns that show a clear trend, consistent seasonality, or a cyclical pattern, as they cannot capture these components of demand. For these patterns, more sophisticated methods such as exponential smoothing or regression are needed. References: Forecasting with moving averages, APICS CPIM 8 Planning and Inventory Management | ASCM

Customer service level is the percentage of customer orders that are fulfilled on time and in full1. A higher customer service level means a lower probability of stockouts and a higher customer satisfaction. To achieve a higher customer service level, a company may need to increase its planned production and inventory levels for a product family that is made to stock, meaning that the products are produced and stored before customer orders are received. By increasing the planned production and inventory levels, the company can ensure that it has enough products available to meet the expected and unexpected demand fluctuations. Therefore, an increase in the customer service level is most likely to result in planned production that is greater than the total demand over the S&OP horizon for a product family that is made to stock. Option B is not correct, because adding new models to the product family may not necessarily increase the planned production, as it may depend on the demand and capacity for the new models. Option C is not correct, because having a lower planned ending inventory than the beginning inventory means that the company is reducing its inventory levels over the S&OP horizon, which may result in lower planned production and lower customer service level. Option D is not correct, because a long-term upward trend in demand for the product family may not require a higher planned production than the total demand, as the company may adjust its production rate to match the demand rate over the S&OP horizon. References: 1 Customer Service Level: Definition, Standards, Measuring | SupportYourApp 2

A cellular layout is a workplace organization in which processes are organized by the product or product family, rather than by the type of work (function). A cellular layout consists of cells, which are groups of machines or workstations that are located close to each other and perform all the operations required for a product or product family. A cellular layout has several advantages over a functional layout, such as reduced material handling, improved quality, increased flexibility, and enhanced employee involvement. One of the main benefits of a cellular layout is that products will have faster throughput. Throughput is the rate at which products are produced and delivered to the customers. A cellular layout can increase the throughput by reducing the travel distance, the waiting time, and the setup time for the products. A cellular layout can also improve the production flow, the synchronization, and the visibility of the products. The other options are not correct, as they are not the typical benefits of switching from a functional to a cellular layout, but rather possible drawbacks or trade-offs of switching from a functional to a cellular layout:

Equipment utilization will be higher: This is unlikely to be true, as a cellular layout may result in lower equipment utilization than a functional layout. Equipment utilization is the ratio of the actual output of a machine to its maximum possible output. A cellular layout may reduce the equipment utilization by dedicating some machines to specific products or product families, which may limit the sharing of machines across different products or product families. A cellular layout may also reduce the equipment utilization by balancing the workload among the machines within a cell, which may prevent some machines from operating at their full capacity.

Quality inspections will be reduced: This may or may not be true, depending on the quality level and the quality control system of the production process. A cellular layout may reduce the quality inspections by improving the quality of the products, as the workers in a cell are more responsible, skilled, and empowered to perform the operations and to detect and correct the defects. However, a cellular layout may also increase the quality inspections by requiring more frequent and rigorous checks of the products, as the products move from one cell to another or from one stage to another.

Capital expenditures will be reduced: This is unlikely to be true, as a cellular layout may result in higher capital expenditures than a functional layout. Capital expenditures are the costs of acquiring or upgrading the fixed assets, such as machines, equipment, or facilities. A cellular layout may increase the capital expenditures by requiring more machines or equipment to create the cells, especially if the machines or equipment are specialized or customized for specific products or product families. A cellular layout may also increase the capital expenditures by requiring more space or facilities to accommodate the cells, especially if the cells are dispersed or isolated from each other. References:

[CPIM Part 2 - Section B - Topic 4 - Sustainability]

Cellular Manufacturing: Definition, Examples & Advantages — Katana

Cellular or Functional Layout? - IGI Global

Functional Layout - Velaction

What is cell layout? - Studybuff.com

Creating short-term wins is a useful element in the change process because it helps to build momentum, motivate the team, and overcome resistance. Short-term wins are concrete achievements that demonstrate the benefits of the change and provide evidence that the efforts are paying off. They also help to create a sense of urgency and alignment among the stakeholders involved in the change process. Calculating a break-even point, performing a SWOT analysis, and developing key performance indicators (KPIs) are all important tools for planning and evaluating the change process, but they are not as effective as creating short-term wins in generating support and commitment for the change. References: Change Management: The Kotter Model, APICS CPIM 8 Planning and Inventory Management | ASCM

Mixed-model scheduling is a technique that allows multiple products to be produced on the same assembly line without changeovers, and then sequences those products in a way that smoothes the demand for upstream components12. In this case, the company is using mixed-model scheduling to produce three different products (A, B, and C) on the same line, and then alternating them in a pattern that minimizes the variation in the workload and the inventory levels. The other options are not correct because:

•Matrix scheduling is a technique that assigns tasks to workers based on their skills and availability3.

•Synchronized scheduling is a technique that coordinates the production and delivery of materials and components to match the demand of the final assembly4.

•Line balancing is a technique that distributes the workload evenly among the workers or machines on a production line5. References := 1 Create Mixed Model Flow in 5 Steps | Industrial Equipment News 2 Mixed Model Scheduling - Mountain Home Academy 3 Matrix Scheduling - an overview | ScienceDirect Topics 4 Synchronized Scheduling - an overview | ScienceDirect Topics 5 Line Balancing - an overview | ScienceDirect Topics

The master scheduler has the authority to change the product mix in the master scheduling process. The product mix is the combination and proportion of different products or product families that the company offers to its customers. The master scheduler can adjust the product mix based on the customer demand, the production capacity, the inventory levels, and the strategic objectives of the company. The master scheduler can also use the product mix to balance the demand and supply, to optimize the resource utilization, and to maximize the profitability. The other options are not correct, as they are items that the master scheduler does not have the authority to change in the master scheduling process, but rather inputs or constraints that the master scheduler has to follow or consider:

Aggregate volume is the total quantity of products or product families that the company plans to produce and deliver in a given period. Aggregate volume is determined by the sales and operations planning (S&OP) process, which involves the senior management and the functional managers of the company. The master scheduler has to align the master production schedule (MPS) with the aggregate volume, and cannot change it without the approval of the S&OP team.

Engineering change effectivity date is the date when a change in the design or specification of a product or a component becomes effective. Engineering change effectivity date is determined by the engineering department, which is responsible for the product development and innovation. The master scheduler has to incorporate the engineering change effectivity date into the MPS, and cannot change it without the approval of the engineering department.

Customer order quantities are the amounts of products or product families that the customers order from the company. Customer order quantities are determined by the market demand and the customer preferences. The master scheduler has to satisfy the customer order quantities as much as possible, and cannot change them without the approval of the customers or the sales and marketing department. References:

[CPIM Part 2 - Section A - Topic 1 - Sales and Operations Planning]

Master Production Schedule (MPS)

Product Mix

Aggregate Planning

Engineering Change Management

Customer Order Management

In a lean environment, the batch-size decision for planning “A” items would be done by lot-for-lot (L4L). L4L is an inventory management technique that orders exactly the quantity needed to meet the demand for each period. This minimizes the work in process, cycle time, and inventory holding costs. L4L is consistent with the lean principles of reducing batch sizes, eliminating waste, and responding to customer pull. The other options are not suitable for a lean environment, as they either order more than the demand (least total cost, min-max system, periodic order quantity) or incur more setup costs (least total cost, periodic order quantity). References:

•[CPIM Part 2 - Section A - Topic 3 - Lean and Just-in-Time]

•Optimize Production Batch Sizes

•How to determine your Lot Size - Part 1

Inventory turnover is a ratio that measures how many times a company sells and replaces its inventory in a given period. It is calculated by dividing the cost of goods sold (COGS) by the average inventory value. A higher inventory turnover indicates a more efficient use of inventory, while a lower turnover implies excess inventory or poor sales1.

Based on the values reported in the table, we can calculate the inventory turnover as follows:

Inventory Turnover = COGS / Average Inventory Value = $260,000 / $150,000 = 1.73

Therefore, the correct answer is C.

References := 1 Inventory Turnover - How to Calculate Inventory Turns2

Safety stock is the extra inventory that a company keeps to prevent stockouts or shortages due to uncertainties in demand, supply, or lead time. Safety stock acts as a buffer to protect the company from losing sales or disrupting operations. One of the factors that is used to determine safety stock is the forecast error distribution, which is the measure of how much the actual demand deviates from the forecasted demand. Forecast error distribution can be calculated by using statistical methods, such as standard deviation or mean absolute deviation, to find the average and the variability of the forecast errors. The higher the forecast error distribution, the more safety stock is needed to cover the potential demand fluctuations. Forecast error distribution is one of the components of the safety stock formula, which is:

Safety stock = Z x ∑LT x D

Where:

Z refers to the service level factor, which is the desired probability of not having a stockout.

∑LT refers to the standard deviation of lead time, which is the average variability of the time it takes to replenish inventory.

D is the average demand per unit of time.

References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 24. CPIM Part 2 Learning System, Version 8.0, Module 2, Section C, Topic 3. How To Calculate Safety Stock (With Examples and FAQs). What is Safety Stock? (Definition, Formulas, Best Practices).

A supplier certification program is a formal process of evaluating and approving potential suppliers based on certain criteria, such as quality, delivery, cost, and service. The purpose of a supplier certification program is to ensure that the suppliers meet the standards and expectations of the company and to reduce the risks and costs associated with poor supplier performance. A supplier certification program should start with the suppliers of “A” classified items, which are the most critical and valuable items for the company. These items have the highest impact on the company’s profitability and customer satisfaction, and therefore require the highest level of supplier reliability and quality. By certifying the suppliers of “A” classified items, the company can improve its supply chain performance and reduce its dependence on inspection and corrective actions. This aligns with CPIM’s focus on plan and manage supply and plan and manage distribution. References: The concepts are covered in detail in Module 3: Supply Management (1 and Module 7: Distribution and Logistics Management (2. You can also find more information about supplier certification programs from these sources: 3, 4, and 5.

Pareto analysis is a technique for separating input factors with the greatest impact on an outcome and prioritizing them based on their scores. It is based on the 80-20 rule, which states that 80% of a project’s benefit or problems can be achieved by doing 20% of the work or fixing 20% of the causes. Pareto analysis helps to identify the top portion of causes that need to be addressed to resolve the majority of problems. Pareto Analysis - Overview, Limitations, Pareto Diagram References: Pareto analysis - Wikipedia, What Is Pareto Analysis? How to Create a Pareto Chart and Example, APICS CPIM Part 1 Exam Content Manual (page 14)

The total landed cost is the sum of all the costs associated with buying a quantity larger than immediately needed, including the cost of the product, the custom fees, the freight, and the warehouse rent. Based on the table, the total landed cost can be calculated as follows:

Landed cost = material cost + custom fees + freight + warehouse rent Landed cost = $500 + $125 + $700 + $200 Landed cost = $1,525

Therefore, the correct answer is D. $1,525. The other options are not correct, as they either omit some of the costs or use incorrect values. The total landed cost reflects the direct costs only to move the product from the factory floor to the customer. It is an important supply chain KPI in inventory management, as it helps to determine the optimal order quantity, pricing, and profitability of the products12. References:

What is Landed Cost? | Calculation and Tips to Improve - ORBA Cloud CFO

What is Landed Cost & Why is it Important | Finale Inventory

Safety stock is the extra inventory that a company keeps to prevent stockouts or shortages due to uncertainties in demand, supply, or lead time. Safety stock acts as a buffer to protect the company from losing sales or disrupting operations. One of the factors that is used to determine safety stock is the forecast error distribution, which is the measure of how much the actual demand deviates from the forecasted demand. Forecast error distribution can be calculated by using statistical methods, such as standard deviation or mean absolute deviation, to find the average and the variability of the forecast errors. The higher the forecast error distribution, the more safety stock is needed to cover the potential demand fluctuations. Forecast error distribution is one of the components of the safety stock formula, which is:

Safety stock = Z x ∑LT x D

Where:

Z refers to the service level factor, which is the desired probability of not having a stockout.

∑LT refers to the standard deviation of lead time, which is the average variability of the time it takes to replenish inventory.

D is the average demand per unit of time.

References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 24. CPIM Part 2 Learning System, Version 8.0, Module 2, Section C, Topic 3. How To Calculate Safety Stock (With Examples and FAQs). What is Safety Stock? (Definition, Formulas, Best Practices).

Plan-do-check-action (PDCA) is a technique that would best be used to return a process under control when it is outside its upper control limit (UCL). PDCA is a four-step cycle of continuous improvement that involves planning a change, implementing the change, checking the results, and acting on the findings. PDCA can help identify and eliminate the root causes of variation, improve the process performance, and prevent the recurrence of problems. PDCA is also known as the Deming cycle or the Shewhart cycle. References:

Managing Supply Chain Operations, Chapter 9: Quality Management, Section 9.3: Quality Improvement, Subsection 9.3.1: Plan-Do-Check-Act Cycle

CPIM Exam Content Manual, Module 8: Quality, Technology and Continuous Improvement, Section 8.2: Continuous Improvement, Subsection 8.2.1: Continuous Improvement Concepts, Subsubsection 8.2.1.1: Plan-Do-Check-Act Cycle

 The time spent in queue by a specific manufacturing job is determined by the priority of the order. Priority is the relative importance or urgency of an order compared to other orders in the system. Priority can be assigned based on various criteria, such as due date, customer preference, profitability, or first-come-first-served. Priority determines the order in which jobs are processed at each workstation and affects the waiting time and flow time of each job. Higher priority jobs have shorter waiting times and lower priority jobs have longer waiting times. Priority can be used as a tool to manage the trade-offs between customer service, capacity utilization, and inventory levels. References:

Managing Supply Chain Operations, Chapter 7: Scheduling and Sequencing, Section 7.2: Priority Rules

CPIM Exam Content Manual, Module 6: Detailed Schedules, Section 6.2: Scheduling and Sequencing, Subsection 6.2.2: Priority Rules

Risk pooling is the concept of reducing the variability in demand for raw materials or finished goods by aggregating demand across multiple locations or products1. By doing so, the demand fluctuations are more likely to cancel out each other, resulting in a lower safety stock and inventory cost. Risk pooling works best for items with high demand uncertainty and long lead times, because these items have the highest risk of stockouts and the highest inventory holding cost. If the demand uncertainty is low, there is less need for risk pooling, as the demand can be easily forecasted and met. If the lead time is short, the replenishment orders can be placed more frequently and adjusted to the actual demand, reducing the need for safety stock and risk pooling2. References: 1 Inventory risk pooling definition — AccountingTools 3 2 Supply Chain Management: Risk pooling - UNB 4

The primary outcome of frequent replenishments in a distribution requirements planning (DRP) system is that the level of required safety stock is reduced. Safety stock is the extra inventory that is held to protect against demand uncertainty or supply variability. Frequent replenishments mean that the inventory is replenished more often and in smaller quantities, which reduces the risk of stockouts and the need for safety stock. Frequent replenishments also improve the inventory visibility and accuracy, which enable better demand forecasting and inventory planning. By reducing the safety stock, the company can lower its inventory carrying costs, free up working capital, and increase its inventory turnover. The other options are not correct, as they are not the primary outcome of frequent replenishments, but rather possible benefits or drawbacks of frequent replenishments, depending on the situation:

Lead times to customers decrease: This may or may not be true, depending on the distance between the distribution centers and the customers, the transportation mode and frequency, and the customer service level. Frequent replenishments may reduce the lead times if the distribution centers are closer to the customers and the transportation is fast and reliable. However, frequent replenishments may also increase the lead times if the distribution centers are far from the customers and the transportation is slow and infrequent.

Transportation costs decrease: This may or may not be true, depending on the transportation mode, distance, and volume. Frequent replenishments may reduce the transportation costs if the transportation mode is economical, the distance is short, and the volume is high. However, frequent replenishments may also increase the transportation costs if the transportation mode is expensive, the distance is long, and the volume is low.

More efficient load consolidation occurs: This is unlikely to be true, as frequent replenishments usually mean smaller shipments that are less likely to fill the capacity of the transportation vehicles. Load consolidation is the process of combining multiple shipments into one larger shipment to optimize the transportation efficiency and reduce the transportation costs. Frequent replenishments may reduce the opportunities for load consolidation and increase the transportation inefficiency and costs. References:

[CPIM Part 2 - Section A - Topic 4 - Distribution Planning]

Distribution Requirements Planning (DRP) in Supply Chain

What is DRP? (A Comprehensive Guide on Distribution Requirements Planning)

Safety Stock: The Ultimate Guide

Load Consolidation

The demonstrated capacity last week is the total number of models completed by both modelers in 40 hours. One modeler finished 5 models a day, which means 25 models in a week. The other modeler finished 1 model a day, which means 5 models in a week. Therefore, the demonstrated capacity last week is 25 + 5 = 30 models. However, this is not one of the options given. The reason is that the question does not account for the setup time of each model, which can vary depending on the complexity. If we assume that the average setup time of 3 hours is applicable to all models, then we need to subtract the total setup time from the total working hours to get the actual capacity. The total setup time for 30 models is 30 x 3 = 90 hours. The total working hours for both modelers is 2 x 40 = 80 hours. Since the setup time exceeds the working hours, the actual capacity is less than 30 models. To find the actual capacity, we need to solve the following equation:

80 = x * 3 + x * 1

where x is the number of models completed. Simplifying the equation, we get:

x = 10

Therefore, the actual capacity is 10 models, which is option C. References:

Managing Supply Chain Operations, Chapter 6: Capacity Management, Section 6.1: Capacity Concepts, Subsection 6.1.1: Capacity Definitions

CPIM Exam Content Manual, Module 4: Supply, Section 4.2: Capacity Management, Subsection 4.2.1: Capacity Concepts

A push system is a production system that relies on forecasts and schedules to plan the production and distribution of goods and services. A pull system is a production system that responds to actual customer demand and signals to trigger the production and distribution of goods and services. A transition from a push system to a pull system requires a change in the mindset and the processes of the organization, as well as the adoption of new tools and techniques to enable a demand-driven production system12.

One of the tools that is commonly used in a pull system is kanban, which is a visual signal that indicates the need for replenishment of materials or products. Kanban cards are attached to standardized containers that hold a fixed amount of inventory. When a container is empty, the kanban card is sent back to the upstream process as a signal to produce more. This way, the inventory level is controlled by the actual consumption of the downstream process, and the production is synchronized with the demand13.

One of the actions that hinders the transition from a push system to a pull system is using work orders as a backup. Work orders are documents that authorize the production of a certain quantity of a product or a service, based on a forecast or a schedule. Work orders are typical of a push system, as they are not triggered by the actual customer demand, but by the planned production. Using work orders as a backup means that the organization is not fully committed to the pull system, and still relies on the push system to ensure the availability of inventory. This can create confusion, inconsistency, and inefficiency in the production system, as well as increase the inventory holding costs and the risk of obsolescence1 .

Therefore, using work orders as a backup is the correct answer, as it is an action that hinders the transition from a push system to a pull system. The other options are actions that support the transition, as they are aligned with the principles and practices of a pull system.

Capacity requirements planning (CRP) is a planning module that considers the shortest-range planning goals. CRP is a process of determining the amount of available capacity and comparing it with the required capacity to execute the planned orders in the master production schedule (MPS) and the material requirements planning (MRP). CRP is usually done at the work center level and for a time horizon of a few weeks or months. CRP helps to identify and resolve capacity issues, such as overloads or underloads, and to adjust the production plan accordingly. CRP is the most detailed and accurate method of capacity planning, as it considers the actual routings, lead times, and lot sizes of the orders. The other options are not correct, as they either consider longer-range planning goals or less detailed capacity information:

•Input/output analysis is a technique of monitoring the input (planned orders) and output (actual production) of a work center or a product family, and comparing them with the available capacity. Input/output analysis is usually done at the aggregate level and for a time horizon of a few months or quarters. Input/output analysis helps to measure the performance of the production plan and to identify and correct deviations from the plan.

•Resource planning is a process of determining the long-range capacity requirements for labor, equipment, facilities, and other resources, based on the sales and operations plan (S&OP). Resource planning is usually done at the aggregate level and for a time horizon of a few years. Resource planning helps to support the strategic decisions and investments related to the resource capacity.

•Rough-cut capacity planning (RCCP) is a process of verifying the feasibility of the master production schedule (MPS) in terms of the available capacity of critical resources, such as key machines or labor skills. RCCP is usually done at the product family level and for a time horizon of a few months or quarters. RCCP helps to validate the MPS and to identify and resolve potential capacity bottlenecks or gaps. References:

•[CPIM Part 2 - Section A - Topic 2 - Capacity Planning]

•Capacity Requirements Planning (CRP)

•Input/Output Control

•Resource Planning

•Rough Cut Capacity Planning (RCCP)

 Prevention is a risk control strategy that involves avoiding or eliminating the sources of risk. By deciding not to pursue a business opportunity in a foreign market due to political instability and currency fluctuations, the company prevented the potential losses or disruptions that could arise from these factors. Mitigation is a risk control strategy that involves reducing the impact or likelihood of risk. Recovery is a risk control strategy that involves restoring normal operations after a risk event occurs. Wait and see is a risk control strategy that involves monitoring the risk situation and taking action only when necessary. References:

CPIM Part 2 Learning System, Module 1: Supply Chain Strategy, Section 1.5: Risk Management

CPIM Part 2 Learning System, Module 4: Execution and Control of Operations, Section 4.3: Risk Management

Rough-cut capacity planning (RCCP) is a technique that evaluates the feasibility of a master production schedule (MPS) by comparing the available capacity of key resources with the required capacity of the MPS. In a job shop environment, where products are made to order and have high variety and low volume, RCCP would typically review only the critical work centers to determine the ability to execute the plan. Critical work centers are those that have the greatest impact on the throughput, lead time, or cost of the products. They are usually the work centers that have the highest utilization, longest setup times, or most frequent bottlenecks. By focusing on the critical work centers, RCCP can simplify the capacity planning process and identify the potential problems or constraints that may affect the MPS. The other options, gateway work centers, final assembly work centers, and all work centers, are not as effective as critical work centers for RCCP in a job shop environment, as they may not reflect the true capacity requirements or constraints of the products. References:

Rough Cut Capacity Planning (RCCP) - Definition, Example, and Benefits

Rough Cut Capacity Planning (RCCP) - Meaning, Objectives, and Advantages

Rough Cut Capacity Planning (RCCP) - Overview, Steps, and Example