CPIM-Part-2 Sample Questions Answers

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 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.

References: 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

Landed cost represents the total cost of a product on its journey from the factory floor to the buyer’s door. It includes the price of goods, shipment costs, insurance fees, customs duties, and any other charges incurred along the way1. Therefore, purchasing and delivering a purchased product to its final destination is the best representation of landed cost among the given options.

Combining smaller shipments to take advantage of bulk efficiencies is not a representation of landed cost, but rather a strategy to reduce it. Bulk efficiencies are the benefits or savings that result from purchasing or shipping large quantities of goods at once, such as lower unit prices, transportation costs, or handling fees. Combining smaller shipments to take advantage of bulk efficiencies can help lower the landed cost by reducing some of the charges involved in the delivery process2.

Supplier absorbing freight charges is not a representation of landed cost, but rather a condition or term of sale. Freight charges are the fees paid to transport goods from one place to another by land, sea, or air. Supplier absorbing freight charges means that the supplier pays for the freight charges and does not pass them on to the buyer. This can affect the landed cost depending on whether the sale is based on free on board (FOB) or cost, insurance, and freight (CIF) terms. FOB means that the buyer is responsible for the freight charges and other costs after the goods are loaded on board the carrier at the point of origin. CIF means that the supplier is responsible for the freight charges and other costs until the goods reach the point of destination3.

Duties levied on imports and exports are not a representation of landed cost, but rather a component or factor of it. Duties are taxes or fees imposed by a government on goods that are imported or exported across its borders. Duties can affect the landed cost by increasing the price of goods or adding extra charges to the delivery process. Duties can vary depending on the type, value, origin, or destination of the goods4.

References := Landed Cost: Meaning & Calculator | Freightos, Landed Cost | Definition, Calculation, Formula & Price, What Is Landed Cost? Definition And Examples, What is Landed Cost? - Definition | Meaning | Example

The production plan is a statement of the resources needed to meet the aggregate demand plan over a medium-term horizon. The production plan is the output of the supply planning step in the sales and operations planning (S&OP) process. The production plan relates to a firm’s financial planning because it is used to identify future cash needs. Cash needs are the amount of money that a firm requires to operate and grow its business. Cash needs can be influenced by various factors, such as sales revenue, cost of goods sold, operating expenses, capital expenditures, inventory levels, accounts receivable, accounts payable, and taxes. The production plan can help to estimate the cash inflows and outflows associated with these factors, and to determine the optimal balance between them. The production plan can also help to identify the potential sources and uses of cash, such as borrowing, investing, or paying dividends. By identifying future cash needs, the production plan can help to improve the firm’s liquidity, profitability, and solvency.

References: 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).

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 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.

References := Bullwhip Effect: Meaning, Example, Impact - Investopedia, Bullwhip Effect - What Is It, Causes, Supply Chain, Examples, Bullwhip Effect: Example, Causes, and Impact on Supply Chain

Sales and operations planning (S&OP) in a make-to-stock (MTS) environment is concerned with projecting inventory. S&OP is an integrated planning process that aligns demand, supply, and financial planning and is managed as part of a company’s master planning1. MTS is a traditional production strategy that is used by businesses to match inventory with anticipated consumer demand2. Inventory is the quantity and value of materials and products that are available in stock or in transit3.

S&OP in an MTS environment is concerned with projecting inventory because inventory is the key link between demand and supply. Inventory can be classified into three types: raw materials, work-in-process, and finished goods3. S&OP aims to balance the inventory levels of these types with the expected demand and supply plans, as well as the financial objectives of the company. S&OP can help optimize inventory management by:

• Reducing inventory costs, such as holding, ordering, and shortage costs3.
• Improving inventory turnover, which is the ratio of sales to average inventory3.
• Increasing inventory availability, which is the percentage of orders that can be fulfilled from stock3.
• Enhancing inventory quality, which is the degree of conformance to specifications and standards3.

The other options are not as relevant for S&OP in an MTS environment as inventory. Item forecasts are estimates of future demand for specific products or services based on historical data, market trends, or customer inputs4. Item forecasts are an input to S&OP, not an output. S&OP uses item forecasts to generate aggregate demand plans for product families or categories, which are then matched with aggregate supply plans for production capacity or resources1. Backlog is the quantity of customer orders that have been received but not yet fulfilled3. Backlog is not applicable for S&OP in an MTS environment, because MTS products are produced before customer orders are received. MTS products are delivered from stock, not from backlog. Bookings are the quantity of customer orders that have been received and confirmed3. Bookings are also not applicable for S&OP in an MTS environment, because MTS products are not dependent on customer orders. MTS products are based on forecasted demand, not actual demand.

References: Make To Stock (MTS): Definition, Example, and How It Works - Investopedia; Forecasting - Definition & Examples - ASQ; What is Sales and Operations Planning (S&OP) | Oracle; Inventory Management - Definition, Types, Objectives and Examples.

Available capacity is the difference between the required capacity and planned operating capacity1. It refers to how capable the resources in an organization are in formulating and implementing strategy1. To calculate available capacity, factors such as the number of machines or workers, the number of shifts, utilization, and efficiency are considered1. Efficiency, in particular, is a crucial factor as it measures how effectively resources are used to produce output. It is calculated as the ratio of actual output to standard output within a specific time period1. Therefore, efficiency directly impacts available capacity by determining how much output can be produced with the available resources and time.

The other options, while important in production and operations management, are not directly used to calculate available capacity:

• Productivity measures the output per unit of input and is more about overall performance rather than available capacity.
• Load refers to the amount of work assigned to a resource or facility but does not directly indicate available capacity.
• Yield measures the percentage of products that meet quality standards out of total units produced but does not directly calculate available capacity.

References: Capacity planning - Wikipedia.

Providing a realistic basis for setting internal performance targets can be accomplished through benchmarking. Benchmarking is a process of comparing one’s own performance, processes, or practices with those of other organizations that are recognized as leaders or best in class in a specific area. Benchmarking can help identify gaps, strengths, weaknesses, opportunities, and threats in one’s own performance, as well as learn from the experiences and successes of others. Benchmarking can also help set realistic, achievable, and challenging goals and targets for improvement, based on external standards or benchmarks. Benchmarking can be done internally(within the same organization), externally (with other organizations in the same industry or sector), or functionally (with other organizations that perform similar functions or processes).

Beta testing is not a way of providing a realistic basis for setting internal performance targets. Beta testing is a stage of product development where a sample of potential users or customers test a product or service before it is released to the general public. Beta testing can help identify and fix any bugs, errors, or issues in the product or service, as well as collect feedback and suggestions for improvement. Beta testing can also help evaluate the usability, functionality, and quality of the product or service, as well as measure customer satisfaction and loyalty. Beta testing is not related to setting internal performance targets, as it is focused on the product or service, not the organization.

Breakthrough innovation is not a way of providing a realistic basis for setting internal performance targets. Breakthrough innovation is a type of innovation that creates significant value for customers and markets by introducing new products, services, or business models that are radically different from existing ones. Breakthrough innovation can help create competitive advantage, disrupt existing markets, or create new markets. Breakthrough innovation is not related to setting internal performance targets, as it is focused on the outcome, not the process.

Best practices are not a way of providing a realistic basis for setting internal performance targets. Best practices are methods or techniques that have been proven to be effective and efficient in achieving desired results or outcomes. Best practices can be derived from one’s own experience, research, or benchmarking. Best practices can help improve performance, quality, or productivity by adopting proven solutions or standards. Best practices are not related to setting internal performance targets, as they are focused on the implementation, not the measurement.

References := Benchmarking - Wikipedia, Benchmarking: Definition & Process | Study.com, What Is Benchmarking? Definition And Examples, What Is Beta Testing? Definition And Examples, What Is Breakthrough Innovation? Definition And Examples, What Are Best Practices? Definition And Examples

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. References: CPIM Part 2 Exam Content Manual, Domain 5: Plan and Manage Inventory, Section 5.4: Inventory Management Techniques, p. 29.

The sales and operations planning (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 meeting, executive S&OP meeting, and S&OP implementation. Once the S&OP process has been completed, the executive S&OP meeting approves the final production plan, which is the output of the supply planning step. The production plan is a statement of the resources needed to meet the aggregate demand plan over a medium-term horizon. The functional responsibility of operations is to meet the revised production plan by developing and executing the master production schedule (MPS) and the detailed schedules. The MPS is a statement of the specific end items to be produced in each time period of the short-term horizon. The detailed schedules are the statements of the specific materials, resources, and activities needed to execute the MPS. References: 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).

The priority rule that is most consistent with the objective of meeting due dates is slack time per operation. Slack time per operation is a priority rule that assigns a priority index to each job based on the ratio of the remaining slack time to the remaining number of operations. Slack time is the difference between the due date and the expected completion time of a job. A lower ratio means a higher priority, as it indicates that the job has less slack time per operation and is more likely to be late. Slack time per operation is a dynamic priority rule, as it updates the priority index after each operation is completed. Slack time per operation can help minimize the number of tardy jobs and the average tardiness of jobs, as it gives preference to the jobs that are closer to their due dates and have more operations left.

First-come-first-served (FCFS) is not a priority rule that is consistent with the objective of meeting due dates. FCFS is a priority rule that processes jobs in the order of their arrival or release times. FCFS is a simple and fair rule, but it ignores the processing times and due dates of jobs. FCFS can result in poor due date performance, as it can delay urgent or short jobs behind long or non-urgent jobs.

Shortest processing time (SPT) is not a priority rule that is consistent with the objective of meeting due dates. SPT is a priority rule that processes jobs in ascending order of their processing times. SPT is an effective rule for minimizing the average flow time and work-in-process inventory of jobs, as it clears out small jobs quickly and reduces congestion in the system. However, SPT does not consider the due dates of jobs, and it can make long or urgent jobs late.

Fewest operations remaining is not a priority rule that is consistent with the objective of meeting due dates. Fewest operations remaining is a priority rule that processes jobs in ascending order of their remaining number of operations. Fewest operations remaining is a rule that can reduce the variability and complexity of jobs, as it tends to complete jobs faster and reduce their flow times. However, fewest operations remaining does not take into account the slack times or due dates of jobs, and it can make urgent or short jobs late.

References := Priority Rules - Tripod, Dispatching rules - Oxford Reference, Sequencing Rules and Due-Date Assignments in a Job Shop - JSTOR

Hedge is a risk management strategy that assumes that losses in one part of the supply chain will be offset by gains in another. Hedge is a method of reducing the exposure to price fluctuations, currency fluctuations, or other uncertainties by taking a position in a related market or asset that moves in the opposite direction. Hedge helps to protect the profitability and cash flow of the supply chain by locking in the prices or rates at a certain level. For example, a company that imports raw materials from another country may hedge against the exchange rate risk by buying a forward contract or an option that guarantees a fixed rate for the currency conversion.

The other options are not risk management strategies that assume that losses in one part of the supply chain will be offset by gains in another. Flexible is a risk management strategy that allows the supply chain to adapt to changing conditions and customer preferences by using multiple sources, modes, or routes. Fluctuation is not a risk management strategy, but a term that describes the variation or volatility of a market or asset over time. Speculative is not a risk management strategy, but a term that describes an activity or investment that involves a high degree of uncertainty or risk, with the expectation of earning a high return. References: CPIM Exam Content Manual Version 7.0, Domain 7: Plan and Manage Distribution, Section 7.1: Distribution Planning Concepts, p. 40; Hedging; Hedging Definition.

Obsolescence is the loss of value or usefulness of an item due to changes in technology, fashion, customer preferences, or other factors. Obsolescence is considered a carrying cost, because it is an expense associated with holding inventory over a period of time1. Carrying costs are the various costs a business pays for holding inventory in stock, such as warehousing, insurance, taxes, depreciation, and opportunity costs2. Obsolescence can increase the carrying costs of inventory,because it can reduce the demand and sales potential of the item, and may require the item to be written off or sold at a lower price3.

The other options are not considered carrying costs, because they are not related to holding inventory in stock. Setup is the cost of preparing a machine or a process for production. Transportation is the cost of moving goods from one place to another. Scrap rate is the percentage of defective or unusable units produced in a process. These costs are more related to production or distribution activities than inventory holding activities.

Shop backlogs are the amount of work that has been ordered but not yet completed by a production facility1. Shop backlogs remain constant when the work input, which is the rate of incoming orders, equals the work output, which is the rate of finished products2. This means that the production facility is able to match the demand and supply of its products, and maintain a steady level of backlog. This can indicate that the production facility is operating efficiently and effectively, and has a stable market position.

The other options are not correct. Forecasts are updated on the basis of the longest lead time item means that the production facility uses the item that takes the longest time to produce as a reference for planning its future production3. This may help the production facility to avoid underestimating its capacity or overcommitting its resources, but it does not guarantee that the shop backlogs will remain constant, as it depends on the actual demand and supply of its products. Capacity is assumed to be infinite means that the production facility does not consider anylimitations or constraints on its ability to produce its products. This may help the production facility to simplify its production planning and scheduling, but it does not reflect the reality of its operations, and may lead to unrealistic expectations or poor performance. Shop orders are released at a steady rate means that the production facility releases a fixed number of orders to its shop floor at regular intervals. This may help the production facility to smooth out its production flow and reduce variability, but it does not ensure that the shop backlogs will remain constant, as it depends on the actual work input and output.

References : Backlog Definition, Implications, and Real-World Examples - Investopedia; Production Planning - an overview | ScienceDirect Topics; [Production Planning: Definition & Types | Study.com]; [Production Planning: Definition & Types | Study.com]; What is a Sprint Backlog? Create With Examples [2023] • Asana.

In a lean environment, the batch-size decision for planning “A” items would be done by lot-for-lot (L4L). A lean environment is a production system that aims to eliminate waste and maximize value by applying the principles and practices of lean manufacturing1. “A” items are the most important items in an inventory system, based on the Pareto principle or the 80/20 rule, which states that 80%of the effects come from 20% of the causes2. Lot-for-lot (L4L) is an inventory ordering policy that orders exactly the quantity needed to meet the demand for each period3.

The reason why L4L is the preferred batch-size decision for planning “A” items in a lean environment is because it minimizes the inventory holding costs and reduces the risk of obsolescence or deterioration of the items3. L4L also supports the concept of pull production, which is a key element of lean manufacturing. Pull production is a method of controlling the flow of materials and information by producing only what is requested by the downstream customers or processes4. L4L aligns the production and consumption rates of “A” items, which are typically high-demand and high-value items, and avoids overproduction or underproduction. L4L also enables faster feedback and learning, as well as better responsiveness to customer needs and expectations.

The other options are not as suitable for planning “A” items in a lean environment. Least total cost is an inventory ordering policy that orders the quantity that minimizes the sum of ordering costs and holding costs5. However, this policy does not consider the demand variability or customer service level, and may result in large batch sizes that increase inventory levels and waste. Min-max is an inventory ordering policy that orders a fixed quantity whenever the inventory level falls below a minimum level6. However, this policy does not reflect the actual demand or consumption rate, and may result in excess inventory or stockouts. Periodic order quantity is an inventory ordering policy that orders a variable quantity at fixed time intervals. However, this policy does not synchronize the production and consumption rates, and may result in mismatched supply and demand.

References: Lean Manufacturing - Definition & Principles - ASQ; Pareto Principle - Definition & Examples - Investopedia; Lot-for-Lot (L4L) Definition | Operations & Supply Chain Dictionary; Pull Production - Definition & Examples - ASQ; Economic Order Quantity (EOQ) Definition - Investopedia; Min-Max Inventory Management: Definition & Examples - Video & Lesson Transcript | Study.com; [Periodic Order Quantity (POQ) Definition | Operations & Supply Chain Dictionary].

A move from acceptance sampling to 100% inspection would be caused by the circumstance of downstream operators encountering recurring defects. Acceptance sampling is a quality control technique that uses statistical sampling to determine whether to accept or reject a production lot of material. It is employed when one or several of the following hold: testing is destructive; the cost of 100% inspection is very high; and 100% inspection takes too long1. 100% inspection is a quality control technique that examines every item in a production lot for defects or nonconformities. It is employed when the cost of passing a defective item is very high; testing is nondestructive; and 100% inspection does not take too long2.

Downstream operators are the workers or machines that perform the subsequent operations or processes on the products after they have been inspected or tested. Downstream operators encountering recurring defects means that the products that have passed the acceptance sampling or testing are still found to be defective or nonconforming by the downstream operators. This can indicate that the acceptance sampling or testing is not effective or reliable in detecting or preventing defects or nonconformities. This can also result in negative consequences, such as rework, waste, delays, customer complaints, or safety issues. Therefore, this circumstance would cause a move from acceptance sampling to 100% inspection, as it would require a more thorough and rigorous quality control technique to ensure that no defective or nonconforming products are passed to the downstream operators.

The other options are not circumstances that would cause a move from acceptance sampling to 100% inspection. History shows that the quality level has been stable from lot to lot is not a circumstance that would cause a move from acceptance sampling to 100% inspection, but rather a circumstance that would support the use of acceptance sampling. Quality level is the proportion of conforming items in a production lot. Quality level being stable from lot to lot means that there is little variation or fluctuation in the quality of the products over time. This can indicate that the production process is under control and consistent in meeting the quality standards or specifications. Therefore, this circumstance would support the use of acceptance sampling, as it would reduce the risk of accepting a defective lot or rejecting a conforming lot.

The company uses one of its qualified suppliers is not a circumstance that would cause a move from acceptance sampling to 100% inspection, but rather a circumstance that would support the use of acceptance sampling. A qualified supplier is a supplier that has met certain quality, delivery, and service standards and has been approved by the company to supply goods or services without inspection or testing. A qualified supplier is expected to maintain a high level of performance and reliability, as well as to report any issues or deviations that may affect the delivery process. Therefore, this circumstance would support the use of acceptance sampling, as it would reduce the need for 100% inspection by relying on the supplier’s quality assurance system.

The percent of defects is expected to be greater than 5% is not a circumstance that would cause a move from acceptance sampling to 100% inspection, but rather a circumstance that would require a change in the acceptance sampling plan. The percent of defects is the proportion of defective items in a production lot. The percent of defects being expected to be greater than 5% means that there is a high probability of finding defective items in the production lot. This can indicate that the production process is out of control or inconsistent in meeting the quality standards or specifications. Therefore, this circumstance would require a change in the acceptance sampling plan, such as reducing the acceptable quality limit (AQL), increasing the sample size, or decreasing the acceptance number, to increase the likelihood of rejecting a defective lot.

References := Acceptance Sampling - an overview | ScienceDirect Topics, What Is Acceptance Sampling? Definition And Examples

To successfully empower individuals to drive change, an organization should ensure everyone can clearly articulate the business’s vision and strategy. According to various sources, such as Forbes, Mercuri Urval, and LSA Global, one of the key factors for effective change leadership is to communicate a powerful and compelling change vision that inspires and motivates employees to support the change. A change vision is a statement that describes the desired future state of the organization after the change is implemented, and how it aligns with the overall business vision and strategy1. A clear and consistent change vision can help employees understand the purpose and benefits of the change, as well as their roles and responsibilities in the change process2. A change vision can also help create a sense of urgency, direction, and alignment among employees, as well as foster a culture of empowerment and participation3.

The other options are not sufficient or necessary to successfully empower individuals to drive change. Conducting thorough training programs for all levels of employees is important, but not enough to empower them to drive change. Training can help employees acquire the skills and knowledge needed to perform their tasks in the new situation, but it does not necessarily influence their attitudes, beliefs, or behaviors toward the change1. Aligning performance appraisals with the business’s vision is also helpful, but not essential to empower individuals to drive change. Performance appraisals can provide feedback, recognition, and incentives for employees who demonstrate the desired behaviors and outcomes related to the change, but they do not address the underlying motivations, emotions, or barriers that may affect employees’ willingness or ability to change4. Establishing and tracking broad change metrics on a quarterly basis is also useful, but not critical to empower individuals to drive change. Change metrics can help measure the progress and impact of the change initiatives, but they do not necessarily engage or involve employees in the change process or give them a sense of ownership or autonomy over the change5.

References: CPIM Part 2 Exam Content Manual, Domain 8: Manage Quality, Continuous Improvement, and Technology, Section 8.2: Continuous Improvement Concepts and Tools, p. 61-62; 5 Ways To Empower And Engage Employees To Lead Change - Forbes; How to successfully drive change in your organisation - Mercuri Urval; Empower Employees to Effect Change - 4 Ways | LSA Global; Empowering Teams to Drive Change Sustainably; Change Management Metrics: How To Measure Your Change Management Project.

Visual control boards are tools that display the key performance indicators (KPIs) and metrics of a production system in a graphical and easy-to-understand format. Visual control boards are usually located at several locations within the production facility, such as the work centers, the shop floor, or the management office. Visual control boards help to communicate operational performance by providing real-time and relevant information, enabling quick feedback and corrective actions, and promoting transparency and accountability.

The other options are not the most effective approaches in communicating operational performance. Quality performance measures are indicators that evaluate the degree to which the products or services meet or exceed the specifications and standards. Quality performance measures are important for communicating operational performance, but they are not sufficient, as they do not cover other aspects of performance, such as cost, time, or customer satisfaction. Reviewing conformance to schedule is a method of comparing the actual production output with the planned production output, based on the master production schedule or the material requirements plan. Reviewing conformance to schedule is useful for communicating operational performance, but it is not timely, as it is usually done after the production is completed, and it does not provide enough details or explanations for the deviations or variances. Monthly meetings with employees are events that involve discussing and reviewing the operational performance with the staff members who are involved in the production process. Monthly meetings with employees are beneficial for communicating operational performance, but they are not frequent, as they are only held once a month, and they may not be effective, as they may lack participation or engagement from the employees.

Producing to backorders means that the company only produces goods when there is a confirmed customer order. This strategy is most appropriate during times of highly fluctuating demand, as it allows the company to avoid holding excess inventory that may incur high carrying costs and become obsolete. Producing to backorders also enables the company to adjust its workforce according to the actual demand, which can be easily changed as the question states. This strategy can improve customer satisfaction, as the products are tailored to the specific needs and preferences of each customer. However, producing to backorders also has some drawbacks, such as longer lead times, higher production costs, and lower economies of scale.

The other strategies are less suitable for highly fluctuating demand. Producing at a constant level means that the company produces goods at a fixed rate regardless of the demand fluctuations. This strategy can result in either excess inventory or stockouts, depending on whether the demand is lower or higher than the production level. Producing to the sales forecast means that the company produces goods based on the projected demand for a certain period. This strategy can be effective if the forecast is accurate, but it can also lead to inventory imbalances if the forecast is inaccurate or if there are unexpected changes in demand. Producing to demand means that the company produces goods based on the current demand in the market. This strategy can be responsive and flexible, but it can also be challenging to implement, as it requires high visibility, coordination, and agility in the supply chain.

References : CPIM Part 2 Exam Content Manual, Domain 4: Plan and Manage Supply, Section B: Production Planning and Control, Subsection 1: Production Strategies and Techniques, Page 19.

Rough-cut capacity planning (RCCP) is a long-term capacity planning technique that validates the master production schedule (MPS) by comparing the required capacity and the available capacity of critical resources. Critical resources are those that have the most impact on the production process, such as machines, labor, or materials. RCCP helps to identify any potential imbalances or bottlenecks in the production system and to adjust the MPS or the resource availability accordingly.

To perform RCCP, one of the forms of data that is required is critical work center availability. A work center is a location where one or more resources perform a specific operation or a group of operations. A critical work center is a work center that has a high utilization rate, a low flexibility, or a high influence on the production output. Critical work center availability is the amount of time or capacity that a critical work center can offer for production activities. Critical work center availability can be affected by factors such as shifts, holidays, maintenance, breakdowns, or setups. RCCP uses critical work center availability to determine whether there is enough capacity to meet the planned production.

Current work in process (WIP) is not a form of data that is required for RCCP. WIP is the inventory of partially finished goods that are waiting for further processing or assembly. WIP is not relevant for RCCP, as RCCP focuses on the future demand and capacity, not the current inventory status.

Resource requirements plan is not a form of data that is required for RCCP. Resource requirements plan is the output of RCCP, not the input. Resource requirements plan is a report that shows the projected load and capacity of each critical resource over a planning horizon. Resource requirements plan can help to identify any gaps or surpluses in capacity and to take corrective actions.

Work center queues are not a form of data that is required for RCCP. Work center queues are the waiting lines of jobs or orders at a work center. Work center queues are an indicator of short-term capacity issues, such as delays, backlogs, or congestion. Work center queues are not relevant for RCCP, as RCCP focuses on the long-term capacity planning, not the short-term scheduling.

References := Guide to Rough-Cut Capacity Planning | Smartsheet, Guide to Rough Cut Capacity Planning - Definition and Example, ROUGH-CUT CAPACITY PLANNING - Operations Management: An Integrated …, Rough-cut Capacity Planning - Infor Documentation Central

 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. References: 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.

The cumulative available-to-promise (ATP) method is based on an assumption that available inventory in a period can be committed to demand in that period and any future period in the planning horizon. The planning horizon is the time span for which plans are made and executed1. The cumulative ATP is a running total of the ATP figure in the master schedule, which shows the planned production or purchase of a product over a series of time periods2. The cumulative ATP method allows the company to account for future shortages and build up inventory for large or seasonal orders3.

The other options are not correct. The demand time fence (DTF) is a point in the near future, usually equal to the cumulative lead time, beyond which changes to the master schedule are not allowed4. The cumulative ATP method does not depend on the DTF, as it considers all future periods in the planning horizon, regardless of whether they are inside or outside the DTF. Future periods with a planned receipt are periods where there is an expected supply of inventory from production or purchase orders2. The cumulative ATP method does not only commit inventory to these periods, but also to any other periods where there is demand.

References : Available-to-Promise (ATP) - Tutorial; Planning Horizon Definition; Demand Time Fence (DTF) Definition; Cumulative Available-to-Promise | Cargoz.

A sales forecast that is based solely on shipment history is a method that uses past sales data to predict future sales. This method assumes that the sales pattern will remain consistent over time, and does not account for any changes or fluctuations in demand or supply1. Therefore, this method can be distorted by any factors that affect the availability or delivery of the products, such as material shortages.

Material shortages are situations where the supply of raw materials, components, or finished goods is insufficient to meet the demand. Material shortages can be caused by various reasons, such as natural disasters, supplier issues, transportation disruptions, quality problems, or demand spikes2. Material shortages can have a negative impact on the sales forecast that is based solely on shipment history, because they can reduce the amount of products that can be shipped to customers, and thus lower the sales revenue. Material shortages can also create a backlog of orders that cannot be fulfilled in time, and thus create a gap between the actual and forecasted sales3.

The other factors listed in the question typically would not distort a sales forecast that is based solely on shipment history, because they do not affect the shipment history directly. Labor rate changes are changes in the wages or salaries paid to workers. They may affect the production costs and profits, but not necessarily the sales volume or revenue4. Currency exchange rates are the rates at which one currency can be exchanged for another. They may affect the competitiveness and profitability of international sales, but not necessarily the sales volume or revenue5. Customer demands are the needs and preferences of customers for products or services. They may affect the sales potential and market share, but not necessarily the sales volume or revenue.

Maintenance, repair, and operating (MRO) supply systems are systems that manage the inventory and procurement of the items that are used to support the production process, but are not part of the final product. MRO items include spare parts, tools, lubricants, cleaning supplies, safetyequipment, and office supplies. The primary consideration in MRO supply systems typically is stockout costs. Stockout costs are the costs associated with the inability to meet the demand for an item due to insufficient inventory. Stockout costs can include lost sales, customer dissatisfaction, production downtime, emergency orders, and reputation damage. Stockout costs can be very high for MRO items, especially if they are critical for the operation and maintenance of the production equipment. Therefore, MRO supply systems should aim to minimize the risk of stockouts by ensuring adequate availability and accessibility of MRO items.

References: 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).

According to the CPIM Exam Content Manual, a make-or-buy decision is a strategic decision that involves choosing between manufacturing a product or service internally or purchasing it from an external supplier1. A make-or-buy decision is based on a cost-benefit analysis that considers various factors, such as quality, cost, capacity, lead time, technology, and competitive advantage2.

Some of the potential reasons to make instead of buy a product may include:

• Maintain quality: Making a product internally may allow the firm to control and ensure the quality standards of the product, which may affect customer satisfaction and loyalty. Buyinga product from an external supplier may involve quality risks or uncertainties, especially if the supplier is located in a different country or has different quality systems3.
• Reduce cost: Making a product internally may reduce the total cost of ownership of the product, which includes not only the purchase price, but also the costs of transportation, inventory, inspection, warranty, and maintenance. Buying a product from an external supplier may incur higher total costs due to these factors.
• Keep confidential processes within the firm: Making a product internally may protect the firm’s proprietary or confidential processes that give it a competitive edge in the market. Buying a product from an external supplier may expose the firm’s processes to potential imitation or leakage.

Therefore, the correct answer is C. maintain quality, reduce cost, and keep confidential processes within the firm.

References:

• CPIM Exam Content Manual
• Make-or-Buy Decision Explained: How to Make Outsourcing Decisions
• Make or Buy Decision - What Is It, Examples, Factors, Advantages
• Make-or-Buy Decision - Overview, How It Works, Triggers
• Make or Buy Decision - Definition & Examples | Marketing Tutor

 Staging in a manual system corresponds to dispatching in a computer system. Staging is the process of preparing and moving materials or components to the point of use or consumption in a production system1. Staging can be done manually by workers who physically move the items from storage areas to workstations, or automatically by conveyors, robots, or other devices2. Dispatching is the process of authorizing and releasing work orders or tasks to the production system3. Dispatching can be done manually by supervisors who assign work to workers, or automatically by computer systems that use algorithms or rules to prioritize and schedule work4. Both staging and dispatching are functions that facilitate the flow of materials and information in a production system and ensure that the right items are available at the right time and place.

References: CPIM Part 2 Exam Content Manual, Domain 6: Plan, Manage, and Execute Detailed Schedules, Section 6.1: Detailed Scheduling Concepts and Tools, p. 75-76; Staging (manufacturing) - Wikipedia; Staging - an overview | ScienceDirect Topics; Dispatching - an overview | ScienceDirect Topics; Dispatching: Meaning, Objectives, Importance and Procedure.

 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 resultin 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 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. References := Make-to-Stock (MTS) Definition, Make-to-Stock (MTS) vs Make-to-Order (MTO) | TradeGecko, Value Creation: Assessing the Cost-Service Trade-off

 Capable-to-promise (CTP) is a method of order promising that considers both material and capacity availability. CTP is more appropriate than available-to-promise (ATP), which only considers material availability, in environments where the production process is complex, customized, or resource-intensive, and where the demand is uncertain or variable. CTP can provide more accurate and realistic delivery dates, as well as optimize the use of resources and reduce inventory costs.

Among the options given, specialty chemicals packaged and shipped to order is the most suitable environment for CTP. This is because specialty chemicals are often produced in small batches or on demand, according to the specific requirements and preferences of each customer. Therefore, the production process requires high flexibility and customization, as well as careful coordination of materials and capacity. The demand for specialty chemicals may also vary depending on the market conditions and customer needs. CTP can help the company to promise delivery dates that take into account the availability of both materials and capacity, as well as the production lead time and transportation time.

The other options are less suitable for CTP, as they are more likely to use standard or mass production processes, where the products are made in large quantities or in advance, and where the demand is more stable or predictable. In these environments, ATP may be sufficient to promise delivery dates based on material availability alone, without considering capacity constraints.

References : What is a Capable-to-Promise System (CTP System … - Techopedia; Order promising - Supply Chain Management | Dynamics 365; Capable to Promise (CTP) (MRP and Supply Chain Planning Help) - Oracle; Calculate sales order delivery dates using CTP - Supply Chain ….

The bullwhip effect is a supply chain phenomenon that causes fluctuations in demand to amplify as they move upstream, from the consumer to the retailer, to the distributor and then to the producer1. The bullwhip effect can result in inefficiencies and costs such as excess inventory, lost revenues, superfluous capacity and poor customer service1.

One of the activities that would be effective to mitigate the bullwhip effect is to reduce lead times, which are the time intervals between placing an order and receiving the goods2. Reducing lead times can help to reduce the uncertainty and variability in demand, as well as improve the responsiveness and flexibility of the supply chain2. By reducing lead times, the supply chain partners can order less frequently and in smaller quantities, while still meeting customer demand. This can reduce the need for safety stock, cycle stock and pipeline stock, and thus lower the inventory carrying costs and risks2.

The other options are not effective activities to mitigate the bullwhip effect. Implementing track and trace technology, which is a method for tracking the origin, history, location and status of a product or its parts throughout the supply chain3, may help to improve the visibility and transparency of the supply chain, but it may not reduce the demand fluctuations or inventory imbalances caused by the bullwhip effect. Using a push system, which is a production system where goods are produced based on forecasted demand rather than actual customer orders4, may increase the risk of overproduction or underproduction, as well as create more inventory and waste in the supply chain. Increasing inventory, which is the stock of goods or materials held by a company to meet customer demand5, may increase the inventory carrying costs and risks, as well as tie up cash flow and working capital.

References : Lead Time Reduction: Definition & Benefits; The bullwhip effect: causes, intensity, and mitigation - Academia.edu; What is Traceability in Supply Chain Management?; Push vs Pull System: What Is The Difference?; Inventory Definition.

Risk pooling is a strategy to reduce the total safety stock by aggregating the inventory of multiple items or locations. Risk pooling works best for items with high demand uncertainty and long lead times, because these items have higher variability and require more safety stock. By pooling the inventory, the variability of the total demand is reduced, and the safety stock can be lowered without increasing the risk of stockouts. References: CPIM Part 2 Exam Content Manual, Domain 5: Plan and Manage Inventory, Section 5.3: Inventory Management Policies and Objectives, p. 28.

Scrap allowance is a percentage or quantity of material that is expected to be lost or wasted during the production process. Scrap allowance is usually applied to the component items in a bill of materials (BOM), which is a document that lists the materials, quantities, and relationships required to produce an end item. An increase in the scrap allowance in an assembled item will result in replanning of the component items in material requirements planning (MRP), which is a system that calculates the timing and quantity of materials and resources needed to meet the production plan. Replanning of the component items in MRP means that the system will adjust the planned order releases, order quantities, and due dates of the component items to account for the increased scrap allowance. Replanning of the component items in MRP will ensure that enough material is available to meet the demand for the assembled item, and to avoid shortages or excess inventory.

References: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section 4.2: Implement Supply Plans, Subsection 4.2.1: Describe how to implement material requirements planning (MRP) (page 38).

Finished goods inventory is a type of inventory that consists of the final products that are ready for sale to the customers. Finished goods inventory investment is the value of the finished goods inventory held by the company. Service level is a measure of customer satisfaction that indicates the percentage of customer orders that can be fulfilled from the available inventory. Service level typically will increase when finished goods inventory investment is increased, because more inventory means more ability to meet the customer demand. However, the relationship between service level and finished goods inventory investment is not linear, but rather asymptotic. This means that service level will increase at a decreasing rate as finished goods inventory investment increases. In other words, the marginal benefit of increasing finished goods inventory investment will diminish as the service level approaches 100%. This is because there is a limit to how much inventory can improve the service level, and beyond a certain point, the additional inventory will not have a significant impact on customer satisfaction.

References: CPIM Exam Content Manual Version 7.0, Domain 5: Plan and Manage Inventory, Section 5.1: Develop Inventory Plans, Subsection 5.1.2: Describe how to develop an inventory policy (page 44).

A bill of resources is a tool that is used to evaluate the impact that a production plan has on capacity. A bill of resources is a document that lists the required resources, such as machines, labor, materials, and space, for each product or service in the production plan1. A bill of resources can help estimate the total capacity requirements for the production plan, as well as the capacity utilization and availability for each resource2. A bill of resources can also help identify potential capacity gaps, bottlenecks, or excesses, and evaluate alternative production plans or resource allocations3.

A bill of resources can be created by using the following steps4:

• Step 1: Identify the products or services in the production plan and their quantities and timings.
• Step 2: Identify the resources needed for each product or service and their quantities and timings. This can be done by using tools such as product routings, process maps, or work breakdown structures.
• Step 3: Aggregate the resource requirements for each product or service and for the entire production plan. This can be done by using tools such as spreadsheets, tables, or charts.
• Step 4: Compare the resource requirements with the resource capacities and availability. This can be done by using tools such as capacity planning matrices, load profiles, or resource histograms.
• Step 5: Analyze the results and make adjustments or recommendations. This can be done by using tools such as what-if analysis, simulation, or optimization.

Therefore, a bill of resources is a tool that is used to evaluate the impact that a production plan has on capacity.

References: 1: Bill of Resources Definition 1 2: Capacity Planning Definition 2 3: Capacity Planning Tools 3 4: How to Create a Bill of Resources 4

External sustainability reporting and verification is an opportunity for a company to communicate its performance in terms of environmental, social, and governance (ESG) aspects. ESG performance refers to how a company manages its impacts and risks on the natural environment, the society, and its own governance structure. By reporting and verifying its ESG performance, a company can demonstrate its commitment to sustainability, transparency, and accountability to its stakeholders, such as investors, customers, employees, regulators, and the public. External sustainability reporting and verification can also provide a company with various benefits, such as improved reputation, enhanced stakeholder trust, increased operational efficiency, reduced costs, and better decision making123.

 One of the trade-offs that should be evaluated when determining where to place inventory in a multi-echelon supply chain network is the transportation cost and delivery time. A multi-echelon supply chain network is a system of interconnected stages or echelons that perform different functions, such as production, distribution, and retailing, to deliver products or services to the end customers1. Inventory placement is the decision of how much and where to hold inventory in the supply chain network to balance the costs and service levels2.

Transportation cost is the expense of moving products or materials from one echelon to another in the supply chain network. Transportation cost depends on factors such as distance, mode, volume, weight, fuel, and tariffs3. Delivery time is the duration of moving products or materials from one echelon to another in the supply chain network. Delivery time depends on factors such as speed, reliability, frequency, and congestion3.

There is a trade-off between transportation cost and delivery time when determining where to place inventory in a multi-echelon supply chain network. Generally, holding more inventory closer to the customers can reduce the delivery time and increase the service level, but it can also increase the transportation cost and the inventory holding cost4. On the other hand, holding less inventory farther from the customers can reduce the transportation cost and the inventory holding cost, but it can also increase the delivery time and decrease the service level4. Therefore, finding the optimal inventory placement requires balancing the transportation cost and delivery time trade-off.

Some of the methods or tools that can help evaluate the transportation cost and delivery time trade-off are:

• Network optimization: a technique that uses mathematical models to optimize the design and configuration of a supply chain network by minimizing the total costs (including transportation and inventory costs) while satisfying the service level requirements.
• Multi-echelon inventory optimization: a technique that uses mathematical models to optimize the allocation and sizing of safety stocks across multiple echelons of a supply chain network by minimizing the total costs (including transportation and inventory costs) while satisfying the service level requirements.
• Simulation: a technique that uses computer software to mimic the behavior and performance of a supply chain network under different scenarios and assumptions. Simulation can help evaluate the impact of different inventory placement strategies on the transportation cost and delivery time.

Therefore, transportation cost and delivery time is one of the trade-offs that should be evaluated when determining where to place inventory in a multi-echelon supply chain network.

References: 1: Multi-Echelon Inventory Optimization 2 2: Inventory Placement Definition 3 3: Transportation Cost Definition 4 4: The Tradeoff Between Inventory Costs And Transportation Costs : Supply Chain Network Design: Applying Optimization and Analytics to … 1

 Apush system is a production system that operates based on planned or forecasted demand, rather than actual or current demand. In a push system, work orders or tasks are released to the work centers according to a predetermined schedule, regardless of the availability of capacity or resources at the work centers. This means that work centers may receive work even if they are already overloaded or have no idle time, which can result in long lead times, high inventory levels, and poor customer service1.

The other options are more likely to occur when using a pull system, which is a production system that operates based on actual or current demand, rather than planned or forecasted demand. In a pull system, work orders or tasks are released to the work centers only when there is a need or a request from the downstream work centers or customers. This means that work centers are scheduled using finite capacity planning, which is a method of allocating capacity and resources based on the actual availability and constraints of the work centers2. Work centers also operate using decentralized control, which means that each work center has the autonomy and authority to make decisions based on the local conditions and signals from the environment3. Work centers also signal previous work centers when they are ready for more work, which is a way of synchronizing the flow of materials and information along the production process4.

References: Push System vs. Pull System: Adopting A Hybrid Approach To MRP; Push Systems vs. Pull System: Definitions and Differences; JUST-IN-TIME MANUFACTURING | SpringerLink; 9 Just-In-Time and Lean Systems - Seneca College.

The most appropriate action by the master scheduler is to forward the request to senior management. According to the Time Fence Control (MRP and Supply Chain Planning Help) - Oracle, the demand time fence is a period within which the planning process does not consider forecast demand when calculating actual demand, and the planning time fence is a period within which the planning process does not alter the current material plan or master schedule. The master scheduler can make changes to the master schedule within the planning time fence, but only with approval from senior management. The request from marketing falls between the demand and the planning time fences, which means that it may affect the current material plan or master schedule, as well as the capacity and resource requirements of the production system. Therefore, the master scheduler should forward the request to senior management, who can evaluate the impact and feasibility of the request, and decide whether to approve or reject it.

Customer relationship management (CRM) is a program that uses data and technology to manage the interactions and relationships with customers. CRM helps to understand the needs, preferences, and behaviors of customers, and to provide them with better products, services, and experiences. In a rapidly changing business environment, a primary advantage of an effective CRM program is earlier identification of shifts in customer preferences. This means that CRM can help to detect and anticipate the changes in customer demand, tastes, or expectations, and to respond accordingly. This can help to improve customer satisfaction, loyalty, and retention, as well as to gain a competitive edge in the market. CRM does not necessarily reduce forecast variability, which is the degree of difference between the actual demand and the forecasted demand. CRM does not necessarily reduce customer order changes, which are the modifications or cancellations of orders by customers. CRM does not necessarily reduce customer defections, which are the losses of customers to competitors or other alternatives. References: CPIM Exam Content Manual Version 7.0, Domain 3: Plan and Manage Demand, Section 3.1: Demand Management Concepts, p. 16; Customer relationship management; Customer Relationship Management (CRM) Definition.

Sales and operations planning (S&OP) is a process that aligns the sales plan, the production plan, the inventory plan, and the financial plan to achieve the business objectives. S&OP helps to balance supply and demand, optimize resources, reduce inventory costs, and improve customer service. S&OP is done on an aggregate or family level, and covers a sufficient span of time to make sure that the necessary resources will be available. S&OP also involves regular reviews and updates of the plans based on the changes in the market and the company’s performance.

Business planning is a process that defines the long-term vision, mission, goals, and strategies of the organization. Business planning provides the direction and framework for the operational plans, but does not address the specific issues of inventory management and financial performance.

Detailed material planning is a process that determines the quantity and timing of material requirements for each item or component in the production plan. Detailed material planning is based on the master schedule, which is derived from the S&OP. Detailed material planning does not address the alignment of sales and operations at an aggregate level.

Master scheduling is a process that translates the S&OP into a detailed plan for each product or service in a specific time period. Master scheduling specifies the quantityand timing of finished goods to be produced or delivered to meet the demand. Master scheduling is dependent on the S&OP, and does not address the coordination of sales and operations at an aggregate level.

References:

• APICS Exam Handbook, page 12
• CPIM Part 1 Study Guide, page 19
• CPIM Part 2 Study Guide, page 17
• Sales and Operations Planning (S&OP) 101| Smartsheet
• Sales, Inventory & Operations Planning - What It Is and How to Operate

Load variability is the fluctuation in electricity demand over time. It is influenced by factors such as weather conditions, time of day, day of the week, and various external events. The higher the load variability, the more challenging it becomes to accurately predict demand and plan capacity1.

A technique to manage load variability would be to plan additional safety capacity as a part of total available capacity to meet unplanned demand. Safety capacity is the act of consistently planning your production below capacity. The reason for this is so the company can become more flexible and responsive to the changing needs of the customer2. For example, if your company was operating at full capacity and your best customer needed extra product, you would be unable to meet their request. By allowing for safety capacity, your company can become more flexible and more responsive.

The other options are not techniques to manage load variability, because they are either irrelevant or ineffective. Applying capacity planning using overall factors (CPOF) to identify priority items at the work center is a simple approach to capacity planning that applies historical ratios. These ratios are based on the master production schedule along with established production standards3. However, this method does not account for load variability or unexpected changes in demand or supply. Designing the shop floor with machines that sit idle until additional demand requires their use is a wasteful and costly way of managing load variability. It does not optimize the utilization of resources or minimize the inventory costs4. Using capacity bills to provide a rough-cut method of planning total-time-per-unit value is a procedure based on the manufacturing production schedule (MPS). It indicates the total standard time required to produce one end product in each work center required in its manufacture5. However, this method does not address the fluctuations in demand or supply that may occur due to load variability.

Collaborative planning, forecasting, and replenishment (CPFR) is a set of actions taken by supply chain partners to plan and communicate tasks to meet customer demand while reducing cost. It includes business planning, sales forecasting, and replenishment of raw materials and finished goods1. CPFR typically would be most effective for a regional headquarters for a large home improvement retailer, because this type of organization can benefit from the following advantages of CPFR:

• CPFR can strengthen the supply chain partner relationships between the regional headquarters and its suppliers, distributors, and stores, by enhancing trust, transparency, and coordination2.
• CPFR can provide analysis of sales and order forecast which improves the forecast accuracy, by using customer inputs and data from partners in the value chain, as well as advanced analytical tools and techniques3.
• CPFR can manage the demand chain and proactively eliminate problems before they appear, by identifying and resolving potential issues or conflicts in the planning, forecasting, and replenishment processes4.
• CPFR can allow collaboration on future requirements and plans, by involving all the relevant stakeholders in the decision-making process and aligning their goals and expectations5.
• CPFR can combine planning, forecasting and logistic activities, by integrating the best practices in sales and marketing (e.g. such as category management) to supply chain planning and execution processes2.

The other options are not as suitable for CPFR as a regional headquarters for a large home improvement retailer. A distributor with a few major customers and many smaller customers may not have enough incentives or resources to implement CPFR with all its customers, especially the smaller ones who may have low volumes or high variability in demand. A manufacturer that sells directly to a large number of firms may face challenges in coordinating and communicating with all its customers, as well as managing the complexity and diversity of their demand patterns. A company that has a large number of geographically dispersed suppliers may encounter difficulties in establishing trust and transparency with its suppliers, as well as ensuring the quality and reliability of their products or services.

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 producescustomized 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 or services 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. References: 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.