APIC's CPIM Part 1 Practice Exams

Which of the following is an inventory accuracy audit technique in which inventory is counted on a cyclic schedule rather than once a year? Physical inventory Location counting Cycle counting Random counting

Cycle counting: Cycle counting is an inventory accuracy audit technique in which inventory is counted on a cyclic schedule rather than once a year.

Which term refers to the securing of sensitive data and ensuring that access is restricted to role-appropriate views? EDI ERP Data governance Master data

Data governance: Data governance refers to the overall management of data's accessibility, usability, reliability, and security, which also includes securing sensitive data and ensuring that access is restricted to role-appropriate views.

What is earliest job due date an example of? Chase strategy Dispatching Available-to-promise Infinite scheduling

Dispatching: earliest job due date is actually one of the dispatching rules used to determine which job should be run first at an operation.

Which of the following types of production planning and control systems is most appropriate for a job shop environment that is competing on short lead times? Drum-buffer-rope and buffer management Material requirements planning Make-to-order Project management

Drum-buffer-rope and buffer management: he theory of constraints (TOC) is best suited to the production of products going through a job shop with short lead times, because it uses the concept of demand pull to trigger production. Instead of lengthy planning and complex control procedures, TOC enables quick changeover to build different products with short lead times by using the drum and the buffer. Material requirements planning (MRP) focuses on executing a push system, where production is planned ahead and then pushed to the production floor in the form of discrete manufacturing orders. This process can become quite complex as the number of orders released to the floor increases. Make-to-order production normally requires expanding lead times to account for materials planning, possible engineering time, and complex scheduling. Project management would be incorrect for standardized products built with very short lead times.

How can lead time offset be described? Scheduling material to be delivered earlier than the required date Establishing planned order release dates by the duration of the lead time Compensating for the difference between actual and planned lead times Adding safety lead time to offset unforeseen manufacturing problems

Establishing planned order release dates by the duration of the lead time: Lead time offset is the process of back scheduling from the need date by the item lead time to establish an order release date.

Which of the following production environments requires the most complex form of resource profiles to perform rough-cut capacity planning? production volume, product variety, production leadtime, operations per product, production resources Facility A: high, high, long, many, many Facility B: high, low, short, few, many Facility C: low, high, long, many, few Facility D: low, short, few, few

Facility A: High product variety means that a number of different products can be produced, many operations per product means that the rough-cut bill of material is complex, and many production resources means that many resources will have to be created.

In which facility would product unit costs most likely be reduced through a setup reduction program? production volume, product variety, production leadtime, operations per product, production resources Facility A: high, high, long, many, many Facility B: high, low, short, few, many Facility C: low, high, long, many, few Facility D: low, short, few, few

Facility C: Low production volume means that a lot of small orders are released, high product variety means that a number of different products can be produced, and many operations per product means that a lot of setup is being performed.

What is typically prepared after receipt of a customer order to schedule the operations required to complete the product? Level schedule Drum Shipping schedule Final assembly schedule

Final assembly schedule: The final assembly schedule (FAS) is typically prepared after receipt of a customer order, and it schedules the operations required to complete the product from the level where it is stocked (or master-scheduled) to the end-item level.

Which of the following outcomes is a result of sales and operations planning? Formal balancing of supply and demand Scheduling of products and inventory replenishment Full utilization of company manufacturing resources Detailed planning of finished goods

Formal balancing of supply and demand: The most important task of the sales and operations planning (S&OP) process is to balance aggregate demand with the firm's available aggregate inventory and production capacity. Scheduling of production and inventory replenishment occurs after the S&OP plan has been authorized and disaggregated down to the master schedule and MRP levels. The detailed planning of finished goods is performed on the master schedule level. Planning the use of manufacturing resources is performed on the capacity planning level.

Which type of specification requirement for supplier selection includes quality requirements? Quantity Performance Functional Price

Functional: Quality requirements are a form of functional requirement, which indicate the form, fit, and function of the material or service being purchased.

During which step of the purchasing cycle does an organization authorize the purchasing department to purchase specified materials in specified quantities within a specified time? Issue purchase order. Generate requisition. Follow up. Approve payment.

Generate requisition.: The first step of the purchasing cycle, generate requisition, is when an organization authorizes the purchasing department to purchase a set amount of material during a set amount of time.

Which of the following factors are believed to have the most strategic impact on a business's operating environment? Government, economy, competition, customer expectations, quality Government, competition, quality, anti-corruption, raw material supply Government, competition, customer expectations, quality, energy Competition, customer expectations, quality, economy, taxes

Government, economy, competition, customer expectations, quality: The question is asking which factors have the most strategic impact on a business. Taxes are only one aspect of government, which has an overall impact on an organization's operations. Energy is a tactical issue and does not impact a business as much as the economy. Anti-corruption is not considered to be of major strategic consideration.

Which of the following quantitative techniques responds the quickest to trends? High alpha factor exponential smoothing Moving average Expert opinion Seasonal index

High alpha factor exponential smoothing: High alpha factor exponential smoothing responds the quickest to trends. A moving average does not respond well to trends. Expert opinion is a qualitative technique that does not determine trends well, and seasonal indexes are not used for trend calculations.

Which area of total capacity should be reviewed when using the theory of constraints (TOC) to increase overall facility utilization? Protective capacity Idle capacity Excess capacity Productive capacity

Idle capacity: In order to elevate the constraint in a TOC environment, other productive resources that might supplement the constraint should be reviewed for idle capacity. If idle capacity exists at a resource, then work should be routed to fill the open capacity. This will increase total utilization. Excess capacity describes a situation where output capabilities at a nonconstraint resource exceed the amount of productive and protective capacity required to achieve a given level of throughput at the constraint. Protective capacity describes a situation where a given amount of extra capacity at nonconstraints above the system constraint's capacity is maintained. It is used to protect against statistical fluctuations. Productive capacity describes the maximum output capabilities of a resource (or series of resources), or the market demand for that output for a given period of time.

A dispute arises over damage to goods shipped between two entities in different countries. Which international standards, if applied at the time of the shipment, would clearly resolve the dispute? UN Global Compact Omnibus Foreign Trade and Competitiveness Act Export Trading Company Act Incoterms

Incoterms: When goods are moved between two entities, it is imperative that clarity exists as to who is responsible for what. Incoterms, developed by the International Chamber of Commerce, are specifically designed to address this need.

A firm's marketing strategy directly impacts the production plan by which of the following actions? Answers Increasing after-sale service options Increased customer service functions Changing capacity Increasing demand

Increasing demand: By increasing demand from the customer base, marketing will directly impact the existing production schedule created by production management.

Which technology would be best used to automatically update machinery use in order to better plan maintenance routines before breakdowns can occur? Artificial intelligence Blockchain Robotic process automation Internet of Things

Internet of Things: The Internet of Things enables equipment and other devices to update their status and location, which can be helpful for automatically tracking machine use and status in order to plan and execute maintenance routines.

What is the next step in the purchasing cycle after a requisition is generated? Issue purchase order. Approve payment. Follow up. Receive goods.

Issue purchase order.: Once the requisition is generated by the end user, the next step is for purchasing to issue a PO. Answers a, b, and c occur later in the cycle. (The purchasing cycle stages are, in order, generate requisition, issue PO, follow up, receive goods, and approve payment.

What is the purpose of a buffer in the theory of constraints? It prevents unplanned idleness in the constrained work center. It processes jobs at a lower rate than demand. It identifies the root cause of the constraint. It opens an opportunity to exploit the system.

It prevents unplanned idleness in the constrained work center.: The purpose of the TOC buffer placed in front of a constrained work center is to provide adequate material to protect the constraint from the longest reasonably foreseeable downtime.

Which type of purchase process signal is used in lean production systems? Kanban Buffer replenishment Conventional requisitions Planned order releases

Kanban: Lean production systems use kanban signals to trigger replenishment need, often without use of a purchase order or requisition.

Which is an inventory rule that is often applied to C items in ABC classification? Keep ample safety stocks. Order frequently to minimize carrying cost. Order in small quantities. Ensure that forecast errors are tracked and followed up on quickly.

Keep ample safety stocks.: C items in ABC classification can have looser controls than other items because they represent a low dollar volume. Therefore, holding large safety stocks of these items, ordering in bulk, and ordering rarely will ensure that these items are in stock with little negative cost impact.

Which of the following manufacturing processes would most likely be characterized by a narrow range of standard products, low direct labor costs, and a high level of technical support for manufacturing? Project Job shop Batch Line

Line: Line is a type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs. Production volumes are high, production and material-handling equipment is specialized, and all products typically pass through the same sequence of operations.

A cleaning compound used to clean manufacturing equipment would be classified as which of the following types of inventory? Finished goods Maintenance, repair, and operating supplies Work in process (WIP) Raw materials

Maintenance, repair, and operating supplies: Maintenance, repair, and operating supplies (MROs) support general operations and maintenance but do not become part of the product. They include maintenance supplies, spare parts, and consumables such as cleaning compounds, lubricants, pencils, and erasers. Raw materials are purchased items or extracted materials that are converted via the manufacturing process into components and products. A finished good is a product sold as a completed item or repair part or any item subject to a customer order or sales forecast. Work in process (WIP) is defined as a good or goods in various stages of completion throughout the plant. These stages include all materials, from raw material that has been released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory.

Which of the following warehouse activities involves bringing goods together and checking for omissions or errors in the order? Dispatching the shipment Picking goods Dispatching goods to storage Marshalling the shipment

Marshalling the shipment: When marshalling a shipment, goods making up a single order are brought together and checked for omissions or errors, and order records are updated accordingly. Picking is the process of selecting items from storage and bringing them to a marshalling area. Dispatching goods to storage is the process of sorting goods upon receipt and placing them in a storage area. Dispatching the shipment is the process of order packing, preparing shipping documents, and loading items on the correct transport vehicles.

Which of the following identifies all of the components of a physical distribution system? Material handling, transportation, warehouses, distribution inventory, protective packaging, and order processing and communication Material handling, transportation, warehouses, distribution inventory, protective packaging, and reverse logistics Material handling, transportation, warehouses, distribution inventory, order processing and communication, and reverse logistics Material handling, transportation, warehouses, protective packaging, order processing and communication, and services

Material handling, transportation, warehouses, distribution inventory, protective packaging, and order processing and communication: Reverse logistics and services are not considered to be parts of a physical distribution system.

Which of the following is typically a production activity control (PAC) responsibility in a flow manufacturing environment?: Determining the cost of production daily Monitoring the output of each production line Determining the capacity required each day Coordinating changes in customer orders

Monitoring the output of each production line: PAC is responsible for executing the master production schedule and material requirements plan. It releases work orders to manufacturing and monitors work order completion, work-in-process, lead times, work center efficiency, operation times, etc.

What would likely be the result if an organization wanted to reduce material prices for material requirements planning (MRP) ordered materials that are commodities by requiring use of the standard purchasing cycle rather than relying on contract buying? Need for fewer purchase orders Much higher ordering cost Greater ability to implement supplier scheduling Lower total cost of ownership

Much higher ordering cost: Contract buying is the authorization of material releases against a long-term contract. It is used for high-volume and/or high-frequency purchases such as for MRP. Rather than generating a purchase order, purchasing will release orders against the schedule or in lots as specified in the blanket purchase order or other long-term contract. If the purchasing cycle is instead used, many more purchase orders will need to be released, which will increase ordering cost. The change would not necessarily result in lower prices for goods. Supplier scheduling depends on contract buying being in place

A production process is an I-type process from a VATI analysis where operations 1, 2, 3, and 4 operate sequentially and operations 1 through 3 require one unit as input for each one unit of output, but operation 4 requires two units as input to produce one unit of output. Unit processing times are 200 per hour for operation 1, 220 per hour for operation 2, 180 per hour for operation 3, and 100 per hour for operation 4. If demand is 110 per hour, which is true? Operation 4 is the constraint. The market is the constraint. Operation 3 is the constraint. Operation 4 is the capacity constrained resource.

Operation 3 is the constraint.: Operation 3 is the constraint because operation 4 requires two units from it to make one unit of output. Therefore, operations 1 through 3 need to operate at twice the rate of operation 4 to match its production, but it operates at only 1.8 times the rate of operation 4. The market is also not the constraint because demand is higher than the output of operation 4.

Which of the following is included in the cost of goods sold? Standard cost General and administrative expenses Revenue Overhead

Overhead: The cost of goods is classically defined as consisting of direct labor, direct material, and overhead.

Strong customer relations will be best developed by which of the following actions? Implementation of statistical process control (SPC) Use of assemble-to-order to reduce delivery lead time Addition to a mailing list of the firm's new product offerings Partnering in the development and design of requirements

Partnering in the development and design of requirements: An important way to ensure that products and services match customer requirements is to involve customers in the development and design of products. Assemble-to-order actually increases lead times to the customer. Addition to a mailing list of the firm's new product offerings does little to build strong customer relations. The role of SPC (a fundamental tool of quality management) is to ensure that products are being built that match customer specifications and expectations.

A company is experiencing a change in demand from steady to sporadic. It currently uses economic order quantity (EOQ) to determine purchase quantities for a key component. Which of the following models should it use in the future? Lean one-piece flow Period order quantity Fixed order quantity EOQ

Period order quantity: As a product moves from continuous to intermittent demand, a better inventory replenishment tool is a period order quantity, where inventory balances are reviewed periodically and quantity purchased up to a specific maximum quantity. In contrast, EOQ, lean one-piece flow, and fixed order quantity are all based on continuous demand characteristics.

Which of the following primarily focuses on ensuring that inventory records accurately represent the value of inventory? Audit Periodic inventory Cycle counting Perpetual inventory

Periodic inventory: The main purpose of periodic inventory is to satisfy financial auditors that the inventory records represent the value of the inventory.

Which of the following definitions best describes capacity planning? Process of determining the amount of capacity required for production in the future Ability to do rough-cut capacity planning using a simulated master production schedule Resources needed to produce the projected level of work over a time horizon Extra capacity that is added to a system after capacity for expected demand is calculated

Process of determining the amount of capacity required for production in the future: The goal of capacity planning is to determine how much capacity is going to be required to execute the firm's production plans.

Which of the following considerations is primary when contracting with a supplier in a lean environment? Order cost Product quality Quantity discounts Transportation costs

Product quality: In a lean environment, it is expected above all else that materials and components will be delivered with perfect quality and will be ready for the production floor without further quality testing. The other answers may be considerations, but they are not primary considerations, especially in a lean environment.

Which of the following statements best describes flow manufacturing? Production is performed by a series of subcontractors. Production is performed in lots passing through functional departments. Production is performed by a team created especially for that purpose. Production is performed on a small range of products using the same sequence of operations.

Production is performed on a small range of products using the same sequence of operations.: Flow manufacturing is concerned with the production of a small number of high-volume standard products produced repetitively or in a continuous manufacturing environment. Flow production does not mean that subcontractors are used. Since the products are highly standardized, relatively small in variety, and produced repetitively, special manufacturing teams are not needed. The production resources are usually organized into some form of work cell, not in lots passing through functional departments as in a job shop.

What three pieces of information should agree before payment is made on a supplier's invoice? Purchase order, receiving report, and invoice Purchase order, receiving report, and product specification Purchase requisition, purchase order, and invoice Purchase requisition, receiving report, and invoice

Purchase order, receiving report, and invoice: Approving a supplier's invoice for payment is preceded by the three-way match process of reconciling the purchase order, the receiving report, and the invoice.

Which of the following situations will best enable a company to react swiftly to changes in the volume and mix of its products? Quick changeover of equipment Continuous production Decreased safety stock Increased forecast accuracy

Quick changeover of equipment: A manufacturing environment that is characterized by agility and nimbleness has the best chance of responding to changes in the volume and mix of products. Decreased safety stock levels inhibit quick production changeovers. Better forecasting is too long-range to impact very short-term schedule change requirements. Continuous production is normally focused on producing large lot quantities; these large quantities are produced in a very narrow range of highly standardized products, where shop floor setup cannot be easily changed economically to accommodate abrupt changes in the schedule.

Which mode of long-distance transportation is most appropriate for dense and heavy materials? Airplane Pipeline Railroad Truck

Railroad: Of these modes of transportation, railroads have the optimal capacity to deliver dense and heavy materials.

In a make-to-order (MTO) environment, master scheduling should take place at which of the following levels? Subassembly End product Spare part Raw material

Raw material: In an MTO environment, a demand order is typically not produced until an actual order appears. As such, master scheduling in this environment is on the base component and raw material level. Subassemblies normally do not exist in an MTO environment but are built only when the demand order requires them for final assembly scheduling. Spare parts are normally stock items and therefore are not MTO. The end product is never built ahead of time, as it can be subject to a great number of possible variations and is therefore not built until a customer order is received.

What is the best way for a company to reduce the cost of quality and improve customer satisfaction? Perform regular customer surveys. Reduce process variability. Establish a customer warranty program. Increase finished product inspection.

Reduce process variability.: Reducing variability in products and processes decreases the probability of quality defects. The closer products and processes are to the standard, the greater the probability that they will not have quality defects. Increasing finished goods inspection will only eliminate substandard output. The real goal of quality improvement is to attack process variation at the source during production.

Which of the following benefits of setup reduction is most immediate? Reduced work in process Reduced queue time Reduced product cost Improved quality

Reduced product cost: The time to set up a product has a direct cost that is a component of the overall cost of producing the item. When the setup time is reduced, not only is the cost of setup reduced; the lot size can also be reduced, along with queue and lead times. This will immediately decrease the overall cost of the product. The other answers will occur over time, but not immediately, as a result of setup time reduction.

A supply chain handles used automobile computers, which are sent to a remanufacturer that repairs and reprograms them. The computers are then returned to the market. This is an example of: reverse logistics. continued service. rework. reprogramming.

Reverse logistics: Reverse logistics is a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.

Which tool is best suited to tracking the business activities associated with satisfying a customer's demand, from a supply chain management perspective? UNGC SCOR United Nations Global Compact Management Model Performance Standards

SCOR: The SCOR model describes the business activities associated with satisfying a customer's demand, which include plan, source, make, deliver, return, and enable.

What is the term for a continual process of reviewing the strategic business plan and revising and coordinating the plans of various departments? Business planning Sales and operations planning Strategic planning Groupthink

Sales and operations planning: Sales and operations planning is the process by which an organization reviews its strategic plan and revises and coordinates plans between its various departments. Strategic planning is a statement of how the organization is to determine and assemble the resources and perform the actions necessary to support the business plan. Groupthink is when a team seizes on one solution to a problem and does not consider other viable solutions. The business plan sets the long-range strategy and revenue, cost, and profit objectives; it is normally set once a year.

Which of the following factors must be known in order to compute economic order quantity (EOQ)? Safety stock Forecast variation Lead time Setup cost

Setup cost: The four components of the EOQ formula are annual usage, order cost, carrying cost percentage, and unit cost. Setup cost is part of the order cost.

Which of the following inventory evaluation methods best measures falling costs? Average cost Last-in, first-out First-in, first-out Standard cost

Standard cost: The standard cost consists of direct material, direct labor, and overhead. This cost remains fixed until a decision is made to update it as time passes to arrive at a new standard. Any variance between the standard and actual costs can be quantified to show how much actual costs have fallen or risen since the last standard cost update. The problem with the average cost method in changing processes (rising or falling) is that the cost used is not related to the actual cost. The last-in, first-out method assumes that the newest (last) item received into stock is the first sold. Given rising prices, replacement can be made at the current price. In a falling price market, existing inventory is overvalued.When the oldest (first) item in stock is sold first, rising prices cause the replacement cost to be higher than the assumed cost. This method does not reflect the current process, and replacement will be understated.

What is the main insight that the total cost of ownership (TCO) offers to the supply chain manager? TCO is a great concept, but it is nearly impossible to calculate. TCO does not include the cost of poor quality. The acquisition cost is often a very small portion of the total cost of raw materials and components. Vertical integration of the supply chain is the best way to reduce overall costs.

The acquisition cost is often a very small portion of the total cost of raw materials and components.: TCO is the sum of all the costs associated with every activity of the supply stream, of which the acquisition costs are just a small portion. For example, TCO would include the cost of poor quality (rejects, scrap, rework, inspections, etc.) and possibly the cost of end-of-life disposal. Vertical integration has more impact on control of the supply than the costs associated with the supply chain and will sometimes trade off control for increased costs.

What happens when work centers before a bottleneck produce materials at a rate faster than the bottleneck can handle? The constraint buffer grows in duration. Overall system throughput increases, up to a limit. There is a reduction in work-in-process inventory. Overall system throughput increases indefinitely.

The constraint buffer grows in duration.: It doesn't make sense for work centers in front of the bottleneck to produce output at a rate faster than the bottleneck can handle because it only leads to a buildup of WIP inventory, specifically a buildup in the form of an increasing constraint buffer.

In a planning bill for an updated configuration of a cellphone, the total percentages for the amounts required for the three possible memory chips used equal 115. What does this indicate? The manufacturer has received more orders for blue than other colors. The manufacturer is making a hedge against higher demand. There has been an error in the calculations. The manufacturer is making up for missed orders.

The manufacturer is making a hedge against higher demand.: When a planning bill's percentage is higher than 100, it is a form of hedge against volatility in demand. It serves roughly the same purpose as safety stock. Because this is a planning bill, no orders have yet been received, and therefore it does not refer to received orders.

In a market where customers accept a standardized product offering, which of the following situations is characteristic of the production environment? The master schedule typically is stated for the finished product level. Work centers are dedicated to producing a wide range of different products. Supplier partnering likely will be on a pull system. Work in process (WIP) represents the largest cost of inventory.

The master schedule typically is stated for the finished product level.: Because products are standardized with no modification, planning at the master schedule level is performed for the finished good. Finished goods inventories, not WIP, represent the largest cost of inventory. Work centers used for make-to-stock products are dedicated to producing a limited range of similar products. Production planning and scheduling in an MTS environment uses an MRP push system where, in turn, demand from suppliers is also based on the MRP push.

What is a characteristic of a dynamic demand pattern? There is an upward or downward trend. There are regular peaks and valleys. The demand can be calculated. The pattern changes over time.

The pattern changes over time.: A dynamic demand pattern is one where demand patterns for products and services change over time and the pattern is not stable. The peaks and valleys are irregular, rather than regular, and the trend is not stable and may go upward and downward at times. The calculation of demand is not a characteristic of a dynamic demand pattern.

Which of the following statements is true for a company that uses the first-in, first-out method of evaluating inventory in a market where prices are decreasing? The replacement value of products will be understated. The difference between the old and the new will be stated as a variance. The cost reported will be an average of the old and the new. The replacement value of products will be overstated.

The replacement value of products will be overstated.: In a period of rising prices, replacement is at a higher price than the assumed cost. This method does not reflect current prices, and replacement will be understated. The reverse is true in a falling price market. For example, an opening purchase order arrives for 10 units at $2.00 and a second purchase order arrives for 10 units at $1.00. The price is falling and is therefore lower than the assumed cost. Therefore, the replacement cost of the item will be overstated.

Which is an objective of purchasing? To control budgetary expenditures of all employees through sound purchase order control. To obtain goods and services of the required quality at the right cost. To keep many sources of supply available to ensure competitive pricing. To ensure that goods are always purchased at the lowest possible price.

To obtain goods and services of the required quality at the right cost.: The objectives of purchasing are to obtain goods and services of the quality and quantity needed at the right cost, to provide customer service, and to identify qualified suppliers and maintain good relations. The other answers are correct because many sources of a supply may not be available; purchasing does not control or approve the budgetary expenditures; and the lowest price is not necessarily the right price.

Which is a major objective of distribution inventory management? To always have enough of everything on hand so there are no stockouts To minimize the cost of warehouse space To provide the required level of customer service To minimize labor costs

To provide the required level of customer service: Customer service is a major objective of distribution inventory management; other objectives include minimizing the cost of transportation and handling and interacting with the factory to minimize scheduling problems. The other answers are worthy goals, but not major objectives of distribution inventory management.

What is replenishment lead time? Element of time added to normal lead time to protect against fluctuations in lead time so that an order can be completed before its real need date Amount of time that normally elapses between the time an order is received by a supplier and the time the order is shipped Total period of time that elapses from the moment it is determined that a product should be reordered until the product is back on the shelf available for use Longest planned length of time to accomplish the activity in question

Total period of time that elapses from the moment it is determined that a product should be reordered until the product is back on the shelf available for use:

Which of the following describes the break-even point? Target profit is maximized. Fixed costs equal total revenue. Total revenue equals total cost. Fixed expenses and fixed costs equal total revenue.

Total revenue equals total cost.: The break-even point is the intersection of the total revenue and total cost curves.

Which of the following factors has the greatest impact on reducing transportation inventory? Shipment size Safety stock Transit time Fuel surcharges

Transit time: The average amount of inventory that is in transit at any given time is a function of the average transit time in days. Reducing the average transit time in days is the only way to reduce transportation inventory levels. This can be done by using faster modes of transport or by selecting suppliers that are closer to the organization. This reduces both cost and lead times. If faster transport is used, its increased cost may offset any cost savings. The other answers are less significant given shorter transit times.

Global competition is increasing primarily because of which of the following factors? Regulations have been reduced and simplified. Economic conditions and consumer demographics are more stable. Manufacturing companies are resorting to more local sourcing. Transportation and communication cost less and are more effective.

Transportation and communication cost less and are more effective.: Global logistics and communications have provided customers with world-wide access to more products than in the past. The other answers may or may not apply at any given time.

Which of the following programs asks businesses to embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anti-corruption? United Nations Children's Fund United Nations Global Compact ADB/OECD Anti-Corruption Initiative Universal Declaration of Human Rights

United Nations Global Compact: The incorrect answers all represent global initiatives to increase human rights and well-being, but they do not have the focus of the United Nations Global Compact on supply chain management.

Which of the following is a means of replenishing inventory through a supplier's review and responsibility to maintain targeted inventory levels? Collaborative planning, forecasting, and replenishment Two-bin system Kanban Vendor-managed inventory

Vendor-managed inventory: Vendor-managed inventory (VMI) is a means of optimizing supply chain performance in which the supplier has access to the customer's inventory data and is responsible for maintaining the inventory level required by the customer.

Based on the information below, in what week would a planned order release be generated to satisfy the net requirement? Lead time: 3 weeks Order quantity: 100 Net requirement exists in: week 6 Net requirement quantity: 150 Week 1 Week 2 Week 3 Week 6

Week 3: Because the net requirement exists in week 6, the planned order release is offset by the lead time of three weeks. Thus, the planned order release will be generated in week 6 - 3 weeks = week 3.

When using throughput (theory of constraints) accounting, what is an important question to ask marketing and/or production professionals related to the throughput component of the analysis? How will inventory costs be impacted by the proposed change? Will we need to hire additional workers or buy auxiliary equipment? Will higher output be converted to cash quickly or sit in inventory? How quickly will the new capacity be depreciated?

Will higher output be converted to cash quickly or sit in inventory?: While all of the questions are good questions to ask when considering whether to make a new investment in capacity, only the question about higher output being converted to cash or adding to inventory levels is related to the throughput component of the analysis. Questions about inventory costs relate to the investment component of the analysis, while the need to hire more workers or make side investments and questions related to depreciation relate to the operating expense component of the analysis.

A work center is receiving enough work, but it is not performing to plan. To detect problems in this work center, the planner should compare: actual output to planned output. actual input to actual output. actual input to planned input. planned output to planned input.

actual output to planned output.: Actual output is compared to planned output to identify problems in the work center. Actual input is compared to planned input to identify when work center output might vary from the plan because work is not available at the work center, which is not the problem here. The other answers are not helpful for identifying problems in the work center.

A stockkeeping unit in a distribution system describes: the pack size or type of bin location. an item stocked at various distribution centers. an item at a particular geographic location. a measurement of stock.

an item at a particular geographic location.: A stockkeeping unit is an item stocked at a particular location.

The ability of a company to address the needs of and inquiries and requests from customers refers to: on-time delivery. customer service. order fill rates. customer relationship management.

customer service.: Customer service is the ability of a company to address the needs of and inquiries and requests from customers.

If the replenishment lead time of two weeks is reduced by 50% and all other factors remain constant, the safety stock will most likely: increase by 50%. remain constant. double. decrease.

decrease.: The following formula is used to determine a new safety stock when the lead time interval changes: New Safety Stock = Old Safety Stock x Square Root of (New Lead Time Interval/Old Lead Time Interval) Using the example of old safety stock of 150, an old lead time of two weeks, and a new lead time of one week (reduced by 50%, per this problem), the new safety stock becomes 106, which is a decrease from 150.

In production and inventory control, it is important to know whether demand is independent or dependent because the distinction: conveys what materials are unique or common to products. determines the selection of appropriate replenishment methods. defines the content of products. determines needed product quantities.

determines the selection of appropriate replenishment methods.: For the most part, products subject to independent demand are driven by a forecast and will use either a reorder point or ERP master scheduling for planning and replenishment. Normally, production inventories that should be planned in an MRP system are subject to dependent demand.

The optimal way to avoid a constraint downstream is by: establishing a space buffer. lowering constraint throughput. establishing a material buffer. lowering system throughput.

establishing a space buffer.: A space buffer is located immediately downstream of the constraint and protects against downtime downstream from the constraint. The size allowed should be enough to protect against any reasonably foreseeable downtime. Usually this buffer is empty. Lowering total system output will indeed reduce the possibility of a constraint, but then the entire productive system will be underutilized. Lowering the constraint throughput will have the effect of lowering the output of the entire productive system. A material buffer is used to protect the constrained process from running out of production due to problems occurring in predecessor non-constrained processes.

Using reusable packaging, such as bins or racks, rather than corrugated containers is an example of: recycling. green reverse logistics. design for service. kanban.

green reverse logistics.: A key element in green reverse logistics is the reduction in the amount of packaging.

The available capacity that exists on nonconstraint resources beyond the capacity required to support the constraint is: finite capacity. productive capacity. idle capacity. capacity management.

idle capacity.: In the theory of constraints, activation of any nonconstraint resource beyond what is necessary to support the constraint only produces unwanted and unnecessary inventory. It is better from a cost and throughput perspective to leave the resource idle.

The term genchi genbutsu is synonymous with: production planning. management by objectives. management by walking around. production capacity.

management by walking around.: Genchi genbutsu is the Japanese term for managing the production floor by physically walking around and viewing operations. The other options do not fit the definition of genchi genbutsu.

Forecasts are more accurate for: nearer time periods. smaller time periods. larger time periods. further time periods.

nearer time periods.: The near future holds less uncertainty than a time in the distant future.

The United Nations Global Compact Management Model defines a: corporate certification. risk management plan. set of regulations. practical framework.

practical framework.: The United Nations Global Compact Management Model is, by definition, a framework for guiding companies through the process of formally committing to, assessing, defining, implementing, measuring, and communicating the Global Compact and its principles.

A manufacturing cell is characterized by: a process layout. production of similar items. specialization of labor. large production runs.

production of similar items.: A manufacturing cell is defined as a manufacturing process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell.

A written inquiry sent to suppliers to obtain competitive and reliable pricing is known as a: bid proposal. purchase order. sales order. request for quotation.

request for quotation.: The request for quotation (RFQ) asks suppliers for information on price, compliance with specifications, terms and conditions of sale, delivery, and payment terms. An RFQ is an inquiry, not an order.

Drum-buffer-rope (DBR) is the term for: scheduling and managing operations that have an internal constraint or a capacity-constrained resource. balancing the assignment of tasks to workstations to minimize the number of workstations and the amount of idle time at all stations for a given output. spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential time periods tends to be distributed evenly and is achievable. periodically changing employee job responsibilities to provide a broader perspective and view of the organization.

scheduling and managing operations that have an internal constraint or a capacity-constrained resource.: DBR is the theory of constraints method for scheduling and managing operations that have an internal constraint or a capacity-constrained resource.

The term "demand management" is defined as: the function of recognizing all demands for goods and services to support the marketplace. forecasting the demand for a particular good, component, or service. a supply chain inventory management approach that concentrates on demand pull rather than supplier push inventory models. categorizing demand types into groups that share similar characteristics.

the function of recognizing all demands for goods and services to support the marketplace: Demand management is the overall function of recognizing all demands for goods and services to support the marketplace. Forecasting is an aspect of demand management that is assumed in the correct answer, while the other responses have little to do with demand management.

The function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization is known as: inventory control. distribution. transportation. supply chain management.

transportation.: Transportation concerns activities relating to the movement of inventories into and out of an organization. Distribution is concerned only with the movement of goods out of an organization. Inventory control refers to those activities and techniques of maintaining the desired levels of items. Supply chain management is described as the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.

The function of priority planning in a manufacturing company is to determine what material is needed and: the capacity required. when it is needed. where it is needed. potential sources for it.

when it is needed.: Priority planning is, by definition, the function of determining what material is needed and when. The other options deal with either producing the product based on the priority plan or getting and delivering the material identified by priority planning.

On the balance sheet, if owners' equity is $5,000 and liabilities are $3,000, what are the assets? $2,000 $3,000 $5,000 $8,000

$8,000: Assets = Liabilities + Owners' Equity; $3,000 + $5,000 = $8,000

Which of the following time periods will result in a smoother forecast that is less swayed by random variability when using the moving average forecast technique? 2 months 3 months 6 months 12 months

12 months: Using more periods—in this case, 12—will smooth out random variation more. The potential downside is that the smoother forecast will make current trends harder to see.

Based on the information below, what is the number of days of supply for this item closest to? On-hand inventory: 9,600 units Annual usage: 130,000 Reorder point: 1,200 units Reorder quantity: 3,600 units Working days per year: 260 7 10 19 27

19: Days of supply equals inventory on hand divided by the average daily usage. The average daily usage is the annual usage divided by the working days per year. For this problem, average daily usage is calculated as 130,000/260 = 500. Days of supply is calculated as 9,600/500 = 19.2, rounded here to 19.

A company has a drilling department with 5 drill presses. The department operates 8-hour days, 5 days a week. What is the weekly available time in hours? 25 40 80 200

200: The calculation requires multiplying the 5 drill presses by the 8-hour shift by the 5 working days, or 5 x 8 x 5 = 200 hours.

A manufacturer has a seven-day workweek. Using a periodic review system, multiple orders are placed every Tuesday, with a lead time of two days. For one item, the manufacturer maintains a safety stock level of 50 and has an average daily demand of 25. What would be the target (maximum) inventory level? 175 225 275 475

275: T = D x (R + L) + SS; in this case, 25 x (7 + 2) + 50 = 275

Using ABC classification for cycle counting, A items are counted every week, B items are counted quarterly, and C items are counted annually. There are 2,000 A items, 5,000 B items, and 20,000 C items. How many items are counted each day in total if there are 50 working weeks in the year translating to 250 workdays in the year? 404 units 574 units 560 units 395 units

560 units: To determine the total number of items to count, multiply the number of items by the number of times the item is counted for each class and then sum the results. A items are counted weekly, so this is 50 times per year: 2,000 units × 50 weeks = 100,000 counts. B items are counted quarterly, so this is 4 times per year: 5,000 × 4 = 20,000 counts. C items are counted once, so this is just 20,000 counts. Next, sum the counts: 100,000 counts + 20,000 counts + 20,000 counts = 140,000 counts. Then divide this sum by the number of manufacturing calendar days in the year: 140,000 counts/250 days = 560 counts per day.

A company adheres to a policy of level production for its product. What production rate will result in zero ending inventory after four periods? beginning inventory = 0 Period 1 Demand 60 Period 2 Demand 80 Period 3 Demand 40 Period 4 Demand 100 60 70 90 100

70: Total Demand for Four Periods = 60 + 80 + 40 + 100 = 280/4 Periods = 70 Units

Based on the following demand history, what is the moving three-month forecast for August? April: 67 units May: 63 units June: 80 units July: 70 units 70 71 75 93

71: The calculation is as follows: 63 + 80 + 70 = 213/3 = 71 units. Although data was given for April, the question asks for a three-month forecast for August, so this data is not used.

What is the term for an array of inventory broken out into different categories based on Pareto's law? Group technology ABC classification Days of supply Value analysis

ABC classification: An ABC classification of inventory represents a group of items in decreasing order of annual monetary volume (price multiplied by projected volume) or other criteria. This array is then split into three classes: A, B, and C.

What action by a company would indicate that it is conducting a green reverse logistics operation? Accepting dead batteries and ensuring that they are properly disposed of at manufacturing facilities Purchasing all electricity from green sources, such as solar or wind energy Using vehicles and machinery with electric motors instead of combustion engines Purchasing carbon offsets to compensate for emissions produced by its manufacturing process

Accepting dead batteries and ensuring that they are properly disposed of at manufacturing facilities: Accepting dead batteries and ensuring that they are properly disposed of at manufacturing facilities is the best example of a green reverse logistics operation. The other options include green initiatives but don't feature reverse logistics.

Which of the following outcomes is the primary objective of total quality management (TQM)? Achieving customer satisfaction Reducing product defects Increasing employee involvement Improving equipment utilization

Achieving customer satisfaction: The ultimate goal and singular objective of TQM is to produce products that achieve the highest levels of customer satisfaction. Reducing product defects, increasing employee involvement, and improving equipment utilization are not in themselves primary goals, although they can all help to further the main objective of achieving maximum customer satisfaction.

Which of the following techniques deals with the analysis and planning of logistics and manufacturing during short-, intermediate-, and long-term periods? Advanced planning and scheduling Distribution requirements planning Transportation management system Materials requirements planning

Advanced planning and scheduling: Advanced planning and scheduling (APS) techniques deal with the analysis and planning of logistics and manufacturing during short-, intermediate-, and long-term time periods. The five main components of APS systems are demand planning, production planning, production scheduling, distribution planning, and transportation planning.

When purchasing natural products like fruit, what should the supplier agreement specify? Allowable variation in quantity. Exact delivery dates. Discounts if paying late. Exact quantity per order.

Allowable variation in quantity.: Specifying allowable variation in quantity for natural products is an example of the specificity needed in supplier agreements so as to avoid later confusion or disagreement. However, specifying exact delivery dates on products that depend on the weather may also not be possible.

Which cost will decrease if order quantity decreases? Cost of manufacturing operations Cost of customer service Cost of ordering Annual cost of carrying inventory

Annual cost of carrying inventory: The annual cost of carrying inventory will decrease as the order quantity decreases because the average inventory level will fall. Cost of ordering will increase as more orders are placed in the same time period. Costs of manufacturing and customer service are not affected by the order quantity.

A firm offers products configured from a large number of stocked options and subassemblies. Which of the following production environments is the firm most likely to use? Make-to-order Make-to-stock Assemble-to-order Engineer-to-order

Assemble-to-order: In an assemble-to-order environment, production is based on the final assembly of standardized options and subassemblies as determined by the customer. Engineer-to-order products are normally unique and one of a kind. Make-to-order products are produced from stocked components and assemblies that can be modified as determined by the customer. Make-to-stock products are normally made in a lot size according to standardized bills of materials and routings and then inventoried.

Which of the following statements is true about inventory in an engineer-to-order (ETO) environment? Buffer inventory should be held closer to the raw material stage. Customer influence on the product design should not affect inventory levels. Large safety stocks must be maintained. Lot-size inventory increases to the finished goods level.

Buffer inventory should be held closer to the raw material stage.: In an ETO environment, most inventory needed for production is ordered after authorization of the customer order. The reason for this is that the product being built is almost always unique. However, the manufacturer may have raw material and component inventories that are common to all of the possible configurations it can make. As such, the producer might have buffers for these types of inventory. Because they are usually unique, ETO orders are rarely, if ever, built to a lot size. An ETO producer will not purchase inventories until the customer order configuration has been authorized for production. The finalized customer product design for an ETO product has a very high impact on an ETO producer's inventories.

Which are costs of carrying inventory? Storage costs and purchasing costs Production control costs and purchasing costs Capital costs and production control costs Capital costs and storage costs

Capital costs and storage costs: Capital and storage costs are two of the three main components of inventory carrying costs, along with risk costs. The other options include either production control or purchasing costs, neither of which is a component of inventory carrying cost.

Which of the following best defines reverse logistics? Complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling Function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization Distribution network that deals with change of ownership of goods and services, including the activities of negotiation, selling, and contracting Items returned to the manufacturer as defective, obsolete, overages, etc.

Complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling: Reverse logistics is a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.

Which managed inventory strategy would best suit a lean manufacturer that is unable to provide consistent order sizes due to fluctuations in demand for the various products it produces? Consignment Vendor-managed inventory Continuous replenishment Lot for lot

Continuous replenishment: Continuous replenishment uses actual sales or warehouse shipments without stockouts, resulting in lower associated costs and improved inventory turnover. It would be best suited for the manufacturer due to the manufacturer's inability to provide consistent order information and its preference to reduce waste, which would include extra inventory storage in the form of consignment or VMI.