Practice Test Questions Review
Implementing customer relationship management (CRM) will enable a company to:
...align resources to manage new and existing customers. The primary benefit of CRM is to manage new customers and retain existing ones. It allows for a customized, not standardized,sales approach. CRM can be used to provide information for market segmentation, but that is not the primary purpose.
The schedule will not allow exhaustive analysis of all the scenarios that the team knows are causing a system to crash, but they need to correct the majority of the issues. What quality tool would best help them focus their resources?
A Pareto diagram visualizes the causes that contribute to 80% of the effects (or system crashes).
What is the minimum level of enterprise evolution in which a firm might use a logistics supplier to integrate with external members and also internally combine warehousing and transportation activities to optimize cost versus customer service?
A company at Stage 3 will make advances such as carrying out warehousing and transportation decisions in tandem to achieve the optimal balance of cost-effectiveness and customer service. At this point, the nucleus firm may begin to take a step toward integration with the external members of the chain by contracting with a logistics supplier.
A supply chain manager's superior asks her to draw up a project charter and be the project manager on a project to continually improve inventory levels by conducting ongoing audits. What should be clarified first?
A project is a temporary endeavor with a clear end date in mind. What is being described is actually part of supply chain operations rather than a project. A few changes, such as an end date and some measurable objectives, could turn this into a project.
An appropriate use of an advanced planning and scheduling (APS) system is:
APS systems can be used to identify an imbalance between available and required capacity so that constraint management can occur. Optimization of routes is done by a transportation management system. Supply chain event management systems are used when specific events occur. Replenishment of inventory is handled by material requirements planning.
A manufacturer in a highly competitive industry wants to improve efficiency and lower overall costs for its products by increasing information sharing and collaboration with multiple suppliers and distribution partners. It is exploring a business-to-business exchange to facilitate this effort. Which ownership model would work best for the manufacturer?
According to the APICS Dictionary, 16th edition, a virtual trading exchange is "an online trading exchange that enables both information integration and collaboration between multiple trading partners." This would be the best option in this situation, as it focuses on information integration and collaboration. Note that private trade exchanges may also help promote integration and collaboration but are formed by market-dominated companies. Given the competitiveness of the industry, this answer is incorrect.
One of a tire producer's suppliers is a natural rubber producer whose products are becoming subject to more demand even as the product becomes more rare. Another of their suppliers is a tire recycler, who provides the tire producer with old tires. Which of the following collaborative intensities would be appropriate for these partners?
Because the natural rubber is becoming more rare, the tire producer should consider some form of partnership or better for this partner. The tire recycler is not offering a unique value-added service but a commodity service, so these transactions should be kept at arm's length.
Which of the following two warehouse functions share the same benefit of having consolidated, full-trailer shipments into and/or out of the facility?
Break-bulk and cross-dock facilities provide the benefits of consolidated, full-trailer shipment, either into the facility, out of the facility, or both. Not - stockpiling and mixing
Capacity management is used primarily for:
Capacity management is used to determine the capacity required to supply the load.
Use of a fixed order quantity model is most likely to be effective in which of the following cases?
Fixed quantity ordering is generally used to fill containers, qualify for quantity discounts, or both. The model works best when demand is known and stable with predictable lead times.
When determining the transportation mode for servicing distribution warehouses, which of the following factors should be considered?
Comparative qualities for modes of transportation are speed, availability, dependability, capability, and frequency. Cost is a factor, but many of the variable costs are dependent on the other factors.
Which of the following statements about customer segmentation is true?
Customer segmentation predates CRM, but in the past it relied heavily on demographic segmentation, which does not use actual customer buying behavior as CRM segmentation methods do. Customer segmentation can increase both revenue and profitability for retail and B2B customers.
How does demand-driven material requirements planning (DDMRP) minimize buffer inventories while maintaining desired customer service levels?
DDMRP dynamically determines the best places to position inventory and dynamically adjusts the size of buffer inventories to maximize return on investment for the inventory. To do this, it performs daily reviews that account for how long customers will wait for their orders, whether faster lead time would generate new sales, and whether certain inventory positions would leave the organization with more options for dynamic lead time compression.
If there are supply and demand imbalances after the servicing orders step of demand management, what should the organization do?
Demand management includes planning, communicating, influencing, and managing and prioritizing demand. After analyzing and then forecasting demand, servicing orders occurs. After that, the next step in the process is influencing customers to buy or influencing them to alter purchases if there are supply and demand imbalances.
Which of the following is a preventive action?
Diversifying the customer base is a preventive action because it is done in advance of any problems such as lost customers. The other answers are all contingent actions.
A risk response will cost $30,000 for a risk of loss with a probability of 60% and an impact of $500,000. What is the expected monetary value of this risk after the response is factored in?
EMV = Probability x (Impact + Cost) = 0.6 x (-$500,000 + -$30,000) = -$318,000
An organization that uses standard costing is calculating the efficiency of its main manufacturing facility over the last month. In any given week, the facility has 1,600 standard hours of work. The hours actually worked over the last four weeks are as follows: week 1—1,689, week 2—1,547, week 3—1,590, week 4—1,730. What is the total efficiency for the last four weeks?
Efficiency is total standard hours worked divided by hours actually worked. The sum of total standard hours worked for the period in question is 6,400. The sum of the hours actually worked is 6,556. 6,400/6,556 = 97.6%.
When working to extend risk management to supply chain partners, one best practice to generate lowest supply chain risk is to:
Examples of supply chain business rules for a supply chain designed to manage risk include business rules for customer priority, supplier priority, production routing, transportation routing, and so on.
What Incoterm would be appropriate for a truckload (TL) delivery if the buyer wants the seller to handle both delivery and unloading at their factory warehouse?
FOB, DPU, DAP, FCA Delivered at Place Unloaded (DPU) involves the seller delivering the goods to a location and unloading them.
If an organization wants to gain access to the U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) membership list of certified suppliers, it must:
Gaining access to the C-TPAT list of certified suppliers is a benefit of voluntary membership, which in part requires that the organization develop and implement a program to enhance supply chain security in accord with C-TPAT guidelines.
An organization has pursued lean and Just-in-Time manufacturing and offshoring to a nearby low-labor-cost country. Which of the following is a significant consequence of these actions on the organization's supply chain?
Higher Risk, not higher TCO. Offshoring implies that the supply chain is more geographically diverse, and, as a result, natural and manmade disasters can have a tremendous impact and could lead to a shutdown of the production lines due to lack of parts.
If you were a supply chain manager for IKEA, which strategy would you promote with your suppliers according to IKEA's IWAY initiative?
IKEA's strategy is to engage in long-term relationships with fewer suppliers, and IKEA is committed to helping the suppliers do their best environmentally. The company has developed a code of conduct that suppliers must adhere to in order to work with IKEA. The code delineates the requirements for the outside environment and the social and working conditions in an initiative they call IWAY.
Companies and supply chain partners who are notmembers of a trading bloc might need to do which of the following to counteract the bloc's impact?
If a trade bloc is large, nonmembers may see their prices and demand for exports decrease. This can result in deterioration in trade terms and decreased market power of these nonmembers. Seeing a decrease in their exports, they may resort to protectionist tactics and increase their lobbying efforts.
Successful implementation of customer relationship management (CRM) and supplier relationship management (SRM) philosophies usually requires:
Implementing CRM and SRM does not require that companies change their core competencies, although employees may need to acquire new skills. Nor do organizations need to form common goals or mission statements. They will need, however, to revisit work processes, job definitions, and decision-making structures.
A firm is trying to harmonize supply and demand so as to minimize total product, transportation, and inventory costs. Which of the following would be the first step the company needs to take in this endeavor?
Improve forecast accuracy.
As a general rule, instituting Just-in-Time (JIT) in a manufacturing facility affects employees' jobs in which of the following ways?
In JIT, there is an emphasis on training and cross-training to boost employees' skills and knowledge to keep up with their growing responsibilities. As a result,job responsibilities tend to expand.
A retailer replenishes stock by placing orders for new goods from a manufacturer on a one-to-one replacement basis and provides the manufacturer with point-of-sale data for their own forecasting purposes. This describes which of the following inventory management models?
In a quick response program, the retailer continues to order from the supplier, although the supplier may collect POS data for the purposes of planning and forecasting. This is similar to a continuous replenishment system;in that type of system, however, the retailer does not place orders.
After the United Kingdom exited from the European Union (EU), what trade document is now needed to pass EU customs when road transport is used?
In the case of the EU, the TIR Carnet is only used when the shipment originates or ends outside of EU customs territory or if the transit will involve movement temporarily out of and back into EU customs territory. Because the United Kingdom has exited from the European Union, it now needs to use TIR Carnets for EU trade.
Which type of supply base analysis would best reveal areas where giving more business to selected suppliers would have the most bottom-line impact?
In this case, the vital few to manage are the categories that have low average spend per supplier. This type of Pareto analysis finds those categories that could benefit from increasing the average volume of business per supplier by consolidating suppliers.
A company keeps running out of several inexpensive items that are critical to production. The best solution for this problem is to:
Increasing the minimum inventory level provides a greater buffer against running out of inventory. Items could be reclassified as A-level items, but, due to their low costs, this would not be the best solution. Shifting inventory to the supplier would still cause a lag in replenishment. Standardization does not resolve the inventory level issue.
Cycle counting is usually paired with which of the following to minimize the total cost of inventory shrinkage?
Inventory shrinkage is "losses of inventory resulting from scrap, deterioration, pilferage, and so forth" (APICS Dictionary, 16th edition). ABC inventory classification groups inventory into categories of relative value, and when paired with cycle counting, can be used to count A items more frequently, thus reducing the likelihood of shrinkage for the most valuable inventory.
If a restaurant chain performs hourly forecasting, which of the following will likely be reduced, assuming that there is acceptable forecast error?
Labor Costs Hourly projections are useful in determining all the capacity requirements of a restaurant—numbers of workers to put on each shift, number of registers to maintain, number of tables, space requirements, and so on—as well as in making decisions about food items to stock. Therefore, labor and materials costs should be reduced. Overhead costs are generally fixed costs that could be reduced more effectively by longer-term forecasting. Even if an organization forecasts accurately, underlying demand variability will still exist. But if it is better planned for, supply variability can be reduced.
A plant has $1 in variable costs per unit produced, and units sell for $2 each. The plant has firm orders for 1,000,000 units and has $600,000 in overhead for the period. The gross profit margin for these units is thus $0.40 per unit. A special order request comes in and there is available capacity, but the price would be $1.50 per unit for 200,000 units. What would a marginal analysis suggest the organization do?
Marginal analysis considers only the additional costs and additional benefits. The overhead is a sunk cost in this decision and thus is ignored. The additional cost is $1 per unit in variable costs and the benefit is $1.50 per unit in variable costs, for a marginal net benefit of $0.50 per unit, or $100,000 in gross profit for 200,000 units. Since the organization has available capacity that would otherwise go unused, the rational decision is to accept this offer.
An organization is undertaking a total cost of ownership study of the supply chain, looking to reduce costs. When looking at landed costs, which cost may represent an area to generate cost savings?
Monitoring and control costs frequently differ between alternatives. These are generally higher when outsourcing is used and may represent an opportunity to reduce total costs to the supply chain.
Which of the following performance measures would be expected to increase with a successful sales and operations planning (S&OP) implementation?
Percentage of on-time deliveries The S&OP process will have the most impact on the percentage of on-time deliveries due to the collaborative effort of all departments and the visibility to future inventory levels. The other options may be indirectly impacted but are not direct benefits.
An organization's two distribution centers have planned order releases of 100 and 200 units respectively. Its central factory has a projected available balance of 100 units and scheduled receipts of 200 units and keeps 100 units of safety stock. In distribution requirements planning, what is the net requirement for the central factory for a given week?
Net Requirement = (Gross Requirements + Safety Stock) - (Projected Available Balance + Scheduled Receipts) = [(100 units + 200 units) + (100 units)] - (100 units + 200 units) = 400 units - 300 units = 100 units
In the Supply Chain Operations Reference (SCOR®) model, which of the following metrics measures the reliability of a supply chain?
On-time delivery is one of the metrics SCOR uses to measure supply chain reliability.
In which stage of the continuous improvement model might it be necessary to rethink the goal or move the benchmark?
Project planning
Which of the following tasks is most likely to be performed by a purchasing agent/planner rather than a purchasing manager?
Purchasing managers focus on strategic tasks such as supplier selection, contract negotiation, and analysis and evaluation of the supply system. Purchasing agents or planners focus on placing orders, following up with suppliers as needed, monitoring supply needs, and measuring supplier performance.
Which of the following expresses the costs that should be included in a total cost of ownership (TCO) analysis?
Since a supply chain is a very complex system with multiple costs, effective analysis requires selecting only those costs that help differentiate between alternative strategies. Costs that are the same for each option can be omitted from consideration.
An organization outsources a key activity and stays involved with the supplier, monitoring and controlling on a daily basis. The resulting quality is not what was desired, but the supplier insists that its quality is superior to that of its competitors. Which of the following is the most likely reason for this problem?
Rather than failing to define quality metrics, the organizations in this scenario failed to agree on a common standard or target for those metrics.
An organization has decided to reduce the number of distribution warehouses it uses to fulfill customer orders. What will be the most likely result?
Reducing the number of warehouses reduces the amount of safety stock incrementally. Order fill rates typically increase, as the inventory is not disbursed to as many locations. In-transit inventory is increased, as the number of transit days increases. Lot sizes may or may not be impacted but will most likely be larger.
A toy manufacturer wants to use an auction to procure a large shipment of common screws at the lowest possible cost. Which type of auction should the manufacturer use?
Reverse auctions are internet auctions in which suppliers attempt to underbid their competitors; company identities are known only by the buyer. The manufacturer could draw multiple bids for the screws and drive the suppliers to lower their prices to the lowest level possible, saving the manufacturer money.
Which of the following parts of a transportation management system (TMS) would a manager use to optimize and select carriers for the movement of a container from a container ship to a railcar and finally to a truck?
Routing must be able to deal with various transportation modes. Mode switching tools optimize the movement of goods across multiple modes such as air-to-ground or courier-to-air-to-courier. Routing guides allow users to define rules for shipment routings, and the TMS can automatically control carrier selection.
The primary reason for an organization to implement a supplier relationship management (SRM) system is to:
SRM helps companies manage the relationships with its suppliers, thereby streamlining procurement activities. The other options may be an indirect result but are not the primary purpose.
What is an example of a desirable supplier value-added service?
Supplier value-added services can include consulting services, such as providing input to category market research. Suppliers who are providing a material that does not fit their strategy may feel value added, but this makes the organization either a nuisance or an exploit customer, and neither is desirable. Providing transfer packing that eliminates customer process steps would be value added.
A company has stated in its annual business report that its management philosophy is based on the principles of total quality management (TQM). In order to ensure that TQM is effectively implemented, the company should focus on:
TQM is a philosophy supported by a managerial system focused on meeting customer expectations with respect to all needs, from all departments or functions of an organization, whether the customer is internal or external, a supply chain partner, or a consumer.
When communicating requirements and priorities for managing supply from internal resources, a best practice is to:
Targeting communications requires understanding what will motivate the listener best and using terminology that the listener will understand and appreciate (e.g., business terms for executives, technical terms for engineers). Targeting communications also means not overloading persons with too much information, setting organization-specific key performance indicators, and allowing production plan details to be automatically communicated (reserving personal discussions for exceptions or special situations). ex: learn key engineering terminology for use with engineers
A company is beginning the process of defining market segments for its products and services. The most appropriate objective for this undertaking would be to identify groups of customers with similar:
The APICS Dictionary, 15th edition, defines a customer-driven approach as "a company's consideration of customer wants and desires in deciding what is produced and its quality." Design should start with analysis of actual customer requirements or needs.
Which of the following categories of cost would a retailer typically include in the cost of carrying inventory?
The APICS Dictionary, 15th edition, states the following: "The cost of holding inventory [is] usually defined as a percentage of the dollar value of inventory per unit of time (generally one year). Carrying cost depends mainly on the cost of capital invested as well as such costs of maintaining the inventory as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary from 10 percent to 35 percent annually, depending on type of industry.
Inside a demand time fence, can customer orders still be promised without needing higher authority approval?
The APICS Dictionary, 16th edition, states the following: "In some contexts, the demand time fence may correspond to that point in the future inside which changes to the master schedule must be approved by an authority higher than the master scheduler. Note, however, that customer orders may still be promised inside the demand time fence without higher authority approval if there are quantities available-to-promise (ATP)."
What has the ERTMS (European Rail Traffic Management System) done for rail transport in Europe?
The ERTMS is a digital command and control system that has standards for technical interoperability. This system has sped up trains and increased rail infrastructure capacity.
The costs of an organization's initial customer marketing and relationship building consistently result in expenses in excess of the revenues that are generated. Which of the following describes this situation?
The costs of acquiring new customers tend to be front-loaded in the relationship. If enough customers can be retained over the long term, the cost of retaining them declines as the profits derived from them increase.
What will happen with a time-series forecast if strong seasonality is not removed prior to forecasting?
The downward trend that is generated by a change in seasonal demand would be projected forward. In other words, it would lag the change in trend.
An organization's inventory on its balance sheet in year 1 is $6 million and in year 2 it is $4 million. If its cost of goods sold (COGS) in year 2 is $80 million, what is its inventory turnover ratio?
The inventory turnover ratio requires calculating average inventory, which in this case uses the balance sheet values for years 1 and2, which are ($6 million + $4 million)/2 = $5 million. The inventory turnover ratio is COGS divided by average inventory: $80 million/$5 million = 16 times.
According to the functional and innovative product categories designated by Marshall L. Fisher, which of the following would be a proper performance indicator for a typical innovative product?
The key performance indicators for each supply chain differ because of the product characteristics. Aggressively reducing lead times, for example, is appropriate for innovative products but would be irrelevant for functional products that can be manufactured and delivered on predictable schedules in high volumes.
Using primarily a pull system in the distribution network offers which of the following benefits to the supply chain as a whole?
The main benefit of the pull system of distribution is sensitivity to local customer demand, since orders begin near the customer and "pull" products from upstream. This approach does not facilitate communication, eliminate safety stock, or improve visibility down the chain because there is no central coordination and upstream partners have to depend upon forecasting to plan for future orders rather than upon (for example) a predetermined production schedule.
A power supply that can be used with different end cables in countries with different electrical infrastructures is an example of which of the following design strategies?
The power supply is a module that, along with other modules, can be mixed and matched to assemble devices for use in countries with different power supply infrastructures.
A supply chain management functional area runs its operations as a series of agile projects. The product owner suggests that an integration project with a key supplier should be started now even though it is lower on the kanban board than other planned mini-projects. This is because the supplier is now ready to integrate. What should the team do?
The product owner represents the needs of the customer and has presented a compelling reason to reprioritize this mini-project. A kanban board is designed to be regularly reprioritized and so the reprioritization should be done. The scrum master does not make this decision on his or her own; rather it is a team decision.
During rough-cut capacity planning (RCCP), it is discovered that a bottleneck resource has unused capacity during a planning week and too much load in the next week. Which of the following should the master scheduler do?
The schedule could be revised to allow some of the load in the second week to be performed in the first week.
As part of the sourcing process, what is a prerequisite to doing a spend and portfolio analysis on suppliers?
The steps in the sourcing process include: 1) Develop/validate supply plan; 2) Research supply market; 3) Create/refine categories and category strategy; 4) Do spend and portfolio analyses; 5) Segment suppliers; 6) Conduct procurement processes; and 7) Continuously improve.
When determining lot size, which of the following costs should be balanced?
The two costs that must be considered for optimum lot sizes are carrying and ordering.
A customer buys a significant percentage of your spare parts for now obsolete product lines. The customer is not interested in upgrades to the new lines. Which would be an appropriate strategy for dealing with this customer?
This customer does not align with your strategy even though the customer does still represent significant business. In the customer desirability matrix, this is considered an exploit customer. The proposed action would allow the organization to end support for the obsolete product without the customer needing to upgrade.
If you know the available time at a work center and want to calculate its rated capacity, you also need to know which of the following?
To calculate rated capacity, you multiply the number of available hours by the efficiency and utilization. Essentially, that tells you how much of the available time is being used and how efficiently it's being used.
An organization automatically detects when a frequent purchaser calls. The customer is not placed on hold and is offered a purchase upgrade discount. Which type of customer segmentation is this organization using?
Today more and more organizations are treating customers differently based on the differences in the customers' contributions to the bottom line. Segmentation by value shows a customer-driven business which groups are most profitable to them so they can focus marketing efforts on those customers.
What can be done about the risk of non-malicious information system failures causing an inability to conduct business for a period?
Trade disruptions that are caused by information systems failures could be mitigated using trade disruption insurance for lost profits. Trade disruption insurance is broader than business interruption insurance, which addresses the loss of use of physical property. Cyber insurance can help against malicious attacks that cause failures.
When investing in new capacity in an industry with ever shorter product life cycles, which of the following would represent the best investment?
With shorter product life cycles, there is less certainty as to what kind of process will be needed to make new products. Moving toward more general-purpose equipment and away from high-speed, special-purpose equipment is an effective strategy for dealing with this dilemma in that the general-purpose equipment would be more flexible and adaptable to new products.
The voluntary initiative for companies to embrace, support, and enact a set of core values in the areas of human rights, labor standards, the environment, and anticorruption is the:
United Nations Global Compact.
A group of employees is discussing which features would be best for a new product they will be launching. Using a flipchart, they have written their overarching product goal and the four product features they want. They're now in the midst of adding further details about each of the product features. Which of the following tools are they using?
Using a tree diagram enables one to take broad categories and repeatedly break them down into smaller, more refined details. This tool can help an employee team delineate tasks and activities required to meet a specific goal. The desired product features then branch off to the right from the goal, and relative details are added for each feature. Each of these branches helps to clarify another aspect of the product.
A virtual supply chain organization can best be characterized as:
Virtual supply chain organizations work together to deliver products and services to customers as one entity, yet they retain their autonomy.
Volume growth is a key performance indicator for which of the following?
Volume growth measures the success of merchandizing efforts.
According to the APICS definition of waste, which is a type of waste?
Waste includes any activity that does not add value to the goods or services in the consumer's eyes. According to the definition in the 15th edition of the APICS Dictionary, waste can also be a "by-product of a process or task with unique characteristics requiring special management control."
Which is a reverse logistics best practice for an organization that places a strategic priority on efficient, cost-effective returns processing and has the infrastructure to do this at high levels of customer satisfaction?
While reverse logistics is not a core competency for most organizations, this organization appears to have it as a core competency and a strategic priority. Therefore, it should retain these functions in house. The products in the reverse chain won't necessarily move through the same nodes as products in the forward chain because fewer, and different, warehouses, may be required.
Which would be the fastest way for a fashion clothing company to get to market while also minimizing demand mismatch risks?
Zara, Mango, and other fashion-conscious clothing companies and brands have found ways to begin the seasonal design process early. By paying careful attention to trends on the street, they can get a head start in ordering materials and developing prototypes of designs that seem likely to appeal to their target customers in the upcoming season. But they delay final design decisions and the start of manufacturing until real data come in.
What needs to be phased out as part of an end-of-sales plan from a material requirements planning perspective?
t is important to ensure that material requirements planning components are planned accordingly as part of the end-of-sales plan, including removing safety stocks and buffers.
