CSCP Practice Exam
A process expert says that most likely, the cost per unit of a new product should be $12, but, in the worst case, it could be as much as $16. He says that if commodity prices stay low, unit costs could be as low as $9. If a PERT weighted average is used, what should the risk analysis use as the cost per unit?
$12.17 PERT Weighted Average = (Optimistic + [4 x Most Likely] + Pessimistic)/6 = ($9 + [4 x $12] + $16)/6 = $12.17
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?
-$318,000 EMV = Probability x (Impact + Cost) = 0.6 x (-$500,000 + -$30,000) = -$318,000
An implementation of an advanced planning system is scheduled to cost US$520,000 in the first year and US$80,000 each year for the next four years. It is expected to produce annual benefits in cost savings and efficiency gains of US$200,000 a year for five years. Which of the following is the correct result of an ROI analysis?
19% Total costs are US$840,000 and total benefits are US$1,000,000. Return on investment (ROI) is [(Total Benefits - Total Costs)/Total Costs] x 100 = [($1,000,000 - $840,000)/$840,000] x 100 = 0.190476 x 100 = 19%.
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?
97.6% 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%.
Cycle counting is usually paired with which of the following to minimize the total cost of inventory shrinkage?
ABC inventory classification 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.
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?
Accept the offer and increase gross profits by $100,000. 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.
Realigning an organization from product-focused to customer-focused requires which of the following changes?
Analyzing each customer contact point to determine how key players can maximize the customer's experience Every customer contact point must be analyzed to identify key players within the organization who can affect customer satisfaction and to determine what they can do to maximize the customer's experience. This requires a high level of collaboration across sections of the organization and a clear articulation throughout the organization, to every member, of this new priority.
According to the APICS definition of waste, which is a type of waste?
Any unique by-products requiring special management control 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."
If you are the supply chain manager, where should you be looking in the supply chain in order to get the best view of potential changes to the market?
At the next stop downstream in the chain and at the consumer end Watch trends in demand at the consumer end of the chain, not just at the next stop downstream. Visibility to the end of the chain can speed up response to changes in the market.
Which of the following measurements best describes performance related to sales and operations planning (S&OP)?
Balance of supply with demand over the planning horizon The key to S&OP success is to balance supply and demand throughout the entire planning horizon.
An organization finds itself overextended, attempting to create, market, and sell products well outside its areas of expertise, and is beginning to suffer financially as a result. How can subcontracting certain processes benefit the organization as it attempts to tackle the source of the problem?
By allowing it to focus on core competencies Given that the root cause of the issue is a lack of focus on core competencies, the main benefit the organization would seek to realize by subcontracting is the ability to focus on its core competencies. An enterprise contracts only for activities that are not core competencies (in most cases). It does so to increase its ability to focus on its core activities.
What has the ERTMS (European Rail Traffic Management System) done for rail transport in Europe?
Centralizes command and control between nations 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.
What is the most important thing for an organization to establish before it attempts to break into a market with many competitors or when the market conditions are considered challenging due to the economy?
Clear competitive advantage Market conditions can be considered challenging when the organization needs to break into a market dominated by other competitors or when the prospective customers are less likely to make a purchase because of the state of the economy. In such situations, the organization's competitive strategy needs to show how its offerings will have a clear competitive advantage.
A company wants to reduce the lead time of components and increase the on-time delivery performance of suppliers. Which of the following processes needs to be implemented?
Collaborative planning, forecasting, and replenishment (CPFR) CPFR is a way to integrate the components of demand management among supply chain partners.
Which third-party logistics provider (3PL) contract clauses need to be robust because 3PLs will likely see details on supplier and manufacturer costs?
Confidentiality clauses Since 3PLs or 4PLs(fourth-party logistics providers) are working so closely with your suppliers and customers and likely have direct access to organizational data, confidentiality clauses need to be robust.
Which of the following warehouse ownership models can combine the benefits of economies of scale and scalability with lower long-term costs?
Contract warehousing Contract warehousing combines characteristics of private and public warehousing. A long-term contractual relationship typically results in lower total cost than a public warehouse while providing expertise, flexibility, scalability, and economies of scale. It accomplishes this by sharing management, labor, equipment, and information resources across multiple clients.
A letter of credit offers security from which risk?
Counterparty risk The letter of credit offers security from counterparty risk. Governments could still intervene in the transaction if there are regulatory issues. The party receiving the goods could still refuse to accept delivery and the party accepting the goods could accept them and pay only to find out the goods are substandard after the fact.
A chain of children's clothing stores has implemented a frequent shopper reward program. The company has also implemented point-of-sale (POS) computer systems in each store, and the sales data from each store are transmitted to headquarters. The data for all stores are analyzed weekly by headquarters staff to determine the most popular styles and colors. This analysis of the data is an example of which of the following computer applications?
Data mining Data mining is a process used to search for previously unknown relationships and can be used as a toolset to identify those relationships and patterns in the data that enable predictive analysis.
For the remanufacturing process to work, companies must take the remanufacturing of products into account beginning in which phase?
Design About 70% of the cost to build something new is in the materials. By taking remanufacturing into account during the design phase, even before the new product is developed, companies can effectively address the larger cost component of reclaiming products after they have been used for one or more life cycles.
Which of the following is a preventive action?
Diversifying the customer base 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.
How does demand-driven material requirements planning (DDMRP) minimize buffer inventories while maintaining desired customer service levels?
Dynamically adjusting buffer levels based on daily reviews of how long customers will wait for orders 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 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?
Efficiency and utilization 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.
A manufacturer creates a new supply plan that is aligned with the corporate strategy, mission, and culture. The manufacturer makes decisions on using centralized vs. autonomous sourcing and plans for future growth. However, soon after the plan is implemented, unforeseen issues begin causing stockouts of crucial supplies, disrupting the manufacturing process and causing massive losses. What is the likely cause of this failure?
Failure to conduct a risk assessment The unforeseen issues would likely have been identified and accounted for had the organization conducted a risk assessment. The risks of a supply plan must be spelled out for decision makers at a high level, including an assessment of the likelihood of each risk, its impact if it occurs, and possible means and costs involved in mitigating the risk. Process change risks should be called out. Contingency plans should be included.
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?
Get the customer to commit to buying enough spare parts right now to cover the expected remaining life of its products. 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.
A make-to-stock manufacturing organization should do which of the following when demand forecasting predicts increased demand due to economic growth?
Increase cycle stock. The APICS Dictionary, 16th edition, defines cycle stock as follows: "One of the two main conceptual components of any item inventory, the cycle stock is the most active component; the cycle stock depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received."
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?
Increased risk 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 there are supply and demand imbalances after the servicing orders step of demand management, what should the organization do?
Influence customers to alter purchases as needed. 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.
What technologies form the foundation of an intelligent supply chain because one provides input data at a much finer grained level of detail than otherwise possible and the other enables each object providing that data to have a "digital twin?"
Internet of Things (IoT) and intelligent asset management (IAM) IoT devices enable networking on non-computer devices using internet communications. This technology provides input data at a much finer grained level of detail than otherwise possible. IAM creates a digital version or "digital twin" of an industrial asset so the asset's performance and maintenance status can be updated. While blockchain is an enabling technology for an intelligent supply chain, it fulfills different functions than those described in the question.
A company seeking improvement in its supply chain financial performance should concentrate on which of the following metrics?
Inventory turns Reducing the amount of inventory has a direct impact on the financial aspects of a supply chain.
An interorganizational supply chain visibility initiative is championed by the channel master's executives, and they provide the other companies with detailed project plans and change management steps. However, the project fails after partner employees resist or ignore the changes after the project ends. What would have best promoted success?
Involve executives from other companies as champions and decision makers. Highly competent management of change is important. But leadership from the top ranks of the organization is crucial to the success of continuous process improvement. If the leaders in the affected partner companies aren't brought into the process as full partners and passionate advocates, getting the employees to commit to the change will be difficult or impossible.
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?
It is sustainable if some customers can be retained long term. 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?
It will predict a downward swing in demand to keep on going down indefinitely. 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.
As a general rule, instituting Just-in-Time (JIT) in a manufacturing facility affects employees' jobs in which of the following ways?
Job responsibilities expand. 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.
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 business plan would typically include which of the following?
Long-term guidance for developing tactical production plans The business plan provides a long-range view of strategy and guidance for developing tactical plans for sales, marketing, and operations.
During the phase of the master data life cycle in which information is analyzed, used, or transferred to another party, what is a reasonable practice most organizations could use to reduce data privacy risks?
Maintain a secure audit trail. During the analyze, use, or transfer step or other operational use of data step, these data already exist in the system but this step involves manipulation of these data, so an audit trail can track who made what changes and when they occurred. The audit trail can then be the control mechanism to enforce master data policies, such as those related to data privacy. The audit trail itself needs very high security.
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?
Modular design 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.
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 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.
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?
Move the integration project to at or near the top of the kanban board. 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.
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
Inside a demand time fence, can customer orders still be promised without needing higher authority approval?
Only when available-to-promise quantities exist 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)."
Which of the following metrics should a company use to measure supply chain responsiveness?
Order fulfillment cycle time The amount of time lapsed between order receipt and delivery to a customer is a measure of how responsive the supply chain is.
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?
Pareto diagram A Pareto diagram visualizes the causes that contribute to 80% of the effects (or system crashes).
Which type of supply base analysis would best reveal areas where giving more business to selected suppliers would have the most bottom-line impact?
Pareto ranking of categories by their average spend per supplier, ranked from lowest to highest average spend 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.
An organization wants to categorize risk at one of its factories. It identifies the likelihood of the risks as follows: Power outage: 80% Flood at facility: 5% Supply disruption: 70% Quality issues: 5% The potential impacts of these risks are rated as follows: Power outage: 5% Flood at facility: 95% Supply disruption: 70% Quality issues: 10% What are the resulting percentages for use in a probability and impact matrix?
Power outage: 4%; flood at facility: 5%; supply disruption: 49%; quality issues: 1% Multiplying the impact and probability of each assessed item yields a useful probability and impact matrix that the organization can use to better focus risk preparedness efforts. The resulting figures are: Power outage: 4% Flood at facility: 5% Supply disruption: 49% Quality issues: 1%
Volume growth is a key performance indicator for which of the following?
Product merchandizing Volume growth measures the success of merchandizing efforts.
A firm produces a wide variety of coaxial cable assemblies to customer order. They have been committed to shipping orders within 96 hours of receipt of the customer order. However, the firm has now decided to produce the most common configurations to stock and ship within 24 hours of receipt of the order. Customers will still be able to request specific configurations of the product, but those orders will be shipped within ten business days of order receipt. This shift in strategy is an example of which of the following product design strategies?
Product standardization With product standardization, a large variety of products may be offered, but only a few are kept in inventory. When a product not kept in stock is ordered, the order may be filled by a product that offers a superset of the features required by a customer.
When investing in new capacity in an industry with ever shorter product life cycles, which of the following would represent the best investment?
Purchasing fast changeover general-purpose equipment 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.
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?
Quick-response program 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.
Which of the following is a benefit of effective supply chain management?
Reduced variability of flows Effective supply chains reduce variability, increase visibility, and streamline operations.
Which of the following actions by a distributor is most likely to reduce the variability in demand seen by the manufacturers?
Reducing the delivery time to the retailers Faster deliveries to retailers will improve their ability to maintain proper levels of inventory. Demand during the lead time will be less uncertain because the lead time will be shorter. When retailers have less uncertainty, this results in more accurate orders to the manufacturer (i.e., a reduction in the bullwhip effect).
A company is most likely to achieve which of the following benefits when implementing time fence policies?
Reducing the number of schedule changes Demand time fences are used to ensure stable demand inside a short time period, thereby reducing the number of schedule changes.
Lean supply chains use which of the following actions to achieve their objectives?
Reducing waste The elimination of waste, whether it be excess inventory, processes, time, etc., is the fundamental principle of lean.
An organization rewards its commodity suppliers up front by purchasing inventory in advance of need (up to the safety stock level) and paying those suppliers to warehouse and replenish that inventory as lot-size orders are filled. Which of the following aspects of a supplier relationship management strategy is important to verify at the start of this relationship and periodically thereafter?
Relative value of warehousing rent to supplier versus smooth flows to operations Maintaining continuity and smooth flows depends on the effective coordination of inputs (purchases) of goods and services from external suppliers. As a result, the purchasing function becomes a prime player in helping to provide that coordinated flow.
Which of the following tasks is most likely to be performed by a purchasing agent/planner rather than a purchasing manager?
Resolving discrepancies in orders or accounts 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.
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?
Resort to protectionist tactics. 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.
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?
Retain the functions, but restrict returns processing to selected facilities. 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.
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 auction 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.
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?
Revise the schedule. The schedule could be revised to allow some of the load in the second week to be performed in the first week.
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 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.
What needs to be phased out as part of an end-of-sales plan from a material requirements planning perspective?
Safety stocks and buffers It 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.
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?
Segmentation by value 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.
Using primarily a pull system in the distribution network offers which of the following benefits to the supply chain as a whole?
Sensitivity to demands of the final customer 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.
Which of the following approaches to production scheduling accurately incorporates the theory of constraints?
Slow the process down to the bottleneck's speed. The theory of constraints focuses attention on slowest-moving part of a manufacturing process because it determines the maximum output of the process. Speeding up production before the constraint only produces an oversupply of inventory in front of the constraint, while speeding up the process after the constraint will result only in a lack of inventory after the constraint. Avoiding either of these problems requires running the process at the speed of the constraint.
When determining the transportation mode for servicing distribution warehouses, which of the following factors should be considered?
Speed, dependability, capability 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 categories of cost would a retailer typically include in the cost of carrying inventory?
Spoilage 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. Carrying cost is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory."
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?
Stage 3: Integrated enterprise 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.
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?
TIR Carnet 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.
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.
Which of the following is a likely outcome of asking suppliers to participate in an organization's product design effort?
The product quality could be improved without significantly increased costs. Higher quality for the price is a typical benefit of involving suppliers in design.
Which is true of transitioning from a traditional buyer-supplier relationship to a strategic alliance?
The relationship will have multiple contact points aligned by the business process. Strategic alliances can entail interaction between many functions, such as engineering, marketing, production planning, inventory, or quality management. Goals for these relationships may include cost reduction, quality improvement, better delivery performance, increased flexibility, or new product introduction. Alliances need to be flexible, and each partner must bring value to the relationship relative to the scope of collaboration.
Which of the following describes commercial bribes?
They may be a payoff to cover up inferior products. Commercial bribes are usually aimed at covering up for an inferior product or obtaining new business or proprietary information. They can also involve industrial espionage, where sensitive information is stolen or kickbacks or payoffs are made for trade secrets or price schedules.
An organization has decided to reduce the number of distribution warehouses it uses to fulfill customer orders. What will be the most likely result?
Total safety stock will decrease. 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.
Which is a best practice for expediting transportation?
Track the percentage of orders expedited and the marginal costs of expediting. Organizations can measure the amount of expediting that is being done and its costs so they can determine the savings that could be achieved by avoiding these costs. While tracking the total transportation costs is important, failing to track expediting costs would be an error.
What can be done about the risk of non-malicious information system failures causing an inability to conduct business for a period?
Trade disruption insurance 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.
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?
Tree diagram 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.
The ability to manage which of the following factors typically is critical for a firm moving from transaction-based relationships to cooperative relationships with trading partners?
Uncertainty and risk Flexibility and malfunction recovery are the terms of operational performance that account for a firm's uncertainty and risk. The firm's logistical competency when moving from transaction-based relationships to cooperative relationships is directly related to how well it is able to accommodate unexpected circumstances and its implementation of adjustments to prevent or accommodate any unforeseen risks.
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. The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights,labor, the environment,and anticorruption.
In addition to probability and impact, what else is often given prioritization consideration in a qualitative risk analysis?
Urgency The final step in the qualitative risk analysis process is to decide if some risks need higher priority due to urgency.
If you were a supply chain manager for IKEA, which strategy would you promote with your suppliers according to IKEA's IWAY initiative?
Use the code of conduct to encourage long-term relationships with a limited number of suppliers. 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.
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?
Virtual trading exchange 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.
Which could be used to produce a more accurate and useful SWOT analysis?
Voluntary use of ISO 31000 Series Standards Use of ISO 31000, 31010, and Guide 73 allows more accurate assessment of internal strengths and weaknesses and external opportunities and threats (i.e., SWOT analysis). The other standards might also be of some use (though not as direct), but one does not get certification for a series of standards (it is for individual standards only), and accreditation is not applicable.
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?
What will the end date for this project be? 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.
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.
A sustained increase in the perfect order metric is most likely caused by:
better collaboration among the logistic functions. Perfect orders require more than just no stockouts. They require all logistics functions to work correctly, from order promising, to warehousing and materials handling, to transportation. Better collaboration would be most likely to create a sustained increase.
A check cashing company has developed a strategic supply plan for opening a number of new stores. If a risk assessment shows that many organizations are considering converting from paychecks to providing payroll cards, avoiding the need for their service, the supply plan developer should:
call out this risk to decision makers. The risks of a supply plan must be spelled out for decision makers at a high level, including an assessment of the likelihood of each identified risk, its impact if it occurs, and possible means and costs involved in mitigating the risks.
An organization is failing to achieve its envisioned savings from its new supplier contracts and web-based ordering system, and it discovers that some employees are still using old, personally preferred suppliers. This is a failure in:
compliance management. Compliance management is emerging as a discipline equal in importance to strategic sourcing. It includes monitoring and measuring compliance and identifying off-contract purchases to uncover lost savings opportunities.
A business is attempting to create more powerful bonds with its customers by delivering greater customer satisfaction and mutual dependence. This business is pursuing a strategy of:
creating lifetime customers. While businesses may employ customer segmentation, competitive differentiation, and niche marketing to appeal to customers, this strategy describes the creation of lifetime customers.
A chain of grocery stores has implemented a customer loyalty program that includes sending customers coupons four times per year. The coupons are for items each customer has frequently purchased in the past but has not purchased in the past three months. This program would typically be considered an element of:
customer relationship management. Customer relationship management (CRM) is about nurturing mutually beneficial, long-term relationships intimate enough to provide tailored solutions to meet mutual needs. CRM programs focus more on the customer, while sales force automation is more centered on those tools used by salespeople.
A salesperson makes a delivery promise that is prior to the customer's delivery request date because this customer is in the most valuable customer segment. If the order arrives instead at the delivery request date, the customer will most likely be:
dissatisfied due to heightened customer expectations. Customers have expectations about supplier availability, performance, and service reliability. Organizations can go a long way toward customer satisfaction by setting realistic expectations with their customers. One phrase that sums this up is to under-promise and over-deliver.
A large public utility understands that customer relationship (CRM) will be important in the future. It has committed to implementing the philosophy and supporting processes and information technology applications based on this future need. The factor most likely to inhibit success of the implementation is that the company:
does not have documented objectives for the effort. CRM is often seen as a point solution designed to automate tasks and improve efficiencies rather than a clearly articulated strategy complete with metrics to ensure maximum return on investments. Companies often spend large sums to achieve a single CRM function utilized by just a single department and wonder why the return does not have a companywide effect. A company must first define the projected objectives and benefits of the project before it can begin the process of assembling the CRM suite of products.
A global supply chain has many partners, and inventory ownership along the chain is similarly fragmented. A company wanting to reduce the risk of theft, vandalism, or terrorism in this environment must:
establish minimum security protocols that all partners can agree to and uphold. Securing global supply chains is crucial to the protection of the firm, its products, and its reputation. Secure supply chains require that the firm not only designs such internal processes to reduce security risks but also collaborates with supply chain partners to minimize the risk involved in cross-border operations. The inattention to or inadequacy of a single supply chain partner can nullify any defense efforts and jeopardize the continuity of the supply chain itself.
An appropriate use of an advanced planning and scheduling (APS) system is:
identifying constraints within a facility. 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.
When communicating requirements and priorities for managing supply from internal resources, a best practice is to:
learn key engineering terminology for use in discussions with engineers. 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).
A men's clothing retailer operates three chains of stores in a single country. Each of the chains serves a specific age group with very little overlap. The strategy of having each chain focus on a specific age group is an example of:
market segmentation. The APICS Dictionary, 15th edition, defines market segmentation as "a marketing strategy in which the total market is disaggregated into submarkets, or segments, that share some measurable characteristic based on demographics, psychographics, lifestyle, geography, benefits, and so forth." In this example, each chain serves a specific age group, which would qualify as a measurable characteristic.
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:
meeting customer wants and needs. 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.
The need for supply chain security typically would be the greatest for a company that:
produces pharmaceutical products using ingredients sourced globally. Providing a secure global supply chain is crucial in protecting a firm and its reputation and meeting regulation requirements. Cross-border operations present additional risks to the protection of a firm's assets, product, facilities, equipment, information, and personnel from theft, damage, or terrorism. A secure global chain will also prevent the introduction to the supply chain of unauthorized contraband, people, or weapons.
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:
spend funds on supply chain security enhancements as needed in accord with C-TPAT guidelines. 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.
A virtual supply chain organization can best be characterized as:
supply chain partners working in close collaboration while retaining independent ownership. Virtual supply chain organizations work together to deliver products and services to customers as one entity, yet they retain their autonomy.
An advantage of cycle counting over annual physical inventory is:
timely detection of problems. It is much easier to find the cause of inventory inaccuracy during the cycle counting procedure rather than waiting until the annual inventory. Both processes correct the value and include counting every item at least once a year.
