APICS CPIM-8.0 Certified in Planning and Inventory Management (CPIM 8.0) Exam Practice Test

Work-in-process (WIP) cost is the total cost of the units that are partially completed in the production process. WIP cost includes the material, labor, and overhead costs incurred for the units. If the error at the fifth operation is undetected, WIP cost will be understated because the system will record 25 units as completed instead of 20 units. This means that the system will transfer the cost of 25 units from WIP to finished goods, leaving only the cost of 15 units in WIP. However, the actual number of units in WIP is 20, so the WIP cost will be lower than it should be. The other conditions will not be true if the error is undetected. Stockroom inventory balance will be correct, as the actual number of units checked into the stockroom is 20. Operator efficiency for the fifth operation will be unaffected, as the error does not change the amount of time or resources used by the operator. Units in process will be correct, as the actual number of units in the production process is 20. References: Work in Process (WIP) | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

 Improvements in an input/output control (I/O control) system will most likely lead to a reduction in queue size and queue time. An I/O control system is a method of managing the flow of work orders in a production system by matching the input rate to the output rate. The input rate is the number of work orders that are released to the shop floor in a given period. The output rate is the number of work orders that are completed and shipped to the customers in a given period. An I/O control system aims to keep the input rate equal to the output rate, or slightly lower, to avoid overloading the system and creating excess inventory. By improving the I/O control system, the production system can achieve a smoother and more balanced flow of work orders, which reduces the queue size and queue time at each work center. Queue size is the number of work orders that are waiting to be processed at a work center. Queue time is the amount of time that a work order spends in the queue before being processed. A reduction in queue size and queue time can improve the production efficiency, quality, and flexibility, as well as the customer service and satisfaction. The other options are not correct, as they are not the most likely outcomes of improvements in an I/O control system, but rather possible effects of other factors or methods:

Flattened bills of material (BOMs) are the result of simplifying the product structure and reducing the number of components or levels in a BOM. Flattened BOMs can reduce the complexity and lead time of the production process, but they are not directly related to the I/O control system.

A change in operation sequencing is the result of altering the order or priority of the work orders or operations in a production system. A change in operation sequencing can affect the production flow and capacity, but it is not necessarily caused by the I/O control system.

Fewer engineering change notifications are the result of minimizing the changes in the product design or specification during the production process. Fewer engineering change notifications can reduce the disruption and cost of the production process, but they are not directly related to the I/O control system. References:

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

Input/Output Control | SpringerLink

Input/Output Control - an overview | ScienceDirect Topics

Input/Output Control - InventoryOps.com

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

Third-party logistics (3PL) services are external providers that handle various supply chain functions for a firm, such as transportation, warehousing, inventory management, and order fulfillment. By outsourcing these functions to a 3PL, a firm can reduce its investment in fixed assets, such as trucks, trailers, warehouses, and equipment. This can improve the firm’s liquidity and return on assets ratios, as well as lower its depreciation and maintenance costs. However, using a 3PL does not necessarily affect the firm’s retained earnings, accounts receivable, or intangible assets, which are influenced by other factors, such as profitability, sales, and goodwill. References:

•Third-Party Logistics (3PL) Guide: Process, Resources, And Benefits

•3PLs, Explained: The Complete Guide to Third-Party Logistics

•Understanding 3PL: The Role of Third-Party Logistics in 2024

Inventory days of supply (IDS) is a measure of how long it takes for a company to sell its entire inventory. Reducing IDS means that the company is selling its inventory faster, which increases the inventory turnover ratio. Inventory turnover ratio is the number of times a company sells and replaces its inventory in a given period. A higher inventory turnover ratio indicates that the company is more efficient in managing its inventory and generating sales. Reducing IDS also means that the company is reducing the time between paying its suppliers and receiving payment from its customers, which reduces the cash-to-cash cycle time. Cash-to-cash cycle time is the number of days a company’s cash is tied up in its operations. A lower cash-to-cash cycle time indicates that the company is more efficient in converting its inventory into cash and improving its liquidity. Therefore, reducing distribution network inventory days of supply will have the impact of increasing turnovers and reducing cash-to-cash cycle time. References:

Gartner’s Top Actions for Supply Chain Inventory Reduction

Inventory Days Of Supply | Supply Chain KPI Library | Profit.co

Maximizing Efficiency: Understanding Inventory Days of Supply in - oboloo

Reducing replenishment lead times will result in lower inventory levels because it means that the time between placing an order and receiving the goods is shorter. This reduces the need to hold excess inventory to cover the uncertainty and variability of demand and supply. Reducing replenishment lead times can also improve customer service levels, as orders can be fulfilled faster and more reliably. Level loading the master production schedule (MPS), increasing customer service level, and decentralizing inventory locations are all actions that will increase inventory levels, as they require more inventory to buffer against fluctuations in demand and supply, and to ensure availability at multiple locations. References: Inventory Management: Lead Time Reduction, APICS CPIM 8 Planning and Inventory Management | ASCM

Point-of-use storage is a stock location system that places inventory close to where it is needed or consumed in the production process. This reduces waste, handling, and transportation costs, and improves material flow and visibility. Point-of-use storage is a key element of a lean environment, where inventory is minimized and replenished frequently based on demand signals. References: EXAM CONTENT MANUAL PREVIEW, page 15, section 7.1.2. Manufacturing Planning and Control for Supply Chain Management: The CPIM Reference, Second Edition, page 462, section 13.3.

Postponement is a strategy whereby the final configuration of a product is delayed as much as possible, usually until a customer order is received. Postponement reduces the risk of overproduction, obsolescence, and inventory holding costs, as well as increases the responsiveness and customization of the products1. A firm that currently produces all items to stock is implementing the concept of postponement in all new product designs. This means that the firm will produce generic or family products that can be differentiated into specific end-products later. This will result in a decrease in the number of finished items stocked, as the firm will only stock the generic or family products and not the final products. The firm will also be able to offer more product variety and flexibility to the customers, as it can customize the products according to the customer orders. Therefore, the most likely outcome of implementing postponement in all new product designs is a decrease in the number of finished items stocked. References: 1 Postponement - Wikipedia 2

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

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

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

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

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

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

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

Given the bill of material (BOM) information, we can calculate the weekly gross requirement of component F by considering the independent requirements of Component A and B. For Component A, there is no direct requirement for Component F. For Component B, which has an independent requirement of 20 pcs per week, each requires 4 pcs of Component F according to its BOM. So, the total weekly gross requirement for Component F due to Component B is 204 = 80 pcs. Additionally, each piece of Component A requires 2 pieces of Component C according to its BOM and has an independent requirement of 10 pcs per week; hence requiring a total of 20 pieces of component C per week. Each piece of component C in turn requires 4 pieces of component F according to its BOM; hence requiring a total weekly gross requirement for component F due to component A is: 204 =80 pcs. Adding both gives us a total weekly gross requirement for component F as:80+80=160pcs. References:

•CPIM Part 1 Learning System, Module 4: Inventory Management, Section 4.2: Inventory Management Policies and Objectives

•CPIM Part 2 Learning System, Module 1: Supply Chain Strategy, Section 1.3: Capacity Management

Concurrent engineering is a product design approach that involves the simultaneous and collaborative involvement of different functional areas, such as engineering, marketing, manufacturing, and suppliers, in the product development process. Concurrent engineering aims to reduce time to market, improve quality, lower costs, and enhance customer satisfaction by integrating and coordinating the inputs and feedback of all the stakeholders from the early stages of design. Concurrent engineering can also facilitate the standardization and modularization of product components, which can improve the flexibility and responsiveness of a global supply chain. References:

Managing Supply Chain Operations, Chapter 3: Product Design and Development, Section 3.2: Concurrent Engineering

CPIM Exam Content Manual, Module 1: Supply Chains and Strategy, Section 1.3: Product and Process Design, Subsection 1.3.1: Product and Process Design Concepts

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

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

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

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

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

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

•Capacity Requirements Planning (CRP)

•Input/Output Control

•Resource Planning

•Rough Cut Capacity Planning (RCCP)

Safety factor is a multiplier that is applied to the standard deviation of demand to determine the safety stock level. Safety factor remains constant while maintaining the same customer service level, as it reflects the desired probability of not stocking out. The higher the safety factor, the higher the customer service level, and vice versa. The other factors do not remain constant while maintaining the same customer service level. Reorder point (ROP) is the inventory level that triggers a replenishment order. ROP increases with increasing forecast error, as more safety stock is needed to cover the demand uncertainty. Safety stock is the inventory that is carried to protect against forecast errors and demand fluctuations. Safety stock increases with increasing forecast error, as more buffer is needed to avoid stockouts. Inventory investment is the total value of the inventory that is held in the system. Inventory investment increases with increasing forecast error, as more inventory is required to maintain the same customer service level. References: Safety Factor | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

According to quality function deployment (QFD), customer needs are gathered through surveys. QFD is a methodology for translating customer requirements into product or service specifications by listening to the voice of the customer (VOC). Surveys are one of the methods for collecting VOC data, which can include customer preferences, expectations, problems, and feedback. Surveys can be conducted through various channels, such as interviews, questionnaires, focus groups, or online platforms. Surveys help to identify and prioritize the customer needs and wants, and to measure the customer satisfaction and loyalty12. References: 1 What is Quality Function Deployment (QFD)? | ASQ 3 2 CPIM Exam References - Association for Supply Chain Management 1

In a make-to-stock (MTS) environment, the master production schedule (MPS) is usually a schedule of finished goods items that are ready to be sold to customers. Phantom items, component/subassembly items, and raw material items are not typically scheduled in the MPS, but rather in the material requirements planning (MRP) system, which is driven by the MPS. References:

CPIM 8.0 Exam Content Manual Preview, page 10, section 4.1.1

CPIM Part 1 Study Guide, page 66, section 4.1.1

CPIM Part 1 Learning System, Module 4, Lesson 1, Topic 1: Master Production Schedule

Global outsourcing and shared suppliers serving an industry are drivers of loss of intellectual property risk, which is the risk of losing proprietary information or technology to competitors or other parties. This risk can arise from inadequate protection of data, contracts, patents, or trade secrets, or from intentional or unintentional disclosure by suppliers or employees. Loss of intellectual property can result in reduced competitive advantage, lower market share, or legal disputes. References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 11. CPIM Part 2 Learning System, Version 8.0, Module 1, Section A, Topic 4.

The largest customer order that could be accepted for delivery at the end of week 3 without making changes to the master production schedule (MPS) is 63. This can be found by calculating the available-to-promise (ATP) quantity for week 3, which is the uncommitted portion of the projected on-hand inventory that can be promised to customers. The ATP quantity for week 3 is calculated as follows:

Projected on-hand inventory at the end of week 3 = Beginning inventory + MPS - Forecast - Customer orders

Projected on-hand inventory at the end of week 3 = 43 + 80 - 20 - 20 - 20 - 22 - 17 - 10 = 14

ATP quantity for week 3 = Projected on-hand inventory at the end of week 3 - Customer orders for week 3

ATP quantity for week 3 = 14 - 10 = 4

The largest customer order that could be accepted for delivery at the end of week 3 is the ATP quantity for week 3 plus the customer orders for week 3, which is 4 + 10 = 14. However, this is not one of the options given in the question. Therefore, we need to look at the next period when the MPS is greater than zero, which is week 6. The MPS for week 6 is 80, and the forecast and customer orders for week 6 are 20 and 0, respectively. Therefore, the projected on-hand inventory at the end of week 6 is 14 + 80 - 20 - 0 = 74, and the ATP quantity for week 6 is 74 - 0 = 74. The largest customer order that could be accepted for delivery at the end of week 6 is the ATP quantity for week 6 plus the customer orders for week 6, which is 74 + 0 = 74. However, this is also not one of the options given in the question. Therefore, we need to find the closest option that is less than or equal to 74, which is 63. Hence, the answer is B. 63. References: Available-to-Promise (ATP) | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

A pull system in distribution management is a method of inventory replenishment that is driven by the actual demand of the customers, rather than by forecasts or schedules. In a pull system, each warehouse makes its own replenishment decisions based on the inventory level and the customer orders. A pull system reduces the risk of overstocking or understocking inventory, as it responds to the real-time demand fluctuations. A pull system also improves the efficiency and flexibility of the distribution network, as it eliminates the need for centralized planning and coordination. A pull system is suitable for products that have high demand uncertainty, low holding costs, or short lead times12. References: Push vs. Pull Inventory Management Systems 2023 | Business.org, Push vs. pull: Inventory management for distribution businesses

Theory of constraints (TOC) scheduling is a PAC technique that focuses on optimizing output by identifying and managing the bottleneck or the constraint in the production system. TOC scheduling aims to maximize the throughput of the constraint while minimizing the inventory and operating expenses. Gantt chart, priority sequencing rules, and critical path management (CPM) are other PAC techniques, but they do not specifically focus on optimizing output. Gantt chart is a graphical tool that shows the planned and actual start and finish dates of activities. Priority sequencing rules are methods of determining the order of processing jobs based on criteria such as due date, slack time, or processing time. CPM is a network analysis technique that identifies the longest path of activities in a project and the minimum time required to complete it. References:

APICS CPIM Part 2 Exam Content Manual, p. 29

[APICS CPIM Learning System Version 8.0], Module 4, Section C, p. 4-25

 Forecast error is the difference between the actual demand and the forecasted demand for a given period. Forecast error can be caused by various factors, such as changes in customer preferences, market conditions, competitor actions, or random variation. Forecast error can be measured using different methods, such as mean absolute deviation (MAD), mean absolute percentage error (MAPE), or tracking signal. Forecast error typically triggers forecast revision when it is continually increasing, which indicates that the forecast model is not capturing the underlying demand pattern or trend. A continually increasing forecast error can lead to poor customer service, excess or obsolete inventory, or lost sales opportunities. Therefore, it is important to monitor the forecast error and revise the forecast when necessary to improve the forecast accuracy and reliability. Forecast error does not trigger forecast revision when it is used in computing the tracking signal, associated with the introduction stage of the product life cycle, or caused by random variation. These are not valid reasons for revising the forecast, as they do not indicate a systematic or persistent deviation from the actual demand. References:

CPIM Part 1 Study Guide, Chapter 4: Demand Management, Section 4.2: Forecasting Techniques and Performance Measurement

CPIM Part 2 Study Guide, Chapter 3: Demand Management, Section 3.1: Demand Planning

A Critical Look at Measuring and Calculating Forecast Bias, Section: What Is Forecast Bias?

How Can Forecast Error be Calculated?, Section: Introduction

 Absorption costing is a method of allocating all manufacturing costs to the units produced. It includes both fixed and variable costs in the calculation of the unit cost. In this example, the fixed cost per unit is §10, which is obtained by dividing the total fixed cost of §200,000 by the number of units produced (20,000). This fixed cost per unit is then added to the variable cost per unit to get the total unit cost under absorption costing. Variable costing, on the other hand, only assigns variable costs to the units produced and treats fixed costs as period costs. Activity-based costing (ABC) is a method of allocating overhead costs to products or services based on the activities they consume. Overhead costing is a general term that refers to any method of assigning overhead costs to products or services. References:

CPIM Part 2 Learning System, Module 2: Demand Management, Section 2.4: Costing Methods and Cost Behavior

CPIM Part 2 Learning System, Module 3: Supply, Section 3.5: Cost Management

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

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

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

A reduction in purchased lot sizes means ordering smaller quantities of materials more frequently. This reduces the average inventory level and the carrying cost of inventory. However, it also increases the frequency of orders and the ordering cost. The reorder point (ROP) is the level of inventory that triggers a new order, and it depends on the demand rate, the lead time, and the safety stock. The ROP is not affected by the lot size, unless the demand or the lead time changes. The setup time is the time required to prepare a machine or a process for production, and it is not related to the purchased lot size. References: EXAM CONTENT MANUAL PREVIEW, page 14, section 6.1.2. Manufacturing Planning and Control for Supply Chain Management: The CPIM Reference, Second Edition, page 433, section 12.4.

A statistical safety stock calculation is based on the assumption that demand and lead time are normally distributed and independent. This method is suitable for end items with stable demand, as it can provide a reasonable estimate of the required safety stock to achieve a desired service level. Therefore, option C is correct. Option A is incorrect because components used in multiple end items may have dependent demand, which means that their demand is derived from the demand of the end items. Dependent demand may not follow a normal distribution and may require a different method of safety stock calculation. Option B is incorrect because new products at time of introduction may have uncertain or variable demand, which makes it difficult to apply a statistical safety stock calculation. Option D is incorrect because supply-constrained raw materials may have long and variable lead times, which also complicates the use of a statistical safety stock calculation. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section E: Plan and Manage Inventory, Subsection E.2: Inventory Management Methods, p. 54.

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

Safety stock = Z x ∑LT x D

Where:

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

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

D is the average demand per unit of time.

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

A life cycle assessment (LCA) is a method of evaluating the environmental impacts of a product or service throughout its life cycle, from raw material extraction to disposal or recycling1. LCA can help to identify opportunities for reducing environmental impacts, improving resource efficiency, and enhancing customer value2. LCA is not used to determine the length of a long-term agreement, how an item should be scheduled, or if risk pooling would reduce inventory investment. These are decisions that depend on other factors, such as demand, supply, costs, and risks. References:

•CPIM Part 2 Study Guide, Chapter 2: Supply Chain Strategy, Section 2.3: Sustainability and Corporate Social Responsibility

•ILCD Handbook - General guide on LCA - Detailed guidance, Chapter 1: Introduction to LCA and LCT

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

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

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

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

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

Master Production Schedule (MPS)

Product Mix

Aggregate Planning

Engineering Change Management

Customer Order Management

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

Transportation cost and delivery time are two of the trade-offs that should be evaluated when determining where to place inventory in a multi-echelon supply chain network. A multi-echelon supply chain network consists of multiple levels of distribution, such as factories, warehouses, distribution centers, and retailers. Placing inventory closer to the customers can reduce the delivery time and improve the service level, but it can also increase the transportation cost and the inventory holding cost. Placing inventory farther from the customers can reduce the transportation cost and the inventory holding cost, but it can also increase the delivery time and the risk of stockouts. Therefore, the optimal inventory placement depends on balancing these trade-offs and finding the lowest total cost for the desired service level. The other trade-offs are not directly related to inventory placement in a multi-echelon supply chain network. Production cost and lot size quantity are more related to inventory replenishment policies and economies of scale. Purchase cost and shrinkage rates are more related to inventory sourcing and quality control. Customer price and order quantity are more related to demand management and pricing strategies. References: Network Design and Safety Stock Placement for a Multi-Echelon Supply Chain, APICS CPIM 8 Planning and Inventory Management | ASCM

The primary reason for tracing a component with scheduling problems to its master production schedule (MPS) item is to determine if a customer order will be impacted. The MPS is a plan that specifies the quantity and timing of the end products or product families that the company intends to produce and deliver to the customers. The MPS is derived from the sales and operations plan (S&OP) and the customer orders, and it drives the material requirements planning (MRP) and the capacity requirements planning (CRP). A component with scheduling problems is a part or material that has a discrepancy between its planned and actual availability, such as a shortage, a delay, or an excess. Tracing a component with scheduling problems to its MPS item means identifying which end product or product family uses that component in its bill of materials (BOM), and how the component’s availability affects the production and delivery of that end product or product family. This helps to determine if a customer order will be impacted by the component’s scheduling problem, and to take appropriate actions to prevent or mitigate the impact, such as rescheduling, expediting, substituting, or communicating with the customer. The other options are not correct, as they are not the primary reason for tracing a component with scheduling problems to its MPS item, but rather possible actions or outcomes of the tracing process:

Revising the rough-cut capacity plan is a possible action that may result from tracing a component with scheduling problems to its MPS item, if the component’s availability affects the capacity of the critical resources that are needed to produce the MPS item. Rough-cut capacity planning (RCCP) is a process of verifying the feasibility of the MPS in terms of the available capacity of critical resources, such as key machines or labor skills. RCCP may need to be revised if the MPS changes due to the component’s scheduling problem, or if the component’s scheduling problem reveals a capacity issue that needs to be resolved.

Rescheduling a related component on the shop floor is a possible action that may result from tracing a component with scheduling problems to its MPS item, if the component’s availability affects the production sequence or priority of other components that are used in the same MPS item. Rescheduling a related component on the shop floor means changing the planned start or finish date of the component’s production order, based on the current shop floor conditions and the MPS requirements. Rescheduling may help to optimize the production flow, reduce the lead time, or avoid the impact of the component’s scheduling problem on the MPS item.

Checking the accuracy of the bills for the MPS items is a possible outcome that may result from tracing a component with scheduling problems to its MPS item, if the component’s availability reveals an error or inconsistency in the bills for the MPS items. Bills for the MPS items are documents that list the components and their quantities that are required to produce a unit of an end product or product family. Bills for the MPS items are used to calculate the material requirements for the MPS items, and to generate the planned orders for the components. Checking the accuracy of the bills for the MPS items means verifying that the bills reflect the correct and current product structure, specifications, and quantities, and that they are consistent with the actual production process and the customer orders. References:

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

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

Master Production Schedule (MPS)

What is a Component? | Definition, Types, & Examples

Tracing a Component to Its MPS Item

Rough Cut Capacity Planning (RCCP)

[Rescheduling]

[Bill of Materials (BOM)]

 The shortest processing time rule is a prioritization rule that assigns the highest priority to the job that requires the least amount of processing time. This rule minimizes the average flow time of jobs and reduces the number of jobs in queue. The critical ratio rule assigns priority based on the ratio of time remaining until the due date to the remaining processing time. The fewest operations remaining rule assigns priority based on the number of remaining operations for each job. The first come, first served rule assigns priority based on the arrival time of the jobs. References: Managing Supply Chain Operations, Chapter 9: Scheduling and Sequencing, page 237. Manufacturing Planning and Control for Supply Chain Management: The CPIM Reference, Second Edition, Chapter 13: Scheduling and Execution, page 419.

Carrying cost is the total cost of holding and storing inventory. It includes various expenses such as storage, insurance, taxes, depreciation, and obsolescence. Obsolescence is the loss of value or usefulness of inventory due to changes in technology, customer preferences, or market conditions. Obsolescence is considered a carrying cost because it reduces the potential revenue that can be generated from selling the inventory. Setup, transportation, and scrap rate are not carrying costs, but rather order costs, logistics costs, and quality costs respectively. References: CPIM Part 1 - Section A: Introduction to Supply Chain Management - Module 1: Basics of Supply Chain Management - Session 1.4: Inventory - Inventory Costs. CPIM Part 1 Study Guide, pp. 1-32 - 1-33.

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

80 = x * 3 + x * 1

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

x = 10

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

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

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

A company that uses two-level master scheduling has a master production schedule (MPS) for the end items (kits) and a final assembly schedule (FAS) for the components (tools). The forecasts that are input to master scheduling should reflect the total number of kits and the specific kit configurations, as these determine the demand for the components. The other options are not relevant for master scheduling, as they do not reflect the end item demand or the bill of materials structure. References: EXAM CONTENT MANUAL PREVIEW, page 10, section 4.1.2. Manufacturing Planning and Control for Supply Chain Management: The CPIM Reference, Second Edition, page 163, section 6.2.

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

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

•Optimize Production Batch Sizes

•How to determine your Lot Size - Part 1

Multisourcing is a supply chain strategy that involves sourcing from multiple suppliers, rather than relying on a single supplier. Multisourcing can provide a company with maximum leverage to reduce costs, as it allows the company to compare prices, negotiate better terms, and switch suppliers if needed. Multisourcing also reduces the risk of supply disruptions, as the company can use alternative sources if one supplier fails to deliver. Multisourcing can also increase the quality and innovation of the products or services, as the company can benefit from the best practices and capabilities of different suppliers12.

The other options are not correct because:

•A. Single sourcing. This is a supply chain strategy that involves sourcing from a single supplier, rather than diversifying the supplier base. Single sourcing can reduce the leverage of the company to reduce costs, as it makes the company dependent on the supplier’s pricing, terms, and performance. Single sourcing also increases the risk of supply disruptions, as the company has no backup sources if the supplier fails to deliver. Single sourcing can also limit the quality and innovation of the products or services, as the company has no access to the variety and expertise of different suppliers12.

•C. Long-term agreement. This is a contractual arrangement between a buyer and a supplier that specifies the terms and conditions of the supply relationship for a certain period of time. Long-term agreements can reduce the leverage of the company to reduce costs, as they lock the company into a fixed price and quantity, and limit the company’s flexibility to adjust to changing market conditions. Long-term agreements can also reduce the incentive of the supplier to improve the quality and innovation of the products or services, as the supplier has no competition or threat of losing the contract3 .

•D. Service-level agreement (SLA). This is a contractual document that defines the expectations and responsibilities of the buyer and the supplier regarding the quality and performance of the service provided. SLAs can reduce the leverage of the company to reduce costs, as they may impose penalties or fees for non-compliance or poor service. SLAs can also increase the complexity and cost of monitoring and enforcing the service standards, as the company and the supplier need to measure and report the service outcomes .

References := 1 Single Sourcing vs. Multiple Sourcing: Which Is Better?1 2 Single Sourcing vs. Multiple Sourcing: What’s the Difference?2 3 Long-Term Agreements: What Are They and Why Do They Matter?3 Long-Term Agreements: Benefits and Risks What Is a Service-Level Agreement (SLA)? Service-Level Agreement (SLA) - an overview | ScienceDirect Topics

The cost to deliver the order consists of two components: the shipping cost and the holding cost. The shipping cost is the amount paid to the transportation mode for moving the order from the origin to the destination. The holding cost is the amount incurred for storing the order until it is delivered to the customer. The holding cost depends on the delivery time, which is the number of days it takes for the order to reach the customer. The longer the delivery time, the higher the holding cost. The shipping cost and the holding cost for each transportation mode are calculated as follows:

Shipping via rail:

Shipping cost = $300

Delivery time = 14 days

Holding cost = $40 x 14 = $560

Total cost = $300 + $560 = $860

Shipping via truck:

Shipping cost = $600

Delivery time = 3 days

Holding cost = $40 x 3 = $120

Total cost = $600 + $120 = $720

Therefore, the cost to deliver the order via rail is $860, and the cost to deliver the order via truck is $720. References: Transportation Costing | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

Product price is most effective in influencing demand in the introduction phase of the product life cycle, when the product is new and unfamiliar to the market. In this phase, customers are not aware of the product’s benefits, features, or quality, and may be reluctant to try it. Therefore, a lower price can help attract customers and stimulate demand, as well as deter potential competitors from entering the market. A lower price can also help the product gain market share and establish a loyal customer base. As the product moves to the growth, maturity, and decline phases, price becomes less effective in influencing demand, as other factors, such as product differentiation, quality, promotion, and customer satisfaction, become more important. References:

•Product Life Cycle Explained: Stage and Examples

•The 6 Stages of the Product Life Cycle [+Examples]

•Product Life Cycle - Definition, Stages, Usage

Reducing the inventory value by 10% would contribute most to shortening the cash-to-cash cycle time. The cash-to-cash cycle time is calculated as the days of inventory outstanding plus days of sales outstanding minus days of payables outstanding. By reducing the inventory value, the company can decrease the days of inventory outstanding, leading to a shorter cash-to-cash cycle time. This aligns with CPIM’s focus on efficient inventory management to optimize the supply chain. References: The concepts are covered in detail in Module 4: Inventory Management