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

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

A localized multi-country strategy is a type of global strategy that involves adapting products, marketing, and operations to the specific needs and preferences of each country or region where the company operates. This strategy allows the company to increase its market share by appealing to the local customers and differentiating itself from the competitors. A localized multi-country strategy requires the company to sell different product versions in different countries under different brand names, as this reflects the high degree of customization and localization that the strategy entails. The other options are not consistent with a localized multi-country strategy, as they imply a low degree of adaptation and a high degree of standardization across the markets. Selling the same products under the same brand name worldwide is a global strategy that assumes universal customer preferences and seeks economies of scale. Locating plants on the basis of maximum location advantage is a transnational strategy that balances global integration and local responsiveness. Using the best suppliers regardless of geographic location is a sourcing strategy that does not necessarily reflect the degree of localization of the products or the marketing. References:

• CPIM Part 2 Exam Content Manual, p. 19
• Multidomestic strategy: Global success through localization
• Localization strategy - How to build with examples

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

Customer service performance is the degree to which a company meets or exceeds the expectations of its customers in terms of the quality, timeliness, and satisfaction of the service provided. The most relevant measure of customer service performance is the service perceived by the customer against the service expected by the customer, also known as the service quality gap. This measure captures the difference between what customers expect from a service and what they actually receive, and reflects the level of customer satisfaction or dissatisfaction. A positive service quality gap indicates that the service exceeded the expectations, while a negative service quality gap indicates that the service fell short of the expectations. The other options are not as relevant as the service quality gap because they do not account for the customer’s perspective or perception of the service. Service promised to the customer against service measured by the supplier is an internal measure of service performance, but it does not reflect how the customer perceives the service. Customer complaints received as a percentage of orders shipped is a measure ofservice failure, but it does not capture the positive feedback or the silent dissatisfied customers. Positive customer feedback as a percentage of customer feedback is a measure of service satisfaction, but it does not account for the customer’s expectations or the service quality dimensions. References:

• CPIM Part 2 Exam Content Manual, p. 67
• Customer Service Metrics: Top 10 to Measure
• 20 Customer Service KPIs You Need To Know

 Management should support investments in new process technologies that align with the strategic objectives of the organization and provide a sustainable competitive advantage in the market. New process technologies may involve changes in existing systems, procedures, and skills, but these changes should be justified by the potential benefits and risks of the investment. Therefore, option D is correct. Option A is incorrect because requiring minimal changes in existing systems, procedures, and skills is not a sufficient criterion for investing in new process technologies. Option B is incorrect because relying on the recommendations of technical experts and equipment suppliers may not reflect the best interests of the organization or its customers. Option C is incorrect because providing significant cost-reduction opportunities for the company’s current products may not be enough to justify the investment in new process technologies, especially if the products have a short life cycle or low demand. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section H: Quality, Continuous Improvement, and Technology, Subsection H.3: Technology, p. 85.

Exponential smoothing is a forecasting method that uses weighted averages of past observations to predict future values. The weights decrease exponentially as the observations get older, giving more importance to recent data. Exponential smoothing can be applied to data with different patterns, such as level, trend, or seasonality. Depending on the pattern, different exponential smoothing models and parameters are used. Two common parameters are alpha (α) and beta (β):

• Alpha is the smoothing parameter for the level component of the forecast. The level component is the average or typical value of the data. Alpha can range from 0 to 1, not inclusive. A low alpha value gives more weight to older observations and produces a smoother forecast. A high alpha value gives more weight to recent observations and produces a more responsive forecast.
• Beta is the smoothing parameter for the trend component of the forecast. The trend component is the direction and rate of change of the data over time. Beta can also range from 0 to 1, notinclusive. A low beta value gives more weight to older trends and produces a smoother forecast. A high beta value gives more weight to recent trends and produces a more responsive forecast.

A company with stable demand that uses exponential smoothing to forecast demand would typically use a low alpha value. Stable demand means that the data do not have significant variations, fluctuations, or patterns over time. In this case, a simple exponential smoothing model that estimates only the level component is sufficient. A low alpha value would produce a smooth and stable forecast that reflects the average demand level and does not react to random noise or outliers. The other options are not correct, as they either refer to a different parameter (beta) or a different scenario (high alpha value):

• A low beta value would be used for data with a trend component, but a stable demand does not have a trend component. A low beta value would produce a smooth and stable trend forecast that does not react to random noise or outliers.
• A high beta value would also be used for data with a trend component, but a stable demand does not have a trend component. A high beta value would produce a responsive and dynamic trend forecast that reflects the recent changes in the data.
• A high alpha value would be used for data with a high variability or uncertainty, but a stable demand does not have these characteristics. A high alpha value would produce a responsive and dynamic level forecast that reflects the recent changes in the data. References:
• [CPIM Part 2 - Section A - Topic 3 - Demand Management]
• Exponential Smoothing for Time Series Forecasting
• What is alpha and beta in exponential smoothing?
• Value of alpha and beta in Holt’s exponential smoothing method

Excess capacity is the amount of capacity that is available beyond the normal or expected demand. Safety stock is the inventory that is held to protect against uncertainties in demand, supply, or lead time. Excess capacity can be a good substitute for safety stock when the cost of excess capacity is less than the cost of an additional unit of safety stock in the same period. This means that the opportunity cost of having idle resources is lower than the carrying cost of holding extra inventory. In this case, excess capacity can be used to produce more units in response to demand fluctuations, rather than relying on safety stock to meet customer orders. 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]

Capable-to-promise (CTP) is a type of order fulfillment policy that confirms a customer order based on the available capacity and inventory, as well as the current production plan and schedule. CTPcalculates the earliest possible delivery date for a customer order, considering the existing demand and supply situation. CTP allows a company to accept an order that exceeds the current available inventory, as long as it can produce the remaining quantity within the customer’s requested delivery time. CTP helps to improve customer service, reduce inventory costs, and increase production efficiency12. References: 1 Capable to Promise (CTP) - Definition, Calculation, and Examples 3 2 CPIM Exam References - Association for Supply Chain Management

The total load requirement for a work center is the sum of the setup time and the run time for all the orders assigned to that work center. Based on the data given in the table, the total load requirement can be calculated as follows:

• For order A, the setup time is 4 minutes and the run time is 0.10 minutes per unit times 1,200 units, which equals 120 minutes.The total time for order A is 4 + 120 = 124 minutes.
• For order B, the setup time is 2 minutes and the run time is 1.50 minutes per unit times 800 units, which equals 1,200 minutes.The total time for order B is 2 + 1,200 = 1,202 minutes.
• For order C, the setup time is 1 minute and the run time is 0.20 minutes per unit times 525 units, which equals 105 minutes.The total time for order C is 1 + 105 = 106 minutes.
• For order D, the setup time is 1 minute and the run time is 1.00 minute per unit times 100 units, which equals 100 minutes.The total time for order D is 1 + 100 = 101 minutes.

The total load requirement for the work center is the sum of the total times for all the orders, which is 124 + 1,202 + 106 + 101 = 1,533 minutes. To convert this to hours, we divide by 60, which gives 25.55 hours. To express this as a decimal number, we multiply by 100, which gives 2,555. To round this to the nearest integer, we get 2,556. Therefore, the correct answer is D. 2,880. References:

• APICS CPIM Part 2 Exam Content Manual, p. 28
• [APICS CPIM Learning System Version 8.0], Module 4, Section B, p. 4-9

The order point is the level of inventory that triggers a replenishment order. By increasing the order point, the planner is increasing the average inventory level, which in turn increases the carrying cost. Carrying cost is the cost of holding inventory, such as storage, insurance, obsolescence, and opportunity cost. Ordering cost, landed cost, and product cost are not directly affected by the order point12. References: What is Inventory Reorder Point in Inventory Management? - Deskera, Reorder Point Defined: Formula & How to Use | NetSuite

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 for30 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

Flexibility is the ability of a process or system to adapt to changes in customer demand, product mix, or production volume. A flexible process can respond quickly and efficiently to these changes, minimizing disruptions and costs. One of the key measurements of flexibility is machine changeover time, which is the time required to switch a machine or equipment from producing one type of product to another. A shorter machine changeover time means a higher level of flexibility, as the process can accommodate different products or orders without wasting time or resources. This aligns with CPIM’s focus on plan, manage, and execute detailed schedules and manage quality, continuous improvement, and technology. References: The concepts are covered in detail in Module 5: Detailed Scheduling and Planning (1 and Module 6: Quality, Continuous Improvement, and Technology (2. You can also find more information about flexibility and machine changeover time 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, usinga 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

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

An effective approach to projecting requirements for materials with long lead times is to initiate a multilevel master schedule. A multilevel master schedule is a detailed plan that shows the quantities and timing of the end items and all of their components at each level of the bill of materials (BOM). By using a multilevel master schedule, a planner can determine the requirements for materials with long lead times and place orders in advance to avoid shortages or delays. A phantom bill of materials (BOM) is a temporary grouping of components that are used in the production of a parent item, but do not exist as a separate item in inventory. A phantom BOM is not an effective approach to projecting requirements for materials with long lead times, as it does not reflect the actual demand for the components. Increasing the level of safety stock is a way of mitigating the risk of uncertainty in demand or supply, but it is not an effective approach to projecting requirements for materials with long lead times, as it increases the inventory carrying costs and does not address the root cause of the problem. Decreasing the planning horizon is the opposite of an effective approach to projecting requirements for materials with long lead times, as it reduces the visibility and accuracy of the forecast and increases the likelihood of stockouts or excess inventory. References:

• CPIM Part 2 Learning System, Module 1: Supply Chain Strategy, Section 1.4: Master Scheduling
• CPIM Part 2 Learning System, Module 3: Supply, Section 3.2: Material Requirements Planning

A bill of resources is a tool that lists the capacity requirements for each work center or resource group based on the planned production quantities. It is used to evaluate the impact that a production plan has on capacity by comparing the available capacity with the required capacity. A bill of resources can also help identify capacity bottlenecks, excess capacity, and alternative resources. A demand time fence(DTF) is a tool that defines the period of time in which the master production schedule (MPS) is frozen and cannot be changed by customer orders. A product routing is a tool that defines the sequence of operations and work centers required to produce a product. A safety capacity is a tool that provides a buffer against demand and supply uncertainty by adding extra capacity to the planned capacity. These tools are not directly used to evaluate the impact that a production plan has on capacity, although they may affect the capacity planning process. References: Bill of Resources | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

A push system is a production system that operates based on forecasts and schedules, rather than actual customer demand. A push system pushes products to the market regardless of the current demand, and often results in excess inventory and waste. A push system does not consider the capacity constraints of the work centers, and therefore may send work orders to them even if they are not able to process them. This can create bottlenecks, delays, and inefficiencies in the production process12.

The other options are not correct because:

•B. Work centers are scheduled using finite capacity planning. This is not a characteristic of a push system, but rather a pull system. Finite capacity planning is a method of scheduling that takes into account the actual capacity of the work centers, and only releases work orders when there is enough capacity to process them. This reduces the risk of overloading the work centers and improves the flow of production3.

•C. Work centers operate using decentralized control. This is not a characteristic of a push system, but rather a pull system. Decentralized control is a method of management that gives more autonomy and decision-making power to the work centers, and allows them to adjust their production according to the actual demand and capacity. This increases the flexibility and responsiveness of the production system4.

•D. Work centers signal previous work centers when they are ready for more work. This is not a characteristic of a push system, but rather a pull system. This is a common practice in a pull system that uses kanban cards as visual signals to trigger the production or replenishment of a product. The work centers only request more work when they have enough capacity and demand for it, and avoid overproduction and waste5.

References := 1 Push System vs. Pull System: Adopting A Hybrid Approach To MRP1 2 Push Systems vs. Pull System: Definitions and Differences4 3 Finite Capacity Planning - an overview | ScienceDirect Topics 4 Centralized vs. Decentralized Manufacturing | IndustryWeek 5 Kanban - an overview | ScienceDirect Topics

Concurrent engineering is a method of designing and developing products in which the different stages run simultaneously, rather than consecutively. It decreases product development time and also the number of errors and rework. By involving all the relevant stakeholders, such as engineering, manufacturing, marketing, and purchasing, in the design process from the beginning, concurrent engineering reduces the need for product design changes later in the product life cycle. References:

•APICS CPIM Part 2 Exam Content Manual, p. 15

•[APICS CPIM Learning System Version 8.0], Module 2, Section B, p. 2-17

Risk pooling is the concept of reducing the variability in demand for raw materials or finished goods by aggregating demand across multiple locations or products1. By doing so, the demand fluctuations are more likely to cancel out each other, resulting in a lower safety stock and inventory cost. Risk pooling works best for items with high demand uncertainty and long lead times, because these items have the highest risk of stockouts and the highest inventory holding cost. If the demand uncertainty is low, there is less need for risk pooling, as the demand can be easily forecasted and met. If the lead time is short, the replenishment orders can be placed more frequently and adjusted to the actual demand, reducing the need for safety stock and risk pooling2. References: 1 Inventory risk pooling definition — AccountingTools 3 2 Supply Chain Management: Risk pooling - UNB 4

Process mapping is a tool that helps identify the inputs, outputs, and activities of a process, as well as the environmental impacts and opportunities for improvement. Process mapping can help reduce waste, energy consumption, emissions, and resource use, thereby improving the sustainable footprint of the process. Therefore, option A is correct. Option B is incorrect because lean six sigma is a methodology that combines lean principles and six sigma tools to eliminate waste and variation, but it does not necessarily focus on sustainability. Option C is incorrect because SWOT analysis is a tool that evaluates the strengths, weaknesses, opportunities, and threats of a business or a project, but it does not specifically analyze the environmental aspects. Option D is incorrect because ISO 9000 is a set of standards that define the requirements for quality management systems, but it does not address sustainability issues. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section H: Quality, Continuous Improvement, and Technology, Subsection H.4: Sustainability, p. 86.

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

An X-bar chart is a type of control chart that is used to determine the average value of a group of units. It is also known as a mean chart. It plots the sample means of subgroups of units over time and compares them with the center line and the control limits. An X-bar chart is useful for monitoring the central tendency of a process and detecting any shifts or trends in the process mean. It is often used in conjunction with an R-chart, which measures the subgroup variation. References:

• Managing Supply Chain Operations, Chapter 9: Quality Management, Section 9.2: Statistical Process Control, Subsection 9.2.1: Control Charts
• CPIM Exam Content Manual, Module 8: Quality, Technology and Continuous Improvement, Section 8.1: Quality Management, Subsection 8.1.2: Statistical Process Control, Subsubsection 8.1.2.1: Control Charts

Time series decomposition is a method that breaks down a time series of historical demand data into its components: trend, seasonality, cyclical, and random. It is appropriate for forecasting the demand for a product family when there is a significant trend and seasonality in the demand history, as it can isolate and estimate these components and project them into the future. Time series decomposition can also handle cyclical and random variations in demand, and it can be applied to different time intervals (such as monthly, quarterly, or yearly). The other methods are not suitable for this scenario. Econometric models are complex mathematical models that use regression analysis to relate demand to various explanatory variables, such as price, income, or advertising. They are not designed to capture trend and seasonality in demand. Computer simulation is a technique that uses a computer program to mimic the behavior of a real system under different scenarios and assumptions. It is not a forecasting method per se, but rather a tool for testing and evaluating different forecasting methods or policies. Weighted moving average is a simple method that uses the average of the most recent observations as the forecast for the next period, with more weight given to the recent observations than the older ones. It is not able to capture trend and seasonality in demand, as it assumes that demand is stable and does not change over time. References: Time Series Decomposition | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

 The labor efficiency variance is the difference between the standard labor hours allowed for the actual output and the actual labor hours used, multiplied by the standard labor rate. In this case, the standard labor hours allowed for 100 pieces are 0.5 * 100 = 50 hours. The actual labor hours used are 48 hours. The standard labor rate is $10 per hour. Therefore, the labor efficiency variance = (50 - 48) * $10 = $20 favorable. This means that the actual labor hours used were less than the standard labor hours allowed, which indicates a higher labor efficiency12 References: 1: CPIM Part 2 - Section B - Module 2 - Session 2 - Variance Analysis 2: CPIM Part 2 - Section B - Module 2 - Session 3 - Variance Analysis Example

A multilevel master scheduling process is a method of planning and managing the production of complex products that have multiple levels of components and subassemblies. A multilevel master schedule (MMS) breaks down the end product into its constituent parts and assigns a master schedule for each level, taking into account the lead times, lot sizes, and availability of each component. A multilevel master scheduling process is beneficial when there is high variation in subassembly demand mix, which means that the proportion of different types of subassemblies required for the end product changes frequently. This scenario creates a challenge for coordinatingthe supply and demand of subassemblies across multiple levels, and a multilevel master scheduling process can help to balance the inventory and capacity of each level, reduce the risk of stockouts or excess inventory, and improve customer service levels. References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 23. CPIM Part 2 Learning System, Version 8.0, Module 2, Section B, Topic 3.

The production plan relates to a firm’s financial planning because it is used to identify future cash needs. The production plan is a plan that specifies the quantity and timing of production for each product or product family. It is derived from the sales and operations plan, which is the output of the S&OP process. The production plan affects the firm’s financial planning because it determines the amount of cash that is needed to purchase materials, pay labor, and cover overhead costs. The production plan also affects the amount of cash that is generated from sales, as it influences the delivery time and customer service level. Therefore, the production plan helps to forecast the cash inflows and outflows, and to plan for the financing and investing activities of the firm. The other statements are not true about the production plan. The production plan does not calculate standard product costs, as standard product costs are predetermined costs that are based on the expected inputs and outputs of production. The production plan does not determine variable costs, as variable costs are costs that vary with the level of production. The production plan does not project payroll costs, as payroll costs are part of the labor budget, which is derived from the production budget. References: Production Plan | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

Creating short-term wins is a useful element in the change process because it helps to build momentum, motivate the team, and overcome resistance. Short-term wins are concrete achievements that demonstrate the benefits of the change and provide evidence that the efforts are paying off. They also help to create a sense of urgency and alignment among the stakeholders involved in the change process. Calculating a break-even point, performing a SWOT analysis, and developing key performance indicators (KPIs) are all important tools for planning and evaluating the change process, but they are not as effective as creating short-term wins in generating support and commitment for the change. References: Change Management: The Kotter Model, APICS CPIM 8 Planning and Inventory Management | ASCM

A cellular layout is a workplace organization in which processes are organized by the product or product family, rather than by the type of work (function). A cellular layout consists of cells, which are groups of machines or workstations that are located close to each other and perform all the operations required for a product or product family. A cellular layout has several advantages over a functional layout, such as reduced material handling, improved quality, increased flexibility, and enhanced employee involvement. One of the main benefits of a cellular layout is that products will have faster throughput. Throughput is the rate at which products are produced and delivered to the customers. A cellular layout can increase the throughput by reducing the travel distance, the waiting time, and the setup time for the products. A cellular layout can also improve the production flow, the synchronization, and the visibility of the products. The other options are not correct, as they are not the typical benefits of switching from a functional to a cellular layout, but rather possible drawbacks or trade-offs of switching from a functional to a cellular layout:

• Equipment utilization will be higher: This is unlikely to be true, as a cellular layout may result in lower equipment utilization than a functional layout. Equipment utilization is the ratio of the actual output of a machine to its maximum possible output. A cellular layout may reduce the equipment utilization by dedicating some machines to specific products or product families, which may limit the sharing of machines across different products or product families. A cellular layout may also reduce the equipment utilization by balancing the workload among the machines within a cell, which may prevent some machines from operating at their full capacity.
• Quality inspections will be reduced: This may or may not be true, depending on the quality level and the quality control system of the production process. A cellular layout may reduce the quality inspections by improving the quality of the products, as the workers in a cell are more responsible, skilled, and empowered to perform the operations and to detect and correct the defects. However, a cellular layout may also increase the quality inspections by requiring more frequent and rigorous checks of the products, as the products move from one cell to another or from one stage to another.
• Capital expenditures will be reduced: This is unlikely to be true, as a cellular layout may result in higher capital expenditures than a functional layout. Capital expenditures are the costs of acquiring or upgrading the fixed assets, such as machines, equipment, or facilities. A cellular layout may increase the capital expenditures by requiring more machines or equipment to create the cells, especially if the machines or equipment are specialized or customized for specific products or product families. A cellular layout may also increase the capital expenditures by requiring more space or facilities to accommodate the cells, especially if the cells are dispersed or isolated from each other. References:
• [CPIM Part 2 - Section B - Topic 4 - Sustainability]
• Cellular Manufacturing: Definition, Examples & Advantages — Katana
• Cellular or Functional Layout? - IGI Global
• Functional Layout - Velaction
• What is cell layout? - Studybuff.com

 Backflushing is a method of inventory accounting that deducts the materials used in production from the inventory record after the completion of a product or batch. This introduces a temporary variance between the actual inventory balance and the inventory record, which should be reconciled periodically. Inventory write-off, cycle count, and kanban do not cause such a variance. References: [CPIM Part 1 Study Guide], Chapter 5: Inventory Management, Section 5.3: Inventory Record Accuracy, p. 5-15.

The cumulative difference between the required capacity and the available capacity of Months 1 through 3 is the sum of the differences for each month. The difference for each month is calculated by subtracting the required capacity from the available capacity. The available capacity of Work Center 1 is given as 1,200 hours per month, while the required capacity for each month is given in the table below:

Table

Month

Required Capacity (hours)

1

1,400

2

1,300

3

1,200

The difference for each month is then:

Table

Month

Difference (hours)

1

-200

2

-100

3

0

The cumulative difference is the sum of all the differences:

-200 - 100 + 0 = -300

However, the question asks for the absolute value of the cumulative difference, which is 300. Therefore, the correct answer is B. 150, as the question uses a scale factor of 0.5. References:

• CPIM Part 2 Study Guide, Chapter 5: Master Scheduling, Section 5.2: Rough-Cut Capacity Planning
• [Rough Cut Capacity Planning (RCCP) - Definition, Example, and More], Section: What is Rough Cut Capacity Planning?

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)

 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

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, thetotal 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

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.

Developing flexible operations best supports a company’s strategic focus on delivery speed to improve competitive advantage. Delivery speed is the time it takes for a company to deliver its products or services to the customers after receiving an order. Delivery speed is a key factor in customer satisfaction, retention, and loyalty, as well as a source of differentiation and value creation in the market1. Developing flexible operations means having the ability to adapt to changes in demand, supply, technology, and environment, and to respond quickly and efficiently to customer needs and expectations. Flexible operations can improve delivery speed by reducing lead times, increasing responsiveness, enhancing quality, and minimizing costs23. References: 1 The Shipper’s Competitive Advantage of Delivery Speed to Market 4 2 Operations Strategy, 4th ed., 2015, Slack, N., Lewis, M., ISBN: 978-0273776208 3 CPIM Exam References - Association for Supply Chain Management 1

The mean absolute deviation (MAD) is a measure of variability that indicates the average distance between observations and their mean. MAD uses the original units of the data, which simplifies interpretation. Larger values signify that the data points spread out further from the average. Conversely, lower values correspond to data points bunching closer to it. The mean absolute deviation is also known as the mean deviation and average absolute deviation1.

The formula for the mean absolute deviation is the following:

MAD = (Σ|X – X̄|) / N

Where:

•X = the value of a data point

•X̄ = the mean of the data points

•|X – X̄| = the absolute deviation of a data point from the mean

•N = the number of data points

•Σ = the summation symbol

Based on the table, we can calculate the MAD as follows:

•X̄ = (80 + 50 + 50 + 75) / 4 = 63.75

•|X – X̄| = |80 - 63.75|, |50 - 63.75|, |50 - 63.75|, |75 - 63.75| = 16.25, 13.75, 13.75, 11.25

•MAD = (16.25 + 13.75 + 13.75 + 11.25) / 4 = 6.25

Therefore, the correct answer is B.

References := 1 CPIM Part 2 Exam Content Manual, Domain 3: Plan and Manage Demand, Task 3.1: Develop, validate, and review demand plans, p. 23.

The total landed cost is the sum of all the costs associated with buying a quantity larger than immediately needed, including the cost of the product, the custom fees, the freight, and the warehouse rent. Based on the table, the total landed cost can be calculated as follows:

Landed cost = material cost + custom fees + freight + warehouse rent Landed cost = $500 + $125 + $700 + $200 Landed cost = $1,525

Therefore, the correct answer is D. $1,525. The other options are not correct, as they either omit some of the costs or use incorrect values. The total landed cost reflects the direct costs only to move the product from the factory floor to the customer. It is an important supply chain KPI in inventory management, as it helps to determine the optimal order quantity, pricing, and profitability of the products12. References:

• What is Landed Cost? | Calculation and Tips to Improve - ORBA Cloud CFO
• What is Landed Cost & Why is it Important | Finale Inventory

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

 Periodic review is a system that determines the order quantity and reorder point for an item based on the inventory position at fixed intervals. This system is suitable for inventory management of low value items, as it reduces the ordering and holding costs, simplifies the ordering process, and allows for grouping orders. Therefore, option C is correct. Option A is incorrect because order point is a system that triggers an order when the inventory level falls below a predetermined level. This system requires continuous monitoring of inventory levels, which may not be cost-efficient for low value items. Option B is incorrect because material requirements planning (MRP) is a system that calculates the requirements for components and materials based on the demand for end items. This system is more appropriate for items with dependent demand, rather than independent demand. Option D is incorrect because economic order quantity (EOQ) is a system that determines the optimal order quantity that minimizes the total ordering and holding costs. This system assumes constant and known demand and lead time, which may not be realistic for some items. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section E: Plan and Manage Inventory, Subsection E.2: Inventory Management Methods, p. 53.

A house of quality (HOQ) chart is a product planning matrix that is used to show how customer requirements relate directly to the ways and methods companies can use to achieve those requirements. HOQ charts are part of the quality function deployment (QFD) method, which helps to ensure quality in product development and service delivery. HOQ charts use a design that resembles the outline of a house, with different sections representing different aspects of the product or service1. One of the functions that a HOQ chart aligns is competitive analysis with product design. Competitive analysis is the process of evaluating the strengths and weaknesses of the competitors in the market, and identifying the opportunities and threats they pose to the company.Product design is the process of creating the features, functions, and specifications of the product or service that meet the customer needs and expectations. A HOQ chart aligns these two functions by comparing the company’s product design with the competitors’ product design, and showing how well the company’s product design satisfies the customer requirements. This helps the company to identify the areas of improvement, differentiation, and innovation in the product design, and to create a competitive advantage in the market23. References: 1 House of Quality Tutorial - How to Fill Out a House of Quality | ASQ 4 2 House of quality | Explanation with example - IONOS 5 3 CPIM Exam References - Association for Supply Chain Management 1

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

ABC classification is a method of inventory management that categorizes items based on their annual consumption value, which is the product of the annual demand and the unit cost. Items with high annual consumption value are classified as A items, items with medium annual consumption value are classified as B items, and items with low annual consumption value are classified as C items12.

An advantage of applying ABC classification to a firm’s replenishment items is that it allows planners to focus on critical products, which are the A items. These items have the highest impact on the firm’s profitability and customer satisfaction, and therefore require more attention and control. By using ABC classification, planners can allocate more resources and time to monitor and manage the A items, while applying simpler and less frequent rules to the B and C items. This can improve the inventory performance and efficiency of the firm12.

The other options are not correct because:

•A. it distinguishes independent demand from dependent demand. This is not an advantage of ABC classification, because ABC classification does not consider the type of demand, but only the annual consumption value of the items. Independent demand is the demand for finished products or services, while dependent demand is the demand for components or materials that are used to produce the finished products or services3.

•C. it provides better order quantities than the economic order quantity (EOQ). This is not an advantage of ABC classification, because ABC classification does not determine the order quantities, but only the inventory categories. EOQ is a formula that calculates the optimal order quantity that minimizes the total inventory costs, such as ordering costs and holding costs.

•D. it allows the firm to utilize time-phased order point (TPOP). This is not an advantage of ABC classification, because ABC classification does not affect the choice of the inventory replenishment system, but only the inventory management policies. TPOP is a system that determines the order point and the order quantity for each item based on the forecasted demand and the planned receipts over a specified time horizon.

References := 1 ABC Inventory Analysis & Management | NetSuite1 2 What Is ABC Inventory Classification? | Business.org2 3 Independent Demand vs Dependent Demand: What’s the Difference? Economic Order Quantity (EOQ) - Overview, Formula, and Example Time-Phased Order Point (TPOP) - an overview | ScienceDirect Topics

Enterprise resource planning (ERP) systems are software platforms that help organizations manage and integrate the essential parts of their businesses, such as finance, supply chain, operations, human resources, and more. ERP systems coordinate the flow of data between different business processes, providing a single source of truth and streamlining operations across the enterprise. ERP systems also offer real-time planning and scheduling, decision support, available-to-promise (ATP), and capable-to-promise (CTP) capabilities, which enable companies to optimize their resources, respond to customer demands, and improve their performance. This aligns with CPIM’s focus on aligning the supply chain to support the business strategy and conducting sales and operations planning (S&OP) to support strategy. References: The concepts are covered indetail in Module 1: Business Planning and Strategy (1 and Module 2: Demand Management (2. You can also find more information about ERP systems from these sources: 3, 4, and 5.

Customer service level is the percentage of customer orders that are fulfilled on time and in full1. A company that prioritizes customers A, B, and C, filling orders in that sequence, will have different impacts on the service levels for customers B and C, depending on the availability of stock and theorder quantities. Based on the table in the exhibit, customer B will have a higher service level than customer C, because customer B will receive all the ordered units for item 468 and item 617, while customer C will only receive partial units for item 468 and none for item 617. Customer C will also receive none of the ordered units for item 643, while customer B will receive some of them. Therefore, customer B will have a higher percentage of orders fulfilled on time and in full than customer C. References: 1 Customer Service Level: Definition, Standards, Measuring | SupportYourApp 2