ISM INTE Supply Management Integration Exam Practice Test

Demand planning is a vital process that helps a company predict future demand for its products. By accurately forecasting demand, the company can adjust its production and inventory levels, avoiding both shortages and excess inventory. In this case, better demand planning would have allowed the firm to anticipate the impact of the sales promotion, preventing excess inventory.

Collaboration with product development to create sustainable packaging aligns product presentation with consumer expectations of sustainability, enhancing brand image. Reference: Kotler, P., & Keller, K. L. (2016). Marketing Management.

Creating a value stream map to identify bottlenecks is the first step in addressing delays in the order-to-delivery process. This visual tool helps pinpoint areas causing delays, enabling targeted improvements to streamline operations and reduce lead times.

To calculate the Mean Absolute Percentage Error (MAPE), we follow these steps:

1.Find the absolute error for each month.

2.Convert the absolute error to a percentage of the actual demand for each month.

3.Find the average of these percentage errors over the six-month period.

Here’s the calculation:

•January: ∣100,000−80,000100,000∣×100=20%\left| \frac{100,000 - 80,000}{100,000} \right| \times 100 = 20\%100,000100,000−80,000×100=20%

•February: ∣105,000−90,000105,000∣×100=14.29%\left| \frac{105,000 - 90,000}{105,000} \right| \times 100 = 14.29\%105,000105,000−90,000×100=14.29%

•March: ∣110,000−100,000110,000∣×100=9.09%\left| \frac{110,000 - 100,000}{110,000} \right| \times 100 = 9.09\%110,000110,000−100,000×100=9.09%

•April: ∣70,000−100,00070,000∣×100=42.86%\left| \frac{70,000 - 100,000}{70,000} \right| \times 100 = 42.86\%70,00070,000−100,000×100=42.86%

•May: ∣90,000−110,00090,000∣×100=22.22%\left| \frac{90,000 - 110,000}{90,000} \right| \times 100 = 22.22\%90,00090,000−110,000×100=22.22%

•June: ∣100,000−90,000100,000∣×100=10%\left| \frac{100,000 - 90,000}{100,000} \right| \times 100 = 10\%100,000100,000−90,000×100=10%

MAPE=(20+14.29+9.09+42.86+22.22+10)6=19.41%≈20%MAPE = \frac{(20 + 14.29 + 9.09 + 42.86 + 22.22 + 10)}{6} = 19.41\% \approx 20\%MAPE=6(20+14.29+9.09+42.86+22.22+10)=19.41%≈20%

Thus, the MAPE for the six months of data is approximately 20%. References:

•Chase, R. B., Jacobs, F. R., & Aquilano, N. J. (2006). Operations Management for Compet-itive Advantage. McGraw-Hill/Irwin.

•Hyndman, R. J., & Athanasopoulos, G. (2018). Forecasting: principles and practice. OTexts.

A Warehouse Management System (WMS) is designed specifically to manage and optimize ware-house operations. It provides real-time data on inventory levels, storage locations, and warehouse capacity, enabling supply managers to understand and maximize the utilization of distribution centers. A WMS can track and improve the efficiency of receiving, putaway, picking, and ship-ping processes, providing a comprehensive view of the warehouse's capacity and performance. References:

•Frazelle, E. (2002). World-Class Warehousing and Material Handling. McGraw-Hill.

•Richards, G. (2017). Warehouse Management: A Complete Guide to Improving Efficiency and Minimizing Costs in the Modern Warehouse. Kogan Page Publishers.

Consignment refers to an agreement where vendor-owned inventory is stored on the buyer's premises until it is used. The supplier retains ownership until the items are consumed, reducing the buyer's upfront inventory costs and risks associated with holding stock.

The graph shows inventory levels being replenished back to the maximum level immediately after reaching zero, indicating near-instantaneous replenishment. This is characteristic of a system where the lead time for orders is very short or negligible, allowing the firm to maintain optimal inventory levels without significant delay. This approach minimizes stockouts and ensures a con-tinuous supply of inventory. References:

•Stevenson, W. J. (2018). Operations Management. McGraw-Hill Education.

•Silver, E. A., Pyke, D. F., & Thomas, D. J. (2016). Inventory and Production Management in Supply Chains. CRC Press.

Capital expenditure policies primarily relate to fixed assets, as they involve investments in long-term assets that are capitalized and depreciated over time. Reference: Horngren, C. T., Datar, S. M., & Rajan, M. V. (2015). Cost Accounting: A Managerial Emphasis.

Spot buying refers to the purchase of commodities on the open market for immediate delivery. This practice is typically used to meet urgent needs or take advantage of favorable market conditions. It contrasts with forward buying, which involves purchasing for future delivery to lock in prices or quantities.

The number of aircraft anticipated to be built is most likely to be protected by the Non-Disclosure Agreement (NDA). This information is sensitive as it can reveal the scale of the project, future business plans, and production capabilities, which competitors could exploit if they gained access. The NDA ensures that the supplier keeps this information confidential to protect the interests of the aircraft manufacturer. Other details like the time frame, start date, and the name of the end customer are also important but the quantity of aircraft directly ties to the company's strategic plans and capacity. References:

•Bagley, C. E., & Dauchy, C. E. (2018). The Entrepreneur's Guide to Law and Strategy. Cengage Learning.

•Seidel, G. (2014). Negotiating Business Transactions: An Extended Simulation Course. Aspen Publishers.

Using the exponential smoothing formula, Ft=Ft−1+α(At−1−Ft−1)F_t = F_{t-1} + \alpha (A_{t-1} - F_{t-1})Ft=Ft−1+α(At−1−Ft−1), where FtF_tFt is the forecast, α\alphaα is the smoothing constant (0.2), At−1A_{t-1}At−1 is actual demand (140), and Ft−1F_{t-1}Ft−1 is the previous forecast (125). Calculation: 125+0.2×(140−125)=128+2=130125 + 0.2 \times (140 - 125) = 128 + 2 = 130125+0.2×(140−125)=128+2=130. Reference: Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.

In a price-sensitive and competitive market, focusing on total cost of ownership is critical. By negotiating with suppliers to minimize inventory and logistics costs, the firm can better control expenses and remain competitive. This approach ensures proper supply chain alignment with the new market segment's demands.

The best order maximizes recovery by first selling the rubber balls, exploring alternative uses of the material, complying with disposal regulations, and donating the residual material. This approach considers potential revenue, sustainability, and community support. Reference: Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2013). Supply Chain Logistics Management.

The Producer Price Index for Intermediate Materials is most relevant for monitoring price behavior in industrial packaging, reflecting changes in production costs that affect supply chain economics. References: Price index reports are essential tools for tracking market trends and making informed procurement decisions in industrial sectors.

A decision tree is an effective tool for evaluating potential costs and benefits under conditions of uncertainty, such as varying forecasts for future sales. It allows the supply manager to visually map out different decision paths and their associated costs, probabilities, and outcomes. This helps in comparing different scenarios and making informed decisions about the raw materials needed for a new product launch. Decision trees are particularly useful in situations with multiple possible outcomes and complex decisions. References:

•Clemen, R. T., & Reilly, T. (2013). Making Hard Decisions with DecisionTools. Cengage Learning.

•Heizer, J., Render, B., & Munson, C. (2017). Operations Management: Sustainability and Supply Chain Management. Pearson.

An increase in cost of goods sold while maintaining a constant average inventory value results in higher inventory turnover. This indicates improved efficiency in managing inventory relative to sales. References: Inventory management metrics highlight turnover as a critical measure of how effectively inventory is being utilized.

Routine categories are regarded as low risk and low value. These items are typically standardized and widely available, requiring minimal management effort. They often include office supplies or basic maintenance items. This classification allows firms to focus resources on more critical areas. Reference: Kraljic’s purchasing portfolio model.

Understanding product characteristics is fundamental in packaging optimization, as these details influence packaging design, materials, and methods. This knowledge ensures that the packaging protects the product while optimizing space and cost. References in logistics emphasize the importance of aligning packaging with product requirements to improve efficiency and sustainability.

Workshops facilitate collaboration and innovation, addressing cost drivers comprehensively and fostering alignment on sustainability and cost reduction goals. Reference: Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2013). Supply Chain Logistics Management.

Inventory accuracy is crucial for effective warehouse management. It ensures that the physical count of goods matches the inventory records, which is essential for minimizing errors, reducing waste, and improving customer satisfaction. The primary point the report should address is how a physical tracking system enhances inventory accuracy, leading to more efficient operations.

Point-of-use storage refers to the placement of inventory close to where it is needed in production. This approach supports just-in-time and Kanban systems by ensuring materials are readily accessible, reducing handling and transit times. Reference: Lean manufacturing principles emphasize minimizing waste, and point-of-use storage is a key strategy.

Vendor-managed inventory (VMI) places the responsibility on the supplier to maintain stock lev-els at the purchaser's facility. This system enhances supply chain efficiency, reduces inventory costs, and ensures timely replenishment based on actual consumption patterns.

In urgent situations, expediting replacement parts minimizes downtime and maintains production flow. Direct communication with the supplier is critical for fast resolution. Reference: Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2013). Supply Chain Logistics Management.

Expediting is most warranted for a purchase order that is past due, as it directly impacts operations and may cause delays in the production process. Ensuring timely delivery of overdue items is critical to maintaining supply chain efficiency. References: Expediting is used to resolve critical supply issues, especially for items that are essential and overdue.

Speculative buying occurs when an organization purchases more inventory than necessary based on the forecasted increase in prices or potential shortages. This strategy aims to capitalize on market conditions, potentially resulting in financial gains. Reference: Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2016). Purchasing and Supply Chain Management.

Conducting an online auction is an effective strategy for rapidly liquidating excess inventory and remorse returns. This approach maximizes recovery value by reaching a broad audience of potential buyers in the secondary market, addressing inventory concerns promptly and efficiently.

For a firm purchasing and selling products internationally, referencing international standards ensures compatibility, quality, and compliance across different markets. This practice facilitates global trade and meets regulatory requirements. References: International standards (e.g., ISO) are critical in maintaining consistency and reliability in global supply chains.

The first step in training a new warehouse employee should be to explain the company's safety policy and verify understanding of all safety-related requirements (Option C). Safety is paramount in warehouse environments to prevent accidents and ensure compliance with regulations. Providing comprehensive safety training first helps instill a culture of safety and protects both the employee and the organization. Reference: Occupational Safety and Health Administration (OSHA) standards.

In the VICS CPFR model, the first stage is strategy and planning, which involves establishing the collaboration framework and defining the scope of the partnership. This stage sets the foundation for subsequent processes. References: CPFR (Collaborative Planning, Forecasting, and Replenishment) guidelines emphasize starting with strategic alignment.

During the analysis phase of an ERP system development process, the supply manager should communicate with end users to review their business environments. This phase involves gathering detailed information about user requirements and business processes to ensure the ERP system will meet organizational needs. It's crucial for identifying gaps and ensuring user buy-in. References: ERP implementation methodologies emphasize the importance of user engagement during the analysis phase to align system functionalities with business operations.

To align procurement with the organization's strategy, the supply manager should first review existing procurement practices to determine their strategic or tactical nature. This assessment provides insight into how procurement supports overall business goals and identifies areas for alignment and improvement, ensuring procurement adds maximum value.

Access issues at the new warehouse can lead to increased delivery times and shipping costs, as drivers may face delays or require alternative routes. Resolving access problems is crucial for restoring efficient operations.

Implementing a Corrective Action Plan (Option C) will be most helpful in resolving the issue of scratched parts. This plan involves identifying the root cause of the problem, implementing changes to prevent recurrence, and monitoring the effectiveness of these changes. A structured approach to corrective action can address quality issues efficiently and prevent future disruptions. Reference: Quality management systems and corrective action planning.

Standardization ensures that products meet uniform quality standards, reducing variability and enhancing customer satisfaction. This advantage is vital in maintaining brand reputation and streamlining production processes.

The buyer should be most concerned about the risks associated with the shipping terms, especially as they take possession once the goods are loaded. This includes potential liabilities and loss during transit. Understanding these risks is critical for mitigating potential issues. Reference: Incoterms® 2020 by ICC.

Spot buying refers to purchasing goods on the open market for immediate requirements, often at a premium, to meet urgent needs. This approach addresses shortages quickly, ensuring continuity in production.

Target cost is determined by subtracting the required profit margin from the selling price of the end product. This calculation helps in setting a cost benchmark that guides the firm's production and pricing strategies, ensuring profitability while meeting market price points.

A centralized warehousing strategy minimizes the repetition of inventory across locations, optimizing resource utilization and technology use. It facilitates hiring qualified personnel and streamlining operations, which aligns with the firm's goals of efficiency and effectiveness in warehousing.

Implementing Supplier-managed inventory (SMI) allows FGH, Inc. to share production and inventory data with Supplier X, streamlining the replenishment process. This approach enables the supplier to manage inventory levels and deliveries based on real-time demand, reducing coordination efforts and improving delivery efficiency.

In negotiating contracts for new products, flexibility is crucial, especially when dealing with un-certainties in demand and production schedules. A low minimum order quantity (MOQ) provides JKL, Inc. with the ability to order smaller amounts of materials as needed, reducing inventory holding costs and the risk of overstocking. This flexibility can be particularly important during the initial stages of product introduction when demand forecasts may be less certain. Ensuring a low MOQ can also facilitate better cash flow management and reduce the potential for waste. Refer-ences:

•Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and Supply Chain Management. Cengage Learning.

•Burt, D. N., Petcavage, S. D., & Pinkerton, R. L. (2010). Supply Management. McGraw-Hill Education.

The EOQ formula considers order costs and carrying costs. With the increase in carrying costs from $4 to $6 in Year 2, the EOQ will decrease, specifically to 32 units, as higher carrying costs lead to lower optimal order quantities. This balances inventory holding costs against order costs. Reference: Economic Order Quantity calculation and inventory management.

The supplier should proactively identify components expected to become obsolete and purchase the necessary parts before they are needed. This ensures compliance with the service agreement and supports the continued operation of the buyer’s equipment, minimizing downtime and operational disruption. Reference: Supplier agreements and obsolescence management.

Maritime law governs incidents at sea, including jettisoning cargo to save a vessel during emergencies. This scenario reflects principles of general average, where losses are shared among parties. Reference: Tetley, W. (2002). Marine Cargo Claims.

A market analysis best describes the study conducted by a cross-functional team to evaluate the feasibility of a new product line. This analysis assesses market demand, competition, and potential profitability, providing insights necessary for decision-making. Reference: Product development and market research methodologies.

In project management, supplier selection typically occurs during the project planning phase. This phase involves defining the project's scope, setting objectives, and identifying necessary resources, including suppliers. References to the PMBOK Guide support that procurement planning and supplier selection are integral components of project planning.

The supply manager's actions align with the principle of continuous improvement, a key component of quality management. By gathering feedback from various stakeholders, the manager seeks to enhance the supply chain's performance, addressing issues and optimizing processes. This approach fosters a culture of ongoing enhancement, supported by Total Quality Management (TQM) principles.

Forming a cross-functional team ensures diverse perspectives and expertise in decision-making, leading to well-rounded strategies for managing MRO materials more efficiently. It fosters collaboration and alignment across departments. Reference: Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2016). Purchasing and Supply Chain Management.

When a project manager brings stakeholders together to conduct an analysis, understanding the resources, expectations, and gains from the project is likely to identify potential conflicts that could impede the project's success. Identifying these conflicts early allows the project manager to address and mitigate them, ensuring smoother project execution. This is crucial for aligning stakeholder interests and maintaining focus on project goals. Other aspects like additional re-sources, time frames, and roles and responsibilities are important but typically come after under-standing and resolving any potential conflicts. References:

•Project Management Institute. (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). PMI.

•Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. Wiley.

Causal modeling is typically the most useful method for identifying complex market conditions affecting product or service demand factors. This method examines the relationships between variables, allowing businesses to understand how different factors influence demand. It provides deeper insights into cause-and-effect relationships than methods like time series analysis or moving averages. Reference: Advanced forecasting techniques in supply chain management.

Using FCA Incoterms® means the buyer assumes responsibility at the point where goods are loaded onto the transport. Adjusting for transportation costs, Supplier 3, with a lower base bid price and assuming buyer's responsibility earlier, results in the lowest adjusted total cost. This selection balances cost and risk, aligning with the buyer's preferred Incoterm.