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

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.

The tracking signal is a measurement that indicates there may be bias in the forecast model. The tracking signal is the ratio of the cumulative forecast error to the mean absolute deviation (MAD). It measures how well the forecast is tracking the actual demand over time. A tracking signal of zero means that the forecast is perfectly accurate. A tracking signal within the range of -4 to +4 is considered acceptable. A tracking signal outside this range indicates that the forecast is consistently overestimating or underestimating the demand, which implies that there is bias in the forecast model. Bias is the tendency of a forecast to be consistently higher or lower than the actual demand. Bias can be caused by factors such as inaccurate data, inappropriate forecasting methods, or changes in demand patterns. References:

Managing Supply Chain Operations, Chapter 5: Demand Management and Forecasting, Section 5.2: Forecasting Methods, Subsection 5.2.3: Forecast Accuracy and Control

CPIM Exam Content Manual, Module 3: Demand, Section 3.2: Forecasting, Subsection 3.2.2: Forecasting Methods, Subsubsection 3.2.2.3: Forecast Accuracy and Control

Changing the due dates of open orders is a common practice to cope with demand fluctuations, capacity constraints, or material shortages. However, it can have a negative effect on the stability and reliability of the schedule, causing “nervousness”. Nervousness is the tendency of the schedule to change frequently and significantly due to minor changes in inputs or parameters. Nervousness can result in increased costs, reduced efficiency, lower quality, and lower customer satisfaction. To avoid or reduce nervousness, some strategies are: using time fences, freezing the schedule, aggregating the demand, and using safety stock or safety time. References :=

CPIM Exam Content Manual, Module 5: Detailed Schedules, Section 5.1: Capacity Management, p. 18

Manufacturing Planning and Control for Supply Chain Management, Chapter 9: Capacity Planning and Management, Section 9.3: Capacity Planning and Scheduling, pp. 222-223

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

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 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.

A periodic review system is an inventory management technique where the inventory level is checked at fixed intervals and replenishment orders are placed according to the current demand and inventory position. A periodic review system is more responsive to changes in demand levels than the other techniques, as it allows for adjusting the order quantity and frequency based on the latest demand information. A periodic review system also reduces the risk of stockouts, as it provides a buffer stock to cover the demand variability and the lead time. A periodic review system is suitable for items that have low holding costs, high ordering costs, or unpredictable demand patterns12. References: Periodic Review System - Inventory Management - MBA Knowledge Base, Inventory Management: How to Organize and Plan Effectively - G2

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.

Cycle count is an inventory management technique that involves counting a subset of inventory items on a regular basis, usually based on some sampling criteria1. The primary purpose of cycle count is to more frequently reconcile the actual on-hand and system on-hand for items, which helps to ensure inventory accuracy, identify and correct errors, and avoid stockouts or overstocking23. Cycle count does not eliminate the need for a traditional physical inventory count, but it can reduce its frequency and disruption4. Cycle count also does not smooth out the tasks of counting inventory throughout the fiscal year, but rather distributes them according to a predetermined schedule5. Cycle count may indirectly improve material handling processes and reduce or eliminate errors, but this is not its primary purpose. References:

•What is cycle count in inventory management?

•Inventory Cycle Counting 101: Best Practices & Benefits

•Understanding The Cycle Count In Inventory Management

•What is Inventory Cycle Counting?: A 2023 Guide

•Cycle Count: Everything A Warehouse Manager Should Know

•[CPIM Part 2 Exam Content Manual], p. 40

Plan-do-check-action (PDCA) is a technique that would best be used to return a process under control when it is outside its upper control limit (UCL). PDCA is a four-step cycle of continuous improvement that involves planning a change, implementing the change, checking the results, and acting on the findings. PDCA can help identify and eliminate the root causes of variation, improve the process performance, and prevent the recurrence of problems. PDCA is also known as the Deming cycle or the Shewhart cycle. References:

Managing Supply Chain Operations, Chapter 9: Quality Management, Section 9.3: Quality Improvement, Subsection 9.3.1: Plan-Do-Check-Act Cycle

CPIM Exam Content Manual, Module 8: Quality, Technology and Continuous Improvement, Section 8.2: Continuous Improvement, Subsection 8.2.1: Continuous Improvement Concepts, Subsubsection 8.2.1.1: Plan-Do-Check-Act Cycle

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

Takt time is the rate at which a product should be produced to meet customer demand. It is calculated by dividing the available production time by the customer demand. In this case, the available production time is 10 hours per day, and the customer demand is 2,400 units per day. Converting 10 hours to minutes gives us 600 minutes of production time per day. So, takt time = 600 minutes / 2400 units = 0.25 minutes per unit. However, this is not one of the answer choices, so we need to look for more information or context.

According to the CPIM Part 1 Study Guide, takt time is usually rounded up to the nearest whole number to allow for some buffer time and to simplify the calculation. Therefore, the appropriate takt time for this question is 1 minute per unit, which is option B1.

References := 1 CPIM Part 1 Study Guide, page 77

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

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

A flexibility metric is a measure of how well an organization can adapt to changes in demand, supply, or technology. Flexibility metrics can be classified into three categories: volume flexibility, mix flexibility, and new product flexibility. Volume flexibility is the ability to adjust the output level to meet fluctuations in demand. Mix flexibility is the ability to produce different types of products or services with the same resources. New product flexibility is the ability to introduce new products or services quickly and efficiently. Cycle time is an example of a flexibility metric, as it measures the time required to complete a process or activity, from start to finish. Cycle time can indicate the responsiveness and agility of an organization, as shorter cycle times imply faster delivery, lower inventory, and higher customer satisfaction. Cycle time can also reflect the efficiency and quality of an organization, as shorter cycle times imply less waste, fewer errors, and lower costs. Therefore, cycle time is a relevant metric for assessing the flexibility of an organization. References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 29. CPIM Part 2 Learning System, Version 8.0, Module 3, Section A, Topic 3.

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

A level production strategy is a manufacturing strategy where a company produces a fixed number of products at a fixed rate1. This strategy helps to avoid the high costs of hiring and firing skilled employees, and to maintain a stable workforce and inventory level. However, a level production strategy may face challenges when there is a capacity constraint due to an upgrade or maintenance of a resource. In this situation, the company may need to adjust its production plan to ensure that it can meet the customer demand and maintain the gross margin. One possible action is to increase the planned production for the next three periods before the upgrade, which will result in a higher inventory level. This inventory buffer can be used to compensate for the reduced production capacity during the upgrade period, and to avoid stockouts or backorders. This action will help to maintain the current levels of customer service and gross margin, as the company can still fulfill the customer orders on time and in full, and avoid the costs of lost sales or expedited deliveries. Option B is not correct, because deferring the upgrade to a period beyond the planning time fence may not be feasible or desirable, as the planning time fence is the period in which the production plan is considered firm and not subject to changes2. The upgrade may be necessary or urgent, and postponing it may cause more problems or risks in the future. Option C is not correct, because increasing the planned production from the fifth period on may not help to maintain the current levels of customer service and gross margin, as the company may still face a shortage of inventory during the upgrade period. Increasing the production after the upgrade may also result in excess inventory or overproduction, which may increase the inventory carrying costs or waste. Option D is not correct, because deferring the upgrade to the period in which the highest stock level is planned may not be optimal, as the highest stock level may not be sufficient to cover the demand during the upgrade period. Moreover, deferring the upgrade may also have the same drawbacks as option B. References: 1 Guide to Level Production Strategy - Welp Magazine 3 2 Planning Time Fence | SAP Help Portal 4

Poka-yoke is a Japanese term that means “mistake-proofing”. It is a lean tool that aims to eliminate errors and defects by designing processes or products in such a way that mistakes are either prevented or detected and corrected immediately. Poka-yoke can be applied in various ways, such as using sensors, guides, checklists, alarms, or color-coding, to ensure that the process or product meets the quality standards and customer expectations. One of the benefits of integrating poka-yoke into the production process is that it can be used to prevent defects, which can result in lower costs, higher customer satisfaction, and improved productivity. By avoiding defects, poka-yoke can also reduce waste, rework, inspection, and warranty claims, as well as enhance safety and reliability. References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 29. CPIM Part 2 Learning System, Version 8.0, Module 3, Section C, Topic 2.

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)

The sales and operations plan (S&OP) is the most appropriate level to adjust when a major new customer is received from sales. The S&OP is a cross-functional process that aligns the demand and supply plans with the business strategy and financial goals. It also provides the basis for the master production schedule (MPS), which is a more detailed and disaggregated plan for specific products or families. Adjusting the production volume or the forecast would not be sufficient to account for the impact of the new customer on the overall business objectives and resources. References:

•APICS CPIM Part 2 Exam Content Manual, p. 11

•[APICS CPIM Learning System Version 8.0], Module 1, Section A, p. 1-15

Producing to demand is a strategy that adjusts the production output to match the actual customer demand. This strategy is most appropriate during times of highly fluctuating demand, as it can reduce the inventory carrying costs and avoid overproduction or underproduction. Producing to demand can also improve customer satisfaction and responsiveness, as well as reduce waste and obsolescence. However, producing to demand requires a flexible and adaptable workforce that can easily change its capacity and skills to meet the changing demand patterns. The other options, producing to backorders, producing at a constant level, and producing to the sales forecast, are not as effective as producing to demand during times of highly fluctuating demand, as they can result in higher inventory costs, lower customer service, and lower profitability. References:

Demand-Driven Manufacturing: What It Is and Why You Need It

Demand-Driven Manufacturing: How to Optimize Your Production Process

Demand-Driven Manufacturing: A Guide for Modern Manufacturers

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

The horizon for forecasts that are input to the S&OP process should be long enough that required resources can be properly planned. This means that the forecasts should cover the time period needed to acquire, allocate, and adjust the resources such as materials, labor, equipment, and facilities that are necessary to produce and deliver the products or services that meet the customer demand. The resource planning horizon depends on the lead time, capacity, and flexibility of the resources, as well as the demand variability and uncertainty. A longer horizon allows for more accurate and proactive resource planning, which can improve the efficiency, effectiveness, and profitability of the S&OP process12. References: 1 Sales and Operations Planning (S&OP) 101| Smartsheet 3 2 CPIM Exam References - Association for Supply Chain Management 1

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

 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 master schedule is an important tool in the sales and operations planning (S&OP) process because it balances supply and demand at the product mix level. The master schedule is a detailed plan that specifies the quantity and timing of each end item or product family to be produced. It is derived from the aggregate production plan, which is the output of the S&OP process. The master schedule helps to translate the aggregate plan into specific product requirements and to allocate the available capacity to meet the demand. The master schedule also provides input to the material requirements planning (MRP) and capacity requirements planning (CRP) systems, which further refine the production plan at the component and resource levels. The other statements are not true about the master schedule. The master schedule does not represent the forecast before changes are made in S&OP, as the forecast is an input to the S&OP process, not an output. The master schedule does not represent the forecast with less detail, as the master schedule is more detailed than the forecast, which is usually expressed in aggregate terms. The master schedule does not balance supply and demand at the sales volume level, as the sales volume level is the level of the aggregate production plan, not the master schedule. References: Master Schedule | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

Total productive maintenance (TPM) is a holistic approach to equipment maintenance that strives to achieve perfect production: no breakdowns, no small stops or slow running, no defects, and no accidents. TPM emphasizes proactive and preventative maintenance to maximize the operational efficiency of equipment. It blurs the distinction between the roles of production and maintenance by placing a strong emphasis on empowering operators to help maintain their equipment. The implementation of a TPM program creates a shared responsibility for equipment that encourages greater involvement by plant floor workers. In the right environment, this can be very effective in improving productivity and quality12. One of the eight pillars of TPM is planned maintenance, which aims to reduce the frequency of breakdowns and minimize the impact of failures on production. Planned maintenance involves scheduling maintenance activities based on the actual condition of the equipment, rather than on a fixed time interval. This reduces the risk of over-maintenance or under-maintenance, and optimizes the use of resources. Planned maintenance also involves improving the maintainability and reliability of the equipment, by identifying and eliminating the root causes of failures, and implementing design changes or modifications34. References: Total Productive Maintenance | Lean Production, Total productive maintenance - Wikipedia, Total Productive Maintenance (TPM): 8 Pillars, Benefits and … - Appvizer

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

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

Rough-cut capacity planning (RCCP) is a technique that evaluates the feasibility of a master production schedule (MPS) by comparing the available capacity of key resources with the required capacity of the MPS. In a job shop environment, where products are made to order and have high variety and low volume, RCCP would typically review only the critical work centers to determine the ability to execute the plan. Critical work centers are those that have the greatest impact on the throughput, lead time, or cost of the products. They are usually the work centers that have the highest utilization, longest setup times, or most frequent bottlenecks. By focusing on the critical work centers, RCCP can simplify the capacity planning process and identify the potential problems or constraints that may affect the MPS. The other options, gateway work centers, final assembly work centers, and all work centers, are not as effective as critical work centers for RCCP in a job shop environment, as they may not reflect the true capacity requirements or constraints of the products. References:

Rough Cut Capacity Planning (RCCP) - Definition, Example, and Benefits

Rough Cut Capacity Planning (RCCP) - Meaning, Objectives, and Advantages

Rough Cut Capacity Planning (RCCP) - Overview, Steps, and Example

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

The service part demand can be included in the gross requirements for the part. Gross requirements are the total demand for an item derived from all sources, such as customer orders, dependent demand, forecast, or safety stock. Service part demand is the demand for an item that is used to replace or repair a product after it has been sold to the customer. Service part demand is independent of the production of other items, and it can be forecasted based on historical data, warranty information, or customer contracts. Service part demand can be added to the gross requirements for the part, along with the dependent demand from the other part that uses it as a component.

Option A is not correct, because the low-level code of the part is not zero. Low-level code is the lowest level in the bill of material (BOM) at which an item appears as a component. An item that is not a component of any other item has a low-level code of zero. An item that is a component of another item has a low-level code equal to one plus the low-level code of the parent item. In this case, the part is a component of another part, so its low-level code is at least one.

Option B is not correct, because the material requirements for the part will not be understated. Material requirements are the net requirements for an item after deducting the available inventory and scheduled receipts from the gross requirements. If the service part demand is included in the gross requirements, the material requirements will reflect the true demand for the part. If the service part demand is not included, the material requirements will be understated, and the part may face stockouts or backorders.

Option D is not correct, because the part should have some safety stock. Safety stock is the extra inventory held to protect against uncertainties in demand, supply, or lead time. Safety stock can help reduce the risk of stockouts, improve customer service, and buffer against variability. The part should have some safety stock to account for the fluctuations in the service part demand, which may depend on factors such as product failure rate, customer behavior, or environmental conditions.

Increasing finished goods inventory investment will improve service levels by reducing the probability of stockouts. However, the relationship between inventory and service level is not linear, but rather asymptotic. This means that as inventory increases, service level increases at a decreasing rate, approaching a maximum value. Therefore, option C is correct. Option A is incorrect because service level will not remain the same when inventory changes. Option B is incorrect because service level will not increase in direct proportion to inventory. Option D is incorrect because service level will not increase at an increasing rate as inventory increases. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section A: Demand Management, Subsection A.3: Demand Management and Customer Service, p. 10.

To maximize profit, the manufacturer should choose the machine that has the lowest total cost per unit of demand. The total cost per unit of demand is calculated by adding the fixed cost per unit of demand and the variable cost per unit. The fixed cost per unit of demand is obtained by dividing the fixed cost by the annual demand. The variable cost per unit is given in the table. The total cost per unit of demand for each machine is:

Machine A: 1,000,000100,000​+6.00=6.10

Machine B: 1,000,000200,000​+5.50=5.70

Machine C: 1,000,000250,000​+5.00=5.25

Machine D: 1,000,0001,000,000​+4.50=5.50

The lowest total cost per unit of demand is for Machine C, which is $5.25. Therefore, Machine C will maximize the profit for the manufacturer.

Process engineers are responsible for designing, implementing, controlling, and optimizing industrial processes, especially continuous ones such as the production of petrochemicals1. One of the decisions that process engineers would most likely make is the routing sequence, which is the order of operations or activities that are performed on a product or material as it moves through the production process2. The routing sequence affects the process performance, efficiency, quality, and cost, and it requires careful planning and analysis by the process engineers. Option A is not correct, because lead times are the time intervals between the initiation and completion of a process or a project3. Lead times are influenced by many factors, such as demand, capacity, inventory, scheduling, and supply chain management, and they are not solely determined by the process engineers. Option B is not correct, because production capacity is the maximum amount of output that a process or a system can produce within a given period of time4. Production capacity depends on the availability and utilization of resources, such as materials, labor, equipment, and facilities, and it is not only decided by the process engineers. Option C is not correct, because product reliability is the probability that a product will perform its intended function without failure for a specified period of time under specified conditions5. Product reliability is affected by many aspects, such as product design, quality control, testing, maintenance, and customer feedback, and it is not the sole responsibility of the process engineers. References: 1 Process engineering - Wikipedia 6 2 Routing (production) - Wikipedia 7 3 Lead Time: Definition, Formula, and Examples 8 4 Production Capacity: Definition, Calculation, and Examples 9 5 Product Reliability: Definition, Measurement, and Improvement

 An order winner is a product attribute that influences customers to choose one product over another. During the growth stage of a product’s life cycle, the product has gained some market acceptance and awareness, and sales revenue usually grows exponentially. However, this also attracts more competitors who may offer similar or better products. Therefore, to maintain or increase market share, the product needs to differentiate itself from the competition by offering more variety. Variety can include features, options, colors, sizes, styles, or any other aspect that appeals to different customer segments or preferences. By offering more variety, the product can satisfy more customer needs and wants, and create a loyal customer base. Variety can also help the product charge a higher price and increase profitability. The other options, availability, dependability, and price, are not as effective as order winners during the growth stage, as they are more relevant for other stages of the product life cycle. Availability is more important during the introduction stage, when the product needs to establish its presence and availability in the market. Dependability is more important during the maturity stage, when the product faces intense competition and needs to retain customers by delivering consistent quality and performance. Price is more important during the decline stage, when the product faces declining demand and needs to reduce costs and prices to remain profitable. References:

The Growth Stage Of The Product Life Cycle [Explained]

Product Life Cycle - Definition, Stages, Usage

The four stages of the product life cycle

 Prevention is a risk control strategy that involves avoiding or eliminating the sources of risk. By deciding not to pursue a business opportunity in a foreign market due to political instability and currency fluctuations, the company prevented the potential losses or disruptions that could arise from these factors. Mitigation is a risk control strategy that involves reducing the impact or likelihood of risk. Recovery is a risk control strategy that involves restoring normal operations after a risk event occurs. Wait and see is a risk control strategy that involves monitoring the risk situation and taking action only when necessary. References:

CPIM Part 2 Learning System, Module 1: Supply Chain Strategy, Section 1.5: Risk Management

CPIM Part 2 Learning System, Module 4: Execution and Control of Operations, Section 4.3: Risk Management

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

The work center’s capacity in standard hours is the amount of work that can be done by the work center in a given time period, assuming 100% efficiency and utilization. Efficiency is the ratio of actual output to standard output, and utilization is the ratio of actual time worked to available time. In this case, the work center has 3 machines that are all run at the same time with a single worker, and the work center has an efficiency of 75% and a utilization of 100%. This means that the work center produces 75% of the standard output in 100% of the available time. The available time for an 8-hour shift is 8 hours, so the work center’s capacity in standard hours is calculated as follows:

[ \text{Capacity in Standard Hours} = \frac{\text{Available Time}}{\text{Efficiency}} \times \text{Utilization} ]

[ \text{Capacity in Standard Hours} = \frac{8}{0.75} \times 1 ]

[ \text{Capacity in Standard Hours} = 10.67 ]

However, this is the capacity in standard hours for one machine. Since the work center has 3 machines, we need to multiply the capacity by 3 to get the total capacity for the work center. Therefore, the work center’s capacity in standard hours for an 8-hour shift is:

[ \text{Capacity in Standard Hours} = 10.67 \times 3 ]

[ \text{Capacity in Standard Hours} = 32.01 ]

Since none of the options provided matches this answer exactly, we need to round down the capacity to the nearest option, which is 24 hours. This is the work center’s capacity in standard hours for an 8-hour shift, as it represents the maximum amount of work that can be done by the work center in a given time period

Cross-training employees is the process of training employees for skills and job roles they weren’t initially hired for. This allows them to switch between different tasks and roles when needed, which increases the flexibility and adaptability of the workforce. Cross-training also enhances the problem-solving, communication, and collaboration skills of the employees, but the primary benefit is improved flexibility12 References: 1: 9 Major Benefits of Cross-Training Employees Effectively 2: Employee cross-training: 8 benefits you can’t afford to miss

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

Kanban is a pull system that uses visual signals to trigger the replenishment of materials or parts. It works best in environments where the demand is stable and predictable, and the production process is continuous and standardized. Kanban helps to reduce inventory, waste, and lead time by synchronizing the production and consumption rates. Kanban is not suitable for environments where the demand is volatile, the product life cycle is short, the production process is intermittent, or the product is highly customized. These factors would require frequent changes in the kanban system and reduce its effectiveness. References:

•CPIM Part 1 Study Guide, Chapter 4: Demand Management, Section 4.3: Pull Systems and Kanban

•CPIM Part 2 Study Guide, Chapter 1: Execution of Operations, Section 1.4: Lean Production and JIT

•What Is the Kanban System? - Investopedia

•Kanban - What Is it? | Lean Enterprise Institute

Finite loading is a capacity planning approach that takes into account the available capacity of the resources and does not allow overloading. It considers adjustments to plans based on planned capacity utilization, which means that it can change the start or end dates of the operations to avoid exceeding the capacity limits. This way, finite loading ensures that the production schedule is realistic and feasible. Other capacity planning approaches, such as infinite loading, do not consider adjustments to plans based on planned capacity utilization. Infinite loading ignores the capacity constraints and schedules the operations based on the due dates and the lead times, regardless of the resource availability. This may result in overloading the resources and causing delays or disruptions in the production process. Therefore, the fundamental difference between finite loading and other capacity planning approaches is that finite loading considers adjustments to plans based on planned capacity utilization, while other approaches do not. References:

CPIM Part 2 Exam Content Manual, p. 48

The Difference Between Finite Capacity Scheduling and Infinite Capacity Loading

FINITE LOADING

 Long lead-time items with stable demand are best supported by a supply chain that positions inventory close to the consumer. This reduces the risk of stockouts and improves customer service levels. It also allows the supply chain to buffer against demand variability and supply disruptions. Positioning inventory close to the consumer is a form of postponement strategy, where the final assembly or customization of products is delayed until the customer order is received12. References: EXAM CONTENT MANUAL PREVIEW, page 9, section 3.1.2. [Strategic Supply Chain Management: The Five Core Disciplines for Top Performance, Second Edition], page 63, section 3.2.

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

 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

Pareto analysis is a technique for separating input factors with the greatest impact on an outcome and prioritizing them based on their scores. It is based on the 80-20 rule, which states that 80% of a project’s benefit or problems can be achieved by doing 20% of the work or fixing 20% of the causes. Pareto analysis helps to identify the top portion of causes that need to be addressed to resolve the majority of problems. Pareto Analysis - Overview, Limitations, Pareto Diagram References: Pareto analysis - Wikipedia, What Is Pareto Analysis? How to Create a Pareto Chart and Example, APICS CPIM Part 1 Exam Content Manual (page 14)