Rough-cut capacity planning (RCCP) is a type of capacity planning method that uses the master production schedule (MPS) as its primary input. RCCP is a technique for checking the feasibility of the MPS by comparing the available capacity of critical resources (such as machines, labor, or materials) with the capacity required by the MPS. RCCP helps to identify and resolve any potential capacity problems or bottlenecks at an aggregate level, before committing to the MPS. RCCP can also be used to evaluate alternative MPS scenarios and to support the sales and operations planning (S&OP) process12. References: 1 Rough Cut Capacity Planning (RCCP) - Definition, Example, and … 3 2 CPIM Exam References - Association for Supply Chain Management

Substituting capital equipment in place of direct labor can be economically justified for scenario A, where volumes are forecasted to increase. This is because capital equipment can provide higher productivity, efficiency, and quality than direct labor, especially for large-scale and standardized production. Capital equipment can also reduce labor costs, such as wages, benefits, and training, and avoid labor shortages or turnover. However, capital equipment also involves high initial investment, maintenance, and depreciation costs, and may require more skilled workers to operate and monitor. Therefore, the substitution of capital equipment for direct labor should be based on a careful analysis of the trade-offs between the costs and benefits of both alternatives.

Option B is not correct, because material prices are forecasted to increase. This scenario does not directly affect the decision to substitute capital equipment for direct labor, as both alternatives use the same materials. However, increasing material prices may reduce the profitability of the production, and may require the company to find ways to reduce material usage, such as improving material yield, reducing scrap and rework, or sourcing from cheaper suppliers.

Option C is not correct, because implementing a pull system in production. This scenario does not favor the substitution of capital equipment for direct labor, as a pull system is based on the principle of producing only what is needed by the customer, when it is needed, and in the quantity needed. A pull system requires flexibility, responsiveness, and adaptability to the changing customer demand, which may be better achieved by direct labor than capital equipment. A pull system also aims to minimize inventory, waste, and overproduction, which may reduce the need for capital equipment.

Option D is not correct, because functional layouts are being utilized. This scenario does not support the substitution of capital equipment for direct labor, as functional layouts are based on grouping similar or related processes or machines together, regardless of the product flow. Functional layouts may result in long and complex material flows, high transportation and handling costs, high work-in-process inventory, and low visibility and coordination of the production. Functional layouts may also require more direct labor to move and monitor the materials and machines. Capital equipment may be more suitable for product layouts, where the processes or machines are arranged according to the sequence of operations for a specific product or family of products.

References:

• Production and Inventory Management
• Capital Equipment and Labor
• Facility Layout and Design

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.

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

One advantage of adopting a supply network perspective is that it enhances understanding of competitive and cooperative forces. A supply network perspective is a holistic view of the supply chain that considers the interdependencies and interactions among the various entities involved in the flow of materials, information, and money. A supply network perspective helps to identify the sources of value creation and capture, the opportunities and threats in the market, and the potential synergies and conflicts among the supply chain partners. A supply network perspective also helps to design and implement effective strategies and tactics to achieve competitive advantage and customer satisfaction. The other statements are not advantages of adopting a supply network perspective. Protecting global markets, defining market relationships and partnerships, and encouraging rivals to collaborate are possible outcomes or objectives of adopting a supply network perspective, but they are not the benefits of the perspective itself. References: Supply Network Perspective | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

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

Fishbone diagrams would help a service organization determine the source of a quality-of-service issue. A fishbone diagram, also known as a cause-and-effect diagram or an Ishikawa diagram, is a tool for identifying and analyzing the root causes of a problem or an effect. It uses a fish-shaped diagram to display the potential causes of a problem in different categories, such as people, processes, equipment, environment, etc. A fishbone diagram can help a service organization to determine the source of a quality-of-service issue by allowing the organization to brainstorm and organize the possible factors that may affect the quality of the service delivered to the customers, such as staff training, customer feedback, service standards, equipment maintenance, etc. A fishbone diagram can also help the organization to prioritize and test the most likely causes, and to develop and implement solutions to improve the quality of service12. References: 1 What is a Fishbone Diagram? Ishikawa Cause & Effect Diagram | ASQ 3 2 CPIM Exam References - Association for Supply Chain Management 1

A cellular production system is a type of lean manufacturing system that reduces waste and improves efficiency by grouping machines and workers into cells that can produce a complete product or a product family. A pull production activity control (PAC) technique is most appropriate for a cellular production system because it allows the cells to produce only what is needed by the downstream processes or customers, thus minimizing inventory and overproduction. A pull PAC technique also enables quick response to changes in demand and feedback from quality control. A push PAC technique, on the other hand, is based on predetermined schedules and forecasts, which may not match the actual demand and may result in excess inventory and waste. The shortest processing time (SPT) rule and the distribution requirements planning (DRP) are not specific to cellular production systems and do not take into account the customer demand or the cell capacity. References:

•CPIM Part 2 Exam Content Manual, p. 49

•Cellular Manufacturing: A Comprehensive Guide

•Cellular manufacturing - Wikipedia

The primary outcome of frequent replenishments in a distribution requirements planning (DRP) system is that the level of required safety stock is reduced. Safety stock is the extra inventory that is held to protect against demand uncertainty or supply variability. Frequent replenishments mean that the inventory is replenished more often and in smaller quantities, which reduces the risk of stockouts and the need for safety stock. Frequent replenishments also improve the inventory visibility and accuracy, which enable better demand forecasting and inventory planning. By reducing the safety stock, the company can lower its inventory carrying costs, free up working capital, and increase its inventory turnover. The other options are not correct, as they are not the primary outcome of frequent replenishments, but rather possible benefits or drawbacks of frequent replenishments, depending on the situation:

• Lead times to customers decrease: This may or may not be true, depending on the distance between the distribution centers and the customers, the transportation mode and frequency, and the customer service level. Frequent replenishments may reduce the lead times if the distribution centers are closer to the customers and the transportation is fast and reliable. However, frequent replenishments may also increase the lead times if the distribution centers are far from the customers and the transportation is slow and infrequent.
• Transportation costs decrease: This may or may not be true, depending on the transportation mode, distance, and volume. Frequent replenishments may reduce the transportation costs if the transportation mode is economical, the distance is short, and the volume is high. However, frequent replenishments may also increase the transportation costs if the transportation mode is expensive, the distance is long, and the volume is low.
• More efficient load consolidation occurs: This is unlikely to be true, as frequent replenishments usually mean smaller shipments that are less likely to fill the capacity of the transportation vehicles. Load consolidation is the process of combining multiple shipments into one larger shipment to optimize the transportation efficiency and reduce the transportation costs. Frequent replenishments may reduce the opportunities for load consolidation and increase the transportation inefficiency and costs. References:
• [CPIM Part 2 - Section A - Topic 4 - Distribution Planning]
• Distribution Requirements Planning (DRP) in Supply Chain
• What is DRP? (A Comprehensive Guide on Distribution Requirements Planning)
• Safety Stock: The Ultimate Guide
• Load Consolidation

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

• Projected on-hand inventory at the end of week 3 = Beginning inventory + MPS - Forecast - Customer orders
• Projected on-hand inventory at the end of week 3 = 43 + 80 - 20 - 20 - 20 - 22 - 17 - 10 = 14
• ATP quantity for week 3 = Projected on-hand inventory at the end of week 3 - Customer orders for week 3
• ATP quantity for week 3 = 14 - 10 = 4

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

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

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

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

In an assemble-to-order (ATO) manufacturing environment, the MPS is used to plan subassemblies and components that have long lead times or high demand variability. These subassemblies and components are produced and stocked in anticipation of customer orders. The end items are only scheduled in the MPS when a customer order is received, and they are assembled from the available subassemblies and components. This reduces the lead time and inventory for the end items, while increasing the flexibility and responsiveness to customer needs. ATO is a hybrid strategy between make-to-stock (MTS) and make-to-order (MTO). References :=

• CPIM Exam Content Manual, Module 4: Supply, Section 4.1: Master Production Schedule, p. 14
• Manufacturing Planning and Control for Supply Chain Management, Chapter 8: Master Production Scheduling, Section 8.3: Master Production Scheduling in Different Environments, pp. 191-192

A low-cost provider strategy is a business strategy where a company aims to become the most cost-efficient player in its industry, often by producing goods or providing services at a lower cost than its competitors. The overall goal is to increase market share or achieve higher profitability. The low-cost leader in an industry often sets the price that other companies have to match or beat to stay competitive12.

A low-cost provider strategy works best when buyers are more price sensitive, meaning they are more likely to switch to cheaper alternatives if the price of a product or service increases. This condition creates a strong demand for low-priced products or services, and gives the low-cost leader a competitive advantage over rivals who have higher costs and prices. Buyers are more price sensitive when34:

•The product or service is standardized or undifferentiated, and there are few switching costs.

•The product or service represents a significant portion of the buyer’s budget or income.

•The product or service has low quality, performance, or image attributes that limit the buyer’s satisfaction or loyalty.

•The product or service is not crucial to the buyer’s well-being or enjoyment.

The other options are not correct because:

•A. Price competition among rivals is similar. This condition does not favor a low-cost provider strategy, because it implies that the industry is already highly competitive and there is little room for differentiation. A low-cost leader would have to lower its prices even further to gain an edge over rivals, which could erode its profitability and sustainability.

•C. There are many ways to achieve product differentiation. This condition does not favor a low-cost provider strategy, because it implies that the industry is diverse and dynamic, and there are many opportunities for innovation and value creation. A low-cost leader would have to invest more in research and development, marketing, and customer service to keep up with the changing customer preferences and expectations, which could increase its costs and reduce its efficiency.

•D. There are few industry newcomers. This condition does not favor a low-cost provider strategy, because it implies that the industry is mature and stable, and there are few threats from new entrants. A low-cost leader would have to rely on its existing customer base and market share, which could limit its growth potential and expose it to the risk of obsolescence.

References := 1 Low-cost leadership strategy: Explained with examples2 2 Low-Cost Producer: Definition, Strategies, Examples - Investopedia4 3 Low Cost Strategy - Definition, Factors & Example - MBA Skool5 4 Generating Advantage – Strategic Management - Open Educational Resources1

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

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

A cradle-to-cradle sustainability model is a design concept that aims to create products that can be reused or recycled indefinitely, without generating any waste or pollution. It mimics the natural cycles of nature, where everything is a nutrient for something else. A cradle-to-cradle model differs from a cradle-to-grave model, which follows a linear path of production, consumption, and disposal.

Option B is an example of a cradle-to-cradle model, because the paper waste from the coffee shop is collected and recycled by a supplier, who then provides new paper products to the coffee shop. This creates a closed loop of material flow, where nothing is wasted and the paper is continuously reused.

Option A is not a cradle-to-cradle model, because the laundry service does not reuse or recycle the baby clothes. It only cleans and delivers them, but does not prevent them from eventually ending up in the landfill.

Option C is not a cradle-to-cradle model, because the company does not ensure that the wood it uses is from sustainable sources, or that the products it makes can be easily disassembled and recycled. It also does not consider the environmental impacts of transporting the wood from different locations.

Option D is not a cradle-to-cradle model, because the bank does not directly influence the design or production of the products that the firms use. It only provides financial incentives for them to adopt more sustainable practices, but does not guarantee that they will follow a cradle-to-cradle approach.

References:

•Cradle-to-Cradle for Sustainable Development: From Ecodesign to Circular Economy

•Cradle to Cradle – Sustainability Guide

Substitute products are components of an organization’s immediate industry and competitive environment. They are products or services that can satisfy the same customer needs or wants as the organization’s offerings, but are provided by different industries or markets. Substitute products can affect the demand, price, and profitability of the organization’s products, and require the organization to monitor and respond to the changes in customer preferences and competitive pressures. Political factors, interest rates, and sociocultural forces are examples of macroenvironmental factors, which are broader and more general forces that affect the organization and its industry, but are not directly related to its competitors or customers. References :=

• CPIM Exam Content Manual, Module 1: Supply Chains and Strategy, Section 1.1: Business Strategy, p. 4
• Strategic Supply Chain Management: The Five Core Disciplines for Top Performance, Chapter 2: Align Your Supply Chain with Business Strategy, Section 2.2: Assessing the External Environment, pp. 25-26

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

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.

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.

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

Level production planning is a strategy that maintains a constant output rate, production rate, or workforce level over the planning horizon. It is suitable for products with stable demand or seasonal demand that can be smoothed by using inventory or backorders. Level production planning can help reduce labor costs, hiring and firing costs, and overtime costs. However, it may also result in high inventory costs or customer dissatisfaction due to long lead times or stockouts. To overcome these drawbacks, the company can investigate subcontracting to meet the extra demand during the peak season. Subcontracting is the process of outsourcing some or all of the production to another firm. It can help the company increase its capacity, flexibility, and responsiveness without investing in additional facilities or equipment. Subcontracting can also reduce the risk of obsolescence or spoilage of seasonal products.

Option B is not appropriate, because chase production planning is a strategy that adjusts the production rate to match the demand rate over the planning horizon. It is suitable for products with highly variable or uncertain demand that cannot be smoothed by using inventory or backorders. Chase production planning can help minimize inventory costs and avoid overproduction or underproduction. However, it may also result in high labor costs, hiring and firing costs, and overtime costs. Moreover, it may limit the company’s ability to capture the market share and satisfy the customer demand during the high demand season.

Option C is not appropriate, because hybrid production planning is a strategy that combines the features of level production planning and chase production planning. It is suitable for products with moderate variability or uncertainty in demand that can be partially smoothed by using inventory or backorders. Hybrid production planning can help balance the trade-offs between inventory costs and labor costs. However, it may also increase the complexity and difficulty of coordinating the production and demand plans. Moreover, it may not address the company’s financial constraints or capacity limitations.

Option D is not appropriate, because reducing the size of the customer base during the high demand season is a risky and counterproductive move. It may result in losing loyal customers, damaging the company’s reputation, and forfeiting potential profits. It may also create an opportunity for competitors to gain market share and customer loyalty.

References:

•Sales and Operations Planning: An Overview

•Sales and Operations Planning: Strategies and Techniques

•Sales and Operations Planning: Best Practices

Check sheets are simple tools that allow data to be collected and recorded in an organized manner. Check sheets can be used to determine the frequency of a defect and the timeperiod between occurrences by counting and categorizing the number of defects that occur over a specified time interval. Check sheets can also help to identify the causes and patterns of defects, and to monitor the effectiveness of improvement actions. The other statements are not true about check sheets. Check sheets do not provide a quick method to identify if possible defects exist, as they require data collection and analysis. Check sheets do not allow improvement teams to see if action items are being completed on time, as they are not designed to track the progress of tasks. Check sheets do not provide an indication of correlation between defects, as they do not measure the relationship between variables. References: Check Sheet | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

A problem statement is a concise description of an issue to be addressed or a condition to be improved upon. It identifies the gap between the current state and the desired state of a process or a system. A good problem statement should include measurements that help describe the problem, such as the magnitude, frequency, location, and impact of the problem. These measurements can help quantify the problem and provide a baseline for improvement. The other options are not essential for a problem statement, but rather for the subsequent steps of problem-solving, such as selecting tools, forming teams, and assigning responsibilities. References:

•[CPIM Part 2 - Section B - Topic 1 - Quality and Continuous Improvement]

•How to Write a Problem Statement

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.

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

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

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.

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

Pyramid forecasting is a method of forecasting that uses a hierarchical structure of data to improve the accuracy and consistency of the forecasts. The lowest level of the pyramid represents the most detailed data, such as individual product items, while the higher levels represent more aggregated data, such as product families or total business. The “roll up” process is the process of aggregating the forecasts from the lower level to the higher level, starting with the most detailed level. This process helps to align the forecasts across different levels and reduce the forecast error123 References: 1: Pyramid Forecasting Process 2: Rolling Forecast Model | FP&A Tutorial + Excel Template 3: ROLL-UP FORECASTS

One way to mitigate liability risk in the supply chain is to require traceability for components. Liability risk is the risk that a party may be held responsible for certain types of losses caused by its actions or products to third parties1. Traceability is the ability to track the origin, history, location, and movement of a product or a component through the supply chain2. Requiring traceability for components can help to mitigate liability risk in the supply chain by enabling the identification and verification of the quality, safety, and compliance of the components, as well as the detection and prevention of counterfeit, defective, or hazardous components. Traceability can also facilitate the recall, repair, or replacement of faulty components, and the allocation of responsibility and accountability among the supply chain partners in case of a liability claim34. References: 1 What is a Liability Risk? - Definition from Insuranceopedia 5 2 Traceability - Wikipedia 6 3 Supply Chain Liability in the Corporate Sustainability Due Diligence … 7 4 CPIM Exam References - Association for Supply Chain Management 8

A bill of distribution is the planned channels of inventory disbursement from one or more sources to field warehouses and ultimately to the customer. There may be one or more levels in the disbursement system. It is used to allocate inventory among different distribution centers based on demand, capacity, and costs. A bill of distribution is similar to a bill of materials, but for distribution planning instead of production planning. The other options are not correct, as they refer to different concepts in distribution management:

•A supply chain community is a network of organizations that collaborate to achieve common goals and objectives in the supply chain.

•Interplant demand is the demand for a product or component from one plant to another within the same company.

•Logistics data interchange (LDI) is the electronic exchange of information between logistics partners, such as suppliers, carriers, and customers. References:

•[CPIM Part 2 - Section A - Topic 4 - Distribution Planning]

•Distribution Channel Design

•APICS Flashcards

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

Price negotiation is most appropriate when purchasing commodities. Commodities are products or materials that are standardized, widely available, and have low differentiation. Examples of commodities include metals, grains, oil, gas, etc. Price negotiation is a process of bargaining with the supplier to obtain the best possible price for the purchase. Price negotiation is suitable for commodities because they have high price volatility, meaning that their prices fluctuate frequently and unpredictably due to changes in supply and demand, market conditions, and other factors. Price negotiation can help the buyer to take advantage of the price fluctuations and secure a lower price or a better contract term with the supplier. Price negotiation can also help the buyer to reduce the total cost of ownership, which includes not only the purchase price but also the costs of transportation, storage, quality, and risk12. References: 1 How to negotiate price: negotiation tips for salespeople 3 2 CPIM Exam References - Association for Supply Chain Management 1

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 strategic plan is a document that outlines the long-term vision, goals, and direction of an organization. It defines the scope and purpose of the organization, identifies the key stakeholders and customers, analyzes the external and internal environment, and sets the strategic priorities and initiatives1. A business plan is a document that describes the details of a specific business venture, product, or service. It covers the market analysis, marketing strategy, financial plan, operational plan, and risk assessment2. The relationship between the strategic plan and the business plan is that the strategic plan constrains the business plan, meaning that the business plan must align with and support the strategic plan. The strategic plan provides the overall framework and guidance for the business plan, which must be consistent with the vision, goals, and direction of the organization. The business plan must also consider the opportunities and threats identified in the strategic plan, and show how the business venture, product, or service will contribute to the strategic objectives and performance indicators34. References: 1 Strategic Plan vs. Business Plan: What’s the Difference? 4 2 Business Plan Definition - Entrepreneur Small Business Encyclopedia 5 3 Difference between a Business vs Strategic Plan | OnStrategy 6 4 CPIM Exam References - Association for Supply Chain Management 1

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

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

• Managing Supply Chain Operations, Chapter 7: Scheduling and Sequencing, Section 7.2: Priority Rules
• CPIM Exam Content Manual, Module 6: Detailed Schedules, Section 6.2: Scheduling and Sequencing, Subsection 6.2.2: Priority Rules

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

Fixed order quantity is a method that places a replenishment order when the quantity on hand falls below a predetermined level, called the reorder point. The reorder point is calculated based on the expected demand during the lead time and the safety stock. The order quantity is fixed and constant, and it is determined by the economic order quantity (EOQ)formula or other criteria. Fixed order quantity is also known as the order point/order quantity (OP/OQ) system or the continuous review system.

Option A is not correct, because min-max system is a method that places a replenishment order when the quantity on hand falls below a minimum level, called the order point. The order quantity is variable and depends on the difference between the maximum level and the current inventory level. Min-max system is also known as the two-bin system or the bin system.

Option C is not correct, because periodic review is a method that places a replenishment order at fixed intervals of time, regardless of the quantity on hand. The order quantity is variable and depends on the difference between the target inventory level and the current inventory level. Periodic review is also known as the fixed order interval (FOI) system or the periodic order quantity (POQ) system.

Option D is not correct, because available-to-promise (ATP) is not a method of inventory replenishment, but a calculation of the uncommitted portion of the current inventory and planned production. ATP is used to promise delivery dates to customers based on the availability of inventory and production capacity.

References:

• Inventory Management and Control
• Inventory Replenishment Methods
• Inventory Replenishment Policies