of 350 /350
Date:09/10/06 PIMprep V6.0 Question Number: 1 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The basic elements of the supply chain include: A) supply, manufacture, distribution. B) design, manufacture, inventory. C) engineer, design, manufacture. D) supply, engineer, manufacture. The correct answer is: A Even though different companies produce different products, the basic elements are the same: supply, manufacture, and distribution. (Arnold, Introduction to Materials Management, Chapter 1).

CPIM.bscm Questions&Answers

Embed Size (px)

DESCRIPTION

APICS,CPIM.Basics of Supply chain management (module 1)Q&As

Citation preview

Page 1: CPIM.bscm Questions&Answers

Date:09/10/06

PIMprep V6.0

Question Number: 1BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The basic elements of the supply chain include:

A)supply, manufacture, distribution.

B)design, manufacture, inventory.

C)engineer, design, manufacture.

D)supply, engineer, manufacture.

The correct answer is: A

Even though different companies produce different products, the basic elements are thesame: supply, manufacture, and distribution.

(Arnold, Introduction to Materials Management, Chapter 1).

Page 2: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 2BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

In order to maximize profit, a company must have all of the following objectives except:

A)Best customer service

B)Most accurate production forecast

C)Lowest inventory investment

D)Lowest distribution cost

The correct answer is: B

A company, to maximize profits, must have the lowest production cost, best customerservice, lowest inventory investment, and lowest distribution costs. While an accurateproduction forecast will contribute to low production costs, it will not guarantee thelowest production costs.

(Arnold, Introduction to Materials Management, Chapter 1).

Page 3: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 3BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The inventory turns ratio measures:

A)the amount of inventory needed to support sales growth.

B)obsolete inventory as a percent of sales.

C)how effectively inventory is being used.

D)the amount of space needed to store inventory.

The correct answer is: C

The inventory turns ratio measures how effectively inventories are being used. It iscalculated by dividing annual cost of goods sold by average inventory in dollars.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Page 4: CPIM.bscm Questions&Answers

Question Number: 4BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Process specifications can be best defined as a document which:

A)shows how the product will appear.

B)shows the steps needed to produce the end item.

C)details the capacity available at a work center.

D)flow charts various processes.

The correct answer is: B

Process specifications describe the steps needed to make an end product. They are usuallyprinted on a routing sheet or kept in the database for online access.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Page 5: CPIM.bscm Questions&Answers

Question Number: 5BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A company's strategic plan:

A)provides the manufacturing plan for families of end items.

B)outlines the sales plan for the next year.

C)is a statement of goals and objectives for a long range period.

D)outlines new products for the next year.

The correct answer is: C

While strategic plans do provide for manufacturing, sales, and new product plans, theyreally provide the overall direction for the company. The result is a statement of goalsand objectives for 2-5 years, and sometimes 10 years.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Page 6: CPIM.bscm Questions&Answers

Question Number: 6BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

In which of the following manufacturing environments would consumer products, such asfilm, food, etc. be classified?

A)Assemble-to-order

B)Engineer-to-order

C)Make-to-order

D)Make-to-stock

The correct answer is: D

Consumer products are generally considered make-to-stock. There are a few standarditems assembled from many components.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Page 7: CPIM.bscm Questions&Answers

Question Number: 7BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Many different end items are made from a small number of components. Whatmanufacturing environment would this be?

A)Make-to-stock

B)Make-to-order

C)Assemble-to-order

D)Engineer-to-order

The correct answer is: B

Make-to-order companies typically make many end items from a small number ofcomponents. The schedule is developed from actual customer orders.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Page 8: CPIM.bscm Questions&Answers

Question Number: 8BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The purpose of a strategic business plan is to:

A)plan production by product family.

B)plan for business changes which take a long time.

C)establish customer requirements over the long term.

D)establish order promising strategies.

The correct answer is: B

Strategic plans are used for long term planning (2-10 years). They are used to allow timeto plan for changes which take a long time to occur. These might include new plants ordistribution centers.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Page 9: CPIM.bscm Questions&Answers

Question Number: 9BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Aggregate inventory management is concerned with:

A)managing inventory items and how they are used.

B)establishing the production plan.

C)the cost and benefits of carrying the different classes of inventory.

D)the distribution network and the movement of inventory.

The correct answer is: C

Aggregate inventory management is concerned with the cost and benefit of carrying rawmaterials, work-in-process, and finished goods inventory. It is financially oriented.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Page 10: CPIM.bscm Questions&Answers

Question Number: 10BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following are objectives of inventory?

I.Maximize customer service

II.Efficient transaction

III.Low cost plan operations

IV.Minimum inventory investment

A)I, II, and III

B)I, III, and IV

C)I, II, and IV

D)II, III, and IV

The correct answer is: B

In order to maximize profits, a company must manage inventories, provide greatcustomer service, and have efficient plant operations, while minimizing the amount ofcapital used for inventory.

(Arnold, Introduction to Materials Management, Chapter 9).

Page 11: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 11BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following would be included in the cost of carrying inventory?

I.Heating and lighting a warehouse

II.Obsolete inventory

III.Labor to move material

IV.Damaged inventory

A)I, II, and III

B)II, III, and IV

C)I, III, and IV

D)I, II, III, and IV

Page 12: CPIM.bscm Questions&Answers

The correct answer is: D

All of the above costs would be included in the cost of inventory. Any costs incurred asthe result of having inventory should be included.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 12BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following best describes a normal distribution?

A)Most values clustered near a central point

B)Warehouses centrally located to markets

C)Values accumulated at six sigma

D)A critical ratio of 1.0

Page 13: CPIM.bscm Questions&Answers

The correct answer is: A

Normal distribution refers to the statistical distribution of values where the majority ofvalues will accumulate around the mean. The resulting graph is shaped like a bell. It isoften known as a "bell curve".

(Arnold, Introduction to Materials Management, Chapter 11).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 13BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Based on the following information, what would the safety stock need to be to ensureproduct is in stock 99.9999% of the time?

MAD = 100On hand = 200Weekly demand = 400

A)100

B)300

C)

Page 14: CPIM.bscm Questions&Answers

500

D)600

The correct answer is: C

To ensure coverage of product 99.9999% of the time, it would require 5 MAD for safetystock.Therefore: 5 * 100 = 500.

(Arnold, Introduction to Materials Management, Chapter 11).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 14BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Each distribution center places orders from central supply as they are needed. This iscalled:

A)pull system.

B)push system.

C)

Page 15: CPIM.bscm Questions&Answers

Just-in-Time delivery.

D)supply chain management.

The correct answer is: A

When each distribution center orders from central supply or the factory independently ofwhat other distribution centers are doing, it is called a pull system. The advantage is thatcoordination and communication is less expensive. The disadvantage is that the lack ofcoordination causes problems with customer service and inventories.

(Arnold, Introduction to Materials Management, Chapter 11).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 15BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A company makes all decisions regarding forecasting and orders centrally for itsdistribution network. This company is using which of the following systems?

A)Pull system

B)Push system

Page 16: CPIM.bscm Questions&Answers

C)Just-in-Time

D)Time phased order point

The correct answer is: B

The push system "pushes" inventory to distribution centers by making stocking decisionscentrally. The advantage is that inventory is sent where it is needed most. Thedisadvantage is that the coordination is more expensive than the pull system.

(Arnold, Introduction to Materials Management, Chapter 11).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 16BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A company wants to store 15,000 cartons with 20 cartons on each pallet. The warehouseis set up to store pallets 5 high. How many pallet positions are needed?

A)150

B)500

Page 17: CPIM.bscm Questions&Answers

C)750

D)3000

The correct answer is: A

The number of pallet positions can be calculated by dividing the number of cartons ofstorage needed by the number of cartons per pallet which equals the total number ofpallets needed.Divide the total number of pallets needed by the number of pallets stacked height whichequals the number of positions needed.

For this problem:15,000/ 20 = 750 pallets needed;750/ 5 = 150 positions.

(Arnold, Introduction to Materials Management, Chapter 12.)

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 17BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

All of the following are basic grouping methods to store and locate stock in a warehouseexcept:

Page 18: CPIM.bscm Questions&Answers

A)Items related functionally

B)Items in sequential SKU number

C)Items which are physically similar

D)Items which are fast moving

The correct answer is: B

The purpose of grouping items in a warehouse is to be more productive in storage and inthe picking process. Items which have sequential SKU numbers may have nothing to dowith each other. As a result, this would not be a criteria for grouping.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 18BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

What is the major disadvantage of a fixed location warehouse?

A)

Page 19: CPIM.bscm Questions&Answers

Put away time is increased

B)Cube utilization is poor

C)Dock time is increased

D)Material handling costs rise

The correct answer is: B

Fixed location warehouses offer poor cube utilization because pallet locations are leftempty when the product assigned to the location is out of stock. Generally, fixedlocations are used in small warehouses with low throughput.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 19BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following are advantages of point of use storage?

I.Ease of control

Page 20: CPIM.bscm Questions&Answers

II.Material handling is reduced

III.Storage costs are reduced

IV.Material is accessible at all times

A)I, II, and III

B)II, III, and IV

C)I, III, and IV

D)I, II, III, and IV

The correct answer is: B

All are advantages of point-of-use storage except ease of control, which is an advantageof central storage.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Page 21: CPIM.bscm Questions&Answers

Question Number: 20BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following are advantages of using central storage?

I.Ease of control

II.Costs are reduced

III.Inventory record accuracy is easier to attain

IV.Safety stock is reduced

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: B

Costs are not reduced with central storage. There are labor costs, racking, paper system,and other costs associated with central storage.

Page 22: CPIM.bscm Questions&Answers

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 21BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following best describes cycle counting?

A)A process to reduce cycle time

B)Set up reduction to shorten the production cycle

C)Counting inventory on a pre-determined schedule

D)Conducting a time study at a work center

The correct answer is: C

Cycle counting is used to count inventory on a pre-determined schedule for the purposeof identifying errors and taking corrective action so the error will not occur again.

(Arnold, Introduction to Materials Management, Chapter 12).

Page 23: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 22BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The movement of finished goods from production to the customer is:

A)physical supply.

B)supply chain.

C)physical distribution.

D)conversion cycle.

The correct answer is: C

Physical distribution is the actual movement of goods from production to the customer.Physical supply is the movement of raw material from the supplier to manufacturing.

(Arnold, Introduction to Materials Management, Chapter 13).

Page 24: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 23BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

All of the following activities are part of the physical distribution system except:

A)Transportation

B)Warehousing

C)Material handling

D)Forecasting of customer orders

The correct answer is: D

Physical distribution includes the activities of transportation, distribution, inventory,warehousing, material handling, packaging, and order processing. Forecasting is not aphysical distribution activity.

(Arnold, Introduction to Materials Management, Chapter 13).

Page 25: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 24BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Trucks, as a mode of transportation, are best suited for:

A)moving small quantities to widely dispersed markets.

B)moving large quantities to widely dispersed markets.

C)moving small quantities to narrowly dispersed markets.

D)moving large quantities to narrowly dispersed markets.

The correct answer is: A

Trucks are best when there is a need to move small quantities to widely dispersedmarkets. Trains are better for moving large quantities.

(Arnold, Introduction to Materials Management, Chapter 13).

Page 26: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 25BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

For a given product, the line haul cost is $1.50 per mile. The product will move 400miles. If 40,000 pounds are being shipped, what is the cost per hundred weight?

A)1.00

B)1.50

C)2.00

D)2.50

The correct answer is: B

The truck will cost $600 to move 400 miles ($1.50 * 400 miles).To calculate the cost per hundred weight:Divide the total cost for the truck by 400. (40,000 pounds divided by 100).Therfore:$600 divided by 400 = $1.50/cwt.

(Arnold, Introduction to Materials Management, Chapter 13).

Page 27: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 26BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following best describes the purpose of a distribution warehouse?

A)A warehouse to store goods for long periods of time

B)A storage warehouse for floor stock

C)A warehouse to move and mix goods

D)A supply chain warehouse for regional storage

The correct answer is: C

A distribution warehouse is used primarily to break down large lots into smaller lots forshipment. A general warehouse is used for long term storage.

(Arnold, Introduction to Materials Management, Chapter 13).

Page 28: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 27BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following are the roles which warehouses serve?

I.Transportation consolidation

II.Inventory efficiency

III.Product mixing

IV.Customer service

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: B

Page 29: CPIM.bscm Questions&Answers

Warehouses serve three important roles:

1) Transportation consolidation - consolidate small shipments (LTL) into largeshipments (TL)2) Product mixing - group a variety of products into one order 3) Customer service - allows products to be placed closer to the customer

Inventory will typically rise with an increase in the number of warehouses.

(Arnold, Introduction to Materials Management, Chapter 13).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 28BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A market boundary can be defined as the:

A)geographic boundary of a region.

B)line where the laid down cost is the same from two supply sources.

C)line where shipments in one distribution center equals another.

D)

Page 30: CPIM.bscm Questions&Answers

mileage boundary where shipment costs exceed the margin to be gained.

The correct answer is: B

A market boundary is the line where the laid down cost from two supply sources is equal.The laid-down cost is the delivered cost of a product to a geographic point.

(Arnold, Introduction to Materials Management, Chapter 13).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 29BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

As a company increases the number of warehouses from one to two, there is an impact onsafety stock. Safety stock will:

A)increase by a factor of 2.

B)decrease by half.

C)increase, and the percent can be calculated.

D)decrease by a calculated percentage.

Page 31: CPIM.bscm Questions&Answers

The correct answer is: C

The safety stock will increase by an amount which can be calculated, but it will notdouble automatically. The amount of the increase will depend on service levels by part,the demand variation, and other factors. As the number of warehouses increases, demandat each will decrease, causing greater variations in product demand. Therefore, safetystock will increase appropriately.

(Arnold, Introduction to Materials Management, Chapter 13).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 30BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The Just-in-Time philosophy can be best defined as:

A)Delivering goods just before they are needed

B)Fulfilling customer orders just as they are needed

C)Manufacturing without inventory

D)

Page 32: CPIM.bscm Questions&Answers

Elimination of waste

The correct answer is: D

The Just-in-Time philosophy is concerned with the elimination of waste or non-valueactivities. Maintaining large inventories is just one of many non-value added activities.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 31BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The Toyota Motor Company identified seven sources of waste in manufacturing. Whichof the following represent those sources of waste?

I.Process

II.Overproduction

III.Wait-time

IV.Movement

Page 33: CPIM.bscm Questions&Answers

A)I, II, and III

B)I, II, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: D

The seven sources of waste identified by Toyota are Process, Methods, Movement,Product Defects, Waiting times, Overproduction, and Inventory.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 32BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

To achieve necessary quality levels in a JIT environment, quality must be:

Page 34: CPIM.bscm Questions&Answers

A)built into the product by operators.

B)inspected at multiple points.

C)ensured by the quality control lab.

D)an inspectors function.

The correct answer is: A

Quality must be the operators responsibility. They are the only ones who can make suredefects are not built into the product. They must be allowed to stop the process whendefects are found.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 33BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

In order to reduce the number of transactions which occur in a JIT environment,companies use a system called:

Page 35: CPIM.bscm Questions&Answers

A)transaction prevention.

B)pre-deduct.

C)backflushing.

D)bar coding.

The correct answer is: C

Backflushing is a system for doing inventory and labor transactions based on the finishedgoods production. With this system, one transaction will create the many issuestransactions for inventory. This process works best when the lead time for the product isshort and the product flows down a production line.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 34BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Page 36: CPIM.bscm Questions&Answers

The annual cost of goods sold for a company is $40 million and the average inventory is$10 million. By how much would the inventory need to be reduced to have annualinventory turns equal 20 turns?

A)$2 million

B)$4 million

C)$6 million

D)$8 million

The correct answer is: D

In order for a company with cost of goods sold of $40 million to turn the inventory 20times annually, the inventory would have to be valued at $2 million (40/20). Since theaverage inventory is currently valued at $10 million, the inventory would need to bereduced by $8 million.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 35

Page 37: CPIM.bscm Questions&Answers

BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A company wants to produce 1000 units over the next four months using a level strategy.The months have 20, 21, 19 and 22 working days in each one. Based on this strategy,how much would be produced in the first month?

A)244

B)254

C)260

D)262

The correct answer is: A

To find the answer: Divide the planned production (1000) by the number of days available in the fourmonths (82) to find the daily production rate (12.2). Multiply the daily production rate (12.2) by the number of days in the first month (20) toobtain the first month's production (244).

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Page 38: CPIM.bscm Questions&Answers

Question Number: 36BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

System nervousness is caused by:

A)the inability of the planner to remain calm.

B)requirements changing rapidly.

C)constant demands by manufacturing for long production runs.

D)purchased materials which do not arrive on time.

The correct answer is: B

System nervousness is caused by requirements which change rapidly and usually bysmall amounts. The planner must, in these cases, apply judgement to the situation beforechanging the plans to accommodate the change.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Page 39: CPIM.bscm Questions&Answers

Question Number: 37BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A component has a fixed cost of $1,000 and a variable cost of $5.00 per unit to produce.What would the average cost per unit be if the company produces 4,000 units?

A)$5.00

B)$5.10

C)$5.25

D)$5.50

The correct answer is: C

To produce 4,000 units, the total cost would be $21,000.($5 * 4,000 units + $1,000 fixed cost = $21,000).Divide the $21,000 by the number of units (4000) to find the cost per unit. ( $21,000/4,000 = $5.25).

An alternative way to calculate the cost per unit would be to divide the fixed cost($1,000) by the units produced (4,000) which equals $.25.Add the fixed cost to the variable cost to get the cost per unit. ($5.00 + $.25 = $5.25).

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Page 40: CPIM.bscm Questions&Answers

Question Number: 38BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following best defines throughput?

A)The number of bottlenecks slowing production

B)The total capacity which a factory can produce

C)The speed of a work center to produce

D)The total volume of production passing through a facility

The correct answer is: D

Throughput is the total volume of production passing through a facility. Bottleneckscontrol the throughput in the facility and must be eliminated in order to increase thethroughput.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Page 41: CPIM.bscm Questions&Answers

Question Number: 39BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Forecasts are typically more accurate for the near future than they are for the longerfuture. This occurs because:

A)the near term holds less uncertainty than the long term.

B)more data is available in the near term.

C)aggregate data is easier to forecast.

D)the future is more dynamic in the near term.

The correct answer is: A

The near term is more predictable than the long term. Most companies can easily predictwhat they are going to do next week compared to next year. This allows forecasts to bemore accurate in the near term.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Page 42: CPIM.bscm Questions&Answers

Question Number: 40BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Forecasts are usually wrong but we continue to use them. They are necessary because:

A)forecasters provide a service to the organization.

B)forecasts are a prelude to business planning.

C)the master production schedule (MPS) needs one.

D)materials requirements planning (MRP) cannot operate without one.

The correct answer is: B

Forecasts are the prelude to business planning. They provide an estimate of whatconditions will look like in the future. So even though we know they are wrong, bymeasuring how wrong they are, forecasts can be constantly improved for use by thebusiness.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Page 43: CPIM.bscm Questions&Answers

Question Number: 41BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Even in an intermittent manufacturing shop, certain JIT principles can be applied. Whichof the following principles can be used in an intermittent manufacturing shop?

I.Employee involvement

II.Total preventive maintenance

III.Inventory reduction

IV.Continuous flow lines

A)I and III

B)II and IV

C)I, II, and III

D)I, II, III, and IV

The correct answer is: C

Page 44: CPIM.bscm Questions&Answers

An intermittent manufacturer is characterized by processing in batches, and largevariation in design and order quantities. At the extreme, every job could be made tocustomer specification. The product lacks a continuous flow. However, JIT principle canbe applied for employee involvement, workplace layout, total quality control, preventivemaintenance, setup time reduction, supplier partnerships, and inventory reduction.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 42BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following manufacturing types would typically have the longest deliverytime?

A)Make-to-order

B)Engineer-to-order

C)Make-to-stock

D)Assemble-to-order

The correct answer is: B

Page 45: CPIM.bscm Questions&Answers

Delivery time is defined as the time elapsed from receipt of the customer's order to thedelivery of the product to the customer. Engineer-to-order companies will generally havethe longest delivery time due to the design and engineering time required to create aproduct. In contrast, make-to-order companies will make a product from existingcomponents after an order is received. Make- to-stock companies will ship to thecustomer from stock. Assemble-to-order companies will assemble a customer order fromexisting sub-assemblies.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 43BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following statements would be true regarding the delivery time in anengineer to order company?

A)Delivery time is shorter than a make-to-order company.

B)It would be the same as a make-to-stock item.

C)It would be longer than an assemble-to-order company.

D)It would be shorter than an assemble-to-order company.

Page 46: CPIM.bscm Questions&Answers

The correct answer is: C

Delivery time is defined as the time elapsed between receipt of the customer's order andthe delivery to the customer. Engineer-to-order companies have the longest delivery timedue to the engineering which must occur before the product can be manufactured fordelivery.

(Arnold, Introduction to Materials Management, Chapter 13).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 44BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following would be considered a function of physical distribution?

A)Material handling

B)Routings

C)Kanban size

D)Pull signal

Page 47: CPIM.bscm Questions&Answers

The correct answer is: A

Physical distribution includes all the activities associated with physically moving goods;from the supplier to the start of production, and from the end of production to theconsumer. Material handling is involved with physically moving the goods. The othersare functions within manufacturing.

(Arnold, Introduction to Materials Management, Chapter 13).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 45BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following would be considered part of the physical distribution system?

A)Moving materials between work centers

B)Receiving goods from suppliers

C)Planning the transfer of goods to outside contractors

D)Forecasting inventory levels to support manufacturing

Page 48: CPIM.bscm Questions&Answers

The correct answer is: B

Physical distribution is defined as the physical movement of goods from suppliers to thebeginning of production and from the end of production to the consumer. Receivingwould be included as part of the function of physical distribution.

(Arnold, Introduction to Materials Management, Chapter 13).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 46BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following would most likely be an independent demand item?

A)Inventoried subassembly for a printer

B)Manufactured subassembly in a car

C)Purchased component for a fork truck

D)Spare part for a jet engine

Page 49: CPIM.bscm Questions&Answers

The correct answer is: D

Independent demand is defined as demand for an item which is unrelated to the demandfor another item. Service parts would typically be forecast independently from their useduring the manufacture of the jet engine. Therefore, the jet engine might haveindependent and dependent demand.

(Arnold, Introduction to Materials Management, Chapter 11).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 47BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Production planning is generally a direct input to:

A)material requirements planning.

B)purchase order planning.

C)capacity load at a work center.

D)master production scheduling.

Page 50: CPIM.bscm Questions&Answers

The correct answer is: D

Production plans are agreed upon management plans for manufacturing, shipping andinventory/backlog. These plans are developed at the aggregate level (e.g. monthly,product families). The plan provides management approval for the master scheduler todevelop the detailed master schedule (end products, weekly).

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 48BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following would most likely be a dependent demand item?

A)Safety gloves

B)Office supplies

C)Purchased component

D)Item being shipped to customer

Page 51: CPIM.bscm Questions&Answers

The correct answer is: C

Dependent demand is defined as "demand that is directly related to or derived from thebill of material structure for other items or end products." (APICS Dictionary, NinthEdition) Therefore, a purchased component would be part of a bill of material structureand demand would be related to the demand for other parts in that structure.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 49BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

If a company is going to establish a cycle count program, a primary objective should beto:

A)correct the inventory records.

B)reduce the headcount.

C)identify the causes of inventory errors.

D)eliminate the physical inventory.

Page 52: CPIM.bscm Questions&Answers

The correct answer is: C

The primary objective of a cycle count program is to identify the causes of inventoryerrors and eliminate them permanently. Only by correcting the causes of error will therecords stay accurate for the system to operate properly and, perhaps in the future,eliminate the physical inventory.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 50BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A company needs to increase production in the current week to meet a customer request.The quickest way to accomplish this is to:

A)work overtime.

B)hire more workers.

C)hire temporary workers.

D)subcontract the work.

Page 53: CPIM.bscm Questions&Answers

The correct answer is: A

Working overtime allows skilled workers to finish the customers job. This would bequicker than hiring workers which can take a great deal of time. Temporary workers canbe hired quickly, however, the quality would suffer, and finding a short termsubcontractor would not generally be feasible.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 51BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following does a tracking signal identify in a forecast?

A)Mean absolute deviation

B)Standard deviation

C)Bias

D)Aggregate summarization

Page 54: CPIM.bscm Questions&Answers

The correct answer is: C

Bias occurs when the cumulative actual demand varies from the forecast on a consistentbasis. A tracking signal provides a mathematical method to determine if the forecast erroris truly biased or if random error is occurring. Random error will correct itself while biaswill not. A tracking signal is calculated by dividing the algebraic sum of the forecasterrors by the MAD (Mean Absolute Deviation).

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 52BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

An income statement of a company will show which of the following?

A)Inventory levels

B)Long term debt

C)Cost of products sold

D)Net cash available

Page 55: CPIM.bscm Questions&Answers

The correct answer is: C

Income statements reflect the revenues and expenses of a company generating either aprofit or loss. Cost of products sold is subtracted from the revenue to obtain a grossprofit. From the gross profit, expenses are deducted to arrive at a net income or loss.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 53BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following is a reason to maintain inventory?

A)Improve customer service

B)Reduce transportation costs

C)Increase machine operating time

D)Reduce costs

The correct answer is: A

Page 56: CPIM.bscm Questions&Answers

One of the primary reasons to maintain inventory is to provide competitive customerservice. By having inventory, a company can avoid costly stockouts, lost sales, and lostcustomers. In some industries, such as consumer goods, it is imperative that the productbe in stock when the customer orders.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 54BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following best describes the ABC approach to inventory control?

A)Maintain a high inventory of "A" parts.

B)Have plenty of "C" parts.

C)Keep the "B" parts to a minimum level.

D)Always keep plenty of inventory.

The correct answer is: B

Page 57: CPIM.bscm Questions&Answers

The ABC method of inventory control operates on the assumption that a company'slimited resources should be used to maintain the high priority items, or A items. The Cparts have less value and should therefore be maintained at a very high level of inventoryso inaccuracies will not impact the operation. This would allow less resources to becommitted managing the low priority items.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 55BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The law which states that a small percentage of the group usually accounts for a largepercent of the results is which of the following?

A)Fredo's law

B)Newton's first law

C)Pareto's law

D)Nielsen's law

Page 58: CPIM.bscm Questions&Answers

The correct answer is: C

Pareto was an Italian economist who developed the observation that 80% of the Italianwealth was concentrated in 20% of the population. This observation can apply to manyareas and is used to analyze the inventory for classifying A, B, and C items. Generally,80% of the inventory dollars rest with 20% of the parts.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 56BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Inventory is used to decouple:

A)production plans from master schedules.

B)rough cut capacity from capacity plans.

C)supplier orders from supplier deliveries.

D)supply from the demand.

Page 59: CPIM.bscm Questions&Answers

The correct answer is: D

Inventory is used to separate supply from demand. This allows the manufacturing tooccur smoothly without as much disruption caused by fluctuating demand. The inventoryacts like a shock absorber so the spikes in demand are not reflected in the manufacturingschedule.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 57BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A supervisor's primary role in a total employee involvement company is:

A)controlling.

B)cheerleading.

C)coaching.

D)quality control.

Page 60: CPIM.bscm Questions&Answers

The correct answer is: C

Total employee involvement allows employees to participate in decision making whichwas previously reserved for management. In this environment, the supervisor's role is tohelp employees succeed by assisting employees in a decision making process rather thantelling employees what to do. This coaching process helps employees improve thedecisions they make.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 58BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Conformance can be best described as:

A)making the highest quality products.

B)meeting the specified requirements.

C)working together as a team.

D)flowing product through cells.

Page 61: CPIM.bscm Questions&Answers

The correct answer is: B

Conformance, as defined by APICS Dictionary, Ninth Edition, is "an affirmativeindication or judgement that a product or service has met the requirements of a relevantspecification, contract, or regulation." This does not mean that a manufacturer isnecessarily making the highest quality products in the marketplace.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 59BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The objective of scheduling is to:

A)ensure work centers are properly loaded.

B)meet delivery dates.

C)provide capable to promise information.

D)meet cost targets.

Page 62: CPIM.bscm Questions&Answers

The correct answer is: B

The primary objective of scheduling is to meet delivery dates while utilizingmanufacturing resources effectively.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 60BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

If a variety of products are made in a factory, the most common unit of capacity is:

A)machine turns.

B)inventory turns.

C)time.

D)dollars.

Page 63: CPIM.bscm Questions&Answers

The correct answer is: C

When factories make a variety of products, the most common unit of capacity is time orhours. In factories which make common units, a measure of capacity will be the unit ofoutput. For example, beer is measured in barrels, automobiles are measured in carsproduced, etc.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 61BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following best defines the term break even point?

A)The point at which a product fails

B)Current assets = current liabilities

C)Required capacity = available capacity

D)Revenues = total costs

Page 64: CPIM.bscm Questions&Answers

The correct answer is: D

The break-even point occurs when revenues equal total costs. When volume is less thanthe break even-point, a loss occurs. Conversely, when volume exceeds the break evenpoint, a profit occurs.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 62BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The throughput of a manufacturing process is determined by:

A)overloaded work centers.

B)first work center in the process.

C)underloaded work centers.

D)last work center in the process.

The correct answer is: A

Page 65: CPIM.bscm Questions&Answers

The factory throughput is regulated by the constraint work center. The constraint workcenter is by definition the work center that has no available capacity. Therefore, theoverloaded work center regulates the throughput.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 63BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

In a JIT manufacturing environment, waste can be described as:

A)component scrap.

B)overtime.

C)any process which does not add value.

D)any overhead process.

The correct answer is: C

Page 66: CPIM.bscm Questions&Answers

In Just-in-Time manufacturing, waste can be best described as any process which doesnot add value. The processes can be overtime, scrap, paperwork, approvals, etc. which donot add any value to the product for the customer.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 64BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A key element in selecting a site for a factory is:

A)availability of water.

B)access to rail sidings.

C)cost and availability of transportation.

D)warehouse space and cost.

The correct answer is: C

Page 67: CPIM.bscm Questions&Answers

In siting a factory, low cost and availability of transportation are key components. Thisensures that raw materials to keep the factory supplied are available. Additionally,finished goods leaving the factory can be delivered reliably to customers.

(Arnold, Introduction to Materials Management, Chapter 13).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 65BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The particular channel in which goods move describes:

A)manufacturing channel.

B)marketing channel.

C)capacity channel.

D)distribution channel.

The correct answer is: D

Page 68: CPIM.bscm Questions&Answers

The distribution channel is the path that goods move through distribution centers, towholesalers, and retailers.

(Arnold, Introduction to Materials Management, Chapter 13).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 66BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Inventory areas should be locked except for during normal business hours because:

A)people are apt to steal.

B)storeroom personnel know where parts are stored.

C)transactions might not be completed.

D)it's the right thing to do.

The correct answer is: C

Inventory locations should be kept secure so the transactions are completed andinventories are maintained accurately. If people are allowed to access the inventory

Page 69: CPIM.bscm Questions&Answers

without a proper transaction being completed, inventory accuracy will suffer, and thesystem will become less reliable.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 67BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A company has its warehouse divided so order pickers only pick in their area. Thiswarehouse is operating under which of the following systems?

A)Zone system

B)Area system

C)Consolidated pick system

D)Modified pick system

The correct answer is: A

Page 70: CPIM.bscm Questions&Answers

In a zone system, the warehouse is divided into zones and the order pickers only pick theitems in their zone. The items are sent to the marshalling area to be combined with otheritems from other zones for that customer. An area system allows the picker to pick acomplete order by moving through the warehouse.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 68BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

In a fixed location warehouse system, each SKU has an assigned location. While this hasmany positives, the negative aspect to fixed location warehousing is that:

A)warehouses can get messy.

B)cube utilization is poor.

C)inventory accuracy suffers.

D)items can be damaged in put away.

The correct answer is: B

Page 71: CPIM.bscm Questions&Answers

In fixed location warehouses, cube utilization is poor because if a location has no stock,the space remains empty.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 69BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The balance to cube utilization is:

A)pallet positions.

B)accessibility.

C)put away speed.

D)material handling costs.

The correct answer is: B

Page 72: CPIM.bscm Questions&Answers

Cube utilization must always be balanced with accessibility to the goods when they areneeded. For example, a warehouse could have one hundred per cent cube utilization butthe warehouse pickers could not pick the goods. Therefore, warehouses do not operate at100% cube utilization.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 70BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A normal distribution can be graphed as a :

A)parabolic curve.

B)trend seasonal curve.

C)positive bias curve.

D)bell shaped curve.

The correct answer is: D

Page 73: CPIM.bscm Questions&Answers

In a normal distribution, the actual points are concentrated around the average (mean).The further from the average the data is, the fewer data points emerge.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 71BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Which of the following manufactured product types are best suited for flowmanufacturing?

A)Wide range of disparate products

B)Limited range of similar products

C)Low volume of similar products

D)High volume of disparate products

The correct answer is: B

Page 74: CPIM.bscm Questions&Answers

In a flow manufacturing environment, the workstations required to make a product orfamily of similar products are positioned closely together in the sequence necessary tomake the product. Work flows from one work station to the next in a sequential flow.Because they tend to be inherently inflexible, flow lines are best suited to a high volumeof similar products.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 72BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The key component to quick changeovers is:

A)dramatically reduced set up times.

B)availability of materials to run when the changeover is complete.

C)expensive machines which changeover automatically.

D)large enough lot sizes so changeovers are not critical.

The correct answer is: A

Page 75: CPIM.bscm Questions&Answers

Reducing setup times are the key component to making changeovers quicker. Thequicker the changeover, the smaller the lot size can be. The smaller the lot size, the lessinventory that needs to be maintained. This leads to much lower costs of operations.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 73BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

A company which can adapt swiftly to changes in the volume and mix of their productsis:

A)good at sales and operation planning.

B)forecasting accurately.

C)process flexible.

D)six sigma certified.

The correct answer is: C

Companies which are process flexible are able to adapt quickly to changes in the productmix and volume. They have modified their sales, manufacturing and supplier processes

Page 76: CPIM.bscm Questions&Answers

so they are machine flexible, have small lot sizes, have constant communication with thesales force, have suppliers who are involved in the planning and design of their productsand have developed real time collaboration with all the parties involved. They may notforecast their product at all but are able to adapt to the ongoing changes brought on bymarket forces.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 74BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The key driver in a Total Quality Management (TQM) company should be:

A)lower costs.

B)training employees.

C)problem solving tools.

D)customer needs.

The correct answer is: D

Page 77: CPIM.bscm Questions&Answers

The customer needs should drive all of the focus of employees in a TQM environment.By focusing on the customer, all of the processes to support the customers expectationswill be improved. While training and problem solving tools are key methods fordeveloping employee empowerment, the customer should be in the center of all theprocess improvements.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 75BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

Quality can best be defined as:

A)job one.

B)meeting or exceeding the users' expectations.

C)the best product produced.

D)zero defects.

The correct answer is: B

Page 78: CPIM.bscm Questions&Answers

Quality is best defined by the user of the product. The user sets the expectation for acompany's products and services by buying initially and repeating the purchase. Whilezero defects is a measure of the quality produced, there are customers who are buying offquality products which are perfect for their ultimate use. Again, it depends on theexpectations.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 76BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

In a flow manufacturing environment, product will generally flow consistently andconstantly. As a result, there is little time to do inventory transactions to record themovement of parts through the line. To overcome this, many companies record theirinventory by using:

A)pre flushing.

B)kanban.

C)cycle counts.

D)backflushing.

The correct answer is: D

Page 79: CPIM.bscm Questions&Answers

Backflushing is a method for recording the usage of inventory at a standard quantitywhen the finished unit is completed. Backflushing can also be completed at variouspoints (paypoints) in the routing. This process eliminates the need to record issuetransactions for materials and time entry for labor.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 77BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Production plans have all of the following except:

A)Shipment plan

B)Product families

C)Inventory plan

D)Weekly production

The correct answer is: D

Page 80: CPIM.bscm Questions&Answers

Production plans are generally monthly statements of shipments, production, andinventory (or backlog), broken down by product families, not end items.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 78BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following statements is most correct?

A)The MPS shows families of products.

B)The MPS has more detail than the production plan.

C)The production plan has more detail than the MPS.

D)The production plan rolls up to equal the MPS.

The correct answer is: B

The MPS is a weekly build plan that contains more detail than the production plan.However, the MPS should add up to equal the production plan.

Page 81: CPIM.bscm Questions&Answers

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 79BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

A closed loop MRP system can be best defined as:

A)action taken by a planner to approve planned orders.

B)re-planning of capacity to accommodate restraints.

C)integrated planning and control system with feedback from the bottom-up.

D)integrated systems which include financial software, finite capacity, and logistics.

The correct answer is: C

Closed loop MRP systems operate from the top down with feedback throughout thesystem. These feedback mechanisms allow changes to occur in the top level planning.

(Arnold, Introduction to Materials Management, Chapter 2).

Page 82: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 80BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

You are working as a Master Scheduler in a discrete manufacturing company. A largecustomer has asked if you can deliver an order, but you have some short term capacityconstraints. Which of the following actions could be taken so the order can be delivered?

I.People could be hired

II.Overtime could be worked

III.Inventory could be built in slow times

IV.Work could be subcontracted

A)I, II, and III

B)II, III, and IV

Page 83: CPIM.bscm Questions&Answers

C)I, III, and IV

D)I, II, and IV

The correct answer is: B

Short term capacity can be increased by overtime, inventory, or subcontracting. Often,hiring qualified people takes much longer than the other three options.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 81BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following are strategies to use in developing a production plan?

I.Chase strategy

II.Delphi strategy

III.Level strategy

Page 84: CPIM.bscm Questions&Answers

IV.Backlog strategy

A)I and II

B)I and III

C)II and IV

D)III and IV

The correct answer is: B

The chase strategy means production will vary with demand (inventory stays level). Thelevel strategy establishes production at the average demand. Fluctuations in demand areabsorbed by inventory. The third strategy is subcontracting. Production is kept at theminimum demand level. Variations in the demand level are absorbed by subcontractingproduction.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Page 85: CPIM.bscm Questions&Answers

Question Number: 82BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following are inputs to a realistic MPS?

I.Production plan

II.Forecasts for end items

III.Product costs for end items

IV.Capacity constraints

A)I, II, and III

B)I, II, and IV

C)II, III, and IV

D)I, III, and IV

The correct answer is: B

The production plan, forecasts, and capacity constraints are all inputs to the MPS. Whilecosts are nice to have, they are not a necessary input.

(Arnold, Introduction to Materials Management, Chapter 3).

Page 86: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 83BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following are objectives when establishing the MPS?

I.Efficient use of resources

II.Efficient final assembly

III.High customer service levels

IV.Efficient use of inventory

A)I, II, and III

B)I, II, and IV

C)I, II, III, and IV

D)

Page 87: CPIM.bscm Questions&Answers

I, III, and IV

The correct answer is: D

The master scheduler, when developing the MPS, must make sure labor, material,equipment, and inventory are being used efficiently in order to maintain high levels ofcustomer service. Efficient final assembly would be developed by a final assemblyschedule.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 84BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Final assembly scheduling usually occurs when:

A)a customer order is received.

B)planning a build schedule.

C)the MPS is established.

D)

Page 88: CPIM.bscm Questions&Answers

capacity is constrained.

The correct answer is: A

Final assembly scheduling occurs only after the customer order is received. The FAS isthe actual build schedule which ensures that the customers get what they want. Generally,FAS occurs when there are a variety of options for the customer to order.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 85BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

In make to stock requirements, customer orders are satisfied from:

A)available capacity.

B)work in process inventory.

C)finished goods inventory.

D)raw material inventory.

Page 89: CPIM.bscm Questions&Answers

The correct answer is: C

Make-to-stock companies ship customer orders from finished goods. Make to ordercompanies ship from available capacity.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 86BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Independent demand can be defined by all of the following except:

A)Demand not related to demand from higher level assemblies

B)Forecasted demand

C)Demand calculated based on present demand

D)Demand from customer orders

Page 90: CPIM.bscm Questions&Answers

The correct answer is: C

Demand calculated from present demand would be dependent demand. Its demand isdependent upon a higher level assembly.

(Arnold, Introduction to Material Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 87BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following would best define dependent demand?

I.Demand which is dependent on the forecast

II.Demand which is dependent on demand for a higher level assembly

III.Demand which is calculated

A)I

Page 91: CPIM.bscm Questions&Answers

B)I and II

C)II and III

D)III

The correct answer is: C

Dependent demand is calculated based on demand for higher level assemblies. Forecasteddemand is independent.

(Arnold, Introduction to Material Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 88BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following is not an input to MRP?

A)Master Production Schedule

B)Inventory records

Page 92: CPIM.bscm Questions&Answers

C)Bill of materials

D)Capacity planning

The correct answer is: D

Capacity planning is not an input to MRP. In fact, MRP assumes infinite capacity isavailable in its calculation.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 89BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Planning bills can be best described as:

A)bills of material based on forecast demand.

B)bills of material for new products.

C)

Page 93: CPIM.bscm Questions&Answers

bills of material which represent average products.

D)bills of material for expected usage.

The correct answer is: C

Planning bills are an artificial grouping of components established for planning purposes.They are used to simplify forecasting and scheduling. They are not buildable products.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 90BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

A firm planned order is used to:

A)freeze the planned order against changes in quantity and time.

B)convert the planned order to a scheduled receipt.

C)simulate the projected inventory balance.

Page 94: CPIM.bscm Questions&Answers

D)manipulate the data and quantity of the customer order.

The correct answer is: A

Firm planned orders are used by planners when it is necessary to "freeze" the plannedorder. This might be necessary due to material shortages or capacity problems, e.g.,strikes.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 91BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following would be included in demand management?

I.Forecasted requirements

II.Service parts requirements

III.Branch warehouse requirements

IV.

Page 95: CPIM.bscm Questions&Answers

Inter-plant orders

A)I, II, and III

B)II, III, and IV

C)I, III, and IV

D)I, II, III, and IV

The correct answer is: D

All of the answers would be part of demand management, plus order entry and orderpromising.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 92BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Page 96: CPIM.bscm Questions&Answers

All of the following are principles of forecasting except:

A)Forecasts are usually wrong

B)Forecasts are more accurate for end items

C)Forecasts should include an estimate of error

D)Forecasts are more accurate in the near term

The correct answer is: B

Forecasts are more accurate for product families or groups. The reason is that aggregatenumbers tend to be more accurate than detailed numbers. So although the sales forecasterror may be very small in a company, predicting the shipments of an end item will havemore error associated with it.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 93BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Page 97: CPIM.bscm Questions&Answers

When a company has historical data available for use in forecasting future demand, thetechnique for utilizing this data is called:

A)qualitative forecasting techniques.

B)extrinsic forecasting techniques.

C)intrinsic forecasting techniques.

D)causal forecasting techniques.

The correct answer is: C

Intrinsic forecasting techniques use internal historical data to forecast future demand. It isused based on an assumption that historical patterns can predict future patterns.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 94BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The following formula represents which forecasting technique?

Page 98: CPIM.bscm Questions&Answers

New forecast = (alpha)(latest demand) + (1-alpha)(previous forecast)

A)Weighted moving average

B)Double exponential smoothing

C)Exponential smoothing

D)Focus forecasting

The correct answer is: C

Exponential smoothing uses a smoothing constant called alpha. It smoothes the variationbetween latest actual demand and the forecasted demand.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 95BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Page 99: CPIM.bscm Questions&Answers

The annual demand for a product is 1200 but during July, the product sells 150 units.What is the seasonal index for the product in July?

A)1.0

B)1.5

C)1.75

D)2.00

The correct answer is: B

The seasonal index is calculated by dividing the period average demand by the averagedemand for all periods.For this problem: The seasonal index equals 150 units/100 units or 1.5; where 100 units is the averagedemand for all periods (1200 units/12 months).

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Page 100: CPIM.bscm Questions&Answers

Question Number: 96BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following best describes the term bias?

A)Actual demand consistently varies from forecast; either above or below.

B)The standard deviation is consistently positive.

C)The mean absolute deviation equals the forecast error.

D)The sum of the errors is less than the MAD.

The correct answer is: A

Bias occurs when actual demand varies consistently higher or lower than the forecast.When bias occurs in the forecast, the forecast must be adjusted.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 97BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Page 101: CPIM.bscm Questions&Answers

A tracking signal is used to:

A)monitor the quality of the forecast.

B)determine the variation in the production plan.

C)measure whether the schedule is being met.

D)measure the material plan.

The correct answer is: A

Tracking signals are used to measure the quality of the forecast to determine whether toadjust the forecast. They usually measure the sum of the errors against a deviationmeasure such as MAD.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 98BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Page 102: CPIM.bscm Questions&Answers

Based on the following information, what is the mean?

Period

Demand

1

1000

2

500

3

700

4

600

A)500

B)600

C)700

D)800

The correct answer is: C

Page 103: CPIM.bscm Questions&Answers

The mean is calculated by adding the values and dividing by the number of periods.For this problem:X= (1000+500+700+600)/4X= 2800/4X= 700

(Arnold, Introduction to Materials Management, Chapter 11).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 99BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Demand on a work center is caused by the next work center. Product is not made unlesssignaled by the next work center. This is called:

A)push system.

B)pull system.

C)demand system.

D)MRPII system.

The correct answer is: B

Page 104: CPIM.bscm Questions&Answers

A pull system starts with demand from a customer and signals each preceding operation.Work is not done on a product unless a signal for demand is generated, thus "pulling" aproduct through the manufacturing process.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 100BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following best describes the Master Production Schedule?

A)It is the actual build schedule for manufacturing.

B)It is the final assembly schedule.

C)It is driven by materials requirements planning.

D)It is the planned build schedule for manufacturing.

The correct answer is: D

Page 105: CPIM.bscm Questions&Answers

The Master Production Schedule is the planned build schedule for manufacturing. A finalassembly schedule is generally separate from the MPS and the actual build schedule mayvary from what was planned.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 101BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

A company wants to produce at a level rate. Based on the following information, whatproduction rate will provide a projected inventory of 20 at the end of period five?

Period 1 2 3 4 5

Forecast Demand 20 10 15 15 10

Page 106: CPIM.bscm Questions&Answers

Planned Production

Planned Inventory 10

A)14

B)15

C)16

D)17

The correct answer is: C

The total forecasted demand is equal to 70 for the five periods. In addition to theforecasted demand, the company wants to raise the inventory from 10 to 20 by the end ofperiod five, therefore the total requirement is for 80 units. To produce 80 units over fiveperiods in a level manner, the company must produce 16 units per period in order toachieve its objective.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Page 107: CPIM.bscm Questions&Answers

Question Number: 102BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following are steps in developing a Master Production Schedule?

I.Develop a preliminary MPS

II.Check the schedule against the capacity available

III.Check MPS against the production plan to ensure they are equal

A)I and II

B)I and III

C)II and III

D)I, II, and III

The correct answer is: A

The three steps in developing a Master Production Schedule are:

1. Develop a preliminary MPS.2. Check the preliminary MPS against available capacity.3. Resolve differences between the preliminary MPS and capacity available.

Page 108: CPIM.bscm Questions&Answers

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 103BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Over the past three months, the demand for a product has been 240, 260, and 280.Calculate the three month moving average forecast for month four.

A)240

B)260

C)280

D)300

The correct answer is: B

The three month moving average is calculated by adding the demand for the three months(240+260+280 = 780) and dividing by the number of data (3). Therefore: 780/3 = 260.

Page 109: CPIM.bscm Questions&Answers

This would be used as the forecast for the fourth month.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 104BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The material requirements system receives direct input from:

A)production planning.

B)capacity requirements planning.

C)master production scheduling.

D)purchasing.

The correct answer is: C

The master production schedule, once established, is submitted to the MRP system foruse in calculating demand for the components.

Page 110: CPIM.bscm Questions&Answers

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 105BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Based on the following data, what should the monthly production be to achieve levelproduction?

Beginning inventory = 300 unitsEnding inventory = 400 units

Sales forecast

Month 1

2345

Quantity 300

400200300200

Page 111: CPIM.bscm Questions&Answers

A)200

B)250

C)300

D)350

The correct answer is: C

The company is beginning with 300 units and wants to increase the inventory level by100 units. In addition, the sales forecast calls for 1400 units to be sold over the 5 periods.Therefore, 1400 + 100 units need to be produced for a total of 1500 units over 5 periods,or 300 units per period.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 106

Page 112: CPIM.bscm Questions&Answers

BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Based on the following data, what should the monthly production be to level production?

Beginning inventory = 500 unitsEnding inventory = 200 units

Sales forecast

Month 1

2345

Quantity 400

300400400300

A)250

B)300

C)350

D)400

The correct answer is: B

Page 113: CPIM.bscm Questions&Answers

The company has a beginning inventory of 500 units and will be decreasing the inventoryby 300 units over the 5 periods. During the 5 periods, they will be selling 1800 units.Therefore, the company will need to produce 1800-300 or 1500 units over 5 periodswhich equals 300 per period.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 107BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following best describes a master production schedule?

A)Product families, monthly

B)End items, monthly

C)End items, weekly

D)Product families, weekly

The correct answer is: C

Page 114: CPIM.bscm Questions&Answers

The master production schedule plans end items on a weekly basis. This detailedproduction schedule ties directly to the production plan which is a plan for productfamilies, monthly.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 108BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The forecast for a part is 200 units per week. The actual shipments for the last 5 weekshave been 250, 260, 210, 240, and 220. If the MAD is 20, what would the tracking signalequal?

A)3

B)6

C)9

D)12

The correct answer is: C

Page 115: CPIM.bscm Questions&Answers

Tracking signals measure the bias in a forecast. The above demand would reflect anegative bias in the forecast, as the forecast is consistently less than the actual demand.To calculate a tracking signal, divide the sum of the forecast errors by the MAD.Therefore:50+60+10+40+20 = 180180/20 = 9

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 109BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Based on the following data, what would the projected forecast for month 5 be, using a 3month moving average?

Month 1 2 3 4

Forecast 200 200

Page 116: CPIM.bscm Questions&Answers

200200

Actual Demand 190 210 190 170

A)170

B)180

C)190

D)200

The correct answer is: C

The three month moving average is found by taking the actual demand for the last threemonths divided by three.Therefore, the calculation would be:(210+190+170)/3 = 570570/3 = 190

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Page 117: CPIM.bscm Questions&Answers

Question Number: 110BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

What is the Mean Absolute Deviation for the following data?

Period 1 2 3 4 5

Forecast 100 100 150 150 150

Demand 90 105 140 160 170

A)3

B)9

Page 118: CPIM.bscm Questions&Answers

C)11

D)15

The correct answer is: C

The mean absolute deviation is calculated by adding the absolute value of the differencebetween the actual demand and the forecast, divided by the number of periods.For this example, the absolute deviation is calculated by adding 10+5+10+10+20=55.Divide 55 by the number of periods (5) to equal 11.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 111BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

In order for a forecast to signal negative bias, the tracking signal would be:

A)less than one.

B)more than one.

Page 119: CPIM.bscm Questions&Answers

C)equal to one.

D)equal to zero.

The correct answer is: A

A tracking signal measures the algebraic deviations of the actual demand to the forecast.It then divides those deviations by the MAD. If the deviations divided by the MAD aregreater than one, then the forecast exhibits positive bias; less than one, the forecastexhibits negative bias. Most companies will only adjust the forecast when the trackingsignal reaches an arbitrary target, such as +/- 4.

(Arnold, Introduction to Materials Management, Chapter 8).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 112BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

An anticipated build schedule can be best described as:

A)production plan.

B)

Page 120: CPIM.bscm Questions&Answers

capacity plan.

C)materials requirements plan.

D)master production schedule.

The correct answer is: D

As defined by the tenth edition of the APICS dictionary, the master production scheduleis "the anticipated build schedule for those items assigned to the master scheduler."

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 113BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

In which of the following manufacturing environments are forward scheduling and finiteloading best suited for providing customer promise dates?

A)Make-to-stock

B)Make-to-order

C)

Page 121: CPIM.bscm Questions&Answers

Assemble-to-order

D)Configure-to-order

The correct answer is: B

Forward scheduling assumes that materials are not ordered and operations are notscheduled until the customer order is received, regardless of the due date. In a make-to-order environment, work does not begin until the order is received from the customer.The order is then scheduled forward from the order date and considers the load on thefinite capacity of each work center through which the order must move.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 114BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Planning bills can be best described as:

A)grouping like items together for planning.

B)products which the factory plans to build.

Page 122: CPIM.bscm Questions&Answers

C)indented bill of materials.

D)phantom bill of materials.

The correct answer is: A

A planning bill is an artificial grouping of components for planning purposes. They areused to simplify planning, forecasting, master production scheduling, and materialrequirements planning. They do not represent products which are buildable.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 115BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The portion of a company's inventory and planned production which is not alreadycommitted is:

A)inventory allocation.

B)inventory commitment.

Page 123: CPIM.bscm Questions&Answers

C)available to promise.

D)multi-plant planning.

The correct answer is: C

Available-to-promise is the portion of inventory and planned production not alreadycommitted to orders. It allows accurate delivery promises to be made to the customer.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 116BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The primary reason for a time fence is to:

A)determine how to use the forecast.

B)manage schedule changes most effectively.

C)provide a stable schedule for the suppliers.

Page 124: CPIM.bscm Questions&Answers

D)maintain a steady shipment schedule.

The correct answer is: B

Time fences are mainly used to manage the changes that invariably occur in the masterschedule. The frozen zone usually can be changed only with senior management approvaldue to the high cost of changes. The liquid zone can routinely have changes madebecause resources have not been committed. The slushy zone usually requires negotiatedtrade-offs between marketing and manufacturing. If capacity is available, then changescan usually be made.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 117BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

A bill of materials contains:

I.Components used to make a product

II.Labor needed to build the product

Page 125: CPIM.bscm Questions&Answers

III.Assemblies at various stages of production

IV.Safety stock by item

A)I and II

B)I and III

C)II and III

D)III and IV

The correct answer is: B

A bill of materials contains all of the components used in the manufacture of end items.In addition, the subassemblies at various stages of manufacture are described. Labor isdefined in the routing, generally in standard hours, and safety stock is not generallymaintained on the bill of materials.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Page 126: CPIM.bscm Questions&Answers

Question Number: 118BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The term value can be best defined as:

A)total revenue of products and services.

B)total inventory available for shipment.

C)amount buyers are willing to pay for a product or service.

D)gross margin on a product or service.

The correct answer is: C

Value is defined as the amount buyers are willing to pay for a product or service. Totalrevenue would be the measure of the value.

( Operations Management, Concepts in Manufacturing and Services, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Page 127: CPIM.bscm Questions&Answers

Question Number: 119BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The term, Value Chain, refers to the:

A)total value generated by a company's activities.

B)total revenue for all the products and services.

C)supplier network for providing goods and services.

D)margin associated with the activities.

The correct answer is: A

The Value Chain refers to the total value generated by a company. It is comprised ofvalue activities and margin. Value activities can be broken into two types; primary andsupport. Primary activities are those concerned with the physical creation of the productor service which a company sells. Support activities are those which help brace theprimary activities such as technology, human resources, accounting, etc.

Copyright 2003, Datachem Software, Westboro, MA

Page 128: CPIM.bscm Questions&Answers

Question Number: 120BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The primary advantage of the concurrent engineering process is that:

A)inventory needs are reduced.

B)engineers work with other departments on projects improving communication.

C)project costs for the development are accurately accounted for.

D)product development time is reduced.

The correct answer is: D

Concurrent Engineering is the process of forming product teams for the purpose ofdeveloping a new product(s). Generally the teams are cross-functional and includerepresentatives from all areas in the company. The teams will often include suppliers aswell.

Because the product team is focused on delivery of a new product and is constantlyinteracting with each other, products can be delivered faster, with higher quality at alower cost. Additionally, the manufacturability of the product will be improved, loweringthe ongoing cost of quality.

Copyright 2003, Datachem Software, Westboro, MA

Page 129: CPIM.bscm Questions&Answers

Question Number: 121BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following would NOT be considered a source of demand?

A)Customer orders

B)Interplant orders between facilities

C)Forecasts

D)Goods due in from a supplier

The correct answer is: D

Goods from suppliers would be included as a supply. Demand must incorporate allsources of the demand whether they are forecasts, customer orders, dependent demand,spare parts orders, etc. Only by aggregating all the demands for a part can planningproperly occur.

Copyright 2003, Datachem Software, Westboro, MA

Page 130: CPIM.bscm Questions&Answers

Question Number: 122BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

A responsive company will incorporate the customers' desires for product improvementsinto their goods and services. The ability to do this effectively is described as listening tothe "voice of the customer." The phrase "voice of the customer" can be best described as:

A)conducting focus groups with potential customers to see what features are best.

B)obtaining actual customer descriptions in word for the features and functions they desire.

C)getting feedback to a survey on the company website.

D)sending out surveys to all important customers regarding the goods and services.

The correct answer is: B

The Voice of the Customer is a process for helping customers define their desires for thefeatures and functions of a supplier's goods and services. It involves defining their desiresand translating those desires into actual product and service designs. This is done througha series of meetings and cross communication.

Copyright 2003, Datachem Software, Westboro, MA

Page 131: CPIM.bscm Questions&Answers

Question Number: 123BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following is the primary benefit of a customer partnership?

A)Higher prices can be charged because the customer is not buying from other sources

B)Reduced paperwork between the two parties

C)Lower costs in the supply chain for both companies because of the mutual sharing ofinformation

D)Higher margins for the supplier

The correct answer is: C

A customer partnership (similar to a supplier partnership) will have an overall effect oflowering costs in the supply chain for both partners. These savings can be shared by thecompanies. The costs are lowered because the partners share information collaboratively.Information on new designs, forecasts, customer orders, consigned inventory, sharedcontracts, etc. all contribute to the lower costs.

Copyright 2003, Datachem Software, Westboro, MA

Page 132: CPIM.bscm Questions&Answers

Question Number: 124BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

The attributes of the product or service that cause a customer to buy from a company arecalled the:

A)order winners.

B)order qualifiers.

C)buyers criteria.

D)order modifiers.

The correct answer is: A

Order winners are the characteristics that cause a customer to purchase from a supplier.These characteristics can vary widely but will generally include delivery speed, deliveryreliability, quality, design superiority, education of the employees, customer importance,service, etc.

Copyright 2003, Datachem Software, Westboro, MA

Page 133: CPIM.bscm Questions&Answers

Question Number: 125BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Many companies will call themselves market driven. This would indicate that they:

A)develop strong advertising campaigns.

B)established a strong brand image in the market.

C)respond to the customers needs.

D)conduct market research.

The correct answer is: C

Market driven companies are constantly developing goods and services which providecustomers with a reason to buy from them. They are very capable of listening to themarket and responding quickly to the market messages.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 126BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Page 134: CPIM.bscm Questions&Answers

The primary purpose for forecasting is:

A)estimating safety stock.

B)determining resource and capacity requirements.

C)projecting product demand.

D)level loading the master schedule.

The correct answer is: C

The primary purpose of forecasting is to project product demand. Based on thoseprojections, safety stock can be estimated, resource and capacity constraints can beidentified, and the master schedule load strategy can be determined. However, theseoccur only after projecting what the product demand will be.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 127BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

A forecast which is exhibiting a trend will have which of the following patterns?

Page 135: CPIM.bscm Questions&Answers

A)A steady increase or decrease

B)A consistent fluctuating pattern based on the time of year

C)An inconsistent fluctuation in demand

D)A wavelike fluctuation over several years

The correct answer is: A

A forecast trend displays a steady increase or decrease year to year.

(Arnold, Introduction to Materials Management, Chapter 8)

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 128BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

A forecast analyst has just extracted the recent actual sales history and, in reviewing thedata, notices several outliers. The analyst should most likely:

A)

Page 136: CPIM.bscm Questions&Answers

rerun the data to ensure there were no errors in the extract.

B)rerun the data but remove the outliers.

C)ignore the outliers and use the forecasts as is.

D)refer to the tracking signal.

The correct answer is: B

Outliers are data that are outside the general data points of the actual data. These outliersoccur due to the random events of business. Sometimes they are caused by the actions ofthe business such as promotions, bonus timing, etc. Generally speaking, outliers shouldbe removed from the data as they are apt to skew the forecast causing demand projectionwhich are less than accurate.

There are times when the outliers are left in the data because it results in very littleinaccuracy.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 129BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

A collaborative forecast is best described as:

Page 137: CPIM.bscm Questions&Answers

A)one where the seasonal demand is dampened by the trend.

B)a forecast where the tracking signal is equal to one.

C)a forecast where the customer and the supplying firm have reached a consensus about theforecast.

D)a forecast which has a MAD of 2.06 or less.

The correct answer is: C

Collaborative forecasting allows the customer and supplier to communicate and adjustthe forecast based on the data of both firms. This is usually completed with both firmscommunicating directly in a formal process leading to an agreed upon forecast.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 130BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

Which of the following would NOT be considered marketing research?

A)

Page 138: CPIM.bscm Questions&Answers

Market analysis

B)Sales analysis

C)Consumer research

D)Market penetration

The correct answer is: D

Market penetration is the level by which a product has been accepted in the marketplace.This would include the actual market share which a product has obtained.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 131BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A company needs to produce 4000 units over the next two months. There are 21 workingdays in the first month and 19 working days in the second month. What must the dailyrate be with a level strategy?

A)50

Page 139: CPIM.bscm Questions&Answers

B)75

C)100

D)125

The correct answer is: C

The calculation would be as follows:

4000 units/40 work days = 100 units per day

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 132BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The MPS is used to facilitate communication between which two groups?

A)Manufacturing and Logistics

B)

Page 140: CPIM.bscm Questions&Answers

Sales and Marketing

C)Manufacturing and Finance

D)Sales and Manufacturing

The correct answer is: D

While the MPS can be used for many purposes, it is primarily a tool for use byManufacturing and Sales.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 133BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Rough cut capacity planning can be best described as:

A)checking to be sure that critical resources are available to support the preliminary MPS.

B)making sure warehouse space is available for raw materials.

Page 141: CPIM.bscm Questions&Answers

C)making certain the load at each work center is less than capacity.

D)ensuring resources are available by product family.

The correct answer is: A

Rough-cut capacity planning is concerned with making sure that critical resources areavailable at the preliminary MPS stage before committing to the schedule. Criticalresources are bottleneck operations (not every work center), labor, and materials whichmay be scarce or have long lead times.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 134BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The minimum planning horizon for the MPS should be:

A)twelve months in weekly amounts.

B)equal to the longest cumulative lead time.

Page 142: CPIM.bscm Questions&Answers

C)as long as it takes to acquire new capacity.

D)twice the longest component lead time.

The correct answer is: B

The planning horizon should be equal to the longest cumulative lead time to purchasecomponents and manufacture. This allows visibility for planning.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 135BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Week 1 2 3 4 5

Customer Orders

Page 143: CPIM.bscm Questions&Answers

60302040

MPS110

110

ATP 20

50

Based on the above, what action can the planner take regarding an order for 60 in week3?

A)Reject the order for 60; tell the customer 50 are available

B)Accept the order for week 4 for 60

C)Accept the order for week 2 for 60

D)Accept the order for week 3 for 60

The correct answer is: D

The order for 60 can be accepted for week 3, as 70 are available; 20 from week 1 and 50from week 3.

(Arnold, Introduction to Materials Management, Chapter 3).

Page 144: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 136BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

In addition to calculating requirements, the major objective of MRP is to:

A)keep the order priorities current.

B)maintain the bill of material.

C)calculate the inventory needed.

D)ensure forecasted demand is to be used.

The correct answer is: A

The two major objectives of MRP are to:1) Calculate the material requirements based on demand and on hand inventory. 2) Keep order priorities current as business needs change. While MRP does calculateprojected inventory, it is not its primary objective.

(Arnold, Introduction to Materials Management, Chapter 4).

Page 145: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 137BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

In the product structure below, which of the following parts would be considered parents?

A)A, B, C, D

B)E, F

C)A, C

D)B, D, E, F

The correct answer is: C

Part A and Part C would be considered parents since they have components attached.

(Arnold, Introduction to Materials Management, Chapter 4).

Page 146: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 138BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Based on the following product structure how many E's are needed for 100 A's?

A)100

B)300

C)400

D)600

The correct answer is: D

For 100 A's, the product will need 200 C's. Because 3 E's go into each C, 600 E's (200 *3) will be required.

(Arnold, Introduction to Materials Management, Chapter 4).

Page 147: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 139BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A where-used report provides a list of all:

A)work centers where a part is run.

B)parents where a component is used.

C)components where a parent is used.

D)planning bills.

The correct answer is: B

A where-used report provides a list of all parents where a component is used. It is usefulfor making mass component changes.

(Arnold, Introduction to Materials Management, Chapter 4).

Page 148: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 140BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A pegging report is used to:

A)trace the origin of demand for a component.

B)trace the capacity requirement for a part.

C)identify the quantity per for a particular parent.

D)establish the demand for a part.

The correct answer is: A

A pegging report is used to trace the origin of demand for a component. It shows only theparents for which demand exists, unlike the where-used report which shows every parentin which a component is used.

(Arnold, Introduction to Materials Management, Chapter 4).

Page 149: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 141BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The Bill of Materials is used quite frequently in manufacturing. All of the following areuses of the BOM except:

A)Product costing

B)Planning

C)Calculating capacity

D)Engineering change control

The correct answer is: C

Capacity planning uses the routing file to determine the load on the work centers.

(Arnold, Introduction to Materials Management, Chapter 4).

Page 150: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 142BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Net requirements are:

A)Scheduled receipts - available inventory - forecast

B)Forecasts - scheduled receipts - customer orders

C)Forecasts - customer orders and scheduled receipts

D)Gross requirements - scheduled receipts- available inventory

The correct answer is: D

Net requirements are calculated by gross requirements - scheduled receipts - availableinventory.

(Arnold, Introduction to Materials Management, Chapter 4).

Page 151: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 143BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A low level code is best defined as the:

A)first work center in which the part is processed.

B)lowest level on which a part resides in the BOM.

C)product family which the part belongs to.

D)the most accurate forecast level.

The correct answer is: B

The low-level code tells the MRP system the lowest level in which the part resides. Thesystem uses this information to determine when to total all the requirements for acomponent. The end item is level 0.

(Arnold, Introduction to Materials Management, Chapter 4).

Page 152: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 144BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following best describes the term "load"?

A)Sum of the required times for all actual orders to be run at a work center for a specifiedtime frame

B)Sum of the required times for all planned orders to be run at a work center for a specifiedtime frame

C)Sum of the required times for all planned and actual orders to be run at a work center fora specified time period

D)Sum of the required times for all forecasted orders to be run at the work center for aspecified time period

The correct answer is: C

The load on a work center is calculated by adding the required times for all planned andactual orders to be run at a work center for a specified time period.

(Arnold, Introduction to Materials Management, Chapter 5).

Page 153: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 145BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

In order to back schedule, which of the following information is necessary?

I.Quantity and due dates

II.Bill of materials sequence

III.Setup and run times for each operation

IV.Queue, wait, and move times

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)I, II, and IV

The correct answer is: B

Page 154: CPIM.bscm Questions&Answers

The bill of materials sequence is not needed in order to backward schedule. Backwardscheduling involves machine operation sequence as well as move, queue, and wait times.The quantity would directly impact the time taken at each work center.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 146BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Production activity control can be best described as a (an):

A)planning system.

B)execution system.

C)scheduling system.

D)ordering system.

The correct answer is: B

Page 155: CPIM.bscm Questions&Answers

The production activity control system is responsible for executing the materialsrequirement plan and the master production schedule.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 147BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Dispatching can be best described as:

A)routing the factory orders.

B)developing the work instructions.

C)releasing orders to the shop floor.

D)placing purchase orders with suppliers.

The correct answer is: C

Page 156: CPIM.bscm Questions&Answers

Dispatching is the function of releasing orders to the shop floor based on the materialsrequirements plan priorities.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 148BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

In a certain manufacturing environment, routings are fixed, and work centers are arrangedin the order of the routings. The production at each work center takes a similar amount oftime. This would describe:

A)project manufacturing.

B)intermittent manufacturing.

C)flow manufacturing.

D)specialty manufacturing.

The correct answer is: C

Page 157: CPIM.bscm Questions&Answers

In a flow manufacturing environment, routings are generally fixed with work centersarranged according to the flow.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 149BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

In a certain manufacturing environment, the flow of work is varied, workers must beflexible, and throughput times are long. This describes:

A)project manufacturing.

B)intermittent manufacturing.

C)flow manufacturing.

D)specialty manufacturing.

The correct answer is: B

Page 158: CPIM.bscm Questions&Answers

With intermittent manufacturing, the flow of work is varied, depending on the design.This causes the work flow to be unbalanced. Machinery and workers need to be flexibleand are generally grouped together by function. Throughput times are generally longdepending on the work which needs to be done at each work center. As a result,scheduling is very complex. The capacity needed depends on the mix of products movingthrough the various work centers.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 150BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Of all the times associated with manufacturing lead times, which generally takes the mosttime in intermittent manufacturing?

A)Run time

B)Setup time

C)Queue time

D)Move time

The correct answer is: C

Page 159: CPIM.bscm Questions&Answers

Queue time usually accounts for 85%-95% of total lead time. As a result, it is critical thatproduction control aggressively manages the queue time.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 151BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Operations are scheduled from the date the order is received. This would best describe:

A)backward scheduling.

B)master scheduling.

C)capacity scheduling.

D)forward scheduling.

The correct answer is: D

Page 160: CPIM.bscm Questions&Answers

Forward scheduling begins when an order is received. The due date for the customerwould be calculated based on material purchases and operation scheduling. It is used fordeveloping promise dates for the customer, or determining whether a late order can bedelivered on time.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 152BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The last operation is scheduled for completion on the due date. Other previous operationsare scheduled so that the due date can be met. This describes:

A)backward scheduling.

B)master scheduling.

C)capacity scheduling.

D)forward scheduling.

The correct answer is: A

Page 161: CPIM.bscm Questions&Answers

Backward scheduling schedules the last operation on the routing so that the completiondate is the due date. All previous operations are scheduled back from the last operation.The benefit of backward scheduling is that it schedules back from the customer due date.However, because there is no slack time, on time delivery and service may suffer.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 153BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

When the next operation is allowed to begin before the entire lot is completed on theprevious operation, this is called:

A)operation splitting.

B)operation overlapping.

C)work center overlapping.

D)work center splitting.

The correct answer is: B

Page 162: CPIM.bscm Questions&Answers

Operation overlapping allows the next operation to begin even though the whole lot hasnot been completed through the previous operations. It can be used to expedite an order.However, sometimes costs are increased.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 154BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Bottlenecks can be best defined as:

A)work stations where available capacity is greater than required capacity.

B)work stations where measured capacity is greater than required capacity.

C)work stations where required capacity is greater than available capacity.

D)work stations where the demonstrated capacity is greater than the measured capacity.

The correct answer is: C

Page 163: CPIM.bscm Questions&Answers

Bottlenecks occur when the required capacity is greater than the available capacity. Thiscondition then creates queues in front of the work center.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 155BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The total volume of production passing through a facility is defined as:

A)total output.

B)finished goods production.

C)load.

D)throughput.

The correct answer is: D

Page 164: CPIM.bscm Questions&Answers

Throughput is the total volume passing through a facility. Bottlenecks control thethroughput, as production can only proceed as quickly as the slowest bottleneck.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 156BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

All of the following are principles of bottlenecks except:

A)Using a non-bottleneck 100% of the time does not produce 100% utilization

B)The capacity of the production process depends on the capacity of the bottleneck

C)Time saved at the bottleneck saves nothing

D)Capacity and demand must be considered together

The correct answer is: C

Time saved at the bottleneck is where capacity is saved because the entire productionprocess can only go as fast as the bottleneck.

Page 165: CPIM.bscm Questions&Answers

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 157BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Managing bottlenecks is extremely important to the throughput of the production facility.All of the following should be done to manage bottlenecks except:

A)Change the schedule frequently to meet customer promises

B)Maintain a time buffer before each bottleneck

C)Control the feed rate of material to the bottleneck

D)Increase the bottleneck capacity as much as possible

The correct answer is: A

The schedule should be changed as a last resort to meet customer deliveries. However,frequent changes will in fact reduce capacity at the bottleneck causing the bottleneckcondition to grow worse.

Page 166: CPIM.bscm Questions&Answers

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 158BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A shop packet will contain all of the following except:

A)Engineering drawings

B)Bill of materials

C)Route sheets

D)Customer information

The correct answer is: D

While the customer might be identified, it is not necessary to include the customerinformation in the shop packet. The other items listed in Answers A, B, and C wouldgenerally be included.

Page 167: CPIM.bscm Questions&Answers

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 159BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The input rate is controlled by the:

A)material flow from suppliers.

B)tooling requirements.

C)release of orders to the shop.

D)demand from customers.

The correct answer is: C

Releasing orders to the shop controls the input rate. If orders are released faster than theycan be produced, then queue, work-in-progress, and lead times will increase.

(Arnold, Introduction to Materials Management, Chapter 6).

Page 168: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 160BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

You calculate the critical ratio which is .95 for a particular order. The order is:

A)behind schedule.

B)ahead of schedule.

C)on schedule.

D)Critical ratio has nothing to do with order priority.

The correct answer is: A

The critical ratio measures the priority of an order to the other orders at a work center. Itis calculated by:

Due date - Present date

Page 169: CPIM.bscm Questions&Answers

Actual time remaining

-------------------------- =--------------------------

Lead time remaining

Lead time remaining

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 161BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The lot size rule described as lot-for-lot will do which of the following?

A)Order a fixed amount

B)Order a lot equal to so many periods

C)Order just the amount needed

D)Order in fixed intervals

Page 170: CPIM.bscm Questions&Answers

The correct answer is: C

A lot-for-lot ordering rule will order just the amount needed based on the netrequirement.

(Arnold, Introduction to Materials Management, Chapter 10).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 162BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

For a company, quick setup and changeover provide a competitive advantage. Which ofthe following are advantages created by quick changeovers?

I.Reduced manufacturing lead time

II.Improved quality

III.Improved maintenance

IV.Reduced work-in-process

Page 171: CPIM.bscm Questions&Answers

A)I, II, and III

B)I, II, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: B

Quick changeover and setup create many advantages, including reduced work-in-process,reduced lead time, improved quality, and improved flow. While improved maintenance isusually necessary for improved changeover, it is not created by quick setup.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 163BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following is true regarding priority?

Page 172: CPIM.bscm Questions&Answers

A)It refers to the ability of the plan to meet the demand.

B)It refers to the capacity to meet production.

C)It refers to purchasing's ability to get raw materials in a timely manner.

D)It refers to maintaining the correct due dates on orders.

The correct answer is: D

Priority refers to the system's ability to maintain the true due dates for orders. The systemconstantly evaluates the true due dates for released orders and will expedite or rescheduleout the orders.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 164BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following best describes an exception message?

Page 173: CPIM.bscm Questions&Answers

A)A message to the planner that a problem needs attention

B)A message that the MRP system is done running

C)A message that the system is in balance

D)A message to order within lead time

The correct answer is: A

An exception message provides the planner with a notice that a problem needs attention.These exceptions could be late orders arriving, order not needed, reschedule an order outor in, and many others.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 165BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following best describes the term capacity?

Page 174: CPIM.bscm Questions&Answers

A)The quantity of work done

B)The rate of doing work

C)The amount of inventory produced

D)The number of standard hours produced

The correct answer is: B

Capacity is concerned with the rate of doing work. According to the APICS dictionary,capacity is defined as "the capability of a worker, machine, work center, plan, ororganization to produce output per period of time".

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 166BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A work center includes four machines working 16 hours per day, five days per week.What is the weekly available time?

Page 175: CPIM.bscm Questions&Answers

A)80 hours

B)160 hours

C)320 hours

D)Not enough information to determine

The correct answer is: C

Available time is calculated by multiplying the number of machines (4), by the number ofhours they are available each day (16), by the number of days each week (5).The result would be 4 * 16 * 5 = 320.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 167BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

If a work center has available time of 300 hours per week and the utilization is 80%, howmany hours each week is the work center actually producing parts?

Page 176: CPIM.bscm Questions&Answers

A)200 hours

B)240 hours

C)300 hours

D)Not enough information to determine

The correct answer is: B

The utilization rate measures the percent of time the machines are actually producingparts. The hours actually worked can be calculated by mutiplying the utilizationpercentage (80%) by the number of hours available (300) which equals 240 hours.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 168BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A work center has 300 available hours, a utilization rate of 80% and an efficiency rate of90%. What is the rated capacity of the work center?

Page 177: CPIM.bscm Questions&Answers

A)216 hours

B)240 hours

C)270 hours

D)Not enough information to determine

The correct answer is: A

The rated capacity is calculated by multiplying the available hours (300), by theutilization percentage (80%), by the efficiency rating of the work center (90%).Therefore:300 * .80 * .90 = 216

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 169BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A time fence which is included in the frozen zone has which of the followingcharacteristics?

Page 178: CPIM.bscm Questions&Answers

A)Any change can be made as long as it is within the production plan.

B)Capacity and materials have been committed to specific orders.

C)Changes can be made if capacity is available.

D)Costs for changing are not excessive.

The correct answer is: B

The frozen time fence should have the least changes made because capacity and materialshave been committed to specific orders. Changes in this zone should have a senior levelauthorization because of the expense of the changes.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 170BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The time fence zone known as the liquid zone would have which of the followingcharacteristics?

Page 179: CPIM.bscm Questions&Answers

A)Any change can be made to the MPS within the production plan.

B)Changes must be minimized due to the expense of changing the MPS.

C)Capacity and materials are committed to specific orders.

D)Changes should be authorized at the senior manager level.

The correct answer is: A

The liquid zone is characterized by mostly forecast orders and changes can readily bemade without an impact to the bottom line. The Master Scheduler can make changes inthis zone or the computer will make changes in this zone.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 171BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following are inputs to the Material Requirements Planning system?

Page 180: CPIM.bscm Questions&Answers

I.Master Production Schedule

II.Inventory records

III.Production plan

IV.Bill of materials

A)I, II, and III

B)I, II, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: B

The Material Requirements Planning system needs input from the Master ProductionSchedule, inventory records, and the bill of materials in order to process informationproperly. The production plan is an input to MPS.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Page 181: CPIM.bscm Questions&Answers

Question Number: 172BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The amount of time needed for each order can be calculated by adding:

A)run time, setup time, queue time, and move time.

B)run time, setup time, and queue time.

C)run time and setup time.

D)run time, move time, and queue time.

The correct answer is: C

The time needed for each order can be calculated by adding run time and setup time. Thesetup time is a fixed time component and the run time would be represented by a time perunit run. These would then be combined to calculate the time per job.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Page 182: CPIM.bscm Questions&Answers

Question Number: 173BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The concept of linearity can be best described as:

A)balancing the work at each work station.

B)capacity available for the line to work.

C)scheduling jobs with similar setup times.

D)achieving the plan; no more, no less.

The correct answer is: D

The term linearity is used with Just-in-Time to measure the achievement of the plan. Thisensures that just the demand is produced and no extra parts are manufactured becausetime is available (waste of overproduction).

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 183: CPIM.bscm Questions&Answers

Question Number: 174BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

All of the following are benefits of subcontracting EXCEPT:

A)Excess capacity is not left unused

B)Companies can produce at minimum levels, reducing facilities cost.

C)Cost can be minimized.

D)Overtime can be reduced.

The correct answer is: C

There are many benefits to subcontracting as needed to support manufacturing. Althoughshort-term subcontracting will most likely increase costs, this may not matter when thelack of capacity is temporary. The additional cost may be worth it if the product cannotbe made otherwise.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Page 184: CPIM.bscm Questions&Answers

Question Number: 175BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following is a characteristic of a bottleneck?

A)Available capacity exceeds required capacity

B)Required capacity exceeds available capacity

C)Demonstrated capacity exceeds required capacity

D)Available capacity exceeds throughput

The correct answer is: B

A bottleneck work center is defined as one where the required capacity is greater than theavailable capacity. When this occurs, work in process inventory grows. Therefore, workmust be scheduled at a pace equal to the bottleneck work center.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 185: CPIM.bscm Questions&Answers

Question Number: 176BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following would be true in regards to bottleneck work centers?

A)Capacity is greater than the preceding work center

B)Throughput is controlled by the bottleneck

C)Demand is less than the capacity

D)Bottlenecks eventually go away

The correct answer is: B

Bottlenecks are work centers where demand exceeds capacity. When this occurs, thethroughput, or total volume of production, will be limited by the amount which can passthrough the bottleneck work center. The bottleneck will only disappear when action istaken to increase the capacity at the work center.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 186: CPIM.bscm Questions&Answers

Question Number: 177BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The primary reason to use operation splitting is to:

A)utilize machinery more effectively.

B)increase manpower efficiency.

C)reduce the maintenance costs.

D)reduce lead time.

The correct answer is: D

Operation splitting can be defined as splitting the lot size over multiple machines. Thiswill reduce the lead time. For example, if a lot size is split over two machines, the lot sizeis essentially cut in half.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 187: CPIM.bscm Questions&Answers

Question Number: 178BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The primary reason to use operation overlapping is to reduce the:

A)overall manufacturing lead time.

B)cost of purchased components.

C)machine maintenance.

D)labor contribution.

The correct answer is: A

In operation overlapping, the next operation begins work before the lot is completed atthe prior operation. This reduces the overall manufacturing lead time because the secondoperation is producing parts and not waiting for the lot to be finished. The leadtime isreduced by the amount of the overlapped operation time.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 188: CPIM.bscm Questions&Answers

Question Number: 179BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A part made on a work center has a setup time of 50 minutes and run time of two minutesper piece. An order for 600 parts needs to be processed on two machines at the sametime. The machines can be set up at the same time. The elapsed operation time will be:

A)600

B)650

C)1200

D)1250

The correct answer is: B

Elapsed operation time = Setup time + run time per piece divided by the number ofpieces per machine.Therefore: Elapsed operation time = 50 + [2(600/2)] = 650

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Page 189: CPIM.bscm Questions&Answers

Question Number: 180BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A manufacturer makes tables consisting of a top, 4 legs, and 4 top trims. Demand for thetables is 600 per week. The capacity for the tops is 700 per week, the capacity for legs is2,000 per week, and the capacity for the trim is 2,500 per week. What is the capacity toproduce tables?

A)400

B)500

C)600

D)1000

The correct answer is: B

The capacity for the legs is 2,000 legs per week. Since each table takes 4 legs, onlyenough legs for 500 tables can be produced. The bottleneck operation determines thethroughput.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 190: CPIM.bscm Questions&Answers

Question Number: 181BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Work center load can be best defined as:

A)the schedule of jobs released to a work center.

B)a chart to line balance production.

C)production at a constant quantity.

D)the amount of work released to a work center.

The correct answer is: D

The load on a work center is defined as "the amount of planned work scheduled for andactual work released to a facility, work center, or operation for a specific span of time. "

(APICS Dictionary, Tenth Edition).

Copyright 2003, Datachem Software, Westboro, MA

Page 191: CPIM.bscm Questions&Answers

Question Number: 182BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A manufactured component is going to be late. Which of the following would a plannerreview to ensure a customer will not be affected?

A)Indented bill of materials

B)Pegging inquiry screen

C)Open purchase order report

D)Work order routing

The correct answer is: B

A pegging report or screen would show the source of demand for a part at each level inthe bill of materials. By moving up each level of the bill of materials, the ultimate sourceof demand can be identified.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Page 192: CPIM.bscm Questions&Answers

Question Number: 183BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

If a work center is using a pull signal, they are using what manufacturing system?

A)Just-in-Time

B)Control chart method

C)GANT control

D)ERP system

The correct answer is: A

In a Just-in-Time system of manufacturing, a work center will provide the previous workcenter with a signal to "pull" more materials. This method allows the manufacturingsystem to produce more closely to demand, reducing dramatically the inventory levelsneeded.

(Arnold, Introduction to Materials Management, Chapter 14).

Copyright 2003, Datachem Software, Westboro, MA

Page 193: CPIM.bscm Questions&Answers

Question Number: 184BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Input/output control is used to manage:

A)supplier lead times.

B)queues and lead times.

C)capacity planning.

D)system runtimes.

The correct answer is: B

Input/output control manages the queues by regulating the flow of work into the workcenters. By regulating the inflow of work to equal the outflow of work, the work willflow smoothly to meet the lead times needed. Generally, the input/output control ismeasured in hours.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Page 194: CPIM.bscm Questions&Answers

Question Number: 185BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following shows the demand for capacity at a work center for a specificperiod of time?

A)Bill of resources

B)Dispatch list

C)Net requirements

D)Work center load

The correct answer is: D

Work center load report or display shows the demand for capacity at a work center for aspecified period of time.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 195: CPIM.bscm Questions&Answers

Question Number: 186BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

If the critical ratio is less than 1, an order is:

A)ahead of schedule.

B)on schedule.

C)behind schedule.

D)already late.

The correct answer is: C

The critical ratio measures the amount of time remaining to the amount of workremaining. It is calculated by:

Due date - Present date

Actual time left

-------------------------- =--------------------------

Lead time remaining

Lead time left

Page 196: CPIM.bscm Questions&Answers

If the ratio is less than one, it means that the actual time left is less than the lead time left.This causes the order to be behind schedule. A ratio of 1 means the time remaining equalsthe remaining lead time.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 187BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The function of selecting and sequencing available jobs to be run at each work center iscalled:

A)sequencing.

B)prioritizing.

C)dispatching.

D)cycling.

The correct answer is: C

Page 197: CPIM.bscm Questions&Answers

Dispatching is the process of selecting and sequencing the available jobs to be run atindividual work centers. It is a very important function in that jobs need to be prioritizedin order to meet customer due dates.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 188BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

When the MRP requirements change frequently and by small amounts, this is referred toas:

A)replanning.

B)nervousness.

C)explosion.

D)netting.

The correct answer is: B

Page 198: CPIM.bscm Questions&Answers

System nervousness occurs when the requirements change rapidly and by small amounts.This causes the system to create messages to reschedule orders. Following these orderswould cause chaos on the manufacturing floor and at the suppliers. The most effective ways to reduce system nervousness are to:1) use filters to reduce the messages or,2) use firm orders which cause the system to minimize the replanning.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 189BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Orders which are automatically replanned by the computer are called:

A)firm orders.

B)scheduled receipts.

C)net requirements.

D)planned orders.

The correct answer is: D

Page 199: CPIM.bscm Questions&Answers

Planned orders are replanned by the computer automatically based on the activities whichare occurring. Firm orders are not replanned automatically nor are scheduled receipts.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 190BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Often, when placing an order, a customer will ask when the order will ship. The ability toanswer this question rests with check of the uncommitted material and available capacity.Which of the following tools will most often be used to answer the question "when willmy order ship?"

A)Pegging report to understand where demand is coming from

B)Available to promise portion of the MPS

C)The resource requirements at the key work centers

D)The ability of the supplier to provide materials within lead time

Page 200: CPIM.bscm Questions&Answers

The correct answer is: B

The available-to-promise portion of the Master Production Schedule is the uncommittedinventory and planned production which is available to the customer.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 191BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The ABC Manufacturing company has cross functional teams that include manufacturingand design engineers, and representatives from marketing, finance, manufacturing,materials and suppliers. In this cooperative environment, the teams are rewardedaccording to their ability to bring market driven product designs to customers quickly andat a price that is possible only because they avoid unnecessary costs. This approach tonew product design is known as:

A)design for manufacturability.

B)quality function deployment.

C)voice of the customer.

D)engineering change management.

Page 201: CPIM.bscm Questions&Answers

The correct answer is: A

Design for manufacturability employs cross functional teams to move market drivenproducts to customers quickly and at a lower cost. They are able to do this by being ableto make the appropriate decisions within the team structure making the design processmove quickly.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 192BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A plant manager is walking around the factory floor. She identifies a work center as abottleneck operation. She can tell it is a bottleneck by:

A)the confusion of the operator.

B)the large queue of products waiting to be run.

C)the idle time on the machine.

D)the hour glass shape of the line.

Page 202: CPIM.bscm Questions&Answers

The correct answer is: B

Bottleneck operations are caused by capacity being less than the demand being placed onit. If not scheduled properly, parts to be run will be backed up at the work center waitingto be run. The bottleneck will be the pacing operation and should be scheduledappropriately.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 193BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following would best describe the term standard time?

A)Time which operators put in each day

B)The cost of the labor to produce the part

C)Time it takes a qualified operator to make a part

D)The number of hours per day working at the rated efficiency

The correct answer is: C

Page 203: CPIM.bscm Questions&Answers

Standard time is the time it takes for a qualified operator working at a normal pace tocomplete a job.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 194BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following would best describe the purpose of a shop calendar?

A)Lets all the workers know when the holidays occur

B)Provides time clarity to the shop workers

C)Identifies the available capacity on the shop floor

D)Provides the manufacturing system with the valid shop days for planning

The correct answer is: D

Page 204: CPIM.bscm Questions&Answers

A shop calendar provides the system with the valid days in which the shop will beoperating. Without it the lead times in the system would not be valid as non-workcalendar days (like holidays) would be used.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 195BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following equals manufacturing lead time?

A)Queue, setup, run, wait, and move times

B)Setup, run, wait, and move times

C)Queue, run, wait, and move times

D)Queue, setup, run and move times

The correct answer is: A

Manufacturing lead time is the sum of the queue, setup, run, wait and move times. Thegreatest part of the leadtime is usually queue, setup, wait, and move times (the non-valueadded times).

Page 205: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 196BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

If a company is using backward scheduling to schedule manufacturing, which of thefollowing is used as the first date to determine the schedule?

A)Due date

B)Start date

C)Latest start date

D)Earliest start date

The correct answer is: A

When using backward scheduling, the system uses the due date of the order as the firstdate to begin scheduling. It then schedules backward to determine the start and end dateat each work center, completing the schedule at the start date for the order.

Page 206: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 197BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following describes the strategic advantage of capacity planning?

A)It improves the flow of materials through the factory.

B)It provides more realistic due dates to customers.

C)It improves the scheduling of materials from suppliers.

D)It improves scheduling performance and reduces cost.

The correct answer is: D

Capacity planning provides many benefits to companies. Strategically it improvesscheduling performance and, as a result, reduces cost. The improvement in schedulingalso allows materials to flow through the facility smoothly, provides better schedules forsuppliers to follow, and it does allow more realistic due dates for customers.

Without capacity planning, orders would be generated without regard to capability toproduce causing higher costs, late deliveries and overloaded work centers.

Page 207: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 198BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

In the context of capacity, which of the following best describes the term unit of output?

A)A unit of measure common to all products

B)An individual part number or SKU

C)A bale of scrap generated by the factory

D)An individual's output efficiency

The correct answer is: A

When the variety of products produced at a work center or plant is small, then capacitycan be measured by a unit of output. It is a common unit by which capacity can bemeasured. For example, oil refineries measure barrels, paper mills measure tons of paper,automobile manufacturers measure cars.

Page 208: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 199BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

When no common unit of measure can be found for measuring capacity, which of thefollowing would be used?

A)Each SKU

B)Efficiency

C)Time

D)Utilization

The correct answer is: C

All products have a common unit to measure when it is time. Standard time to make aproduct would be used while hours of available capacity would measure the work center'savailable capacity.

Page 209: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 200BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following best describes the term load?

A)Total hours in which product can be manufactured

B)Sum of all the required capacities

C)Sum of capacity multiplied by the efficiency and utilization

D)Total hours a workcenter can be used

The correct answer is: B

The load on the plant is equal to the amount of planned orders and actual orders releasedto the plant . In other words, it is the sum of all the required capacities. The load on theplant is critical to the success of meeting the schedule. If the plant is overloaded, thendelays will occur. If the plant is underloaded, then downtime will occur.

Page 210: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 201BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

For a sales and operations planning process, which of the following would most likely bethe level of detail used?

A)Each stockkeeping unit

B)Each model within a product family

C)Major product groups

D)Total resource hours

The correct answer is: C

Sales and Operations planning ensures that production can meet market demand. This isdone at a high level and will generally include major product groups. Based on thedemand data, production management will match the demand by product group with aresource profile for that group to determine if the demand can be met.

(Arnold, Introduction to Materials Management, Chapter 2).

Page 211: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 202BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Development of a strategic business plan is the responsibility of which of the followinggroups?

A)Senior management

B)Sales and marketing

C)Design and engineering

D)Finance

The correct answer is: A

Strategic business planning is the responsibility of senior management. They need toensure that the plan they devise is one that is sound and achievable. It would include:

Marketing Plan

Financial Plan

Engineering Plan

Page 212: CPIM.bscm Questions&Answers

Production Plan

All the plans need to mesh in order to establish a cohesive strategic plan.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 203BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

As a planning process, which of the following would have the highest level of detail?

A)Production planning

B)Master production scheduling

C)Material requirements planning

D)Production activity control

The correct answer is: D

Page 213: CPIM.bscm Questions&Answers

Production activity control is responsible for planning and controlling the flow of workthrough the factory. The time horizon is very short; as little as an hour but usually a dayto a month into the future.

(Arnold, Introduction to Materials Management, Chapter 2).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 204BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The "frozen" zone within the time fence is usually:

A)before the final assembly schedule.

B)closest to the due date.

C)furthest from the due date.

D)in the middle of the zones.

The correct answer is: B

Page 214: CPIM.bscm Questions&Answers

The frozen zone of the time fence is the zone in which changes need high level approvaldue to the extra costs associated with the change. At this point in the time fence,resources of manpower, machinery and materials have been committed to meet existingdue dates. Most often, senior managers need to approve the change.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 205BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The link between production planning and what manufacturing actually builds is calledthe:

A)business plan.

B)production plan.

C)final assembly schedule.

D)master production schedule.

The correct answer is: D

Page 215: CPIM.bscm Questions&Answers

The master production schedule forms the link between the production plan and whatmanufacturing builds. It is the plan for the production of individual units. It translates theproduction plan with its monthly family units into weekly individual units.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 206BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

All of the following are basic responsibilities except:

A)Release orders to purchasing or manufacturing

B)Negotiate supplier contracts

C)Reschedule due dates of open orders as required

D)Solve critical material shortages

The correct answer is: B

Page 216: CPIM.bscm Questions&Answers

Negotiating supplier contracts would be the buyer's responsibility.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 207BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following best describes a planning bill?

A)Artificial groupings of components for planning purposes

B)A resource profile for a product family

C)A bill structure where there is no lead time and the gross to net explosion occurs throughthe component to the next level

D)A bill used to plan for kits

The correct answer is: A

Planning bills are artificial groupings of components to facilitate the planning process.They are used to simplify forecasting, master production scheduling, and materialsrequirements planning. They are not buildable products but represent an average product.

Page 217: CPIM.bscm Questions&Answers

(Arnold, Introduction to Materials Management, Chapter 4)

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 208BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The MRP system has given you, the planner, the message, " Expedite Order 45367"which happens to be for a purchased part. You should:

A)immediately change the order to the recommended date.

B)move the order to a later date.

C)contact the supplier to see if they can meet the new delivery date.

D)leave the order as is.

The correct answer is: C

Because the order is for a purchased part, the ability to change the order as recommendedwould be dependent on the supplier's ability to complete the order sooner.

Page 218: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 209BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Action to correct for changed conditions should occur as low in the product structure aspossible. This is called:

A)low level coding.

B)bottom-up replanning.

C)priority replanning.

D)pegging upward.

The correct answer is: B

Adjusting for changing conditions should occur as low in the product structure aspossible. If a low level part requires expediting, then every effort should be made to getthe part earlier. This allows the change to occur with as little disruption to the schedule aspossible. If the low level part cannot be expedited, then the parent item and upper levelparts may need to be adjusted. This will complicate the change as many more parts willneed to be moved in the schedule.

Page 219: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 210BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A Final Assembly Schedule only takes place when:

A)MPS is run in final mode.

B)a picklist is generated.

C)a customer order is received.

D)a planned order is firmed.

The correct answer is: C

A Final Assembly Schedule is a schedule of what will be assembled. It is used whenthere are many options and it is difficult to forecast what the customers will want. Thefinal assembly schedule is developed with actual customer orders.

Page 220: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 211BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The quantity calculated as available-to-promise really is meant to answer the question:

A)When can you ship the product?

B)What available capacity is left?

C)What is the projected available inventory?

D)How much is on hand to ship?

The correct answer is: A

Available-to-promise allows the customer service personnel to promise orders to beshipped by a certain date. The available-to-promise quantity represents the uncommittedinventory and available capacity.

(Arnold, Introduction to Materials Management, Chapter 3).

Page 221: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 212BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The process of communicating start and completion dates to manufacturing departmentsis called:

A)priority control.

B)capacity control.

C)resource control.

D)input/output control.

The correct answer is: A

Priority control is the communication of start and completion dates to manufacturingdepartments in order to execute a plan (APICS Dictionary). The primary method ofcommunication is the dispatch list. It ensures that departments are working on jobs basedon the due dates for completion.

Page 222: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 213BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The primary method of communicating start and completion dates to the manufacturingdepartments is the:

A)stock status report.

B)input/output report.

C)dispatch list.

D)resource planning report.

The correct answer is: C

The dispatch list is the method by which priority control is communicated to themanufacturing departments. The dispatch list ensures the manufacturing departments areworking on the right jobs to meet the necessary due dates.

Page 223: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 214BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following would best describe the technique known as input/output control?

A)Technique for planning capacity

B)Technique for input material information to MRP

C)Technique for measuring resources

D)Technique for capacity control

The correct answer is: D

Input/output control is a technique for capacity control where the planned and actualinputs to a work center and the planned and actual outputs from a work center aremonitored (APICS Dictionary). This technique can help identify work centers which arenot achieving the plan for input or output. This provides manufacturing management withan opportunity to implement corrective action.

Copyright 2003, Datachem Software, Westboro, MA

Page 224: CPIM.bscm Questions&Answers

Question Number: 215BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

In a forward scheduling process, the scheduler is trying to determine the:

A)preflush dates.

B)start date.

C)completion date.

D)backflush points.

The correct answer is: C

In a forward scheduling technique, the scheduler knows the start date based on the orderand must schedule forward through the work centers to determine the completion date forthe order..

Copyright 2003, Datachem Software, Westboro, MA

Page 225: CPIM.bscm Questions&Answers

Question Number: 216BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

The function of maintaining a process within a given range of capability is called:

A)process quality management.

B)total process assurance.

C)process control.

D)customer satisfaction.

The correct answer is: C

Process control is the function of maintaining a process within a specified range ofcapability. This is usually achieved with a feedback and correction process. Oftenprocesses are monitored by control charts and the operator can make adjustments in theprocess to maintain the process capability.

Copyright 2003, Datachem Software, Westboro, MA

Page 226: CPIM.bscm Questions&Answers

Question Number: 217BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A work center can be described as a bottleneck work center. Based on this fact which ofthe following is true regarding this work center?

A)More work released to the work center will increase the flow.

B)It controls the throughput of products processed by them.

C)The capacity of the bottleneck is greater than the demand.

D)A bar code process can alleviate the bottleneck.

The correct answer is: B

Bottleneck work centers are, by definition, a work center whose capacity is equal to orless than the demand placed on it. Bottleneck workcenters control the throughput of allproducts processed by them. They become the pacing resource which means that thebottleneck workcenter should be the workcenter for scheduling the flow of products.

Copyright 2003, Datachem Software, Westboro, MA

Page 227: CPIM.bscm Questions&Answers

Question Number: 218BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Suppose a manufacturer makes tables consisting of a top, four legs and two cross bars tosupport the table. Demand for the table is 600 per week. The table top fabricatingcapacity is 650 per week, the leg department can fabricate 2000 legs per week and thecross bar assembly department has a capacity of 1400 crossbars per week. What is thecapacity of the factory?

A)500 tables

B)550 tables

C)600 tables

D)650 tables

The correct answer is: A

The leg fabrication department can produce 2000 legs per week which equals theequivalent of 500 tables (4 legs per table or 2000 legs). Therefore, the factory can onlyproduce as much as the bottleneck department or 500 tables.

Copyright 2003, Datachem Software, Westboro, MA

Page 228: CPIM.bscm Questions&Answers

Question Number: 219BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Utilization of a non-bottleneck resource is determined by:

A)multiplying the utilization times the efficiency.

B)the required capacity.

C)another constraint in the system.

D)the load at the workcenter.

The correct answer is: C

Utilization of a non-bottleneck resource is affected by the constrained resource.Therefore, the utilization measure for the non-bottleneck resource is not a meaningfulmeasure. It is, however, critical that the bottleneck resource have high utilization. It isrecommended that a stock buffer be used before the bottleneck resource to ensure that thebottleneck is never starved for materials since it directly impacts the rest of the factory.

Copyright 2003, Datachem Software, Westboro, MA

Page 229: CPIM.bscm Questions&Answers

Question Number: 220BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

To increase the throughput of a factory, the industrial engineers have maderecommendations which will increase the capacity of a non-bottleneck resource by 40%.What impact will this change have in the throughput of the factory?

A)Increase the factory output by 40%

B)Depends on the number of work centers

C)Depends on the number of employees

D)No impact

The correct answer is: D

Increasing the capacity of a non-bottleneck workcenter will have no impact on thecapacity of the factory (other than wasting everyone's time with the changes). Unless thecapacity of the bottleneck is increased, no gain in factory capacity can be achieved asthroughput is controlled by the bottleneck resource.

Copyright 2003, Datachem Software, Westboro, MA

Page 230: CPIM.bscm Questions&Answers

Question Number: 221BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following rules should be used when managing bottlenecks?

A)Increase the throughput of the operation preceding the bottleneck.

B)Feed the bottleneck at a rate equal to its capacity.

C)Reduce the rate at the operation preceding the bottleneck.

D)Increase the throughput of the operation after the bottleneck.

The correct answer is: B

A bottleneck controls the throughput of the products processed at the bottleneck. A timebuffer is needed before the bottleneck to measure the bottleneck resource is never starvedfor materials. To maintain the buffer before the bottleneck resource, the bottleneck shouldbe loaded at a rate equal to its capacity to maintain a constant buffer.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Page 231: CPIM.bscm Questions&Answers

Question Number: 222BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A company uses a critical ratio to determine the priority of jobs remaining in the factory.Currently job A-2578 at Work Center 110 is showing a critical ratio of .8. The job is:

A)ahead of schedule.

B)on schedule.

C)behind schedule.

D)already late.

The correct answer is: C

The critical ratio is an index of the relative priority of an order to the other orders at awork center. It is based on the ratio of time remaining to the work remaining. It is usuallyexpressed as:

CR= due date - present date / lead time remaining

A critical ratio equal to 1 indicates the order is on schedule. A critical ratio less than 1indicates the order is behind schedule while over 1 indicates the order is ahead ofschedule. If the critical ratio is zero or less, than the order is already late.

(Arnold, Introduction to Materials Management, Chapter 6.)

Page 232: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 223BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Production activity control is responsible for:

A)executing the production plan and master production schedule.

B)executing the master production schedule and the material requirements plan.

C)executing the forecast and master production schedule.

D)executing the material requirements plan and the purchasing plan.

The correct answer is: B

Production activity control is responsible for executing the master production scheduleand the material requirements plan. It must also make efficient use of labor and machineresources while minimizing work-in-process inventory. It must also ensure customers arereceiving orders as quoted.

(Arnold, Introduction to Materials Management, Chapter 6)

Page 233: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 224BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A customer has called and requested an order be delivered in one month. Based on thisdelivery date, production control has determined the order must start in one week. Themethod of scheduling they used to determine this is:

A)finite scheduling.

B)infinite scheduling.

C)backward scheduling.

D)forward scheduling.

The correct answer is: C

The scheduling technique used was backward scheduling. The production controldepartment started at the due date and calculated backwards through the workcenters todetermine when the order could be started. Forward scheduling starts with the order dateand determines when the order can be completed, or its ending date. Both finite andinfinite capacity are loading techniques for use in scheduling, however, they are notscheduling techniques.

Page 234: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 225BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A company uses operation overlapping. This is done to:

A)reduce total manufacturing lead time.

B)keep setup times low.

C)increase use of an experienced work force.

D)reduce the amount of tooling needed.

The correct answer is: A

Operation overlapping allows the next operation to start before the entire lot is completedon the previous operation. This is done to reduce the total manufacturing lead time. Therecan be some costs to doing this, such as increased move costs by moving smaller lotsmore frequently.

Page 235: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 226BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

A company will use operation splitting in order to:

A)utilize a skilled workforce.

B)utilize machines.

C)reduce manufacturing leadtime.

D)reduce setup times.

The correct answer is: C

Operation splitting splits the order into two or more lots so the order can be run on two ormore machines. This effectively cuts the lead time by at least half. Operation splitting iseffective when setup time is low compared to operation time; a practical work center isidle; and an operator can run more than one machine at a time.

Copyright 2003, Datachem Software, Westboro, MA

Page 236: CPIM.bscm Questions&Answers

Question Number: 227BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Why is feedback necessary in a control system?

A)Available capacity is accurate.

B)Bills of materials will be current.

C)Routing files will be accurate.

D)Feedback allows planning to always remain current.

The correct answer is: D

Feedback is the flow of information back into the control system so actual performancecan be compared with planned performance (APICS Dictionary). This allows adjustmentsto occur in the planning system so they are up-to-date with the actual occurrence.

Copyright 2003, Datachem Software, Westboro, MA

Page 237: CPIM.bscm Questions&Answers

Question Number: 228BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

When does a first-article inspection occur?

A)After the setup is complete

B)When the order is released

C)After the machine is maintained

D)After training has occurred

The correct answer is: A

A first-article inspection occurs on the first part produced after a setup has beencompleted (APICS Dictionary). This is done to ensure that the setup will produce qualityparts.

Copyright 2003, Datachem Software, Westboro, MA

Page 238: CPIM.bscm Questions&Answers

Question Number: 229BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Which of the following best defines the term quality?

A)Passing 98% of the testing

B)Conformance to requirements

C)Best in the industry

D)Completing ISO documentation

The correct answer is: B

Quality can be defined as conforming to the requirements. Ideally, the customer isdefining the requirements to be met. Different customers may have different requirementsfor the parts they purchase, so quality levels can be different for different customers.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 230

Page 239: CPIM.bscm Questions&Answers

BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

If a supplier is responsible to provide 100% acceptable quality material to the customer,they are defined as providing:

A)outgoing inspections.

B)vendor managed inventory.

C)quality at the source.

D)ISO certified parts.

The correct answer is: C

Quality at the source dictates that the supplier provide 100% acceptable quality materialsto the customer. This eliminates the need for incoming inspection, returns, etc. While thesupplier may use outgoing inspections as a way to ensure the quality, it is hoped that thesupplier will build quality into the product and throughout their supply chain.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 231BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Page 240: CPIM.bscm Questions&Answers

Which of the following activities is not part of physical supply/distribution?

A)Transportation

B)Warehousing

C)Order entry

D)Capacity planning

The correct answer is: D

Physical supply/distribution is concerned with the fulfillment of a customer's order. Thiswould include transportation, order entry, and warehousing. Capacity planning, however,is considered part of the manufacturing process.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 232BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Page 241: CPIM.bscm Questions&Answers

All of the following are part of physical supply/distribution except:

A)Supplier inventory

B)Material handling

C)Order entry

D)Finished goods inventory

The correct answer is: A

Physical supply/distribution is involved with the movement of goods from the supplier tothe beginning of production, and from the end of production to the final customers.

(Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 233BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Available to promise can be best defined as:

Page 242: CPIM.bscm Questions&Answers

A)inventory and planned production not already committed.

B)customer orders inside lead time which have been promised.

C)inventory not already committed.

D)capacity which is not used and therefore is available.

The correct answer is: A

Available-to-promise is the part of inventory and planned production which is availableto be promised to customers for delivery. It is calculated by adding scheduled receipts tothe beginning inventory and subtracting actual orders scheduled before the nextscheduled receipt.

(Arnold, Introduction to Materials Management, Chapter 3).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 234BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

All of the following conditions will trigger an exception message except:

Page 243: CPIM.bscm Questions&Answers

A)Changes in timing of a scheduled receipt

B)Changes in the inventory on hand balance due to cycle count adjustment

C)Changes in the forecast

D)Changes in the assigned planner

The correct answer is: D

All of the conditions will trigger an exception message except for changing the plannerassignment (number). This will cause the reports to print differently. Any records whichcause a change in the gross requirements, inventory, or scheduled receipts, will trigger anexception message.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 235BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Of the following choices, which would be the preferred method to minimize systemnervousness?

Page 244: CPIM.bscm Questions&Answers

A)Increase the order quantities

B)Increase the lead time

C)Use firm planned orders

D)Ignore the exception messages

The correct answer is: C

Firm planned orders will reduce system nervousness, especially inside the manufacturinglead time. The planner could ignore the exception messages, however, this could becomea dangerous practice.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 236BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Available capacity can be best described as the:

Page 245: CPIM.bscm Questions&Answers

A)ability of a resource to produce a quantity of output for a particular period.

B)amount of resource needed to produce the necessary output for a specified time period.

C)amount of released work to a facility during a specified time period.

D)amount of load on a work center to produce the output necessary.

The correct answer is: A

Available capacity measures the ability of a resource (e.g., machine, plant, etc.) toproduce output (e.g., parts) for a specified time frame (e.g., hour, day, week, month, etc.).Answer B defines the required capacity, while Answer C defines the load.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 237BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Capacity requirements planning (CRP) is concerned with which of the following?

Page 246: CPIM.bscm Questions&Answers

I.Labor hours for a product family

II.Individual orders and individual work centers

III.Calculating work center loads

IV.Validating the capacity for the master production schedule

A)I and II

B)I and III

C)II and III

D)III and IV

The correct answer is: C

Capacity requirements planning is concerned with very detailed scheduling for individualorders at each work center to calculate work center loads. Resource planning is concernedwith checking the resources available for product families while rough cut capacityplanning validates the MPS prior to running the schedule.

(Arnold, Introduction to Materials Management, Chapter 5).

Page 247: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 238BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following best describes a routing?

A)The path materials follow from beginning to end.

B)The path work follows from work center to work center as it is completed.

C)The path information transactions follow to be completed.

D)The critical ratio calculated determines whether jobs are on schedule.

The correct answer is: B

A routing shows the steps of manufacture including:

Operations to be completed

Sequence of operations

Work centers

Alternate work centers

Tooling necessary

Page 248: CPIM.bscm Questions&Answers

Standard setup and run times

Other activities such as receiving or inventory activities would not typically be on therouting.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 239BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following will affect available capacity?

I.Product specifications

II.Product mix

III.Quantity of customer order

IV.Work pace

Page 249: CPIM.bscm Questions&Answers

A)I, II, and III

B)I, II, and IV

C)II, III, and IV

D)I, III, and IV

The correct answer is: B

Available capacity is affected by many factors including:

Product specification changes will cause work content changes

Product mix - a change in product mix to more complicated products will affect availablecapacity

Work pace - if the speed of the work changes, so will available capacity

Methods - if the equipment or method of each changes, then so will available capacity.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 250: CPIM.bscm Questions&Answers

Question Number: 240BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Sometimes a common unit of measure is not available for use in measuring output. Inthese cases, what measure would be used?

A)Machine speed

B)Number of assemblies

C)Standard time

D)Acceptable quality parts

The correct answer is: C

Standard time, measured as labor hours, can be used as the common measure of outputand work content. It can be used for loading and scheduling.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 251: CPIM.bscm Questions&Answers

Question Number: 241BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Available capacity can be determined in two ways: measurement and calculation.Measured capacity is determined by which of the following methods?

A)Historical data

B)Available time

C)Machine utilization

D)Machine efficiency

The correct answer is: A

Measured capacity is based on historical data, that is, what the machine or operator hasproduced in the past.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 252: CPIM.bscm Questions&Answers

Question Number: 242BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A work center has 4 machines operating 6 days for 8 hours per day. What is the availabletime?

A)24 hours

B)32 hours

C)48 hours

D)192 hours

The correct answer is: D

Available time is the total number of hours a work center can be used. Therefore, 8 * 6 *4 = 192 hours.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 253: CPIM.bscm Questions&Answers

Question Number: 243BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A work center has 4 machines available 8 hours per day for 5 days per week. During theweek, they produce for 128 hours. The utilization is:

A)70%

B)75%

C)80%

D)85%

The correct answer is: C

Utilization = hours actually worked/available hours. In this example, there are 4 machines* 5 days * 8 hours = 160 available hours. Therefore, 128 hours of actual work divided by160 available hours = 80% utilization.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 254: CPIM.bscm Questions&Answers

Question Number: 244BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A work center has 4 machines available for 8 hours per day, 5 days per week. The workcenter is utilized 100 hours but produces 120 hours of standard work. The efficiency ofthe work center is:

A)50%

B)62.5%

C)75%

D)120%

The correct answer is: D

Efficiency = standard hours of work produced/hours actually worked * 100%.For this example, 120 standard hours of work was produced, divided by 100 hours ofactual work = 1.2 * 100% = 120%.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 255: CPIM.bscm Questions&Answers

Question Number: 245BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A work center has an order to process 500 units of part 1468. It takes .5 hours to setupand 3 minutes for each piece to be run. What is the required time to run the order?

A)25 hours

B)25.5 hours

C)30 hours

D)35 hours

The correct answer is: B

Required time equals setup time plus run time.For this example, the setup time equals 30 minutes (.5 hours) plus (500 pieces * 3min./piece).Required time = 30 min. + 1500 min. = 1530 min. = 25.5 hours.

(Arnold, Introduction to Materials Management, Chapter 5).

Copyright 2003, Datachem Software, Westboro, MA

Page 256: CPIM.bscm Questions&Answers

Question Number: 246BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

All of the following are part of manufacturing lead time except:

A)Queue time

B)Wait time

C)Move time

D)Purchasing time

The correct answer is: D

Purchasing time is part of the overall lead time of a product; however, manufacturinglead time includes queue time, setup time, run time, wait time, and move time.

(Arnold, Introduction to Materials Management, Chapter 6).

Copyright 2003, Datachem Software, Westboro, MA

Page 257: CPIM.bscm Questions&Answers

Question Number: 247BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

All of the following are objectives of purchasing except:

A)Buy goods and services in the right quantity and quality.

B)Buy goods and services at the lowest cost possible.

C)Maintain good supplier relations.

D)Schedule the suppliers plant so goods arrive on time.

The correct answer is: D

Purchasing objectives are the three answers in A, B, and C. In addition, purchasing mustmake sure the company receives the best possible service and prompt delivery by thesupplier.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Page 258: CPIM.bscm Questions&Answers

Question Number: 248BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following are factors in selecting suppliers?

I.Technical capability

II.Financial reliability

III.Location

IV.Service after the sale

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: D

All of the factors listed should be considered when trying to select a supplier. Otherfactors include price, credit terms, and quality capabilities.

(Arnold, Introduction to Materials Management, Chapter 7).

Page 259: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 249BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The ability to negotiate price is dependent on the type of product. Which of the followingproducts could generally be negotiated?

A)Maintenance, repair, and operating supplies

B)Copper, coal, wheat, metal

C)Standard electronic components

D)Made to order motors

The correct answer is: D

Generally, made to order items which are made to specification and could be obtainedfrom many sources can be negotiated.

(Arnold, Introduction to Materials Management, Chapter 7).

Page 260: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 250BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following best describes the advantage of a planner/buyer position?

I.Smooth flow of information between supplier and the factory

II.Improved coordination of factory requirements and the supplier

III.Improved flow of materials through the factory

IV.Ability to match material requirements with suppliers capability

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)

Page 261: CPIM.bscm Questions&Answers

I, II, and IV

The correct answer is: D

The planner/buyer concept improves coordination between the factory and supplier. Byeliminating the extra handoff between planner and buyer, communication will improve.While materials will flow more smoothly into the facility, the flow through the factory isdependent on many other factors.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 251BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In most companies, material purchases represent what percentage of the cost of theproduct?

A)30%

B)50%

C)70%

Page 262: CPIM.bscm Questions&Answers

D)90%

The correct answer is: B

In most companies today, material costs represent 50% or higher of the cost of theproduct.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 252BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following best describes MRO inventory?

A)Raw materials used in production

B)Office supplies used in administrative functions

C)Inventory in the distribution network

D)Items used in production but are not part of the product

Page 263: CPIM.bscm Questions&Answers

The correct answer is: D

MRO's are items used in production but are not part of the product. These items wouldinclude hand tools, spare parts, grease, and supplies.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 253BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

All of the following would be reasons for anticipation inventory except:

A)Inventory built ahead of the peak season

B)A potential strike

C)Vacation shutdown

D)Price breaks

Page 264: CPIM.bscm Questions&Answers

The correct answer is: D

Inventory accumulated due to price breaks would be considered lot size inventory.Anticipation inventory is accumulated in "anticipation" of an event (future demand).

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 254BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Companies purchase hedge inventory because:

A)they receive quantity discounts.

B)supply and demand fluctuates randomly.

C)prices fluctuate in worldwide markets.

D)transit lead times impact operations.

The correct answer is: C

Page 265: CPIM.bscm Questions&Answers

Hedge inventory is purchased by companies when prices are low in the market. Manycommodities such as minerals and grains are traded in open markets with widefluctuation. Inventory will be bought when prices are low to take advantage of thepricing.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 255BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following are included in the cost of ordering?

I.Receivers who take in material

II.Setup costs

III.Cost of material planners

IV.Cost of buyers

Page 266: CPIM.bscm Questions&Answers

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: D

The cost of ordering includes any cost associated with placing orders on the factory orsuppliers.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 256BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following conditions will cause the EOQ concept to be invalid?

I.Products that are made to order

Page 267: CPIM.bscm Questions&Answers

II.Short shelf life products

III.Length of production run is unlimited

IV.Raw materials which are on MRP

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: D

EOQ assumptions are usually valid for finished goods with independent and uniformdemand. However, the assumptions break down in many real-world cases. For example,products which have widely fluctuating demand would not be good candidates for EOQcalculations.

(Arnold, Introduction to Materials Management, Chapter 10).

Copyright 2003, Datachem Software, Westboro, MA

Page 268: CPIM.bscm Questions&Answers

Question Number: 257BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Based on the following information, what is the order point?

Lead time = 3 weeksDemand/week = 200Safety stock = 100

A)200

B)300

C)600

D)700

The correct answer is: D

Order point = demand during lead time + safety stockFor this problem:OP = (200 * 3) + 100OP = 600 + 100OP = 700

(Arnold, Introduction to Materials Management, Chapter 11).

Page 269: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 258BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Sometimes a periodic review system is the most effective method to manage inventory.For which of the following conditions would this method be used?

I.Raw materials required in production

II.Small issues from inventory and transactions are expensive

III.Order costs are small

IV.Many items are ordered together

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)

Page 270: CPIM.bscm Questions&Answers

I, II, and IV

The correct answer is: C

The periodic review system is useful in all cases where there are small issues frominventory, transactions are expensive, ordering costs are small, and many items can beordered together. For example, supermarkets order by reviewing what is on the shelf.Because there are so many transactions in a supermarket, they are expensive.Additionally, they sell one or two of an item during each cash register transaction.

(Arnold, Introduction to Materials Management, Chapter 11).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 259BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In operating a warehouse, the major operating cost is:

A)fork truck maintenance.

B)system costs.

C)labor.

Page 271: CPIM.bscm Questions&Answers

D)capital costs.

The correct answer is: C

Labor is the major operating cost for a warehouse. As such, productivity needs to beclosely measured and monitored.

(Arnold, Introduction to Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 260BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following are causes of inventory record inaccuracy?

I.Withdrawal of inventory without authorization

II.Transaction errors in recording inventory issues

III.Poor training of personnel

IV.Secured stockroom

Page 272: CPIM.bscm Questions&Answers

A)I, II, and III

B)II, III, and IV

C)I, III, and IV

D)I, II, III, and IV

The correct answer is: A

Inventory record inaccuracy is caused by many factors, one of which is unsecuredstockrooms.

(Arnold, Introduction of Materials Management, Chapter 12).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 261BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following are the basic responsibilities of a planner?

Page 273: CPIM.bscm Questions&Answers

I.Release orders to manufacturing and purchasing

II.Reschedule dates of existing orders as needed

III.Solve material shortages by replanning

IV.Oversee the cycle counting program

A)I, II, and III

B)I, III, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: A

The planner's responsibilities do not include overseeing the cycle counting programalthough inventory errors greatly impact the planner.

(Arnold, Introduction to Materials Management, Chapter 3).

Page 274: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 262BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following are required factors in selecting a supplier?

I.Technical capability

II.Manufacturing capability

III.Advanced systems capability

IV.Reliability

A)I, II, and III

B)I, II, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: B

Page 275: CPIM.bscm Questions&Answers

The required factors in selecting a supplier are technical ability, manufacturingcapability, reliability, service after the sale, supplier location, and price. While havingadvanced systems capability would be a plus, a supplier would not be eliminated fromconsideration if their systems were poor. Many good suppliers do not have advancedsystems.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 263BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Much of the literature written about purchasing refers to paying a "fair price". Which ofthe following would best describe the term "fair price"?

A)The price paid at a trade show

B)The lowest price in the market place

C)A competitive price in the market place at which the supplier and buyer can make a profit

D)A price at which the fixed costs are absorbed over the total units produced

The correct answer is: C

Page 276: CPIM.bscm Questions&Answers

A fair price is one which must be competitive in the market place but may not be thelowest. The supplier must be able to make a profit, especially in an ongoing businessrelationship. Getting the lowest price may put the supplier in a financially weak position.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 264BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A functional specification tells purchasing:

A)when to buy.

B)how much to buy.

C)where to buy.

D)what to buy.

The correct answer is: D

Page 277: CPIM.bscm Questions&Answers

A functional specification tells purchasing what to buy. Functional specifications areconcerned with the use of the product and what performance characteristics the productneeds to have. Functional specifications are the most difficult to define for a buyer.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 265BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Before a supplier's invoice can be paid, which of the following data must match?

I.Quantity must match the purchase order

II.Price must match the purchase order

III.Quantity must match the receipt

A)I and II

B)

Page 278: CPIM.bscm Questions&Answers

I and III

C)II and III

D)I, II, and III

The correct answer is: D

Before a supplier's invoice can be paid, there must be a three-way match (computersystems can do this automatically). The price on the purchase order must match the priceon the invoice. The quantity received must match the purchase order and the invoice mustmatch the quantity received. Therefore, the price and quantity on all three documents(transactions) must match in order to be paid.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 266BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

If an annual contract is in place with a supplier, the weekly amount to be ordered is donevia:

A)purchase order.

Page 279: CPIM.bscm Questions&Answers

B)release.

C)blanket order.

D)terms statement.

The correct answer is: B

If an annual contract is in place, the weekly amounts would be ordered with a supplierrelease. Often times this is done by the planner or supplier schedule, not a buyer. Thebuyer would typically be the one negotiating the contract.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 267BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Purchase requisitions are generally an output from:

A)master production schedule.

Page 280: CPIM.bscm Questions&Answers

B)capacity planning.

C)production activity control.

D)material requirements planning.

The correct answer is: D

Material requirements planning outputs planned orders for manufacturing and plannedrequisitions for the purchased components. The requisitions are subsequently turned intopurchase orders.

(Arnold, Introduction to Materials Management, Chapter 4).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 268BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

According to the EOQ formula, if the ordering costs for an item are greatly reduced, whatis the likely impact on the quantity ordered?

A)Order multiples will increase

Page 281: CPIM.bscm Questions&Answers

B)Order quantities will increase

C)Order multiples will decrease

D)Order quantities will decrease

The correct answer is: D

According to the EOQ formula, if ordering costs are reduced, then the quantity orderedwill decrease. The EOQ formula finds the lowest total cost by balancing ordering costswith the cost of carrying inventory. If the cost of ordering is reduced, then the quantityneeded to balance the order cost could also be reduced.

(Arnold, Introduction to Materials Management, Chapter 10).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 269BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Given the following annual costs, calculate the cost of creating one order.

Purchasing department salaries = $200,000Operating expenses = $50,000Number of people in department = 5Number of orders per year = 5000

Page 282: CPIM.bscm Questions&Answers

A)$25

B)$50

C)$75

D)$100

The correct answer is: B

The cost of placing an order is found by dividing the total costs to operate the departmentdivided by the number of orders placed. In this example, $200,000 + $50,000 divided by 5,000 orders = $50.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 270BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Page 283: CPIM.bscm Questions&Answers

Which of the following would be the best measure of supplier performance?

A)Part price

B)Method of delivery

C)Delivery time

D)Scrap rate

The correct answer is: C

Delivery time and being on time are two important measures of supplier performance.The need for fast delivery and on-time delivery allows manufacturers to respond to themarket faster. Additionally, on-time delivery and reliable service allows the manufacturerto keep less inventory to offset shortages. As long as the pricing is competitive, deliveryis an important measure.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 271BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Page 284: CPIM.bscm Questions&Answers

The primary benefit of point of use inventory is:

A)reduced material handling.

B)lower safety stock.

C)better cycle count results.

D)improved quality.

The correct answer is: A

Point-of-use inventory results in inventory being stored next to the location which usesthe inventory. This method eliminates the material handling related to moving theinventory from the dock to the central storage and then out to the production line.Generally, the inventory will arrive and move directly to the using location.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 272BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Page 285: CPIM.bscm Questions&Answers

A blanket order in purchasing can be best described as a(n):

A)order covering a variety of suppliers.

B)group of operations.

C)long term commitment to a supplier.

D)supplies order.

The correct answer is: C

A blanket purchase order is a long term commitment to a supplier to purchase a certainquantity of goods over a specified period of time. Short term releases are then madeagainst the blanket order.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 273BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Page 286: CPIM.bscm Questions&Answers

Why would a supplier want a long term customer relationship?

A)Reduced transportation costs

B)Improved ability to plan

C)Reduced packaging cost

D)Less material handling

The correct answer is: B

A long term supply agreement with a customer allows the supplier to properly plan rawmaterials, labor, capacity, and other resources.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 274BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

What is the primary consideration used in selecting a new supplier?

Page 287: CPIM.bscm Questions&Answers

A)Cleanliness of their facility

B)Proximity to your factory

C)Manufacturing capability and reliability

D)ISO certification

The correct answer is: C

In order for the supplier to meet your ongoing needs, they must have the rightmanufacturing capability and reliability. No matter what other attributes they may have,if they cannot meet your needs on a consistent basis, then the supplier should not bechosen.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 275BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Goods from a supplier are in transit for 15 days. If the annual demand is 5000 units, whatis the average annual inventory in transit? (Round to the nearest whole number)

Page 288: CPIM.bscm Questions&Answers

A)198

B)205

C)242

D)263

The correct answer is: B

The average annual in transit inventory is calculated:

(number of days in transit)(annual demand)

Inventory =----------------------------------------------

Days in a year

15 * 5000

Inventory =

Page 289: CPIM.bscm Questions&Answers

-----------------

365

Inventory =205.479 or 205

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 276BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The basic purpose of inventory is:

A)

Page 290: CPIM.bscm Questions&Answers

to decouple supply and demand.

B)to supply customers from stock.

C)to provide work in process in manufacturing.

D)to provide time for quality testing.

The correct answer is: A

The basic purpose of inventory is to decouple supply and demand. The inventory acts as ashock absorber which allows unpredictable variations in demand and supply to beabsorbed by the inventory, not by the operations.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 277BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following best describes the reason for safety stock?

A)Lowers the setup costs per item

Page 291: CPIM.bscm Questions&Answers

B)Lower purchase cost

C)Decouple supply and demand

D)Maximize customer service by protecting against uncertainty

The correct answer is: D

The primary purpose of safety stock is to maximize customer service by limiting theamount of out of stock situations caused by uncertainty. The customer can be anotherwork center, another factory or the ultimate consumer.

While having inventory will in fact allow larger lot sizes to be run lowering setup cost;larger purchases for better pricing; and, allow supply and demand to be independent ofeach other, the primary purpose of the safety stock is to provide improved customerservice. That is the ultimate reason for being in business.

(Arnold, Introduction to Materials Management, Chapter 9).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 278BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Page 292: CPIM.bscm Questions&Answers

The order quantity is 1600 and the safety stock is 200 units. What is the average annualinventory?

A)800

B)900

C)1000

D)1200

The correct answer is: C

The average inventory is calculated by the following formula:

Q

Average Inventory =--------- + SS

2

Page 293: CPIM.bscm Questions&Answers

1600

Average Inventory =------------ + 200

2

Average Inventory =800 + 200

Average Inventory =1000

Page 294: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 279BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The inventory that exists in moving goods from one location to another is called:

A)transportation inventory.

B)anticipation inventory.

C)lot size inventory.

D)fluctuation inventory.

The correct answer is: A

Page 295: CPIM.bscm Questions&Answers

Transportation inventory is the inventory that results from having to move goods fromone location to another. This may be transfers of goods from one plant to another or whentransporting the goods to the customer.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 280BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Items purchased or manufactured in quantities larger than needed result in inventorycalled:

A)hedge inventory.

B)lot-size inventory.

C)anticipation inventory.

D)transportation inventory.

The correct answer is: B

Page 296: CPIM.bscm Questions&Answers

Lot-size inventory results from producing or purchasing larger quantities than needed.The larger lot size may be necessary to reduce the cost of a long setup or the supplier mayrequire a larger lot size to be purchased.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 281BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The EOQ formula for a purchased item would try to balance which of the following?

A)The ordering cost and the setup cost

B)The setup cost and the ordering cost

C)The ordering cost and the annual inventory demand

D)The ordering cost and the inventory carrying cost

The correct answer is: D

The economic order quantity tries to balance the cost of placing the order with theamount of inventory which must be carried. The point at which the lowest total cost isgenerated is the economic order quantity.

Page 297: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 282BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The EOQ formula for a manufactured part would try to balance which of the following?

A)The setup cost and the inventory carrying cost

B)The ordering cost and the setup cost

C)The setup cost and the item landed cost

D)The setup cost and the cost of the annual demand

The correct answer is: A

The economic order quantity for a manufactured item balances the cost of the setup withthe cost of carrying the inventory. The point of the lowest total cost is the economic orderquantity.

Page 298: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 283BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following best describes a purchase requisition?

A)A request for a quote from certain suppliers

B)A request from a using department to purchase a specific quantity of an item for aspecific date

C)A purchase order which has not been approved

D)A receipt document which contains the quantity and price

The correct answer is: B

A requisition is a request from a using department asking the purchasing department toobtain a quantity of a product by a specific date. Generally, the requisitions are approvedprior to reaching purchasing. Based on the approval, the requisition authorizes thepurchasing department to make the purchase. The requisitions may be completed bydepartments or they may be generated from the MRP system and released by the planner.

Page 299: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 284BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following best describes a purchase quotation?

A)Feedback to the requisitioner regarding possible pricing

B)Pricing provided to the customer regarding their purchase

C)Terms and conditions placed on the purchase order

D)Written inquiry sent to suppliers asking for pricing, quantity levels and delivery times

The correct answer is: D

A quotation (quote) is an inquiry sent to suppliers asking them to provide pricing forvarious quantity levels and the delivery times associated with the items.

(Arnold, Introduction to Materials Management, Chapter 7).

Page 300: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 285BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following best describes the concept VMI?

A)Consignment of the inventory

B)Visual management of the inventory levels

C)Vertical grouping of the inventory

D)Allowing the supplier to manage the day-to-day inventory levels

The correct answer is: D

VMI is an abbreviation for vendor-managed inventory, a methodology whereby thesupplier is responsible for the day-to-day management of the inventory at the customer'ssite. The inventory may or may not be consigned. Given the use of the internet, thecapability of the vendors to manage their inventory at the customer site has become mucheasier to accomplish.

Page 301: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 286BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The main benefit of contract buying from a supplier is that:

A)purchase orders can be released automatically.

B)suppliers will be more responsive and flexible to customer needs.

C)suppliers will know what they will be producing.

D)pricing is known for the life of the contract.

The correct answer is: B

The advantage of contract buying is that the supplier will know what to produce overtime. As a result, the benefit from that knowledge is that the supplier can be veryresponsive to the customers needs.

Copyright 2003, Datachem Software, Westboro, MA

Page 302: CPIM.bscm Questions&Answers

Question Number: 287BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In a traditional MRP system, the production planner releases a requisition to purchasingwho would create a purchase order from that release. In recent years, the concept of abuyer/planner has become common. The main reason for this change is a (an):

A)changing schedule can be easily achieved by the supplier.

B)improved communication with supplier personnel.

C)smoother flow of information and materials between the supplier and the factory.

D)reduction in headcount.

The correct answer is: C

Combining the buyer and planner role into a buyer/planner provides a smoother flow ofinformation and materials between the supplier and the factory for several reasons:

The buyer/planner has a better knowledge of the factory needs and the supplier'scapability.

The buyer/planner can better match the material requirements output to the supplier'scapabilities.

Page 303: CPIM.bscm Questions&Answers

There is less chance of miscommunication than having separate planner and buyerpositions.

(Arnold, Introduction to Materials Management, Chapter 7)

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 288BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following would best describe a commodity?

A)Price is based on the catalogue.

B)Price can be negotiated aggressively.

C)Price is set by market supply and demand and can fluctuate widely.

D)Price is set by a willing buyer and seller.

The correct answer is: C

Page 304: CPIM.bscm Questions&Answers

Commodities can be best defined as materials where the prices are set by a market. Theprices can fluctuate widely based on the supply/demand equilibrium in the marketplace.Environmental factors can also affect the price because they affect the supply/demandbalance. Factors such as war , drought, floods, insects etc. can directly impact price.Materials which are considered commodities are wheat, cotton, oil, meat, coal, etc.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 289BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Made-to-order products are usually made to specification. The prices for these items:

A)are based on grouping like items together.

B)are based on the catalogue.

C)are set by a marketplace.

D)can generally be negotiated.

The correct answer is: D

Page 305: CPIM.bscm Questions&Answers

Made-to-order items are usually made to a design specification. Often, the specification issent out for quotation to several suppliers with the capability to engineer the product.These type of products can usually be negotiated.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 290BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In selecting a supplier from which to source a product, there are qualitative andquantitative factors affecting the decision. In an attempt to quantify both factors, TonyArnold, in his Introduction to Materials Management, suggests using a:

A)ranking method.

B)supplier results scorecard.

C)software program.

D)detailed specification.

The correct answer is: A

Page 306: CPIM.bscm Questions&Answers

The supplier ranking method allows a buyer to evaluate several suppliers sourced for thesame product on a number of quantitative and qualitative factors. These factors such asfunction, cost, service, technical expertise and credit terms are given a weighting basedon the importance to the buying company. Each supplier is then rated based on the factorcriteria with the accumulated score providing the basis for a decision.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 291BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In many cases, companies will form a relationship with their supplier whereby the twoorganizations will act as one. This relationship is called a:

A)supplier assurance.

B)supplier collaboration.

C)supplier integration.

D)supplier partnership.

The correct answer is: D

Page 307: CPIM.bscm Questions&Answers

Supplier partnership is the working relationship between a company and supplier so thetwo organizations act as one. Partnerships take time to develop and are built on mutualtrust and respect . They can encompass design, inventory management, supply chainmanagement, software sharing and many other aspects of the supplier-customerrelationship.

Partnerships do not come from a larger company leveraging the supplier but must bebased on a win-win deal for both companies. Suppliers need to understand "what's in itfor them?"

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 292BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The processes that are linked from the initial raw materials to the final consumption ofthe finished product is called the:

A)supplier measurement.

B)value chain.

C)supplier schedule.

D)supply chain.

Page 308: CPIM.bscm Questions&Answers

The correct answer is: D

The supply chain as defined by the APICS dictionary are "those processes from the initialraw materials to the ultimate consumption of the finished product linking across supplier-user companies."

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 293BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The MRP system has generated a planned order for a purchased part. It takes 1 day toapprove the planned order, 1 day to approve the requisition created by the approvedplanned order, 2 days to turn the requisition into a purchase order and have it signed, and10 days for the supplier to create the product after the receipt of the purchase order. Whatwould the supplier lead time be?

A)10 days

B)12 days

C)13 days

D)

Page 309: CPIM.bscm Questions&Answers

14 days

The correct answer is: A

The supplier lead time is the amount of time that normally elapses between the time anorder is received by a supplier and the time the order is shipped. Administrative time andthe delivery time would be added to the supplier lead time.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 294BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

There are two major sources of specifications. One is a buyer specification in which thebuyer develops the specification from "scratch. " The other major source of specificationsis:

A)standard specifications.

B)government specifcations.

C)environmental specifications.

D)industry specifications.

Page 310: CPIM.bscm Questions&Answers

The correct answer is: A

According to the "Introduction to Materials Management" by Tony Arnold, there are twomajor sources of specifications; buyer developed specifications and standardspecifications. The standard specifications are usually developed based on governmentand industry study and testing. The advantage of using standard specifications is that theyare widely known and accepted, and as a result are readily available from most sources.Because they are widely available, they are usually lower priced. Finally, they are usuallyadaptable to a variety of purchasers.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 295BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The point where the revenue line intersects with the total cost line is called the:

A)fixed cost line.

B)variable cost line.

C)break-even point.

D)

Page 311: CPIM.bscm Questions&Answers

economic order quantity.

The correct answer is: C

The break-even point is the intersection point of the total cost line with the revenue line.It is at this point where the firm breaks even and profit equals zero. Total cost is equal tothe fixed cost of the business plus the variable cost per unit times the number of units.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 296BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In a typical sourcing situation, the buyer attempts to buy the product or service for a fairprice. The difficulty is in determining the fair price. Prices have upper and lower limits.The upper pricing limit is determined by the:

A)engineers.

B)government.

C)seller.

D)market.

Page 312: CPIM.bscm Questions&Answers

The correct answer is: D

The market for the product determines the upper limit of the pricing. The marketplace(buyers) determines what it is willing to pay for the product based on several factors suchas the supply level, the demand for the product, and their needs.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 297BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In a typical sourcing situation, the buyer attempts to buy the product or service for a fairprice. The difficulty is in determining the fair price. Prices have upper and lower limits.The lower pricing limit is determined by the:

A)engineers.

B)government.

C)sellers.

D)market.

Page 313: CPIM.bscm Questions&Answers

The correct answer is: C

Sellers set the lower limit on their prices based on the cost of manufacturing and theirprofit expectation. The lower more efficient producers are capable of selling theirproducts at a lower price than the higher cost, inefficient producers.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 298BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A company is negotiating with a possible supplier to purchase 5,000 motors. Thecompany estimates that the supplier's variable costs are $4 and the fixed costs are$10,000. The supplier has quoted a price of $8 per unit. What is the supplier's averagecost per unit?

A)$2

B)$4

C)$6

D)$8

Page 314: CPIM.bscm Questions&Answers

The correct answer is: C

The per unit fixed costs for the supplier is $10,000 divided by 5,000 units or $2. Thevariable cost is $4. Therefore the total cost per unit is $4 + $2 = $6.It is important to understand the supplier's costs in order to determine whether the pricebeing quoted has some potential downward negotiation. In this case, the price quotedmay be "fair."

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 299BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

If purchases are 50% of sales and other expenses are 40% of sales, what would theincrease in profit be if the purchase cost could be reduced to 45% of sales?

A)5%

B)10%

C)25%

D)50%

Page 315: CPIM.bscm Questions&Answers

The correct answer is: D

Let's assume the company has sales of $100. That would mean that the cost of goods soldwould be $50 and the gross profit is $50 ($100-50). Subtract the $40 of other expensesfrom the gross profit of $50 and the net profit is $10.

If the company lowers the purchase cost to 45%, the gross profit would increase to $55($100-45). Subtract the $40 of other expenses and the net profit is now $15 for anincrease of 50% ($5 increase divided by $10).

The impact to the net profit of a company of improved purchasing is dramatic.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 300BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A supplier has placed goods at a customer location without receiving payment for them.This is called:

A)backflush inventory.

B)consigned inventory.

C)

Page 316: CPIM.bscm Questions&Answers

vendor managed inventory.

D)point of use inventory.

The correct answer is: B

Consigned inventory or consignment is the process of the supplier placing goods at thecustomer's location without receiving payment. The payment is made when the goods aresold or used. The goods may be managed by the customer or the supplier depending onthe arrangement.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 301BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A three way match ensures which of the following documents agree?

A)Purchase order, bill of lading and packing list

B)Pick list , receiving document and bill of lading

C)Purchase order, receiving document , and invoice

Page 317: CPIM.bscm Questions&Answers

D)Packing list, receiving document and invoice

The correct answer is: C

A three way match is done to ensure the purchase order price agrees with the invoiceprice; and, the receiving quantity agrees to the invoice quantity. The purpose is to ensurethat you get what was ordered and you pay for what you get.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 302BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In a single source supplier relationship, what is the best way for purchasing to lower thecost?

A)Negotiate strongly with the supplier.

B)Jointly eliminate waste in the supply chain and share the savings.

C)Establish rebate programs for volume purchasing.

D)Develop annual contracts for defined volumes.

Page 318: CPIM.bscm Questions&Answers

The correct answer is: B

The supply chain has many areas of waste. The best way to lower costs is to jointlyidentify and eliminate the waste in the supply chain and share the savings with thesupplier. Ongoing cost reduction must be a part of every single source partnershipagreement. It is not enough to "maintain pricing" each year.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 303BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The MRP system is set for lot ordering. As a result, it is generating many orders for smallquantities. Which of the following will best alleviate the large quantities of purchaseorders being generated while keeping inventory levels low?

A)Change the lot size to increase the quantity ordered.

B)Use period of supply instead of lot for lot.

C)Establish a long term contract for the item and release against the contract.

D)Keep releasing small lot for lot orders to keep inventory low.

Page 319: CPIM.bscm Questions&Answers

The correct answer is: C

The best solution would be to establish an annual contract for the parts and release ordersagainst the contract. This would allow the lot size to remain small while minimizing theamount of purchase orders being generated. Answers A and B would reduce the numberof purchase orders but would increase inventory levels. Answer D will not eliminate thepurchase order administration.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 304BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following is the least important factor in selecting a supplier?

A)Technical ability

B)Manufacturing capability

C)Location

D)ISO 9000 registration

Page 320: CPIM.bscm Questions&Answers

The correct answer is: D

While ISO registration is a plus, a supplier should not be eliminated if they have notbecome ISO registered. There are very qualified suppliers who have not become ISOregistered and the registration does not guarantee a quality product is being produced.

It is more important that they have technical ability to produce the products;manufacturing capability to produce the parts consistently and are located close to yourmanufacturing facility to ensure short lead times are maintained.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 305BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The decision of when to order raw materials is the responsibility of:

A)manufacturing planning.

B)purchasing.

C)engineering.

D)sales.

Page 321: CPIM.bscm Questions&Answers

The correct answer is: A

It is the responsibility of manufacturing planning to determine when to order rawmaterials and how much. Purchasing's responsibility is to execute the orders given tothem by planning to ensure manufacturing schedules are maintained.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 306BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following is NOT an objective of purchasing?

A)Obtain goods and services of the required quantity and quality.

B)Determine the level of inventory to ensure high levels of customer service.

C)Obtain goods and services at the lowest cost.

D)Ensure the best service and delivery from the supplier.

The correct answer is: B

Page 322: CPIM.bscm Questions&Answers

Manufacturing planning is responsible for maintaining the levels of inventory necessaryto ensure high levels of customer service while not over investing in inventory. The otherthree answers are objectives of purchasing plus developing and maintaining goodsupplier relations and developing new sources of supply.

(Arnold, Introduction to Materials Management, Chapter 7).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 307BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Generally speaking, purchasing can have the greatest impact on the net income of acompany than any other department. This is due to the fact that:

A)manufacturing relies on purchasing to identify quality suppliers.

B)buyers work very hard at sourcing.

C)suppliers want to reduce their prices to good customers.

D)materials usually represent the largest cost in a company.

Page 323: CPIM.bscm Questions&Answers

The correct answer is: D

Because materials represent the largest cost on the income statement, a reduction in thecost of materials will have the greatest positive impact on the net income.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 308BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

If the invoice price does not match the purchase order price, it is purchasing'sresponsibility to:

A)find out what caused the discrepancy and correct it.

B)change the purchase order price to agree to the invoice.

C)change the invoice price to match the purchase order.

D)not pay the invoice until the supplier sends a corrected copy.

The correct answer is: A

Page 324: CPIM.bscm Questions&Answers

There are times when the invoice price and the purchase order price do not agree.Purchasing needs to identify the cause of the discrepancy and correct the cause of theproblem. The purchase order could have been created for the wrong price or the suppliermade a mistake. Generally, the invoice would not be paid until the prices matched or itwas authorized for payment by purchasing.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 309BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In purchasing an item from a supplier, several factors must be considered. Which of thefollowing would most likely be the first factor to consider before others?

A)Functional specifications

B)Price requirements

C)Quantity to purchase

D)Brand description

The correct answer is: C

Page 325: CPIM.bscm Questions&Answers

The demand for the item must be considered before price or quality level can bediscussed. Quantity is a key factor in deciding how the part is designed, specified andmanufactured. If the quantity needed is just one, then the specification would call for thepart to be designed for the least cost; otherwise a standard item would be used. However,if thousands are needed, then the item would be designed to take advantage of economiesof scale.

(Arnold, Introduction to Materials Management).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 310BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

In reviewing the pricing of a part, the buyer must ensure that the price placed on the partby the supplier is related to the:

A)quality of the item.

B)cost of the item.

C)market price for the item.

D)use of the item and its anticipated selling price.

Page 326: CPIM.bscm Questions&Answers

The correct answer is: D

The economic value (what the part is worth) can only be defined by the use of the itemand the selling price. In other words, can the customer use the part and make the intendedprofit when it is sold. If not, then, there is no economic value for the part. For example,there are bolts used in toys and in jet engines. The bolts used to hold toys together requireless strength and cost less than those used in jet engines which have greater demands andmust be certified by the FAA. The jet engine bolts will cost more because they havegreater economic value.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 311BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

EDI is a method to:

A)provide supplier information through a website.

B)access trading exchanges.

C)electronically exchange transaction information.

D)electronically reprice purchase orders.

Page 327: CPIM.bscm Questions&Answers

The correct answer is: C

Electronic Data Interchange (EDI) is the electronic exchange of transactional data. Theprocess reduces the paperwork and time necessary to exchange information with tradingpartners. Transactions often include purchase orders, shipment notification, invoices, etc.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 312BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

When purchasing needs to order items of small value, such as supplies, the objectiveshould be to:

A)require a quote process with approvals.

B)keep the cost of ordering low.

C)negotiate the best price possible.

D)find multiple suppliers and have them bid for the business.

The correct answer is: B

Page 328: CPIM.bscm Questions&Answers

With small value items, the objective should be to keep the cost of ordering low. Ideally,one supplier could be found that could supply many items and maintain a very easyordering process including vendor managed inventories.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 313BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

The difference in the price paid and the standard cost is:

A)purchase price variance.

B)invoice difference.

C)planning price variance.

D)standard cost variance.

The correct answer is: A

Page 329: CPIM.bscm Questions&Answers

Purchase price variance is the difference between the purchase price paid and thestandard cost.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 314BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Deliberately sole sourcing remote suppliers within a small geographic area to facilitateshipments is known as:

A)supply chain grouping.

B)supplier scoring.

C)transportation supply.

D)supplier clustering.

The correct answer is: D

According to the APICS dictionary, supplier clustering is the "deliberate sole sourcing ofremote suppliers within a small geographic area to facilitate joint shipments of whatwould otherwise be less-than-truckload quantities."

Page 330: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 315BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

A supplier certification verifies that a supplier:

A)has perfect quality built into each part manufactured.

B)maintains, improves and documents effective procedures.

C)has been ISO certified.

D)has had a significant quality audit to verify its quality.

The correct answer is: B

Supplier certification verifies that a supplier operates, maintains, improves anddocuments effective procedures that relate to a customer's requirements. The process ofverification may include ISO certification or a quality audit.

Page 331: CPIM.bscm Questions&Answers

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 316MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Which of the following functions are included as part of demand management?

I.Forecasting

II.Order entry

III.Approving requisitions

A)I and II

B)I and III

C)II and III

D)I, II, and III

The correct answer is: A

Page 332: CPIM.bscm Questions&Answers

Approving requisitions would be considered part of the manufacturing process, notdemand management.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 317MASTER PLANNING OF RESOURCES (MPR) :Demand Management

In a distribution resource planning system, the ability to check physical distributionresources exists. These resources would include:

I.Tractor and trailer capacity

II.Warehouse storage space

III.Finances

A)I and II

B)I and III

Page 333: CPIM.bscm Questions&Answers

C)II and III

D)I, II, and III

The correct answer is: D

Distribution resource planning allows a resource check on critical resources indistribution, similar to manufacturing resource planning in manufacturing. These criticalresources could be physical assets, such as warehouse space, trailer capacity, or financesto ensure the proper capital is available to meet the plan.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 318MASTER PLANNING OF RESOURCES (MPR) :Demand Management

A company has a distribution center A, 3000 miles away from the supplying plant and adistribution center B, 1000 miles away. If both turn inventory over with the samevelocity, which will require the most in-transit inventory (assuming the inventory movesby rail or truck)?

I.Center A

II.

Page 334: CPIM.bscm Questions&Answers

Center B

A)I

B)II

C)Neither I nor II

The correct answer is: A

Center A would require more product to be in-transit to maintain the velocity due to itsdistance from the source.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 319MASTER PLANNING OF RESOURCES (MPR) :Demand Management

In a distribution requirements planning system, in-transit lead time is accounted for by:

A)safety stock in the receiving warehouse.

Page 335: CPIM.bscm Questions&Answers

B)being offset as a gross requirement in the supply warehouse.

C)safety stock in the supply warehouse.

D)None of the above

The correct answer is: B

In DRP, the lead time between warehouses is offset as the planned shipment to thereceiving warehouse becomes the gross requirement in the supply warehouse. This logicis similar to the lead-time offset in an MRP system where the planned order release isoffset by the lead time to purchase or make the part.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 320MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Which of the following best describes the term logistics in the non-military sense?

A)The movement of finished goods to the final customer

B)

Page 336: CPIM.bscm Questions&Answers

Obtaining and distributing products and materials

C)Demand management and physical distribution

D)None of the above

The correct answer is: B

Logistics is the art and science of purchasing, producing, and distributing materials toensure the products are in the right place and in the proper quantities.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 321MASTER PLANNING OF RESOURCES (MPR) :Demand Management

All of the following functions are included in physical distribution EXCEPT:

A)Customer order entry

B)Warehousing

C)Final assembly scheduling

Page 337: CPIM.bscm Questions&Answers

D)Transportation to customer

The correct answer is: C

Final assembly scheduling is a manufacturing process. Physical distribution begins whenthe product is completed.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 322MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Which of the following are true statements regarding pull systems?

I.Just-in-Time uses pull systems in production

II.They are best for distribution systems

III.Inventory management in distribution is decentralized with pull systems

Page 338: CPIM.bscm Questions&Answers

A)I and II

B)I and III

C)II and III

D)I, II, and III

The correct answer is: B

In production, a pull system only requires items to be produced as they are pulled bydemand. Just-in Time methodology would use a pull system to move product through themanufacturing processes. Centralized "push" systems are best for distribution networksso inventories can be best utilized throughout the distribution network. If a fieldwarehouse is ordering from a central supply, this would be an example of a pull system ina distribution network.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 323MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Why is Distribution Resource Planning considered a "push" inventory managementsystem?

Page 339: CPIM.bscm Questions&Answers

A)Inventory is "pushed" to feed warehouses from a central location.

B)Inventory is "pushed" to field warehouses when they reach their reorder points.

C)Push systems allow decentralized control of inventory.

D)None of the above

The correct answer is: A

Inventory is managed throughout the distribution network from a centralized location. Itis "pushed" to where it is needed based on demand so the inventory in the whole networkis managed.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 324MASTER PLANNING OF RESOURCES (MPR) :Demand Management

A company uses a random location storage system in its warehouses. While the inventorybalances are accurate, it is plagued by picking problems. Which of the following shouldbe checked?

Page 340: CPIM.bscm Questions&Answers

I.Personnel could need retraining.

II.Locations should be cycle counted to verify correct locations on the system.

III.Purchase orders may be late.

A)I and II

B)I and III

C)II and III

D)I, II, and III

The correct answer is: A

Whether purchase orders are arriving late really has no bearing on a locator system. Untilstock is placed in a location, the system does not know it exists. A review of trainingwould be warranted as new people may not have been trained properly to pick. Also,locations in a warehouse must be cycle counted similar to inventory records to validateprocedures.

Copyright 2003, Datachem Software, Westboro, MA

Page 341: CPIM.bscm Questions&Answers

Question Number: 325MASTER PLANNING OF RESOURCES (MPR) :Demand Management

The product your company manufactures is due for a design change at the end of themodel year. Which of the following factors should be considered in planning theproduction for the current model?

I.The accuracy of the forecast for the remainder of the current model year

II.The cost of obtaining parts if demand exceeds the forecast

III.The probability of having leftover parts when the model year ends

IV.The marketing plans for the new model design

A)I, II, and III

B)I, II, and IV

C)I, III, and IV

D)II, III, and IV

The correct answer is: A

Page 342: CPIM.bscm Questions&Answers

When models change, there are many factors to consider to ensure inventory unique tothe old model is used up. At the same time, the components for the new model need to beplanned to ensure a smooth transition to the new model. The accuracy of the forecastmust be considered to make sure parts are neither over ordered nor under ordered. If theproduction phase out of the old model is not well planned, there is a danger of havingleftover parts or a need to order small lots to support the remaining production.Marketing plans, which identify the sales channels, demographics, etc. for which the newmodel is targeted would not be considered when planning the production. The sales planswould be developed from the marketing plans and would support the forecast by whichproduction would be planned.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 326MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Which of the following factors are utilized in a DRP system?

I.Transit time between warehouses

II.On hand inventory at each location

III.Economic order quantity calculation

IV.Forecast of demand by warehouse

Page 343: CPIM.bscm Questions&Answers

A)I, II, and III

B)I, II, and IV

C)II, III, and IV

D)I, II, III, and IV

The correct answer is: B

Distribution requirements planning is the function of determining the need to replenishinventory at branch warehouses. It does this by using the netting logic similar to MRP toplan inventory at each location based on the lead times to move product to each location.The forecast and customer orders would generate the gross requirements and theinventory is netted at each warehouse location. Economic order quantity calculationswould not be part of the DRP system.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 327MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Page 344: CPIM.bscm Questions&Answers

In using a DRP system, aggregate forecasts are often used. These aggregate forecasts arethen broken down into detailed forecasts by the distribution center. When this happens,which of the following will most likely occur?

A)The forecast will become more accurate.

B)Relative errors will increase.

C)Inventory levels at the centers will increase.

D)Inventory accuracy will decline.

The correct answer is: B

As aggregate forecasts are broken down into more and more detail, the relative errors willincrease. The user must be careful not to adjust the detailed forecasts in such a way thatbias enters the forecast. This would cause the aggregate forecast to vary widely.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 328MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Which of the following would best describe "in transit" inventory?

Page 345: CPIM.bscm Questions&Answers

A)Parts moving from one operation to another in the same plant

B)Parts being put away in a warehouse

C)Parts moving from a plant to a distribution center

D)Parts moving through a cell in manufacturing

The correct answer is: C

Intransit inventory can be best defined as material moving between geographic locations.This would include plant to distribution centers or movement between warehouses.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 329MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Planned orders from the warehouse translate to which of the following in the factory?

A)Planned orders in the MRP system

Page 346: CPIM.bscm Questions&Answers

B)Scheduled receipts

C)Gross requirements in the MPS

D)Inventory in the MPS

The correct answer is: C

Planned orders from the warehouse in a DRP system become gross requirements in themaster production schedule at the factory. The logic is similar to the MRP logic.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 330MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Which of the following will affect the efficient use of warehouse space?

I.Cube utilization

II.Rack density

Page 347: CPIM.bscm Questions&Answers

III.Rack accessibility

IV.Order picking process

A)I and II

B)III and IV

C)I, II, and III

D)I, II, III, and IV

The correct answer is: D

Warehouse space is usually the largest capital cost in the distribution network. As such,the space needs to be used effectively. This means racks need to be as dense as possible,and the space in those racks needs to be utilized as much as possible without becominginefficient to operate. Additionally, the operation of the warehouse needs to be efficient,so the picking process and access to the racks must be easy to accomplish.

Copyright 2003, Datachem Software, Westboro, MA

Page 348: CPIM.bscm Questions&Answers

Question Number: 331MASTER PLANNING OF RESOURCES (MPR) :Demand Management

The mode can be defined as the:

A)average of a group of values.

B)middle value of a group of values.

C)most common or frequent value in a group of values.

D)sum of the deviations divided by the number of values.

The correct answer is: C

The mode is the MOST frequent value in a group of values.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 332MASTER PLANNING OF RESOURCES (MPR) :Demand Management

Page 349: CPIM.bscm Questions&Answers

The mean can be defined as the:

A)average of a group of values.

B)middle value of a group of values.

C)most common or frequent value in a group of values.

D)sum of the deviations divided by the number of values.

The correct answer is: A

The mean is the AVERAGE of a group of values found by adding all the values anddividing by the number of values.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 333MASTER PLANNING OF RESOURCES (MPR) :Demand Management

The median can be defined as the:

A)

Page 350: CPIM.bscm Questions&Answers

average of a group of values.

B)middle value of a group of values.

C)most common or frequent value of a group of values.

D)sum of the deviations divided by the number of values.

The correct answer is: B

The median is the MIDDLE value where half the values are above and half the values arebelow the median.

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 334MASTER PLANNING OF RESOURCES (MPR) :Demand Management

In a DRP environment, demand from a branch warehouse would result in which of thefollowing at the central supply warehouse?

A)Gross requirement

B)