APICS CPIM-Part-2 Exam With Confidence Using Practice Dumps

Sales and operations planning (S&OP) in a make-to-stock (MTS) environment is concerned with projecting inventory. S&OP is an integrated planning process that aligns demand, supply, and financial planning and is managed as part of a company’s master planning1. MTS is a traditional production strategy that is used by businesses to match inventory with anticipated consumer demand2. Inventory is the quantity and value of materials and products that are available in stock or in transit3.

S&OP in an MTS environment is concerned with projecting inventory because inventory is the key link between demand and supply. Inventory can be classified into three types: raw materials, work-in-process, and finished goods3. S&OP aims to balance the inventory levels of these types with the expected demand and supply plans, as well as the financial objectives of the company. S&OP can help optimize inventory management by:

• Reducing inventory costs, such as holding, ordering, and shortage costs3.
• Improving inventory turnover, which is the ratio of sales to average inventory3.
• Increasing inventory availability, which is the percentage of orders that can be fulfilled from stock3.
• Enhancing inventory quality, which is the degree of conformance to specifications and standards3.

The other options are not as relevant for S&OP in an MTS environment as inventory. Item forecasts are estimates of future demand for specific products or services based on historical data, market trends, or customer inputs4. Item forecasts are an input to S&OP, not an output. S&OP uses item forecasts to generate aggregate demand plans for product families or categories, which are then matched with aggregate supply plans for production capacity or resources1. Backlog is the quantity of customer orders that have been received but not yet fulfilled3. Backlog is not applicable for S&OP in an MTS environment, because MTS products are produced before customer orders are received. MTS products are delivered from stock, not from backlog. Bookings are the quantity of customer orders that have been received and confirmed3. Bookings are also not applicable for S&OP in an MTS environment, because MTS products are not dependent on customer orders. MTS products are based on forecasted demand, not actual demand.

References: Make To Stock (MTS): Definition, Example, and How It Works - Investopedia; Forecasting - Definition & Examples - ASQ; What is Sales and Operations Planning (S&OP) | Oracle; Inventory Management - Definition, Types, Objectives and Examples.

The percentage of defective parts is the proportion of units that do not meet the specification limits. The process capability index (Cpk) is a measure of how well the process can produce within the specification limits. Both the percentage of defective parts and the Cpk depend on the specification range and the process variation1.

If the supplier changes the tolerance range from + 0.3 mm to + 0.5 mm, the specification range becomes wider, which means that more units will fall within the specification limits and fewer units will be defective. Therefore, the percentage of defective parts decreases.

However, if the process variation remains unchanged, the Cpk will decrease, because Cpk is inversely proportional to the specification range2. A wider specification range means a lower Cpk, which indicates a lower process capability. A lower Cpk also implies a higher percentage of defective parts in relation to the process variation3.

Therefore, the correct answer is D. The percentage of defective parts decreases, and the process capability index decreases.

References:

• Understanding Process Capability Index (Cpk) [With Calculator]
• [Process Capability Index - an overview | ScienceDirect Topics]
• Converting A Capability Index to PPM Defective - Accendo Reliability

 Inventory turns, also known as inventory turnover or stock turnover, is a measure of how many times a company sells and replaces its inventory in a given period. It is calculated as the ratio of cost of goods sold (COGS) to average inventory1. A higher inventory turnover indicates that the company is selling its inventory quickly and efficiently, while a lower inventory turnover indicates that the company is holding too much inventory or having difficulty selling its products.

Increasing safety stock to improve customer fill rate would result in a decrease in inventory turns, as it would increase the average inventory level. Safety stock is the extra inventory that is held to prevent stockouts and meet unexpected demand2. Customer fill rate is the percentage of customer orders that are fulfilled from available inventory without delay3. Increasing safety stock can improve customer fill rate by reducing the risk of stockouts and ensuring high service levels. However, increasing safety stock also increases the inventory carrying costs and risks, such as storage, handling, obsolescence, shrinkage, and opportunity costs4. Therefore, increasing safety stock is a trade-off between customer satisfaction and inventory efficiency.

The other options are not correct. Pipeline inventory is the inventory that is in transit between locations or stages in the supply chain5. Increasing safety stock would not affect pipeline inventory, as it is determined by the lead time and demand rate. Transportation costs are the expenses incurred for moving goods from one location to another6. Increasing safety stock would not affect transportation costs, as it is determined by the distance, mode, volume, and frequency of transportation. Sales revenue is the income generated from selling goods or services to customers7. Increasing safety stock would not affect sales revenue directly, as it is determined by the price and quantity of sales. However, increasing safety stock may have an indirect positive effect on sales revenue by improving customer satisfaction and loyalty.

References : Inventory Turnover Ratio | Formula | Calculator (Updated 2021); Safety Stock: The Ultimate Guide; Fill Rate - Definition, Formula & Example; Inventory Carrying Cost: Definition & Formula; Pipeline Inventory: Definition & Example; Transportation Costs: Definition & Examples; Sales Revenue: Definition & Examples.