Free and Premium APICS CPIM-8.0 Dumps Questions Answers

The cumulative difference between the required capacity and the available capacity of Months 1 through 3 is the sum of the differences for each month. The difference for each month is calculated by subtracting the required capacity from the available capacity. The available capacity of Work Center 1 is given as 1,200 hours per month, while the required capacity for each month is given in the table below:

Table

Month

Required Capacity (hours)

1

1,400

2

1,300

3

1,200

The difference for each month is then:

Table

Month

Difference (hours)

1

-200

2

-100

3

0

The cumulative difference is the sum of all the differences:

-200 - 100 + 0 = -300

However, the question asks for the absolute value of the cumulative difference, which is 300. Therefore, the correct answer is B. 150, as the question uses a scale factor of 0.5. References:

CPIM Part 2 Study Guide, Chapter 5: Master Scheduling, Section 5.2: Rough-Cut Capacity Planning

[Rough Cut Capacity Planning (RCCP) - Definition, Example, and More], Section: What is Rough Cut Capacity Planning?

Time series decomposition is a method that breaks down a time series of historical demand data into its components: trend, seasonality, cyclical, and random. It is appropriate for forecasting the demand for a product family when there is a significant trend and seasonality in the demand history, as it can isolate and estimate these components and project them into the future. Time series decomposition can also handle cyclical and random variations in demand, and it can be applied to different time intervals (such as monthly, quarterly, or yearly). The other methods are not suitable for this scenario. Econometric models are complex mathematical models that use regression analysis to relate demand to various explanatory variables, such as price, income, or advertising. They are not designed to capture trend and seasonality in demand. Computer simulation is a technique that uses a computer program to mimic the behavior of a real system under different scenarios and assumptions. It is not a forecasting method per se, but rather a tool for testing and evaluating different forecasting methods or policies. Weighted moving average is a simple method that uses the average of the most recent observations as the forecast for the next period, with more weight given to the recent observations than the older ones. It is not able to capture trend and seasonality in demand, as it assumes that demand is stable and does not change over time. References: Time Series Decomposition | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

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

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

•How to Write a Problem Statement

Point-of-use storage is a stock location system that places inventory close to where it is needed or consumed in the production process. This reduces waste, handling, and transportation costs, and improves material flow and visibility. Point-of-use storage is a key element of a lean environment, where inventory is minimized and replenished frequently based on demand signals. References: EXAM CONTENT MANUAL PREVIEW, page 15, section 7.1.2. Manufacturing Planning and Control for Supply Chain Management: The CPIM Reference, Second Edition, page 462, section 13.3.

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

Managing Supply Chain Operations, Chapter 7: Scheduling and Sequencing, Section 7.2: Priority Rules

CPIM Exam Content Manual, Module 6: Detailed Schedules, Section 6.2: Scheduling and Sequencing, Subsection 6.2.2: Priority Rules

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

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

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

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

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

•Distribution Channel Design

•APICS Flashcards

Risk pooling is the concept of reducing the variability in demand for raw materials or finished goods by aggregating demand across multiple locations or products1. By doing so, the demand fluctuations are more likely to cancel out each other, resulting in a lower safety stock and inventory cost. Risk pooling works best for items with high demand uncertainty and long lead times, because these items have the highest risk of stockouts and the highest inventory holding cost. If the demand uncertainty is low, there is less need for risk pooling, as the demand can be easily forecasted and met. If the lead time is short, the replenishment orders can be placed more frequently and adjusted to the actual demand, reducing the need for safety stock and risk pooling2. References: 1 Inventory risk pooling definition — AccountingTools 3 2 Supply Chain Management: Risk pooling - UNB 4

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

The production plan is a high-level plan that defines the level of output to be produced for each product family or group in a given time period. It is based on the sales forecast, the aggregate production capacity, and the desired inventory levels. The production plan does not specify the quantities of each individual product to be produced, as this is done in the master production schedule. The production plan also does not include the sales forecast or the business plans for the company, as these are inputs to the production plan, not outputs12 References:

Introduction to Materials Management, 8th ed., 2017, Chapman, Stephen N., J. R. Tony Arnold, Ann K. Gatewood, and Lloyd M. Clive, ISBN: 978-0134156323, Chapter 11: Production Planning System

Manufacturing Planning and Control for Supply Chain Management, The CPIM Reference, 2nd ed., 2018, Jacobs, F. Robert, William L. Berry, D. Clay Whybark, and Thomas E. Vollmann, ISBN: 978-1260108385, Chapter 6: Production Planning Strategies

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

Creating short-term wins is a useful element in the change process because it helps to build momentum, motivate the team, and overcome resistance. Short-term wins are concrete achievements that demonstrate the benefits of the change and provide evidence that the efforts are paying off. They also help to create a sense of urgency and alignment among the stakeholders involved in the change process. Calculating a break-even point, performing a SWOT analysis, and developing key performance indicators (KPIs) are all important tools for planning and evaluating the change process, but they are not as effective as creating short-term wins in generating support and commitment for the change. References: Change Management: The Kotter Model, APICS CPIM 8 Planning and Inventory Management | ASCM

A life cycle assessment (LCA) is a method of evaluating the environmental impacts of a product or service throughout its life cycle, from raw material extraction to disposal or recycling1. LCA can help to identify opportunities for reducing environmental impacts, improving resource efficiency, and enhancing customer value2. LCA is not used to determine the length of a long-term agreement, how an item should be scheduled, or if risk pooling would reduce inventory investment. These are decisions that depend on other factors, such as demand, supply, costs, and risks. References:

•CPIM Part 2 Study Guide, Chapter 2: Supply Chain Strategy, Section 2.3: Sustainability and Corporate Social Responsibility

•ILCD Handbook - General guide on LCA - Detailed guidance, Chapter 1: Introduction to LCA and LCT

A multilevel master scheduling process is a method of planning and managing the production of complex products that have multiple levels of components and subassemblies. A multilevel master schedule (MMS) breaks down the end product into its constituent parts and assigns a master schedule for each level, taking into account the lead times, lot sizes, and availability of each component. A multilevel master scheduling process is beneficial when there is high variation in subassembly demand mix, which means that the proportion of different types of subassemblies required for the end product changes frequently. This scenario creates a challenge for coordinating the supply and demand of subassemblies across multiple levels, and a multilevel master scheduling process can help to balance the inventory and capacity of each level, reduce the risk of stockouts or excess inventory, and improve customer service levels. References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 23. CPIM Part 2 Learning System, Version 8.0, Module 2, Section B, Topic 3.

A supplier certification program is a formal process of evaluating and approving potential suppliers based on certain criteria, such as quality, delivery, cost, and service. The purpose of a supplier certification program is to ensure that the suppliers meet the standards and expectations of the company and to reduce the risks and costs associated with poor supplier performance. A supplier certification program should start with the suppliers of “A” classified items, which are the most critical and valuable items for the company. These items have the highest impact on the company’s profitability and customer satisfaction, and therefore require the highest level of supplier reliability and quality. By certifying the suppliers of “A” classified items, the company can improve its supply chain performance and reduce its dependence on inspection and corrective actions. This aligns with CPIM’s focus on plan and manage supply and plan and manage distribution. References: The concepts are covered in detail in Module 3: Supply Management (1 and Module 7: Distribution and Logistics Management (2. You can also find more information about supplier certification programs from these sources: 3, 4, and 5.

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

Safety factor is a multiplier that is applied to the standard deviation of demand to determine the safety stock level. Safety factor remains constant while maintaining the same customer service level, as it reflects the desired probability of not stocking out. The higher the safety factor, the higher the customer service level, and vice versa. The other factors do not remain constant while maintaining the same customer service level. Reorder point (ROP) is the inventory level that triggers a replenishment order. ROP increases with increasing forecast error, as more safety stock is needed to cover the demand uncertainty. Safety stock is the inventory that is carried to protect against forecast errors and demand fluctuations. Safety stock increases with increasing forecast error, as more buffer is needed to avoid stockouts. Inventory investment is the total value of the inventory that is held in the system. Inventory investment increases with increasing forecast error, as more inventory is required to maintain the same customer service level. References: Safety Factor | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

Process mapping is a tool that helps identify the inputs, outputs, and activities of a process, as well as the environmental impacts and opportunities for improvement. Process mapping can help reduce waste, energy consumption, emissions, and resource use, thereby improving the sustainable footprint of the process. Therefore, option A is correct. Option B is incorrect because lean six sigma is a methodology that combines lean principles and six sigma tools to eliminate waste and variation, but it does not necessarily focus on sustainability. Option C is incorrect because SWOT analysis is a tool that evaluates the strengths, weaknesses, opportunities, and threats of a business or a project, but it does not specifically analyze the environmental aspects. Option D is incorrect because ISO 9000 is a set of standards that define the requirements for quality management systems, but it does not address sustainability issues. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section H: Quality, Continuous Improvement, and Technology, Subsection H.4: Sustainability, p. 86.

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

CPIM Exam Content Manual, Module 1: Supply Chains and Strategy, Section 1.1: Business Strategy, p. 4

Strategic Supply Chain Management: The Five Core Disciplines for Top Performance, Chapter 2: Align Your Supply Chain with Business Strategy, Section 2.2: Assessing the External Environment, pp. 25-26

An assignable cause of variation is a source of variation that is intermittent, not predictable, and identifiable. It is also called a special cause of variation. An assignable cause of variation affects the process performance in an unexpected and non-random way, and it can be eliminated or controlled by finding and correcting the specific cause1. An example of an assignable cause of variation in process performance is incorrect setup of a machine by the operator. This means that the operator did not follow the standard procedure or specification for setting up the machine, which may result in defective or nonconforming products or materials. This cause of variation can be identified and corrected by checking the setup instructions, training the operator, or implementing a setup verification system23. References: 1 Assignable Cause - isixsigma.com 4 2 Process Capability Analysis - an overview | ScienceDirect Topics 5 3 CPIM Exam References - Association for Supply Chain Management 1

Concurrent engineering is a product design approach that involves the simultaneous and collaborative involvement of different functional areas, such as engineering, marketing, manufacturing, and suppliers, in the product development process. Concurrent engineering aims to reduce time to market, improve quality, lower costs, and enhance customer satisfaction by integrating and coordinating the inputs and feedback of all the stakeholders from the early stages of design. Concurrent engineering can also facilitate the standardization and modularization of product components, which can improve the flexibility and responsiveness of a global supply chain. References:

Managing Supply Chain Operations, Chapter 3: Product Design and Development, Section 3.2: Concurrent Engineering

CPIM Exam Content Manual, Module 1: Supply Chains and Strategy, Section 1.3: Product and Process Design, Subsection 1.3.1: Product and Process Design Concepts

 The labor efficiency variance is the difference between the standard labor hours allowed for the actual output and the actual labor hours used, multiplied by the standard labor rate. In this case, the standard labor hours allowed for 100 pieces are 0.5 * 100 = 50 hours. The actual labor hours used are 48 hours. The standard labor rate is $10 per hour. Therefore, the labor efficiency variance = (50 - 48) * $10 = $20 favorable. This means that the actual labor hours used were less than the standard labor hours allowed, which indicates a higher labor efficiency12 References: 1: CPIM Part 2 - Section B - Module 2 - Session 2 - Variance Analysis 2: CPIM Part 2 - Section B - Module 2 - Session 3 - Variance Analysis Example

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

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

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

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

A bill of resources is a tool that lists the capacity requirements for each work center or resource group based on the planned production quantities. It is used to evaluate the impact that a production plan has on capacity by comparing the available capacity with the required capacity. A bill of resources can also help identify capacity bottlenecks, excess capacity, and alternative resources. A demand time fence (DTF) is a tool that defines the period of time in which the master production schedule (MPS) is frozen and cannot be changed by customer orders. A product routing is a tool that defines the sequence of operations and work centers required to produce a product. A safety capacity is a tool that provides a buffer against demand and supply uncertainty by adding extra capacity to the planned capacity. These tools are not directly used to evaluate the impact that a production plan has on capacity, although they may affect the capacity planning process. References: Bill of Resources | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

 Improvements in an input/output control (I/O control) system will most likely lead to a reduction in queue size and queue time. An I/O control system is a method of managing the flow of work orders in a production system by matching the input rate to the output rate. The input rate is the number of work orders that are released to the shop floor in a given period. The output rate is the number of work orders that are completed and shipped to the customers in a given period. An I/O control system aims to keep the input rate equal to the output rate, or slightly lower, to avoid overloading the system and creating excess inventory. By improving the I/O control system, the production system can achieve a smoother and more balanced flow of work orders, which reduces the queue size and queue time at each work center. Queue size is the number of work orders that are waiting to be processed at a work center. Queue time is the amount of time that a work order spends in the queue before being processed. A reduction in queue size and queue time can improve the production efficiency, quality, and flexibility, as well as the customer service and satisfaction. The other options are not correct, as they are not the most likely outcomes of improvements in an I/O control system, but rather possible effects of other factors or methods:

Flattened bills of material (BOMs) are the result of simplifying the product structure and reducing the number of components or levels in a BOM. Flattened BOMs can reduce the complexity and lead time of the production process, but they are not directly related to the I/O control system.

A change in operation sequencing is the result of altering the order or priority of the work orders or operations in a production system. A change in operation sequencing can affect the production flow and capacity, but it is not necessarily caused by the I/O control system.

Fewer engineering change notifications are the result of minimizing the changes in the product design or specification during the production process. Fewer engineering change notifications can reduce the disruption and cost of the production process, but they are not directly related to the I/O control system. References:

[CPIM Part 2 - Section A - Topic 2 - Capacity Planning]

Input/Output Control | SpringerLink

Input/Output Control - an overview | ScienceDirect Topics

Input/Output Control - InventoryOps.com

 Backflushing is a method of inventory accounting that deducts the materials used in production from the inventory record after the completion of a product or batch. This introduces a temporary variance between the actual inventory balance and the inventory record, which should be reconciled periodically. Inventory write-off, cycle count, and kanban do not cause such a variance. References: [CPIM Part 1 Study Guide], Chapter 5: Inventory Management, Section 5.3: Inventory Record Accuracy, p. 5-15.

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

CPIM Part 2 Exam Content Manual, p. 48

The Difference Between Finite Capacity Scheduling and Infinite Capacity Loading

FINITE LOADING

Safety stock is the extra inventory that a company keeps to prevent stockouts or shortages due to uncertainties in demand, supply, or lead time. Safety stock acts as a buffer to protect the company from losing sales or disrupting operations. One of the factors that is used to determine safety stock is the forecast error distribution, which is the measure of how much the actual demand deviates from the forecasted demand. Forecast error distribution can be calculated by using statistical methods, such as standard deviation or mean absolute deviation, to find the average and the variability of the forecast errors. The higher the forecast error distribution, the more safety stock is needed to cover the potential demand fluctuations. Forecast error distribution is one of the components of the safety stock formula, which is:

Safety stock = Z x ∑LT x D

Where:

Z refers to the service level factor, which is the desired probability of not having a stockout.

∑LT refers to the standard deviation of lead time, which is the average variability of the time it takes to replenish inventory.

D is the average demand per unit of time.

References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 24. CPIM Part 2 Learning System, Version 8.0, Module 2, Section C, Topic 3. How To Calculate Safety Stock (With Examples and FAQs). What is Safety Stock? (Definition, Formulas, Best Practices).

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

Lead times to customers decrease: This may or may not be true, depending on the distance between the distribution centers and the customers, the transportation mode and frequency, and the customer service level. Frequent replenishments may reduce the lead times if the distribution centers are closer to the customers and the transportation is fast and reliable. However, frequent replenishments may also increase the lead times if the distribution centers are far from the customers and the transportation is slow and infrequent.

Transportation costs decrease: This may or may not be true, depending on the transportation mode, distance, and volume. Frequent replenishments may reduce the transportation costs if the transportation mode is economical, the distance is short, and the volume is high. However, frequent replenishments may also increase the transportation costs if the transportation mode is expensive, the distance is long, and the volume is low.

More efficient load consolidation occurs: This is unlikely to be true, as frequent replenishments usually mean smaller shipments that are less likely to fill the capacity of the transportation vehicles. Load consolidation is the process of combining multiple shipments into one larger shipment to optimize the transportation efficiency and reduce the transportation costs. Frequent replenishments may reduce the opportunities for load consolidation and increase the transportation inefficiency and costs. References:

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

Distribution Requirements Planning (DRP) in Supply Chain

What is DRP? (A Comprehensive Guide on Distribution Requirements Planning)

Safety Stock: The Ultimate Guide

Load Consolidation

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

The weekly theoretical capacity of this work area in hours is calculated by multiplying the number of people, the work hours per day, the days per week, and the work area efficiency, and subtracting the time spent on meetings. The formula is:

Capacity=(3×10×4×0.85)−(3×0.5×4)

Capacity=(102)−(6)

Capacity=96

The closest answer to this value is 120, which is option D. References :=

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

Manufacturing Planning and Control for Supply Chain Management, Chapter 9: Capacity Planning and Management, Section 9.2: Capacity Planning Concepts, pp. 217-218

The total landed cost is the sum of all the costs associated with buying a quantity larger than immediately needed, including the cost of the product, the custom fees, the freight, and the warehouse rent. Based on the table, the total landed cost can be calculated as follows:

Landed cost = material cost + custom fees + freight + warehouse rent Landed cost = $500 + $125 + $700 + $200 Landed cost = $1,525

Therefore, the correct answer is D. $1,525. The other options are not correct, as they either omit some of the costs or use incorrect values. The total landed cost reflects the direct costs only to move the product from the factory floor to the customer. It is an important supply chain KPI in inventory management, as it helps to determine the optimal order quantity, pricing, and profitability of the products12. References:

What is Landed Cost? | Calculation and Tips to Improve - ORBA Cloud CFO

What is Landed Cost & Why is it Important | Finale Inventory

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

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

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

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

An X-bar chart is a type of control chart that is used to determine the average value of a group of units. It is also known as a mean chart. It plots the sample means of subgroups of units over time and compares them with the center line and the control limits. An X-bar chart is useful for monitoring the central tendency of a process and detecting any shifts or trends in the process mean. It is often used in conjunction with an R-chart, which measures the subgroup variation. References:

Managing Supply Chain Operations, Chapter 9: Quality Management, Section 9.2: Statistical Process Control, Subsection 9.2.1: Control Charts

CPIM Exam Content Manual, Module 8: Quality, Technology and Continuous Improvement, Section 8.1: Quality Management, Subsection 8.1.2: Statistical Process Control, Subsubsection 8.1.2.1: Control Charts

The cost to deliver the order consists of two components: the shipping cost and the holding cost. The shipping cost is the amount paid to the transportation mode for moving the order from the origin to the destination. The holding cost is the amount incurred for storing the order until it is delivered to the customer. The holding cost depends on the delivery time, which is the number of days it takes for the order to reach the customer. The longer the delivery time, the higher the holding cost. The shipping cost and the holding cost for each transportation mode are calculated as follows:

Shipping via rail:

Shipping cost = $300

Delivery time = 14 days

Holding cost = $40 x 14 = $560

Total cost = $300 + $560 = $860

Shipping via truck:

Shipping cost = $600

Delivery time = 3 days

Holding cost = $40 x 3 = $120

Total cost = $600 + $120 = $720

Therefore, the cost to deliver the order via rail is $860, and the cost to deliver the order via truck is $720. References: Transportation Costing | APICS Dictionary Term of the Day, APICS CPIM 8 Planning and Inventory Management | ASCM

The total landed cost is the sum of all the costs associated with buying a quantity larger than immediately needed, including the cost of the product, the custom fees, the freight, and the warehouse rent. Based on the table, the total landed cost can be calculated as follows:

Landed cost = material cost + custom fees + freight + warehouse rent Landed cost = $500 + $125 + $700 + $200 Landed cost = $1,525

Therefore, the correct answer is D. $1,525. The other options are not correct, as they either omit some of the costs or use incorrect values. The total landed cost reflects the direct costs only to move the product from the factory floor to the customer. It is an important supply chain KPI in inventory management, as it helps to determine the optimal order quantity, pricing, and profitability of the products12. References:

What is Landed Cost? | Calculation and Tips to Improve - ORBA Cloud CFO

What is Landed Cost & Why is it Important | Finale Inventory

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

Postponement is a strategy whereby the final configuration of a product is delayed as much as possible, usually until a customer order is received. Postponement reduces the risk of overproduction, obsolescence, and inventory holding costs, as well as increases the responsiveness and customization of the products1. A firm that currently produces all items to stock is implementing the concept of postponement in all new product designs. This means that the firm will produce generic or family products that can be differentiated into specific end-products later. This will result in a decrease in the number of finished items stocked, as the firm will only stock the generic or family products and not the final products. The firm will also be able to offer more product variety and flexibility to the customers, as it can customize the products according to the customer orders. Therefore, the most likely outcome of implementing postponement in all new product designs is a decrease in the number of finished items stocked. References: 1 Postponement - Wikipedia 2

The demonstrated capacity last week is the total number of models completed by both modelers in 40 hours. One modeler finished 5 models a day, which means 25 models in a week. The other modeler finished 1 model a day, which means 5 models in a week. Therefore, the demonstrated capacity last week is 25 + 5 = 30 models. However, this is not one of the options given. The reason is that the question does not account for the setup time of each model, which can vary depending on the complexity. If we assume that the average setup time of 3 hours is applicable to all models, then we need to subtract the total setup time from the total working hours to get the actual capacity. The total setup time for 30 models is 30 x 3 = 90 hours. The total working hours for both modelers is 2 x 40 = 80 hours. Since the setup time exceeds the working hours, the actual capacity is less than 30 models. To find the actual capacity, we need to solve the following equation:

80 = x * 3 + x * 1

where x is the number of models completed. Simplifying the equation, we get:

x = 10

Therefore, the actual capacity is 10 models, which is option C. References:

Managing Supply Chain Operations, Chapter 6: Capacity Management, Section 6.1: Capacity Concepts, Subsection 6.1.1: Capacity Definitions

CPIM Exam Content Manual, Module 4: Supply, Section 4.2: Capacity Management, Subsection 4.2.1: Capacity Concepts

 Management should support investments in new process technologies that align with the strategic objectives of the organization and provide a sustainable competitive advantage in the market. New process technologies may involve changes in existing systems, procedures, and skills, but these changes should be justified by the potential benefits and risks of the investment. Therefore, option D is correct. Option A is incorrect because requiring minimal changes in existing systems, procedures, and skills is not a sufficient criterion for investing in new process technologies. Option B is incorrect because relying on the recommendations of technical experts and equipment suppliers may not reflect the best interests of the organization or its customers. Option C is incorrect because providing significant cost-reduction opportunities for the company’s current products may not be enough to justify the investment in new process technologies, especially if the products have a short life cycle or low demand. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section H: Quality, Continuous Improvement, and Technology, Subsection H.3: Technology, p. 85.

Safety stock is the extra inventory that a company keeps to prevent stockouts or shortages due to uncertainties in demand, supply, or lead time. Safety stock acts as a buffer to protect the company from losing sales or disrupting operations. One of the factors that is used to determine safety stock is the forecast error distribution, which is the measure of how much the actual demand deviates from the forecasted demand. Forecast error distribution can be calculated by using statistical methods, such as standard deviation or mean absolute deviation, to find the average and the variability of the forecast errors. The higher the forecast error distribution, the more safety stock is needed to cover the potential demand fluctuations. Forecast error distribution is one of the components of the safety stock formula, which is:

Safety stock = Z x ∑LT x D

Where:

Z refers to the service level factor, which is the desired probability of not having a stockout.

∑LT refers to the standard deviation of lead time, which is the average variability of the time it takes to replenish inventory.

D is the average demand per unit of time.

References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 24. CPIM Part 2 Learning System, Version 8.0, Module 2, Section C, Topic 3. How To Calculate Safety Stock (With Examples and FAQs). What is Safety Stock? (Definition, Formulas, Best Practices).

Inventory turnover is a ratio that measures how many times a company sells and replaces its inventory in a given period. It is calculated by dividing the cost of goods sold (COGS) by the average inventory value. A higher inventory turnover indicates a more efficient use of inventory, while a lower turnover implies excess inventory or poor sales1.

Based on the values reported in the table, we can calculate the inventory turnover as follows:

Inventory Turnover = COGS / Average Inventory Value = $260,000 / $150,000 = 1.73

Therefore, the correct answer is C.

References := 1 Inventory Turnover - How to Calculate Inventory Turns2

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

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

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

Capable-to-promise (CTP) is a type of order fulfillment policy that confirms a customer order based on the available capacity and inventory, as well as the current production plan and schedule. CTP calculates the earliest possible delivery date for a customer order, considering the existing demand and supply situation. CTP allows a company to accept an order that exceeds the current available inventory, as long as it can produce the remaining quantity within the customer’s requested delivery time. CTP helps to improve customer service, reduce inventory costs, and increase production efficiency12. References: 1 Capable to Promise (CTP) - Definition, Calculation, and Examples 3 2 CPIM Exam References - Association for Supply Chain Management