CPIM-Part-2 Exam Dumps : Certified in Planning and Inventory Management(Part 2)

Obsolescence is the loss of value or usefulness of an item due to changes in technology, fashion, customer preferences, or other factors. Obsolescence is considered a carrying cost, because it is an expense associated with holding inventory over a period of time1. Carrying costs are the various costs a business pays for holding inventory in stock, such as warehousing, insurance, taxes, depreciation, and opportunity costs2. Obsolescence can increase the carrying costs of inventory,because it can reduce the demand and sales potential of the item, and may require the item to be written off or sold at a lower price3.

The other options are not considered carrying costs, because they are not related to holding inventory in stock. Setup is the cost of preparing a machine or a process for production. Transportation is the cost of moving goods from one place to another. Scrap rate is the percentage of defective or unusable units produced in a process. These costs are more related to production or distribution activities than inventory holding activities.

Load variability is the fluctuation in electricity demand over time. It is influenced by factors such as weather conditions, time of day, day of the week, and various external events. The higher the load variability, the more challenging it becomes to accurately predict demand and plan capacity1.

A technique to manage load variability would be to plan additional safety capacity as a part of total available capacity to meet unplanned demand. Safety capacity is the act of consistently planning your production below capacity. The reason for this is so the company can become more flexible and responsive to the changing needs of the customer2. For example, if your company was operating at full capacity and your best customer needed extra product, you would be unable to meet their request. By allowing for safety capacity, your company can become more flexible and more responsive.

The other options are not techniques to manage load variability, because they are either irrelevant or ineffective. Applying capacity planning using overall factors (CPOF) to identify priority items at the work center is a simple approach to capacity planning that applies historical ratios. These ratios are based on the master production schedule along with established production standards3. However, this method does not account for load variability or unexpected changes in demand or supply. Designing the shop floor with machines that sit idle until additional demand requires their use is a wasteful and costly way of managing load variability. It does not optimize the utilization of resources or minimize the inventory costs4. Using capacity bills to provide a rough-cut method of planning total-time-per-unit value is a procedure based on the manufacturing production schedule (MPS). It indicates the total standard time required to produce one end product in each work center required in its manufacture5. However, this method does not address the fluctuations in demand or supply that may occur due to load variability.

 Establishment of goals and baselines prior to entering the plan-do-check-act (PDCA) cycle allows improvement teams to determine whether an effective change was made in the process. Goals are the desired outcomes or targets that the improvement teams want to achieve by implementing changes in the process1. Baselines are the current or initial performance levels of the process beforeimplementing any changes2. By establishing goals and baselines, improvement teams can have a clear direction and a reference point for their improvement efforts.

In the PDCA cycle, improvement teams follow four steps: plan, do, check, and act. In the plan step, they define the problem, analyze the root cause, and propose countermeasures. In the do step, they test the countermeasures on a small scale. In the check step, they measure and evaluate the results of the test and compare them with the goals and baselines. In the act step, they standardize and sustain the successful countermeasures or revise and repeat the cycle if needed3.

By comparing the results with the goals and baselines in the check step, improvement teams can determine whether an effective change was made in the process. An effective change is one that improves the performance of the process and meets or exceeds the goals set by the improvement teams4. If the results show that an effective change was made, improvement teams can move to the act step and implement the change on a larger scale. If not, improvement teams can go back to the plan step and identify new or revised countermeasures5.

Therefore, establishment of goals and baselines prior to entering the PDCA cycle allows improvement teams to determine whether an effective change was made in the process.

References: 1: Goal Setting Definition 1 2: Baseline Definition 2 3: What is an A33 4: How to Use an A3 Report for Problem Solving 4 5: The A3 Problem Solving Method