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

 Failure Mode and Effects Analysis (FMEA) is a systematic, proactive method for identifying and evaluating the potential causes and impacts of failures in a process, product, or service1. It aims to anticipate and prevent failures by assessing the relative effect and risk of different failure modes1.

The use of FMEA would be most appropriate prior to a new product introduction (NPI). During the NPI phase, FMEA can be used to identify potential failure modes in the design of the product and assess their potential effects on the product’s performance and reliability. This allows for proactive measures to be taken to mitigate or eliminate these risks before the product is launched. FMEA is particularly useful in the early stages of design, as it helps in making informed decisions that can improve the quality and safety of the product1.

In contrast, using FMEA after a one-time quality incident investigation (A) or during evaluation of a new market opportunity © may not be as effective, as these situations do not involve the design or development of a product or process. While FMEA can be used during the define phase of a Six Sigma project (B), its most impactful application is during the design phase of a new product, where it can significantly influence the final outcome.

 Long lead-time items are items that take a long time to procure, produce, or deliver. Stable demand means that the demand for these items is predictable and does not fluctuate much over time. A supply chain that supports long lead-time items with stable demand would best be designed to position inventory close to the consumer, because this would reduce the delivery time and improve the customer service level. Positioning inventory close to the consumer also reduces the transportation costs and risks associated with long-distance shipments. A supply chain that uses a pull system, which is based on actual customer orders rather than forecasts, may not be suitable for long lead-time items, because it may not be able to meet the customer demand in a timely manner. A supply chain that is linked through an enterprise resources planning (ERP) system, which is a software system that integrates various business functions and processes, may improve the visibility and coordination of the supply chain, but it does not necessarily reduce the lead time or position inventory close to the consumer. A supply chain that is designed to be responsive, which means that it can quickly adapt to changes in demand or other variables, may not be necessary for long lead-time items with stable demand, because these items have low demand uncertainty and variability. References:

• Inventory Positioning | Supply Chain Resource Cooperative
• Push System vs. Pull System: Adopting A Hybrid Approach To MRP
• What Is Inventory Positioning in Supply Chain Management?

Reducing distribution network inventory days of supply will have the impact of increasing turnovers and reducing cash-to-cash cycle time. Distribution network inventory days of supply is a measure of how long it takes for a company to sell its entire inventory in its distribution network, which includes the warehouses and transportation systems that deliver the products to the customers1. It is calculated by dividing the average inventory by the cost of sales per day1. A lower distribution network inventory days of supply indicates that the company is selling its inventory faster and more efficiently, while a higher distribution network inventory days of supply indicates that the company is holding too much inventory or having difficulty selling its products.

Turnovers, 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 by dividing the cost of goods sold by the average inventory2. A higher turnover indicates that the company is selling its inventory quickly and efficiently, while a lower turnover indicates that the company is holding too much inventory or having difficulty selling its products.

Cash-to-cash cycle time, also known as cash conversion cycle or net operating cycle, is a measure of how long it takes for a company to convert its cash outflows into cash inflows. It is calculated by adding the days sales outstanding (DSO), which is the average time it takes for customers to pay for their purchases, and the distribution network inventory days of supply, and subtracting the days payable outstanding (DPO), which is the average time it takes for the company to pay its suppliers3. A shorter cash-to-cash cycle time indicates that the company is managing its cash flow more effectively, while a longer cash-to-cash cycle time indicates that the company is tying up more cash in its operations.

Therefore, reducing distribution network inventory days of supply will have the impact of increasing turnovers and reducing cash-to-cash cycle time, as it will decrease the average inventory level, increase the cost of sales per day, and decrease the distribution network inventory days of supply component in the cash-to-cash cycle time formula. This will improve the efficiency and profitability of the company’s operations and reduce its working capital needs.

References : Inventory Days Of Supply | Supply Chain KPI Library | Profit.co; Inventory Turnover Ratio | Formula | Calculator (Updated 2021); Cash Conversion Cycle - CCC.