Free Practice Questions for APICS CPIM-Part-2 Exam

ABC classification is an inventory categorization technique that divides items into three classes based on their usage value, which is the product of the number of units sold and the cost per unit. Class A items have the highest usage value and account for a large proportion of the total inventory value, but a small percentage of the number of items. Class B items have a moderate usage value and account for a moderate proportion of the total inventory value and the number of items. Class C items have the lowest usage value and account for a small proportion of the total inventory value, but a large percentage of the number of items1.

An advantage of applying ABC classification to a firm’s replenishment items is that it allows planners to focus on critical products. Replenishment items are items that are regularly ordered or produced to maintain a certain level of inventory. By using ABC classification, planners can prioritize the replenishment of class A items, which have the highest impact on the firm’s profitability and customer satisfaction. Planners can also apply different inventory management techniques and policies for each class of items, such as more frequent reviews, tighter controls, lower safety stocks, and higher service levels for class A items, and less frequent reviews, simpler controls, higher safetystocks, and lower service levels for class C items234. This way, ABC classification can help planners optimize the replenishment process and reduce costs, waste, and stockouts.

The other options are not advantages of applying ABC classification to a firm’s replenishment items, because they are either irrelevant or incorrect. ABC classification does not distinguish independent demand from dependent demand, which are two types of demand that depend on whether the item is sold to customers or used as a component in another item5. ABC classification does not provide better order quantities than the economic order quantity (EOQ), which is a formula that calculates the optimal order quantity that minimizes the total inventory costs6. ABC classification does not allow the firm to utilize time-phased order point (TPOP), which is a method that determines when to place an order based on the projected inventory position and the lead time7.

The information about the consistent overage in actual run time for one operation should be sent first to the engineering manager to evaluate the run time for the routing. A routing is a document that specifies the sequence of operations and work centers required to produce a product or feature. A run time is the amount of time needed to perform an operation or a task at a work center. An overage in actual run time means that the actual time spent on an operation or a task is more than the planned or standard time. This can result in lower efficiency, productivity, or quality, as well as higher costs, waste, or delays.

The engineering manager is responsible for designing and maintaining the routing and the run time for each operation or task. The engineering manager can evaluate the run time for the routing by comparing the actual and planned times, identifying the causes of the overage, and taking corrective actions. For example, the engineering manager may:

Review the accuracy and validity of the planned or standard time, and update it if necessary.

Analyze the performance and capability of the machines, equipment, or labor involved in the operation or task, and improve them if needed.

Investigate the presence of any errors, defects, rework, or variability in the operation or task, and eliminate them if possible.

Implement lean production techniques, such as value stream mapping, waste reduction, or continuous improvement, to optimize the operation or task.

The other options are not appropriate for sending the information about the consistent overage in actual run time for one operation first. The product manager is not responsible for designing or maintaining the routing or the run time for each operation or task. The product manager is responsible for managing and marketing the product or feature, such as defining its specifications, features, price, or promotion. Increasing the selling price of the product is not a solution for addressing the overage in actual run time, as it may reduce customer demand or satisfaction, as well as increase competition. The quality manager is not responsible for designing or maintaining the routing or the run time for each operation or task. The quality manager is responsible for ensuring and improving the quality of the product or feature, such as setting quality standards, implementing quality control methods, or conducting quality audits. Adding a new qualitymeasurement to the operation is not a solution for addressing the overage in actual run time, as it may increase complexity or cost without improving efficiency or productivity. The production supervisor is not responsible for designing or maintaining the routing or the run time for each operation or task. The production supervisor is responsible for overseeing and coordinating the production activities at a work center, such as scheduling operations, assigning resources, monitoring performance, or resolving issues. Reviewing and explaining the overage in actual run time is not a solution for addressing it, as it does not identify or eliminate its causes.

References := [Routing - an overview | ScienceDirect Topics], [Run Time - an overview | ScienceDirect Topics], [Engineering Manager Job Description - Betterteam], [Product Manager Job Description - Betterteam], [Quality Manager Job Description - Betterteam], [Production Supervisor Job Description - Betterteam]

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.

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.

Carrying cost is the cost of holding inventory over a period of time. Carrying cost includes the cost of storage, insurance, taxes, obsolescence, spoilage, and opportunity cost of capital. Carrying cost is usually expressed as a percentage of the inventory value per year. An order point is the level of inventory that triggers a replenishment order. An order point is calculated based on the demand rate, the lead time, and the safety stock. An order point is used to maintain a balance between inventory availability and inventory cost. A planner who chooses to increase the order point for a raw material is most likely to increase the carrying cost, as a higher order point means a higher average inventory level, which in turn means a higher carrying cost. Increasing the order point may reduce the risk ofstockouts and improve customer service, but it also increases the inventory investment and its associated costs.

The other options are not likely to increase as a result of increasing the order point. Ordering cost is the cost of placing and receiving an order. Ordering cost includes the cost of processing, transportation, inspection, and setup. Ordering cost is usually expressed as a fixed amount per order. Ordering cost is not affected by the order point, but by the order quantity and the number of orders. Landed cost is the total cost of delivering a product or service to the customer. Landed cost includes the cost of production, transportation, taxes, duties, and fees. Landed cost is usually expressed as a percentage of the product or service value. Landed cost is not affected by the order point, but by the sourcing, pricing, and logistics decisions. Product cost is the total cost of producing a product or service. Product cost includes the cost of materials, labor, and overhead. Product cost is usually expressed as a variable amount per unit. Product cost is not affected by the order point, but by the production methods, techniques, and efficiency. References: CPIM Exam Content Manual Version 7.0, Domain 5: Plan and Manage Inventory, Section 5.1: Inventory Management Concepts, p. 30; Order Point; Carrying Cost.

Manufacturing flexibility can be measured by using changeover time. Changeover time is the time it takes to go from the last good part of one product run to the first good part of the next product run1. Manufacturing flexibility is the ability of a system to handle a range of products or variants with fast setups2. By using changeover time as a measure of manufacturing flexibility, we can assess how quickly and efficiently a system can switch from one product to another, and how well it can respond to changes in customer demand, product mix, quality standards, and delivery schedules3.

Some of the benefits of reducing changeover time and increasing manufacturing flexibility are4:

Lower manufacturing costs: More value-added capacity can be unlocked because the equipment is idle for less time.

Higher customer satisfaction: Customers can get their products faster and with more variety.

Greater competitive advantage: The system can adapt to market changes and offer more customized products or services.

Improved quality and productivity: The system can avoid defects, waste, and errors that may occur during long or complex changeovers.

Some of the methods or tools that can help reduce changeover time and increase manufacturing flexibility are5:

Single-minute exchange of die (SMED): A technique that aims to reduce changeover time to less than 10 minutes by converting internal setup activities (those that can only be done when the machine is stopped) to external setup activities (those that can be done while the machine is running), and streamlining both types of activities.

Total productive maintenance (TPM): A technique that involves maintaining and improving the equipment performance and reliability by involving all employees in preventive maintenance, autonomous maintenance, focused improvement, and quality management.

Quick response manufacturing (QRM): A technique that focuses on reducing lead times throughout the entire organization by applying the principles of time-based competition, cellular manufacturing, system dynamics, and enterprise-wide application.

Therefore, changeover time is a measure that can be used to evaluate the manufacturing flexibility of a system.

References: 1: What is Changeover? (Lean terminology) - Velaction 5 2: FLEXIBILITY IN MANUFACTURING | SpringerLink 3 3: How to Reduce Changeover Time - MachineMetrics 6 4: The Tradeoff Between Inventory Costs And Transportation Costs 5: Changeover [Manufacturing Definition] | Creative Safety Supply 

The most appropriate production output reporting method for repetitive manufacturing is backflush. Repetitive manufacturing is a production system where the same or similar products are produced in large quantities or in a continuous flow1. Backflush is a method of reporting output and consumption of materials at the end of the production process, rather than at each operation or stage2. Backflush can simplify and streamline the production output reporting process, as it eliminates the need for tracking and recording each individual transaction or movement of materials and components. Backflush can also reduce the paperwork, errors, and costs associated with production output reporting2.

The other options are not as appropriate as backflush for repetitive manufacturing. Operation-by-operation is a method of reporting output and consumption of materials at each operation or stage of the production process3. This method can provide more detailed and accurate information about the production performance and costs, but it can also be more complex and time-consuming, as itrequires tracking and recording each individual transaction or movement of materials and components. Count point is a method of reporting output and consumption of materials at selected points or milestones in the production process4. This method can provide a balance between detail and simplicity, but it can also introduce errors or discrepancies, as it requires estimating or extrapolating the output and consumption of materials between the count points. Job tickets are documents that record the time, materials, and costs associated with a specific job or order5. This method can provide more flexibility and customization, but it can also be more suitable for job shop or batch production systems, where different products are produced in small quantities or on demand.

References : Repetitive Manufacturing: Definition & Benefits; Backflush Costing: Definition & Example; Operation by Operation Reporting - ERP Software Blog; Count Point Reporting - ERP Software Blog; Job Ticket Definition.

 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.

 Customer service performance is the degree to which a product or service meets or exceeds customer expectations. The most relevant measure of customer service performance is how the customer perceives the service compared to what they expected. This measure reflects the customer’s satisfaction and loyalty, which are key factors for business success. Other measures, such as service promised versus measured, customer complaints, or positive feedback, are more related to the supplier’s perspective and may not capture the customer’s true perception of service quality. References : CPIM Part 2 Exam Content Manual, Domain 3: Plan and Manage Demand, Section A: Demand Management, Subsection 4: Customer Service Management, Page 11.

Standardized containers are containers that have uniform dimensions and specifications, such as pallets, crates, boxes, etc. Standardized containers can facilitate transportation efficiency and inventory management by reducing the handling time, increasing the loading capacity, improving the space utilization, and simplifying the packaging and labeling processes. Standardized containers can also enable the use of automated storage/retrieval systems (AS/RS) and other technologies that require consistent dimensions and weights of the items. References: CPIM Part 2 Exam Content Manual, Domain 7: Plan and Manage Distribution, Section 7.1: Distribution Network Design, p. 38.