APICS APICS Certifications CPIM Questions & Answers

• Question 131:

  A company selling seasonal products is preparing their sales and operations plan for the coming year. Their current labor staffing is at the maximum for their production facility and cannot meet the forecasted demand. The business plan shows they do not have the financial capability to add to the production facility. Which of the following actions would be most appropriate?

  A. Uselevel production planning and investigate subcontracting to meet the extra demand.

  B. Usechaseproduction planningand only take the orders that can be produced In the highdemand season.

  C. Usehybridproduction planningto save labor costs and inventory costs in the low demand season.

  D. Usehybridproduction planningand reduce the size of the customer base during the highdemand season.

  Correct Answer: A

  Level production planning is a strategy that maintains a constant output rate, production rate, or workforce level over the planning horizon. It is suitable for products with stable demand or seasonal demand that can be smoothed by using inventory or backorders. Level production planning can help reduce labor costs, hiring and firing costs, and overtime costs. However, it may also result in high inventory costs or customer dissatisfaction due to long lead times or stockouts. To overcome these drawbacks, the company can investigate subcontracting to meet the extra demand during the peak season. Subcontracting is the process of outsourcing some or all of the production to another firm. It can help the company increase its capacity, flexibility, and responsiveness without investing in additional facilities or equipment. Subcontracting can also reduce the risk of obsolescence or spoilage of seasonal products.

  Option B is not appropriate, because chase production planning is a strategy that adjusts the production rate to match the demand rate over the planning horizon. It is suitable for products with highly variable or uncertain demand that cannot be smoothed by using inventory or backorders. Chase production planning can help minimize inventory costs and avoid overproduction or underproduction. However, it may also result in high labor costs, hiring and firing costs, and overtime costs. Moreover, it may limit the company's ability to capture the market share and satisfy the customer demand during the high demand season.

  Option C is not appropriate, because hybrid production planning is a strategy that combines the features of level production planning and chase production planning. It is suitable for products with moderate variability or uncertainty in demand that can be partially smoothed by using inventory or backorders. Hybrid production planning can help balance the trade-offs between inventory costs and labor costs. However, it may also increase the complexity and difficulty of coordinating the production and demand plans. Moreover, it may not address the company's financial constraints or capacity limitations.

  Option D is not appropriate, because reducing the size of the customer base during the high demand season is a risky and counterproductive move. It may result in losing loyal customers, damaging the company's reputation, and forfeiting potential profits. It may also create an opportunity for competitors to gain market share and customer loyalty.

• Question 132:

  Which of the following statements correctly describes the relationship between the strategic plan and the business plan?

  A. These are two names for the same plan.

  B. The strategic plan constrains the business plan.

  C. The two plans are developed independently.

  D. The two plans are the output of a single process.

  Correct Answer: B

  A strategic plan is a document that outlines the long-term vision, goals, and direction of an organization. It defines the scope and purpose of the organization, identifies the key stakeholders and customers, analyzes the external and internal environment, and sets the strategic priorities and initiatives1. A business plan is a document that describes the details of a specific business venture, product, or service. It covers the market analysis, marketing strategy, financial plan, operational plan, and risk assessment. The relationship between the strategic plan and the business plan is that the strategic plan constrains the business plan, meaning that the business plan must align with and support the strategic plan. The strategic plan provides the overall framework and guidance for the business plan, which must be consistent with the vision, goals, and direction of the organization. The business plan must also consider the opportunities and threats identified in the strategic plan, and show how the business venture, product, or service will contribute to the strategic objectives and performance indicators.

  References: Strategic Plan vs. Business Plan: What's the Difference? 4 Business Plan Definition - Entrepreneur Small Business Encyclopedia 5 3 Difference between a Business vs Strategic Plan | OnStrategy 6 4 CPIM Exam References Association for Supply Chain Management 1

• Question 133:

  Long lead-time items with stable demand would best be supported by a supply chain:

  A. using a pull system.

  B. linked through an enterprise resources planning (ERP) system.

  C. designed to be responsive.

  D. positioning inventory close to the consumer.

  Correct Answer: D

  Long lead-time items with stable demand are best supported by a supply chain that positions inventory close to the consumer. This reduces the risk of stockouts and improves customer service levels. It also allows the supply chain to buffer against demand variability and supply disruptions. Positioning inventory close to the consumer is a form of postponement strategy, where the final assembly or customization of products is delayed until the customer order is received

• Question 134:

  A company decided not to pursue a business opportunity In a foreign market due to political Instability and currency fluctuations. Which risk control strategy did this business utilize?

  A. Mitigation

  B. Prevention

  C. Recovery

  D. Wait and see

  Correct Answer: B

  Prevention is a risk control strategy that involves avoiding or eliminating the sources of risk. By deciding not to pursue a business opportunity in a foreign market due to political instability and currency fluctuations, the company prevented the potential losses or disruptions that could arise from these factors. Mitigation is a risk control strategy that involves reducing the impact or likelihood of risk. Recovery is a risk control strategy that involves restoring normal operations after a risk event occurs. Wait and see is a risk control strategy that involves monitoring the risk situation and taking action only when necessary.

• Question 135:

  A life cycle assessment (LCA) would be used to determine:

  A. the length of a long-term agreement.

  B. how an Item should be scheduled.

  C. environmental aspects and impacts.

  D. If risk pooling would reduce inventory investment.

  Correct Answer: C

  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.

• Question 136:

  A company with stable demand that uses exponential smoothing to forecast demand would typically use a:

  A. low alpha value.

  B. low beta value.

  C. high beta value.

  D. high alpha value.

  Correct Answer: A

  Exponential smoothing is a forecasting method that uses weighted averages of past observations to predict future values. The weights decrease exponentially as the observations get older, giving more importance to recent data. Exponential smoothing can be applied to data with different patterns, such as level, trend, or seasonality. Depending on the pattern, different exponential smoothing models and parameters are used. Two common parameters are alpha () and beta ():

  Alpha is the smoothing parameter for the level component of the forecast. The level component is the average or typical value of the data. Alpha can range from 0 to 1, not inclusive. A low alpha value gives more weight to older observations and produces a smoother forecast. A high alpha value gives more weight to recent observations and produces a more responsive forecast.

  Beta is the smoothing parameter for the trend component of the forecast. The trend component is the direction and rate of change of the data over time. Beta can also range from 0 to 1, notinclusive. A low beta value gives more weight to older trends and produces a smoother forecast. A high beta value gives more weight to recent trends and produces a more responsive forecast.

  A company with stable demand that uses exponential smoothing to forecast demand would typically use a low alpha value. Stable demand means that the data do not have significant variations, fluctuations, or patterns over time. In this case, a simple exponential smoothing model that estimates only the level component is sufficient. A low alpha value would produce a smooth and stable forecast that reflects the average demand level and does not react to random noise or outliers. The other options are not correct, as they either refer to a different parameter (beta) or a different scenario (high alpha value):

  A low beta value would be used for data with a trend component, but a stable demand does not have a trend component. A low beta value would produce a smooth and stable trend forecast that does not react to random noise or outliers.

  A high beta value would also be used for data with a trend component, but a stable demand does not have a trend component. A high beta value would produce a responsive and dynamic trend forecast that reflects the recent changes in the data.

  A high alpha value would be used for data with a high variability or uncertainty, but a stable demand does not have these characteristics. A high alpha value would produce a responsive and dynamic level forecast that reflects the recent changes in the data.

• Question 137:

  The trade-off of increasing safety stock to improve customer fill rate would be a decrease in:

  A. pipeline inventory.

  B. transportation costs.

  C. inventory turns.

  D. sales revenue.

  Correct Answer: C

  Increasing safety stock to improve customer fill rate would result in a decrease in inventory turns. Inventory turns, or inventory turnover, is a metric measuring how fast the inventory is replaced over time. It is calculated as the cost of goods sold divided by the average value of inventory during the period covered1. A higher inventory turnover ratio indicates that the company sells its inventoryquickly and efficiently, while a lower ratio implies that the company holds too much inventory or has difficulty selling it. Safety stock is an extra quantity of a product stored in the warehouse to prevent an out-of-stock situation. It serves as insurance against fluctuations in demand, longer lead times, and price fluctuations2. Increasing safety stock means increasing the average value of inventory, which lowers the inventory turnover ratio. This also increases the inventory carrying costs, such as storage, insurance, taxes, and obsolescence. Therefore, there is a trade-off between increasing safety stock to improve customer fill rate and decreasing inventory turns to reduce inventory costs

• Question 138:

  Which of the following environments is most suitable for the use of kanban systems?

  A. Short product life cycles

  B. High levels of customization

  C. Intermittent production

  D. Stable and predictable demand

  Correct Answer: D

  Kanban is a pull system that uses visual signals to trigger the replenishment of materials or parts. It works best in environments where the demand is stable and predictable, and the production process is continuous and standardized. Kanban helps to reduce inventory, waste, and lead time by synchronizing the production and consumption rates. Kanban is not suitable for environments where the demand is volatile, the product life cycle is short, the production process is intermittent, or the product is highly customized. These factors would require frequent changes in the kanban system and reduce its effectiveness.

• Question 139:

  A company assembles kits of hand tools after receipt of the order from distributors and uses two-level master scheduling. The appropriate levels of detail for the forecasts that are input to master scheduling would be total number of kits and:

  A. each unique tool.

  B. percentage of total for each tool.

  C. raw material requirements.

  D. specific kit configurations.

  Correct Answer: D

  A company that uses two-level master scheduling has a master production schedule (MPS) for the end items (kits) and a final assembly schedule (FAS) for the components (tools). The forecasts that are input to master scheduling should reflect the total number of kits and the specific kit configurations, as these determine the demand for the components. The other options are not relevant for master scheduling, as they do not reflect the end item demand or the bill of materials structure.

• Question 140:

  Risk pooling would work best for items with:

  A. low demand uncertainty and short lead times.

  B. low demand uncertainty and long lead times.

  C. high demand uncertainty and short lead times.

  D. high demand uncertainty and long lead times.

  Correct Answer: D

  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 pooling