CBM CBM Supply Chain & Operations Management 2 — Questions and Answers
Question 1: What is the Economic Order Quantity (EOQ) model designed to determine?
- The optimal order size that minimizes total inventory ordering and holding costs (Correct answer)
- The maximum number of suppliers a company should use
- The ideal warehouse layout for picking efficiency
- The minimum order quantity required by a supplier
Correct answer: The optimal order size that minimizes total inventory ordering and holding costs
EOQ calculates the order quantity that balances ordering costs against inventory holding costs to achieve the lowest possible total inventory cost.
Question 2: Which operations management tool uses a visual representation of material and information flow to identify waste and inefficiencies in a process?
- Value Stream Mapping (Correct answer)
- Gantt Chart
- Pareto Chart
- Control Chart
Correct answer: Value Stream Mapping
Value Stream Mapping is a lean tool that visually depicts every step in a process, highlighting non-value-adding activities and waste to guide improvement efforts.
Question 3: A manufacturer wants to assess supplier reliability. Which metric measures the percentage of orders delivered on time and in full?
- Perfect Order Rate (OTIF) (Correct answer)
- Supplier Lead Time
- Purchase Price Variance
- Defect Rate
Correct answer: Perfect Order Rate (OTIF)
On Time In Full (OTIF) or Perfect Order Rate measures the percentage of orders that are delivered complete, on time, damage-free, and with correct documentation.
Question 4: In operations management, what does the term 'throughput' refer to?
- The rate at which a system generates revenue through sales (Correct answer)
- The total number of employees in a production facility
- The amount of raw material stored in a warehouse
- The time required to train a new production worker
Correct answer: The rate at which a system generates revenue through sales
In the Theory of Constraints, throughput is defined as the rate at which the system generates money through sales, excluding totally variable costs.
Question 5: Which quality management concept refers to the total cost associated with preventing, detecting, and correcting defective products?
- Cost of Quality (COQ) (Correct answer)
- Total Productive Maintenance
- Statistical Process Control
- Six Sigma DPMO
Correct answer: Cost of Quality (COQ)
Cost of Quality categorizes quality-related expenses into prevention costs, appraisal costs, and failure costs (internal and external) to highlight the financial impact of quality decisions.
Question 6: A business manager is evaluating whether to make a component in-house or purchase it from a supplier. This decision is known as a:
- Make-or-Buy Decision (Correct answer)
- Capital Budgeting Analysis
- Break-Even Analysis
- Capacity Planning Decision
Correct answer: Make-or-Buy Decision
A Make-or-Buy Decision analyzes cost, quality, strategic considerations, and capacity to determine whether to produce internally or outsource to an external supplier.
CBM CBM Supply Chain & Operations Management 2
What is the Economic Order Quantity (EOQ) model designed to determine?