CPIM Distribution Planning 3 — Questions and Answers
Question 1: In a hub-and-spoke distribution network, the primary function of the hub is to:
- Store finished goods for long-term inventory
- Consolidate and sort shipments for redistribution to spoke locations (Correct answer)
- Serve as a manufacturing point for regional demand
- Process customer returns exclusively
Correct answer: Consolidate and sort shipments for redistribution to spoke locations
Hubs act as consolidation and sorting points that receive shipments from spokes or suppliers and redistribute them to their destinations.
Question 2: The 'bullwhip effect' in distribution occurs when:
- Demand signals are amplified as they move upstream in the supply chain (Correct answer)
- Warehouse equipment malfunctions cause order delays
- Distribution trucks operate below capacity
- Inventory levels exceed safety stock targets
Correct answer: Demand signals are amplified as they move upstream in the supply chain
The bullwhip effect describes how small demand variability at the retail level becomes amplified into large order swings at upstream tiers.
Question 3: Which type of distribution channel involves goods flowing from manufacturer to wholesaler to retailer to consumer?
- Direct channel
- Single-level channel
- Two-level channel (Correct answer)
- Three-level channel
Correct answer: Two-level channel
A two-level channel has two intermediaries (wholesaler and retailer) between the manufacturer and end consumer.
Question 4: Pool distribution is most beneficial when:
- A single large customer receives full truckloads daily
- Multiple customers in the same region receive less-than-truckload shipments (Correct answer)
- International ocean freight is being consolidated
- A manufacturer ships directly to end consumers
Correct answer: Multiple customers in the same region receive less-than-truckload shipments
Pool distribution consolidates LTL shipments destined for the same region, reducing per-unit transportation cost through consolidation.
Question 5: Which distribution strategy should a company prioritize when customer service level is the primary competitive advantage?
- Minimize number of distribution facilities
- Maximize inventory turns at each DC
- Position inventory geographically to reduce order cycle time (Correct answer)
- Outsource all warehousing to reduce fixed costs
Correct answer: Position inventory geographically to reduce order cycle time
When service is the key differentiator, positioning inventory near customers reduces lead time and improves fill rates.
Question 6: A third-party logistics (3PL) provider offers the primary advantage of:
- Exclusive ownership of transportation assets
- Variable cost structure and specialized expertise without capital investment (Correct answer)
- Guaranteed lowest transportation rates in the market
- Full control over distribution operations
Correct answer: Variable cost structure and specialized expertise without capital investment
3PLs convert fixed logistics costs to variable costs and provide expertise, technology, and network scale without requiring capital investment.
Question 7: Which replenishment approach uses actual customer sales data transmitted from point-of-sale to trigger replenishment orders automatically?
- Min/max replenishment
- Continuous replenishment program (CRP) (Correct answer)
- Order point system
- Economic order quantity
Correct answer: Continuous replenishment program (CRP)
CRP uses real POS data shared by retailers to allow suppliers to automatically replenish store inventory based on actual consumption.
CPIM Distribution Planning 3
In a hub-and-spoke distribution network, the primary function of the hub is to: