CPIM Distribution Planning 5 — Questions and Answers
Question 1: A company is experiencing high stockout rates at its regional DCs despite adequate central warehouse inventory. Which planning action would most directly address this?
- Increase the reorder point at the central warehouse
- Improve demand sensing and replenishment frequency at the regional DC level (Correct answer)
- Reduce safety stock across the network
- Switch all customers to direct shipping from the central warehouse
Correct answer: Improve demand sensing and replenishment frequency at the regional DC level
Improving demand sensing and replenishment frequency at regional DCs ensures inventory is available where and when customers need it.
Question 2: Which cost trade-off is central to determining the optimal number of distribution centers in a network?
- Manufacturing cost vs. quality cost
- Transportation cost vs. facility and inventory cost (Correct answer)
- Labor cost vs. automation cost
- Carrying cost vs. ordering cost
Correct answer: Transportation cost vs. facility and inventory cost
Adding DCs reduces outbound transportation costs but increases fixed facility costs and total inventory (more safety stock required), creating a classic trade-off.
Question 3: What is the primary purpose of a distribution resource plan (DRP) bill of distribution?
- Listing the components needed to manufacture a finished good
- Mapping the supply chain network structure showing how inventory flows between locations (Correct answer)
- Documenting the cost of each distribution lane
- Defining customer service level agreements
Correct answer: Mapping the supply chain network structure showing how inventory flows between locations
A bill of distribution defines the parent-child relationships between stocking locations, showing how replenishment flows from plants or central DCs to regional nodes.
Question 4: Reverse logistics in distribution planning primarily addresses:
- Shipping products from factory to customer
- Managing the return flow of goods from customers back through the supply chain (Correct answer)
- Reversing an incorrect customer shipment within 24 hours
- Backhaul optimization for empty truck returns
Correct answer: Managing the return flow of goods from customers back through the supply chain
Reverse logistics encompasses processes for returns, repairs, refurbishment, recycling, and disposal of products flowing back from customers.
Question 5: When calculating the economic order quantity (EOQ) for a distribution center, increasing the holding cost rate will:
- Increase the EOQ
- Decrease the EOQ (Correct answer)
- Have no effect on EOQ
- Double the EOQ
Correct answer: Decrease the EOQ
EOQ = sqrt(2DS/H); as holding cost H increases, the denominator grows and EOQ decreases, favoring smaller, more frequent orders.
Question 6: Which distribution center layout design is most efficient for a high-velocity, low-SKU-count operation?
- Random storage with dynamic slot assignment
- Fixed storage with dedicated product locations and straight-through flow aisles (Correct answer)
- Chaotic storage with barcode-guided retrieval
- Multi-level racking with automated cranes
Correct answer: Fixed storage with dedicated product locations and straight-through flow aisles
High-velocity, limited-SKU operations benefit from fixed, dedicated locations near shipping with straight-through flow to minimize travel time.
Question 7: A company implements a 'push' distribution strategy. This means inventory is deployed based on:
- Actual customer orders received at each DC
- Forecasted demand, with inventory pushed out to DCs before orders are placed (Correct answer)
- Customer pull signals transmitted through POS systems
- Kanban signals from retail store shelves
Correct answer: Forecasted demand, with inventory pushed out to DCs before orders are placed
A push strategy deploys inventory to distribution points based on forecasts rather than waiting for actual demand signals.
CPIM Distribution Planning 5
A company is experiencing high stockout rates at its regional DCs despite adequate central warehouse inventory.
Which planning action would most directly address this?