CPIM Supply Planning and Management 3 — Questions and Answers
Question 1: When a manufacturer uses a 'chase' production strategy, which outcome is most likely compared to a 'level' strategy?
- Higher inventory levels and lower hiring/layoff costs
- Lower inventory levels and higher workforce variability costs (Correct answer)
- Lower overtime costs and stable workforce
- Higher throughput and lower setup costs
Correct answer: Lower inventory levels and higher workforce variability costs
Chase strategy matches production to demand each period, resulting in low inventory but frequent workforce adjustments and associated costs.
Question 2: In MRP, what is the significance of the 'planning time fence'?
- It defines the period within which no changes are allowed to the MPS (Correct answer)
- It separates the MPS horizon from the long-range plan
- It marks when safety stock replenishment triggers
- It defines the supplier lead time horizon
Correct answer: It defines the period within which no changes are allowed to the MPS
Within the planning time fence, the MPS is frozen or requires management approval to change, protecting shop floor execution stability.
Question 3: A firm's planned production exceeds demonstrated capacity consistently. Which action is LEAST appropriate?
- Adding overtime shifts
- Subcontracting excess work
- Reducing the safety stock policy (Correct answer)
- Revising the MPS downward
Correct answer: Reducing the safety stock policy
Reducing safety stock addresses inventory policy, not the capacity shortfall, and would likely worsen service levels.
Question 4: Which term describes the practice of grouping similar items together in a production run to reduce setup time and cost?
- Cellular manufacturing
- Lot streaming
- Family scheduling (Correct answer)
- Job sequencing
Correct answer: Family scheduling
Family scheduling groups products with similar setups into sequential runs, reducing the total number of major changeovers.
Question 5: Under a 'fixed-period' replenishment system, what triggers a replenishment order?
- Inventory falling below the reorder point
- The passage of a fixed time interval (Correct answer)
- A firm customer order being placed
- Forecast demand exceeding on-hand inventory
Correct answer: The passage of a fixed time interval
In a fixed-period (or periodic review) system, orders are placed at regular predetermined intervals regardless of current inventory level.
Question 6: What does the 'bullwhip effect' specifically describe in supply chain management?
- Increased lead time variability as products move downstream
- Amplification of demand variability as orders move upstream in the supply chain (Correct answer)
- Excess inventory accumulation at the retail level
- Supplier price fluctuations driven by commodity markets
Correct answer: Amplification of demand variability as orders move upstream in the supply chain
The bullwhip effect describes how small fluctuations in end-customer demand become amplified into large order swings as they move upstream to manufacturers and suppliers.
Question 7: A company wants to reduce its total supply chain inventory while maintaining service levels. Which strategy would be MOST effective?
- Increase safety stock at all nodes
- Centralize inventory at a single distribution center (Correct answer)
- Increase the number of stocking locations
- Reduce order frequency to improve lot efficiency
Correct answer: Centralize inventory at a single distribution center
Centralizing inventory exploits the 'risk pooling' effect, where combined variability is lower than the sum of individual location variabilities, reducing total safety stock needs.
CPIM Supply Planning and Management 3
When a manufacturer uses a 'chase' production strategy, which outcome is most likely compared to a 'level' strategy?