CPIM Supply Planning & Procurement Processes 4 — Questions and Answers
Question 1: A firm uses a min-max inventory system. The minimum is 100 units and the maximum is 400 units. Current stock is 85 units. How many units should be ordered?
- 100 units
- 315 units (Correct answer)
- 300 units
- 400 units
Correct answer: 315 units
When stock falls below the minimum, order up to the maximum: 400 − 85 = 315 units.
Question 2: Which of the following is a key output of a supplier scorecard review?
- A revised bill of materials for purchased components
- Objective performance data used to guide supplier development or sourcing decisions (Correct answer)
- Updated safety stock levels for all purchased items
- A revised master production schedule
Correct answer: Objective performance data used to guide supplier development or sourcing decisions
Supplier scorecards aggregate KPIs (quality, delivery, cost) to identify improvement areas and inform sourcing strategies.
Question 3: In the context of procurement, what does the term 'make-or-buy analysis' evaluate?
- Whether to produce a component internally or source it from a supplier (Correct answer)
- Whether to place a market order or a limit order on commodity futures
- Whether to use MRP or a kanban system for replenishment
- Whether to pursue single or dual sourcing
Correct answer: Whether to produce a component internally or source it from a supplier
Make-or-buy analysis compares the costs and strategic implications of internal production versus external procurement.
Question 4: Which supply planning technique uses actual customer demand to pull replenishment through the supply chain rather than pushing based on forecasts?
- MRP
- DRP
- Demand-driven MRP (DDMRP) (Correct answer)
- Capacity Requirements Planning
Correct answer: Demand-driven MRP (DDMRP)
DDMRP uses strategically positioned buffers and actual demand signals to pull replenishment, reducing forecast-driven overproduction.
Question 5: A buyer issues an RFQ to five suppliers. Two respond with bids. What risk does this situation present?
- Maverick spending
- Insufficient competition, potentially yielding non-competitive pricing (Correct answer)
- Supplier collusion on pricing
- Excess inventory due to over-ordering
Correct answer: Insufficient competition, potentially yielding non-competitive pricing
Low bid response rates reduce competitive tension, which may result in higher prices or less favorable terms for the buyer.
Question 6: Which incoterm places maximum responsibility on the seller, requiring them to deliver goods to the buyer's named destination cleared for import?
- EXW (Ex Works)
- FOB (Free on Board)
- DDP (Delivered Duty Paid) (Correct answer)
- CIF (Cost, Insurance, and Freight)
Correct answer: DDP (Delivered Duty Paid)
DDP requires the seller to bear all costs and risks including import duties and taxes until goods are delivered to the buyer's location.
Question 7: Which planning horizon concept defines the time boundary within which the master production schedule is frozen and changes require management approval?
- Demand time fence (Correct answer)
- Planning time fence
- Cumulative lead time
- Order cycle time
Correct answer: Demand time fence
The demand time fence marks the near-term period where the MPS is fixed to protect execution; changes inside require management override.
CPIM Supply Planning & Procurement Processes 4
A firm uses a min-max inventory system.
The minimum is 100 units and the maximum is 400 units.
Current stock is 85 units.
How many units should be ordered?