CPIM Supply Planning & Procurement Processes 5 — Questions and Answers
Question 1: A planner discovers that a supplier's quoted lead time has increased from 4 weeks to 7 weeks. What is the most immediate impact on the supply plan?
- Safety stock can be reduced to compensate
- Planned order release dates must be moved earlier to prevent stockouts (Correct answer)
- The reorder point decreases proportionally
- The economic order quantity automatically adjusts upward
Correct answer: Planned order release dates must be moved earlier to prevent stockouts
Longer lead times require earlier order releases to ensure material arrives on time; the reorder point also increases.
Question 2: Which procurement approach is most effective for reducing the total number of suppliers while maintaining supply continuity?
- Supplier rationalization (Correct answer)
- Competitive bidding
- Spot purchasing
- Consignment inventory
Correct answer: Supplier rationalization
Supplier rationalization systematically reduces the supply base to a smaller, more strategic set of preferred vendors.
Question 3: In a supply chain context, 'supply variability' refers to:
- Fluctuations in customer demand that affect production schedules
- Unpredictability in supplier lead times, quality, or quantity delivered (Correct answer)
- Changes in the bill of materials over a product's lifecycle
- Variation in warehouse labor productivity
Correct answer: Unpredictability in supplier lead times, quality, or quantity delivered
Supply variability encompasses all sources of unreliability from the supply side, including late deliveries and quantity shortages.
Question 4: Which of the following best describes a 'supplier development' initiative?
- Onboarding a new supplier to replace an underperforming one
- Collaborating with an existing supplier to improve their capabilities and performance (Correct answer)
- Negotiating lower prices by leveraging competitive bids
- Reducing the number of approved suppliers in the supply base
Correct answer: Collaborating with an existing supplier to improve their capabilities and performance
Supplier development involves investing time and resources to help an existing supplier improve quality, delivery, or capacity.
Question 5: A company implements postponement as a supply strategy. Which scenario best illustrates this concept?
- Building finished goods inventory well in advance of peak demand
- Deferring final product configuration until a customer order is received (Correct answer)
- Pre-ordering raw materials to lock in favorable commodity prices
- Increasing safety stock to buffer against demand uncertainty
Correct answer: Deferring final product configuration until a customer order is received
Postponement delays differentiation to the last possible moment, allowing generic intermediates to serve multiple market configurations.
Question 6: Which document does a supplier send to notify a buyer of an impending shipment, including item details, quantities, and expected arrival?
- Purchase Order Acknowledgment
- Bill of Lading
- Advanced Shipping Notice (ASN) (Correct answer)
- Certificate of Origin
Correct answer: Advanced Shipping Notice (ASN)
An ASN is sent by the supplier before shipment to inform the buyer of what is coming, enabling advance preparation for receiving.
Question 7: When calculating safety stock using the statistical method, which two inputs are most critical?
- Unit cost and order frequency
- Demand variability and supply lead time variability (Correct answer)
- Carrying cost percentage and ordering cost
- Supplier fill rate and warehouse capacity
Correct answer: Demand variability and supply lead time variability
Statistical safety stock formulas primarily rely on the standard deviation of demand and lead time variability to compute buffer requirements.
CPIM Supply Planning & Procurement Processes 5
A planner discovers that a supplier's quoted lead time has increased from 4 weeks to 7 weeks.
What is the most immediate impact on the supply plan?