CPM Procurement & JIT Inventory 2 — Questions and Answers
Question 1: A plant manager wants to reduce supplier lead time variability. Which strategy best addresses this goal?
- Increase safety stock levels
- Develop long-term supplier partnerships with shared forecasting (Correct answer)
- Switch to spot-market purchasing
- Consolidate all purchases to a single annual order
Correct answer: Develop long-term supplier partnerships with shared forecasting
Long-term supplier partnerships with shared forecasting align incentives and reduce lead time variability through better planning coordination.
Question 2: In a JIT system, what is the primary role of a kanban card?
- Track employee productivity
- Authorize replenishment of a specific part or material (Correct answer)
- Schedule preventive maintenance
- Record quality inspection results
Correct answer: Authorize replenishment of a specific part or material
A kanban card serves as a visual signal that authorizes production or replenishment of a specific quantity of parts or materials.
Question 3: Which of the following purchasing metrics directly measures supplier delivery reliability?
- Total cost of ownership (TCO)
- On-time delivery rate (Correct answer)
- Purchase price variance (PPV)
- Supplier lead time average
Correct answer: On-time delivery rate
On-time delivery rate measures the percentage of orders delivered by the promised date, directly indicating supplier delivery reliability.
Question 4: A plant implements vendor-managed inventory (VMI). Who bears responsibility for maintaining optimal stock levels?
- The plant's procurement team
- The plant's warehouse manager
- The supplier (Correct answer)
- The logistics provider
Correct answer: The supplier
In VMI, the supplier monitors inventory levels and replenishes stock proactively, transferring inventory management responsibility to them.
Question 5: What does the term 'blanket purchase order' refer to in procurement?
- An emergency purchase bypassing normal approval
- A long-term agreement to purchase a quantity over time at fixed pricing (Correct answer)
- A purchase order covering multiple suppliers simultaneously
- A retroactive order for goods already received
Correct answer: A long-term agreement to purchase a quantity over time at fixed pricing
A blanket purchase order is a long-term commitment to buy a set quantity of goods over a period at pre-negotiated prices, reducing administrative overhead.
Question 6: Under JIT principles, which condition best supports a successful single-supplier strategy?
- The supplier has multiple competing plants
- The supplier is geographically distant but cost-competitive
- The supplier has consistently high quality and delivery performance (Correct answer)
- The part being sourced is a commodity with many alternatives
Correct answer: The supplier has consistently high quality and delivery performance
Single-supplier sourcing under JIT requires high confidence in the supplier's quality and delivery consistency to avoid production disruptions.
Question 7: Which of the following best describes 'total cost of ownership' (TCO) in a procurement context?
- The invoice price of purchased goods only
- The sum of all costs associated with acquiring, using, and disposing of a purchased item (Correct answer)
- The annual budget allocated to the procurement department
- The cost of holding inventory over one year
Correct answer: The sum of all costs associated with acquiring, using, and disposing of a purchased item
TCO encompasses acquisition price plus all downstream costs including quality failures, logistics, maintenance, and disposal over the item's life.
CPM Procurement & JIT Inventory 2
A plant manager wants to reduce supplier lead time variability.
Which strategy best addresses this goal?