CSM CSM Operations & Supply Chain Management 2 — Questions and Answers
Question 1: In strategic management, 'outsourcing' a business function is most justified when:
- The function generates the company's primary competitive advantage
- An external provider can perform it more cost-effectively without sacrificing strategic value (Correct answer)
- Internal employees lack interest in performing the function
- Government regulations require use of third-party service providers
Correct answer: An external provider can perform it more cost-effectively without sacrificing strategic value
Outsourcing is strategically sound when a non-core function can be performed better or cheaper externally, freeing resources for activities that drive competitive differentiation.
Question 2: The Theory of Constraints (TOC) helps operations managers by:
- Calculating the minimum staffing needed to meet production targets
- Identifying and managing the single bottleneck limiting overall system throughput (Correct answer)
- Designing employee performance incentive programs
- Determining optimal reorder points for raw materials
Correct answer: Identifying and managing the single bottleneck limiting overall system throughput
TOC, developed by Eliyahu Goldratt, focuses on identifying the one constraint that limits the entire system's output and exploiting or elevating it to improve overall performance.
Question 3: What is 'capacity planning' in operations management?
- Measuring employee workload satisfaction through surveys
- Determining the production resources needed to meet current and future demand (Correct answer)
- Designing the physical layout of a manufacturing facility
- Evaluating suppliers for financial stability and delivery reliability
Correct answer: Determining the production resources needed to meet current and future demand
Capacity planning ensures an organization has sufficient production, labor, and equipment resources to meet anticipated demand while minimizing excess or shortfall.
Question 4: The 'bullwhip effect' in supply chains describes:
- A supplier's tendency to ship defective products during peak demand periods
- Small demand fluctuations at the retail level causing amplified order variability upstream (Correct answer)
- The physical cracking sound of automated warehouse sorting systems
- Rapid price increases cascading from raw materials to finished goods
Correct answer: Small demand fluctuations at the retail level causing amplified order variability upstream
The bullwhip effect occurs when minor demand changes at the consumer level are progressively amplified as orders move upstream, causing inefficient overproduction and excess inventory.
Question 5: Total Quality Management (TQM) emphasizes:
- Delegating quality responsibility solely to the quality assurance department
- Organization-wide participation in continuously improving processes, products, and services (Correct answer)
- Using statistical sampling to inspect finished goods before shipment
- Implementing quality controls only at final production stages
Correct answer: Organization-wide participation in continuously improving processes, products, and services
TQM is a comprehensive management philosophy that involves all employees and departments in continuously improving quality to enhance customer satisfaction and organizational performance.
Question 6: Which metric measures what percentage of customer orders are delivered completely, correctly, and on time?
- Inventory turnover ratio
- Perfect order rate (Correct answer)
- Cash-to-cash cycle time
- Days sales outstanding
Correct answer: Perfect order rate
The perfect order rate measures the percentage of orders that are delivered without any errors in quantity, condition, documentation, or timing — a comprehensive supply chain performance indicator.
CSM CSM Operations & Supply Chain Management 2
In strategic management, 'outsourcing' a business function is most justified when: