CPIM-PART-2 Practice Questions

In a lean environment, one uses material requirements planning (MRP) processing primarily to

create plans to share with suppliers. MRP is a software-based system that calculates the quantity and

timing of materials needed for production, based on the master production schedule, the bill of

materials, and the inventory status. MRP helps to coordinate the flow of materials from suppliers to

the production process, reducing waste and inventory costs. MRP can also generate purchase orders,

work orders, and other documents to communicate the plans with suppliers and internal

departments. MRP does not calculate average daily demand, which is a measure of the average

amount of a product or service that is sold or consumed per day. MRP does not determine the

kanban circuit locations, which are the physical places where kanban cards or containers are

exchanged between processes in a pull system. MRP does not determine where to use

supermarkets, which are locations where a small amount of inventory is kept to buffer against

fluctuations in demand or supply. Reference: CPIM Exam Content Manual Version 7.0, Domain 4:

Plan and Manage Supply, Section 4.1: Supply Planning Concepts, p. 24; Lean MRP; Manufacturing

resource planning.

Up-to-date information about production order status is required to calculate the cost of work in

process (WIP). WIP is the inventory of unfinished goods or partially completed products that are still

in the production process1. The cost of WIP is the sum of the costs of the materials, labor, and

overhead that have been incurred in the production process but have not yet been transferred to the

finished goods inventory2. To calculate the cost of WIP, we need to know how much of each

production order has been completed and how much remains to be done. This information can be

obtained from the production order status, which is a report that shows the current status of each

production order in terms of its quantity, start date, end date, completion percentage, and variance3.

By using the production order status, we can determine the amount of WIP for each production

order and for the entire production process. This can help us monitor and control the production

efficiency, profitability, and quality4.

Reference: 1: Work In Progress (WIP) Definition 2 2: Work-in-Process (WIP) Accounting 3 3:

Production Order Status Report 5 4: How to Calculate Work in Process Inventory 6

The results from responding to uncertainty in the supply chain by exaggerating lead times and

increasing lot sizes is called the bullwhip effect. The bullwhip effect is a phenomenon that occurs

when small changes in demand at the downstream end of the supply chain (such as retailers or

customers) cause larger and larger fluctuations in demand at the upstream end of the supply chain

(such as wholesalers, distributors, or manufacturers). The bullwhip effect can create inefficiencies,

waste, and costs in the supply chain, as well as reduce customer satisfaction and profitability.

One of the causes of the bullwhip effect is the response to uncertainty in the supply chain by

exaggerating lead times and increasing lot sizes. Lead time is the time between placing an order and

receiving it from a supplier. Lot size is the quantity of units ordered or produced at a time. When

there is uncertainty or variability in demand or supply, such as due to seasonality, promotions,

disruptions, or forecasting errors, some supply chain members may try to cope by exaggerating lead

times and increasing lot sizes. For example, a retailer may increase its safety stock or reorder point to

avoid stockouts or delays, or a manufacturer may produce more than needed to take advantage of

economies of scale or discounts. However, these actions can have unintended consequences, as they

can distort the demand information and amplify the demand variability along the supply chain. This

can result in excess inventory, low inventory turnover, high holding costs, poor service levels, lost

sales, obsolete products, or capacity issues.

To prevent or reduce the bullwhip effect caused by responding to uncertainty in the supply chain by

exaggerating lead times and increasing lot sizes, some possible solutions are:

Improving communication and collaboration among supply chain members to share accurate and

timely demand information and forecasts.

Reducing lead times and lot sizes by using lean production techniques, just-in-time inventory

systems, or quick response methods.

Implementing vendor-managed inventory (VMI) systems, where suppliers are responsible for

managing and replenishing the inventory of their customers based on their actual consumption data.

Adopting advanced technologies, such as radio-frequency identification (RFID), artificial intelligence

(AI), or blockchain, to enhance visibility, traceability, and coordination in the supply chain.

Reference := Bullwhip Effect: Meaning, Example, Impact - Investopedia, Bullwhip Effect - What Is It,

Causes, Supply Chain, Examples, Bullwhip Effect: Example, Causes, and Impact on Supply Chain

The capacity requirements plan is used primarily to balance capacity and load at work centers. A

work center is a location where one or more resources perform a specific operation or a group of

operations. Capacity is the amount of time or output that a work center can offer for production

activities. Load is the amount of time or output that a work center is required to produce based on

the planned production schedule. Balancing capacity and load means matching the available capacity

with the required load, so that there is no excess or shortage of capacity at any work center.

The capacity requirements plan is a report that shows the projected load and capacity of each work

center over a planning horizon. It is derived from the master production schedule (MPS), which

specifies the quantity and timing of finished goods to be produced, and the bill of materials (BOM),

which specifies the components and materials needed for each finished good. The capacity

requirements plan also uses the routing file, which specifies the sequence of operations and work

centers required for each finished good, and the work center file, which specifies the capacity and

availability of each work center. The capacity requirements plan can help to identify any gaps or

surpluses in capacity at each work center and to take corrective actions, such as revising the MPS,

rescheduling operations, adding or reducing resources, or outsourcing production.

The other options are not the primary uses of the capacity requirements plan. Calculating the level of

available capacity is an input to the capacity requirements plan, not an output. The level of available

capacity is determined by the work center file, which contains information such as shifts, hours,

efficiency, utilization, and maintenance of each work center. Determining the overall product load

profile is not a use of the capacity requirements plan, as it does not consider the product mix or

demand variability. The overall product load profile is a general estimate of the total production

volume or demand over a period of time. Determining the priority of orders is not a use of the

capacity requirements plan, as it does not consider the due dates or urgency of orders. The priority

of orders is determined by using priority rules or dispatching methods, such as first-come-first-served

(FCFS), shortest processing time (SPT), earliest due date (EDD), or critical ratio (CR).

Reference := Capacity

Requirements

Planning

(CRP):

Definition

and

Procedures, Capacity

Requirements Planning (CRP Plan and Strategies) - ERP Information, Definition of Capacity

Requirements Planning (CRP) - Gartner …

Mixed-model scheduling is a production technique that allows for the simultaneous production of

different products or features on the same production line or system. Mixed-model scheduling can

help reduce lead times, inventory levels, setup times, and material shortages by increasing the

flexibility and responsiveness of the production process. One of the benefits of mixed-model

scheduling is improved demand response, which means the ability to meet customer demand

without delay or stockout. Improved demand response can enhance customer satisfaction and

loyalty, as well as reduce the need for safety stock or buffer inventory. By using mixed-model

scheduling, a company can produce products or features according to the actual or forecasted

customer demand, rather than producing large batches of standardized products or features. This can

help avoid overproduction or underproduction, which can result in excess inventory or lost sales.

Mixed-model scheduling can also help adjust the production output quickly and easily when there

are changes or fluctuations in demand, by using flexible automation, lean production techniques, or

quick response methods.

The other options are not benefits of mixed-model scheduling. Increased inventory is not a benefit of

mixed-model scheduling, but rather a drawback. Increased inventory can increase inventory costs,

such as holding costs, transportation costs, or obsolescence costs. It can also reduce inventory

visibility and control, as well as increase the risk of quality issues or spoilage. Mixed-model

scheduling can help reduce inventory by producing products or features in small batches or single

units that match customer demand. Fewer setups are not a benefit of mixed-model scheduling, but

rather a requirement. Fewer setups mean less time and resources spent on changing or adjusting the

production system to produce different products or features. Fewer setups can increase the

efficiency and productivity of the production process, as well as reduce the setup costs and waste.

Mixed-model scheduling requires fewer setups to enable the simultaneous production of different

products or features on the same production line or system. Fewer material shortages are not a

benefit of mixed-model scheduling, but rather an outcome. Fewer material shortages mean less

disruption or delay in the production process due to the lack of materials or components needed for

production. Fewer material shortages can improve the quality and reliability of the production

process, as well as reduce the material costs and waste. Mixed-model scheduling can result in fewer

material shortages by reducing the lead times and inventory levels of materials or components, as

well as by improving the communication and coordination with suppliers.

Reference := Mixed Model Scheduling - Mountain Home Academy, Reduce Lot Sizes, Mixed Model

Scheduling - Academic library, Introduction To Mixed Model Production …{Strategos}

A bill of resources is a tool that is used to evaluate the impact that a production plan has on

capacity. A bill of resources is a document that lists the required resources, such as machines, labor,

materials, and space, for each product or service in the production plan1. A bill of resources can help

estimate the total capacity requirements for the production plan, as well as the capacity utilization

and availability for each resource2. A bill of resources can also help identify potential capacity gaps,

bottlenecks, or excesses, and evaluate alternative production plans or resource allocations3.

A bill of resources can be created by using the following steps4:

Step 1: Identify the products or services in the production plan and their quantities and timings.

Step 2: Identify the resources needed for each product or service and their quantities and timings.

This can be done by using tools such as product routings, process maps, or work breakdown

structures.

Step 3: Aggregate the resource requirements for each product or service and for the entire

production plan. This can be done by using tools such as spreadsheets, tables, or charts.

Step 4: Compare the resource requirements with the resource capacities and availability. This can be

done by using tools such as capacity planning matrices, load profiles, or resource histograms.

Step 5: Analyze the results and make adjustments or recommendations. This can be done by using

tools such as what-if analysis, simulation, or optimization.

Therefore, a bill of resources is a tool that is used to evaluate the impact that a production plan has

on capacity.

Reference: 1: Bill of Resources Definition 1 2: Capacity Planning Definition 2 3: Capacity Planning

Tools 3 4: How to Create a Bill of Resources 4

The output of the equipment on Day 6 can be calculated by multiplying the demonstrated capacity,

the utilization, and the efficiency. The demonstrated capacity is given as $1,200 per day. The

utilization is the ratio of the actual time that the equipment is used to the available time that it could

be used. Since the utilization is reduced by 25% on Day 6, it means that the equipment is used for

75% of the available time. Therefore, the utilization is 0.75. The efficiency is the ratio of the actual

output to the standard output. It is given as 110%, which means that the equipment produces 10%

more than the standard output. Therefore, the efficiency is 1.1. The output on Day 6 can be found by

multiplying these three factors:

Output = Demonstrated capacity x Utilization x Efficiency Output = $1,200 x 0.75 x 1.1 Output = $990

Therefore, the output on Day 6 is $990. Reference: CPIM Part 2 Exam Content Manual, Version 7.0,

Domain 6: Plan, Manage, and Execute Detailed Schedules, Section A: Detailed Capacity Planning and

Scheduling, Subsection 2: Capacity Management Concepts and Calculations, p. 37-38.

A balanced scorecard is a performance measurement approach that involves linking financial and

non-financial performance measures to organizational goals. According to the web search results, a

balanced scorecard is a strategic planning and management system that organizations use to

communicate what they are trying to accomplish, align the day-to-day work with strategy, prioritize

projects, products, and services, and measure and monitor progress towards strategic targets1. A

balanced scorecard focuses on four key perspectives: financial, customer, internal business process,

and learning and growth2. Each perspective includes objectives, measures, targets, and initiatives

that are aligned with the organization’s vision, mission, and strategy3. By using a balanced scorecard,

organizations can balance the short-term and long-term objectives, the financial and non-financial

outcomes, and the internal and external stakeholders.

Standardized containers are containers that have uniform dimensions and specifications, such as

pallets, crates, boxes, etc. Standardized containers can facilitate transportation efficiency and

inventory management by reducing the handling time, increasing the loading capacity, improving the

space utilization, and simplifying the packaging and labeling processes. Standardized containers can

also enable the use of automated storage/retrieval systems (AS/RS) and other technologies that

require consistent dimensions and weights of the items. Reference: CPIM Part 2 Exam Content

Manual, Domain 7: Plan and Manage Distribution, Section 7.1: Distribution Network Design, p. 38.

Third-party logistics (3PL) services are services that involve outsourcing some or all of the logistics

functions of a firm, such as transportation, warehousing, distribution, or order fulfillment, to an

external provider1. By using 3PL services, a firm can reduce its need to own and operate its own

logistics assets, such as trucks, trailers, warehouses, or inventory management systems. These assets

are classified as fixed assets on the balance sheet, because they are long-term and tangible assets

that are used in the normal course of business2. Therefore, increased use of 3PL services is likely to

have the effect of decreasing the fixed assets on a firm’s balance sheet.

The other options are not likely effects of increased use of 3PL services on a firm’s balance

sheet. Retained earnings are the accumulated net income of a firm that is not distributed to

shareholders as dividends3. Retained earnings are not directly affected by the use of 3PL services,

unless the firm’s net income changes as a result of cost savings or revenue growth from outsourcing

logistics functions. Accounts receivable are the amounts owed to a firm by its customers for goods or

services delivered on credit4. Accounts receivable are not directly affected by the use of 3PL services,

unless the firm’s sales volume or credit terms change as a result of improved customer service or

delivery performance from outsourcing logistics functions. Intangible assets are non-physical assets

that have value based on their intellectual or legal rights, such as patents, trademarks, goodwill, or

brand names5. Intangible assets are not directly affected by the use of 3PL services, unless the firm’s

reputation or market position changes as a result of enhanced quality or innovation from outsourcing

logistics functions. Reference:

What Is Third Party Logistics (3PL) ? | Definition, Types, Benefits

Fixed Asset - Definition & Examples (Assets = Liabilities + Equity)

Retained Earnings - Definition & Formula

Accounts Receivable - Overview, Examples & Importance

Intangible Asset - Definition & Examples