Download Certified in Planning and Inventory Management (Part 2).CPIM-Part-2.VCEplus.2023-11-23.27q.vcex

A buffer in the theory of constraints (TOC) is a level of inventory that is placed before the governing constraint or the bottleneck to prevent it from being starved or idle. Buffers are used to immunize the system's performance from variability in demand or production. Buffers are part of the drum buffer rope method of scheduling and managing operations that have constraints. The purpose of a buffer in TOC is to prevent unplanned idleness of the resource, which is the most important factor that determines the throughput of the system. Throughput is the rate at which the system generates money through sales. If the resource is idle, then the system loses potential throughput and profit. Therefore, buffers are designed to ensure that there is always enough work available for the resource to process, regardless of any fluctuations or disruptions in the upstream or downstream processes.

Input/output control (I/O) is a type of tool that is used for monitoring a capacity plan. A capacity plan is a statement of the resources needed to meet the production plan over a medium-term horizon. A capacity plan can be stated in different units of measure depending on the type of manufacturing environment, such as hours, units, tons, or dollars. Input/output control (I/O) is a method of measuring and comparing the actual input and output of a work center or a production line against the planned input and output. Input is the amount of work that is released to the work center or the production line, and output is the amount of work that is completed by the work center or the production line. Input/output control (I/O) helps to monitor the performance and efficiency of the work center or the production line, and to identify any deviations or problems that may affect the capacity plan. Input/output control (I/O) also helps to adjust the input or output levels as necessary to maintain the balance between demand and supply, and to achieve the desired throughput.

Maintenance, repair, and operating (MRO) supply systems are systems that manage the inventory and procurement of the items that are used to support the production process, but are not part of the final product. MRO items include spare parts, tools, lubricants, cleaning supplies, safety equipment, and office supplies. The primary consideration in MRO supply systems typically is stockout costs. Stockout costs are the costs associated with the inability to meet the demand for an item due to insufficient inventory. Stockout costs can include lost sales, customer dissatisfaction, production downtime, emergency orders, and reputation damage. Stockout costs can be very high for MRO items, especially if they are critical for the operation and maintenance of the production equipment. Therefore, MRO supply systems should aim to minimize the risk of stockouts by ensuring adequate availability and accessibility of MRO items.

The load on a work center is the total time required to complete all the work orders assigned to that work center. The load can be calculated by multiplying the quantity and the run time of each work order, and then adding them up. The formula is:Load = (Q1 x R1) + (Q2 x R2) + ... + (Qn x Rn)Where Q is the quantity and R is the run time of each work order.Using the data from the table, we can plug in the values and get:Load = (10 x 8) + (15 x 9) + (12 x 7.5) + (20 x 10) + (8 x 6.5) = 80 + 135 + 90 + 200 + 52 = 557Therefore, the load on this work center is 557 hours.

The horizon for forecasts that are input to the sales and operations planning (S&OP) process should be long enough that required resources can be properly planned. The S&OP process is a cross-functional process that aligns the demand and supply plans of an organization. The S&OP process consists of several steps, such as data gathering, demand planning, supply planning, pre-S&OP meeting, executive S&OP meeting, and S&OP implementation. The output of the S&OP process is the production plan, which is a statement of the resources needed to meet the aggregate demand plan over a medium-term horizon. The production plan can be stated in different units of measure depending on the type of manufacturing environment, such as hours, units, tons, or dollars. The horizon for forecasts that are input to the S&OP process should be long enough that required resources can be properly planned, meaning that the organization can anticipate and allocate the necessary capacity, materials, labor, equipment, and facilities to meet the expected demand. The horizon for forecasts should also match the lead time for acquiring or changing the resources, as well as the planning cycle for updating the production plan.

Rivalry among competing sellers is the degree of competition between firms in the same industry. It can affect the profitability and market share of the firms, and influence their strategies and decisions. Rivalry tends to be stronger when the demand is slow, the products are similar, the switching costs are low, and the capacity is high. Rivalry can also lead to innovation, differentiation, and customer satisfaction.Rivalry among competing sellers is generally weaker when buyer demand is growing rapidly. This is because a fast-growing market offers more opportunities for expansion and growth for all the firms, without having to compete aggressively for a limited number of customers. A fast-growing market also reduces the pressure to cut prices or increase advertising, as the demand exceeds the supply. A fast-growing market can also attract new entrants, which can increase the rivalry in the long run, but in the short run, it can create more diversity and segmentation in the market.

When procuring for innovative products, the focus should be on the total landed cost, which is the sum of all costs associated with making and delivering products to the point where they are used. This includes not only the unit cost, but also the transportation, handling, inventory, taxes, duties, and other fees associated with the procurement process. By focusing on the total landed cost, procurement can evaluate the true value of innovative products and compare them with alternative solutions. Focusing on unit cost alone may overlook the potential benefits of innovation, such as improved quality, performance, or sustainability. Lead times and lot sizes are also important factors to consider, but they are not the main focus when procuring for innovation.Reference: CPIM Part 2 Exam Content Manual, Domain 4: Plan and Manage Supply, Section A: Supply Management Concepts and Approaches, Subsection 2: Procurement Strategies and Techniques, Page 17.

Customer service performance is the degree to which a product or service meets or exceeds customer expectations. The most relevant measure of customer service performance is how the customer perceives the service compared to what they expected. This measure reflects the customer's satisfaction and loyalty, which are key factors for business success. Other measures, such as service promised versus measured, customer complaints, or positive feedback, are more related to the supplier's perspective and may not capture the customer's true perception of service quality.Reference: CPIM Part 2 Exam Content Manual, Domain 3: Plan and Manage Demand, Section A: Demand Management, Subsection 4: Customer Service Management, Page 11.

Producing to backorders means that the company only produces goods when there is a confirmed customer order. This strategy is most appropriate during times of highly fluctuating demand, as it allows the company to avoid holding excess inventory that may incur high carrying costs and become obsolete. Producing to backorders also enables the company to adjust its workforce according to the actual demand, which can be easily changed as the question states. This strategy can improve customer satisfaction, as the products are tailored to the specific needs and preferences of each customer. However, producing to backorders also has some drawbacks, such as longer lead times, higher production costs, and lower economies of scale.The other strategies are less suitable for highly fluctuating demand. Producing at a constant level means that the company produces goods at a fixed rate regardless of the demand fluctuations. This strategy can result in either excess inventory or stockouts, depending on whether the demand is lower or higher than the production level. Producing to the sales forecast means that the company produces goods based on the projected demand for a certain period. This strategy can be effective if the forecast is accurate, but it can also lead to inventory imbalances if the forecast is inaccurate or if there are unexpected changes in demand. Producing to demand means that the company produces goods based on the current demand in the market. This strategy can be responsive and flexible, but it can also be challenging to implement, as it requires high visibility, coordination, and agility in the supply chain.

The S&OP process in an ATO production environment focuses on control of key intermediate part inventory, which are the components or subassemblies that are produced in advance and assembled to order when the customer order is received. By controlling the key intermediate part inventory, the S&OP process can balance the demand and supply of the final products, while reducing the lead time and inventory costs. The key intermediate part inventory is also known as the decoupling point, where the production process switches from MTS to MTO mode. The S&OP process can determine the optimal level of key intermediate part inventory based on the forecast and backlog of customer orders, as well as the production capacity and costs.The other options are less relevant for the S&OP process in an ATO production environment. End product backlog refers to the customer orders that have not been fulfilled yet. Finished goods inventory refers to the final products that are ready for sale. Raw material inventory refers to the basic materials that are used to produce the components or subassemblies. These types of inventory are more applicable for MTS or MTO production environments, where the production process is either entirely based on forecast or entirely based on sales order. In an ATO production environment, the S&OP process does not need to control these types of inventory, as they are either minimal or nonexistent.Reference: CPIM Part 2 Exam Content Manual, Domain 4: Plan and Manage Supply, Section B: Production Planning and Control, Subsection 1: Production Strategies and Techniques, Page 19;Demand management process in assemble to order (ATO) environment;Assemble-to-Order (ATO): Overview, Examples, Pros and Cons.