CPIM-Part-2 Sample Questions Answers

 Time-to-market (TTM) is the length of time it takes to develop a product from conception until it is released to the market and is available for sale1. Reducing TTM can provide a competitive advantage, as it can help a company to capture customer demand, respond to market changes, and increase profitability1.

One strategy to decrease TTM for a new product family is to increase collaboration between the buyer and the supplier of new components. Collaboration can involve sharing information, resources, risks, and rewards among supply chain partners to achieve mutual benefits2. By collaborating with the supplier of new components, the buyer can improve the quality, reliability, and innovation of the components, as well as reduce the costs, lead times, and uncertainties associated with them2. This can speed up the product development process and reduce the time and resources required to bring the new product family to the market.

The other options are not effective strategies to decrease TTM for a new product family. Decreasing the number of suppliers for components of the new product may reduce the complexity and variability of the supply chain, but it may also increase the dependency and vulnerability on a single or few suppliers, which may affect the availability and performance of the components3. Decreasing the purchasing lot size for the new product’s components may reduce the inventory carrying costs and risks, but it may also increase the ordering costs and frequency, which may affect the efficiency and responsiveness of the supply chain4. Increasing the safety stocks for the new product’s components may reduce the risk of stockouts and delays, but it may also increase the inventory carrying costs and risks, as well as tie up cash flow and working capital.

References : Time to market: Definition and strategies to speed up TTM; Time To Market (TTM) Defined & Why It’s Important | TCGen; Market Timing Tips Every Investor Should Know; Supply Chain Collaboration: Definition & Benefits; [Supplier Consolidation: Definition & Benefits]; [Economic Order Quantity (EOQ) Model: Definition & Formula]; [Safety Stock: The Ultimate Guide].

 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 thecapacity 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).

References := Capacity Requirements Planning (CRP): Definition and Procedures, Capacity Requirements Planning (CRP Plan and Strategies) - ERP Information, Definition of Capacity Requirements Planning (CRP) - Gartner …

External sustainability reporting and verification is an opportunity for a company to communicate its performance in terms of environmental, social, and governance (ESG) aspects. ESG performance refers to how a company manages its impacts and risks on the natural environment, the society, and its own governance structure. By reporting and verifying its ESG performance, a company can demonstrate its commitment to sustainability, transparency, and accountability to its stakeholders, such as investors, customers, employees, regulators, and the public. External sustainability reporting and verification can also provide a company with various benefits, such as improved reputation, enhanced stakeholder trust, increased operational efficiency, reduced costs, and better decision making123.

A capacity-leading strategy is a proactive approach that adds or subtracts capacity in anticipation of future market demand. It is an aggressive strategy with the objective of improving the service level and decreasing lead time1. An advantage of adopting a capacity-leading strategy is that there issufficient capacity to meet demand, which means that the organization can satisfy customer needs and expectations, as well as capture new market opportunities. A capacity-leading strategy can also help the organization gain a competitive edge by being the first to offer new products or services, or by lowering prices due to economies of scale2.

The other options are not advantages of adopting a capacity-leading strategy. There is not necessarily sufficient demand to consume capacity, which means that the organization may face overcapacity problems, such as high inventory costs, low utilization rates, and reduced profitability3. All demand is not satisfied, and profit is not maximized, because there may be other factors that affect customer satisfaction and profitability, such as quality, price, or service4. Overcapacity problems are not minimized, but rather increased, by adopting a capacity-leading strategy, because the organization may have more capacity than needed if demand does not increase as expected3.

References: CPIM Part 2 Exam Content Manual, Domain 4: Plan and Manage Supply, Section 4.1: Supply Management Concepts and Tools, p. 33-34; Capacity Planning Strategies: Types, Examples, Pros And Cons - Toggl; Lead Capacity Strategy, Lead Demand Strategy - UniversalTeacher.com; Capacity Planning Strategies For End-to-End Supply Chain Profitability; Capacity Planning Strategies: Types, Examples, Pros And Cons - Toggl.

Liability risk in the supply chain is the risk that a company may be held legally responsible for damages caused by its products or services, or by its business partners, such as suppliers, subcontractors, or customers1. Liability risk can result in financial losses, legal penalties, reputational damage, and customer dissatisfaction1.

One way to mitigate liability risk in the supply chain is to require traceability for components, which means the ability to track the origin, history, location, and status of a product or its parts throughout the supply chain2. Traceability can help a company to identify and prevent potential quality issues, defects, recalls, counterfeits, or frauds that may cause harm to the customers or the environment2. Traceability can also help a company to comply with regulatory standards, customer requirements, and social responsibility expectations2. Traceability can be achieved by using various methods, such as barcodes, RFID tags, serial numbers, blockchain, or cloud-based platforms3.

The other options are not effective ways to mitigate liability risk in the supply chain. Negotiating lower component cost may reduce the procurement expenses, but it may also compromise the quality and safety of the components, which may increase the liability risk. Pushing inventory to supplier locations may reduce the inventory carrying costs and risks, but it may also increase the dependency and vulnerability on the suppliers, which may expose the company to more liability risk. Using LTL shipments more frequently may reduce the transportation costs and emissions, but it may also increase the handling and damage risks of the products, which may affect the customer satisfaction and liability.

References : Understanding Supply Chain Risk: Liabilities | Avetta; What is Traceability in Supply Chain Management?; How to Achieve Supply Chain Traceability.

Hedge is a risk management strategy that assumes that losses in one part of the supply chain will be offset by gains in another. Hedge is a method of reducing the exposure to price fluctuations, currency fluctuations, or other uncertainties by taking a position in a related market or asset that moves in the opposite direction. Hedge helps to protect the profitability and cash flow of the supply chain by locking in the prices or rates at a certain level. For example, a company that imports raw materials from another country may hedge against the exchange rate risk by buying a forward contract or an option that guarantees a fixed rate for the currency conversion.

The other options are not risk management strategies that assume that losses in one part of the supply chain will be offset by gains in another. Flexible is a risk management strategy that allows the supply chain to adapt to changing conditions and customer preferences by using multiple sources, modes, or routes. Fluctuation is not a risk management strategy, but a term that describes the variation or volatility of a market or asset over time. Speculative is not a risk management strategy, but a term that describes an activity or investment that involves a high degree of uncertainty or risk, with the expectation of earning a high return. References: CPIM Exam Content Manual Version 7.0, Domain 7: Plan and Manage Distribution, Section 7.1: Distribution Planning Concepts, p. 40; Hedging; Hedging Definition.

The sales and operations planning (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. Once the S&OP process has been completed, the executive S&OP meeting approves the final production plan, which is the output of the supply planning step. The production plan is a statement of the resources needed to meet the aggregate demand plan over a medium-term horizon. The functional responsibility of operations is to meet the revised production plan by developing and executing the master production schedule (MPS) and the detailed schedules. The MPS is a statement of the specific end items to be produced in each time period of the short-term horizon. The detailed schedules are the statements of the specific materials, resources, and activities needed to execute the MPS. References: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section 4.1: Develop Supply Plans, Subsection 4.1.2: Describe how to develop a production plan (page 36).

 Capable-to-promise (CTP) is a method of order promising that considers both material and capacity availability. CTP is more appropriate than available-to-promise (ATP), which only considers material availability, in environments where the production process is complex, customized, or resource-intensive, and where the demand is uncertain or variable. CTP can provide more accurate and realistic delivery dates, as well as optimize the use of resources and reduce inventory costs.

Among the options given, specialty chemicals packaged and shipped to order is the most suitable environment for CTP. This is because specialty chemicals are often produced in small batches or on demand, according to the specific requirements and preferences of each customer. Therefore, the production process requires high flexibility and customization, as well as careful coordination of materials and capacity. The demand for specialty chemicals may also vary depending on the market conditions and customer needs. CTP can help the company to promise delivery dates that take into account the availability of both materials and capacity, as well as the production lead time and transportation time.

The other options are less suitable for CTP, as they are more likely to use standard or mass production processes, where the products are made in large quantities or in advance, and where the demand is more stable or predictable. In these environments, ATP may be sufficient to promise delivery dates based on material availability alone, without considering capacity constraints.

References : What is a Capable-to-Promise System (CTP System … - Techopedia; Order promising - Supply Chain Management | Dynamics 365; Capable to Promise (CTP) (MRP and Supply Chain Planning Help) - Oracle; Calculate sales order delivery dates using CTP - Supply Chain ….

A sales forecast that is based solely on shipment history is a method that uses past sales data to predict future sales. This method assumes that the sales pattern will remain consistent over time, and does not account for any changes or fluctuations in demand or supply1. Therefore, this method can be distorted by any factors that affect the availability or delivery of the products, such as material shortages.

Material shortages are situations where the supply of raw materials, components, or finished goods is insufficient to meet the demand. Material shortages can be caused by various reasons, such as natural disasters, supplier issues, transportation disruptions, quality problems, or demand spikes2. Material shortages can have a negative impact on the sales forecast that is based solely on shipment history, because they can reduce the amount of products that can be shipped to customers, and thus lower the sales revenue. Material shortages can also create a backlog of orders that cannot be fulfilled in time, and thus create a gap between the actual and forecasted sales3.

The other factors listed in the question typically would not distort a sales forecast that is based solely on shipment history, because they do not affect the shipment history directly. Labor rate changes are changes in the wages or salaries paid to workers. They may affect the production costs and profits, but not necessarily the sales volume or revenue4. Currency exchange rates are the rates at which one currency can be exchanged for another. They may affect the competitiveness and profitability of international sales, but not necessarily the sales volume or revenue5. Customer demands are the needs and preferences of customers for products or services. They may affect the sales potential and market share, but not necessarily the sales volume or revenue.

A fishbone diagram, also known as a cause-and-effect diagram or an Ishikawa diagram, is a tool for identifying and analyzing the possible causes of a problem or an effect. It is often used in quality management to find the root causes of defects or errors. A fishbone diagram has a main branch that represents the problem or effect, and several sub-branches that represent the categories of causes, such as people, processes, equipment, materials, environment, etc. Each category can have further sub-branches that represent more specific causes. A fishbone diagram would help a service organization determine the source of a quality-of-service issue by allowing them to visualize and organize the potential factors that contribute to the problem and identify the most likely cause. References: CPIM Part 2 Exam Content Manual, Domain 8: Manage Quality, Continuous Improvement, and Technology, Section 8.1: Quality Management Concepts and Tools, p. 59-60.

 Failure Mode and Effects Analysis (FMEA) is a systematic, proactive method for identifying and evaluating the potential causes and impacts of failures in a process, product, or service1. It aims to anticipate and prevent failures by assessing the relative effect and risk of different failure modes1.

The use of FMEA would be most appropriate prior to a new product introduction (NPI). During the NPI phase, FMEA can be used to identify potential failure modes in the design of the product and assess their potential effects on the product’s performance and reliability. This allows for proactive measures to be taken to mitigate or eliminate these risks before the product is launched. FMEA is particularly useful in the early stages of design, as it helps in making informed decisions that can improve the quality and safety of the product1.

In contrast, using FMEA after a one-time quality incident investigation (A) or during evaluation of a new market opportunity © may not be as effective, as these situations do not involve the design or development of a product or process. While FMEA can be used during the define phase of a Six Sigma project (B), its most impactful application is during the design phase of a new product, where it can significantly influence the final outcome.

Fill rate is the percentage of customer orders that are fulfilled without running out of inventory or placing backorders1. Fill rate is an important measure of customer service and inventory management efficiency. A high fill rate indicates that the company can meet customer demand in a timely and accurate manner, while a low fill rate suggests that the company is struggling to satisfy customer expectations.

Operating costs are the expenses associated with running a business, such as rent, utilities, wages, transportation, etc2. Operating costs are influenced by various factors, such as production volume, inventory level, technology, and quality. A high operating cost means that the company spends more money to produce and deliver its products or services, while a low operating cost means that the company spends less money to do so.

Service level is the measure of how well a company delivers its products or services to its customers, based on criteria such as availability, timeliness, quality, and satisfaction3. Service level is affected by various factors, such as demand variability, supply reliability, capacity utilization, and customer feedback. A high service level means that the company meets or exceeds customer expectations, while a low service level means that the company fails or falls short of customer expectations.

As the company continues its initiative to increase the fill rate on these parts to 100%, it is most likely that operating costs will increase faster than service level. This is because increasing the fill rate requires increasing the inventory level, which in turn increases the carrying costs, such as warehousing, insurance, taxes, and obsolescence4. Moreover, increasing the fill rate also requires reducing the variability and uncertainty in demand and supply, which may involve investing in more advanced technology, improving quality control, enhancing supplier relationships, or implementing demand management techniques5. These actions can also increase the operating costs of the company.

However, increasing the fill rate does not necessarily increase the service level at the same rate. This is because service level depends not only on fill rate, but also on other factors, such as delivery speed, order accuracy, product quality, and customer satisfaction6. Therefore, increasing the fill rate may not be enough to improve the service level significantly. In fact, there may be a point of diminishing returns, where increasing the fill rate beyond a certain level does not result in a proportional increase in service level. For example, increasing the fill rate from 95% to 99% may have a noticeable impact on service level, but increasing it from 99% to 100% may have a negligible impact on service level.

Point-of-use storage is a stock location system that places inventory close to where it is needed in the production process, reducing transportation and handling costs and improving efficiency. It is often used in repetitive manufacturing, lean environment, where the demand is stable and predictable, and the inventory is replenished frequently. Fixed location and central storage are stock location systems that store inventory in a designated area, which may require more space and movement. Floating location is a stock location system that assigns inventory to any available space, which may cause confusion and inefficiency. References: CPIM Exam Content Manual Version 7.0, Domain 5: Plan and Manage Inventory, Section 5.2: Inventory Management Methods, p. 32.

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 = 557

Therefore, the load on this work center is 557 hours.

References: CPIM Exam Content Manual Version 7.0, Domain 6: Plan, Manage, and Execute Detailed Schedules, Section 6.3: Monitor Detailed Schedules, Subsection 6.3.2: Describe how to monitor input/output control (I/O) (page 60).

 Staging in a manual system corresponds to dispatching in a computer system. Staging is the process of preparing and moving materials or components to the point of use or consumption in a production system1. Staging can be done manually by workers who physically move the items from storage areas to workstations, or automatically by conveyors, robots, or other devices2. Dispatching is the process of authorizing and releasing work orders or tasks to the production system3. Dispatching can be done manually by supervisors who assign work to workers, or automatically by computer systems that use algorithms or rules to prioritize and schedule work4. Both staging and dispatching are functions that facilitate the flow of materials and information in a production system and ensure that the right items are available at the right time and place.

References: CPIM Part 2 Exam Content Manual, Domain 6: Plan, Manage, and Execute Detailed Schedules, Section 6.1: Detailed Scheduling Concepts and Tools, p. 75-76; Staging (manufacturing) - Wikipedia; Staging - an overview | ScienceDirect Topics; Dispatching - an overview | ScienceDirect Topics; Dispatching: Meaning, Objectives, Importance and Procedure.

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.

References: 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

 Inventory turns, also known as inventory turnover or stock turnover, is a measure of how many times a company sells and replaces its inventory in a given period. It is calculated as the ratio of cost of goods sold (COGS) to average inventory1. A higher inventory turnover indicates that the company is selling its inventory quickly and efficiently, while a lower inventory turnover indicates that the company is holding too much inventory or having difficulty selling its products.

Increasing safety stock to improve customer fill rate would result in a decrease in inventory turns, as it would increase the average inventory level. Safety stock is the extra inventory that is held to prevent stockouts and meet unexpected demand2. Customer fill rate is the percentage of customer orders that are fulfilled from available inventory without delay3. Increasing safety stock can improve customer fill rate by reducing the risk of stockouts and ensuring high service levels. However, increasing safety stock also increases the inventory carrying costs and risks, such as storage, handling, obsolescence, shrinkage, and opportunity costs4. Therefore, increasing safety stock is a trade-off between customer satisfaction and inventory efficiency.

The other options are not correct. Pipeline inventory is the inventory that is in transit between locations or stages in the supply chain5. Increasing safety stock would not affect pipeline inventory, as it is determined by the lead time and demand rate. Transportation costs are the expenses incurred for moving goods from one location to another6. Increasing safety stock would not affect transportation costs, as it is determined by the distance, mode, volume, and frequency of transportation. Sales revenue is the income generated from selling goods or services to customers7. Increasing safety stock would not affect sales revenue directly, as it is determined by the price and quantity of sales. However, increasing safety stock may have an indirect positive effect on sales revenue by improving customer satisfaction and loyalty.

References : Inventory Turnover Ratio | Formula | Calculator (Updated 2021); Safety Stock: The Ultimate Guide; Fill Rate - Definition, Formula & Example; Inventory Carrying Cost: Definition & Formula; Pipeline Inventory: Definition & Example; Transportation Costs: Definition & Examples; Sales Revenue: Definition & Examples.

In a make-to-order (MTO) environment, the production process is triggered by customer orders, which means there is no finished goods inventory or work-in-process inventory to consider in the sales and operations planning (S&OP) process. The available-to-promise (ATP) data is not an input to the S&OP process, but rather an output that indicates the quantity and date of products that can be promised to customers based on the current supply plan. The projected backlog of customer orders, on the other hand, is an important input to the S&OP process, as it reflects the current and future demand for the products and services offered by the organization. The projected backlog can help the organization plan its capacity, resources, materials, and delivery schedules to meet customer expectations and optimize profitability. References: CPIM Part 2 Exam Content Manual, Domain 3: Plan and Manage Demand, Section 3.1: Demand Management Concepts and Tools, p. 27-28.

Reducing distribution network inventory days of supply will have the impact of increasing turnovers and reducing cash-to-cash cycle time. Distribution network inventory days of supply is a measure of how long it takes for a company to sell its entire inventory in its distribution network, which includes the warehouses and transportation systems that deliver the products to the customers1. It is calculated by dividing the average inventory by the cost of sales per day1. A lower distribution network inventory days of supply indicates that the company is selling its inventory faster and more efficiently, while a higher distribution network inventory days of supply indicates that the company is holding too much inventory or having difficulty selling its products.

Turnovers, also known as inventory turnover or stock turnover, is a measure of how many times a company sells and replaces its inventory in a given period. It is calculated by dividing the cost of goods sold by the average inventory2. A higher turnover indicates that the company is selling its inventory quickly and efficiently, while a lower turnover indicates that the company is holding too much inventory or having difficulty selling its products.

Cash-to-cash cycle time, also known as cash conversion cycle or net operating cycle, is a measure of how long it takes for a company to convert its cash outflows into cash inflows. It is calculated by adding the days sales outstanding (DSO), which is the average time it takes for customers to pay for their purchases, and the distribution network inventory days of supply, and subtracting the days payable outstanding (DPO), which is the average time it takes for the company to pay its suppliers3. A shorter cash-to-cash cycle time indicates that the company is managing its cash flow more effectively, while a longer cash-to-cash cycle time indicates that the company is tying up more cash in its operations.

Therefore, reducing distribution network inventory days of supply will have the impact of increasing turnovers and reducing cash-to-cash cycle time, as it will decrease the average inventory level, increase the cost of sales per day, and decrease the distribution network inventory days of supply component in the cash-to-cash cycle time formula. This will improve the efficiency and profitability of the company’s operations and reduce its working capital needs.

References : Inventory Days Of Supply | Supply Chain KPI Library | Profit.co; Inventory Turnover Ratio | Formula | Calculator (Updated 2021); Cash Conversion Cycle - CCC.

The priority rule that is most consistent with the objective of meeting due dates is slack time per operation. Slack time per operation is a priority rule that assigns a priority index to each job based on the ratio of the remaining slack time to the remaining number of operations. Slack time is the difference between the due date and the expected completion time of a job. A lower ratio means a higher priority, as it indicates that the job has less slack time per operation and is more likely to be late. Slack time per operation is a dynamic priority rule, as it updates the priority index after each operation is completed. Slack time per operation can help minimize the number of tardy jobs and the average tardiness of jobs, as it gives preference to the jobs that are closer to their due dates and have more operations left.

First-come-first-served (FCFS) is not a priority rule that is consistent with the objective of meeting due dates. FCFS is a priority rule that processes jobs in the order of their arrival or release times. FCFS is a simple and fair rule, but it ignores the processing times and due dates of jobs. FCFS can result in poor due date performance, as it can delay urgent or short jobs behind long or non-urgent jobs.

Shortest processing time (SPT) is not a priority rule that is consistent with the objective of meeting due dates. SPT is a priority rule that processes jobs in ascending order of their processing times. SPT is an effective rule for minimizing the average flow time and work-in-process inventory of jobs, as it clears out small jobs quickly and reduces congestion in the system. However, SPT does not consider the due dates of jobs, and it can make long or urgent jobs late.

Fewest operations remaining is not a priority rule that is consistent with the objective of meeting due dates. Fewest operations remaining is a priority rule that processes jobs in ascending order of their remaining number of operations. Fewest operations remaining is a rule that can reduce the variability and complexity of jobs, as it tends to complete jobs faster and reduce their flow times. However, fewest operations remaining does not take into account the slack times or due dates of jobs, and it can make urgent or short jobs late.

References := Priority Rules - Tripod, Dispatching rules - Oxford Reference, Sequencing Rules and Due-Date Assignments in a Job Shop - JSTOR

Customer relationship management (CRM) is a program that uses data and technology to manage the interactions and relationships with customers. CRM helps to understand the needs, preferences, and behaviors of customers, and to provide them with better products, services, and experiences. In a rapidly changing business environment, a primary advantage of an effective CRM program is earlier identification of shifts in customer preferences. This means that CRM can help to detect and anticipate the changes in customer demand, tastes, or expectations, and to respond accordingly. This can help to improve customer satisfaction, loyalty, and retention, as well as to gain a competitive edge in the market. CRM does not necessarily reduce forecast variability, which is the degree of difference between the actual demand and the forecasted demand. CRM does not necessarily reduce customer order changes, which are the modifications or cancellations of orders by customers. CRM does not necessarily reduce customer defections, which are the losses of customers to competitors or other alternatives. References: CPIM Exam Content Manual Version 7.0, Domain 3: Plan and Manage Demand, Section 3.1: Demand Management Concepts, p. 16; Customer relationship management; Customer Relationship Management (CRM) Definition.

 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.

 Vendor-managed inventory (VMI) is a type of supply chain collaboration where the supplier takes responsibility for managing the inventory levels and replenishment orders of the buyer. VMI provides a benefit to the buying company in several ways, such as improving service levels, reducing stockouts, increasing visibility, and enhancing trust. One of the specific benefits of VMI is that it reduces administrative expenses for the buying company. Administrative expenses are the costs associated with the general operations and management of the business, such as salaries, rent, utilities, office supplies, and communication. VMI reduces administrative expenses by eliminating or simplifying the tasks related to inventory management, such as forecasting, ordering, invoicing, and payment. VMI also reduces administrative expenses by streamlining the communication and coordination between the buyer and the supplier, and by reducing the errors and disputes that may arise from inventory discrepancies.

References: CPIM Exam Content Manual Version 7.0, Domain 7: Plan and Manage Distribution, Section 7.1: Develop Distribution Plans, Subsection 7.1.3: Describe how to develop supplier-customer relationships (page 66).

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 fewermaterial shortages by reducing the lead times and inventory levels of materials or components, as well as by improving the communication and coordination with suppliers.

References := Mixed Model Scheduling - Mountain Home Academy, Reduce Lot Sizes, Mixed Model Scheduling - Academic library, Introduction To Mixed Model Production …{Strategos}

 A life cycle assessment (LCA) would be used to determine environmental aspects and impacts. Environmental aspects are the elements or characteristics of a product or service that can interact with the environment, such as emissions, energy use, water use, waste generation, etc. Environmental impacts are the effects or consequences of the environmental aspects on the environment, such as climate change, acidification, eutrophication, human health, biodiversity, etc1

A life cycle assessment (LCA) is a systematic analysis of the potential environmental impacts of products or services during their entire life cycle. During an LCA, you evaluate the potential environmental impacts throughout the entire life cycle of a product (production, distribution, use and disposal) by considering all the relevant environmental aspects and their interactions with the environment23

An LCA can help you:

• Identify the most significant environmental aspects and impacts of your product or service
• Compare the environmental performance of different products or services
• Find opportunities to reduce the environmental impacts and improve the environmental performance of your product or service
• Communicate the environmental benefits of your product or service to your customers, stakeholders, and regulators

Therefore, an LCA would be used to determine environmental aspects and impacts.

References: 1: Environmental Aspect Definition 2: Life-cycle assessment - Wikipedia 1 3: Life Cycle Assessment (LCA) - Complete Beginner’s Guide - Ecochain 2

An effective process to create meaningful change begins with identifying and discussing a past crisis, a potential crisis, or major opportunities. This step is important because it helps to create a sense of urgency and motivation for the change, as well as to clarify the vision and goals of the change1. A past crisis can be used as a learning opportunity to analyze what went wrong and how to prevent it from happening again. A potential crisis can be used as a warning signal to anticipate and prepare for the possible challenges and risks. A major opportunity can be used as a catalyst to seize the competitive advantage and create value for the organization and its stakeholders2.

The other options are not the best ways to start an effective process to create meaningful change. Reviewing financial outcomes and metrics over the last 4 quarters year-over-year may provide some insights into the performance and profitability of the organization, but it may not reveal the underlying causes or drivers of the change, or the future trends and scenarios that may affect the organization3. Refreshing corporate strategy to align with current marketplace realities for your industry may be a necessary step in the change process, but it may not be sufficient to generate buy-in and commitment from the people who are involved in or affected by the change4. Using consultants to provide in-depth analysis of current management opportunities may be a helpful way to obtain external perspectives and expertise, but it may not ensure that the change is aligned with the organization’s culture, values, and capabilities5.

References : How To Create A Sense Of Urgency For Change; How To Use Crisis As A Catalyst For Change; Why Financial Metrics Alone Won’t Drive Change; How To Align Your Strategy With Your Organization’s Culture; How To Choose The Right Consultant For Your Change Project.

A part that is sold as a service part and also used as a component in another part is called a dual-sourced item. A dual-sourced item has two sources of demand: the external demand from the customers who buy the service part, and the internal demand from the parent part that uses the component. The planning for a dual-sourced item should include both sources of demand in the gross requirements, so that the net requirements can be calculated correctly. The service part demand can be included in the gross requirements by using a planning bill of material, which is a special bill of material that shows the relationship between a parent item and its service parts. A planning bill of material allows the system to explode the service part demand to the component level and generate planned orders for both the service part and the component.

The other statements about the planning for this part are false. Its low-level code is not zero, because it is not an independent item. It has a higher low-level code than its parent item, because it is a component of another item. The material requirements for the part will not be understated, if both sources of demand are included in the gross requirements. It should have some safety stock, to protect against demand and supply uncertainties. References: CPIM Part 2 Exam Content Manual, Domain 4: Plan and Manage Supply, Section 4.2: Material Requirements Planning (MRP), p. 22-23.

A company that has prioritized customers A, B, and C, filling orders in that sequence, will have an impact on the customer service levels for customers B and C. Customer service level is the percentage of orders that are fulfilled on time and in full. The higher the customer service level, the more satisfied the customer is with the company’s performance. When a company prioritizes customers based on their importance, value, or profitability, it means that it allocates its resources and capacity to serve the most preferred customers first, and then the less preferred customers later. This can result in different customer service levels for different customer segments. In this case, customer A is the most preferred customer, followed by customer B and then customer C. Therefore, customer A will receive the highest customer service level, as the company will fill its orders first and ensure that they are delivered on time and in full. Customer B will receive the second highest customer service level, as the company will fill its orders after customer A’s orders are fulfilled. Customer B may experience some delays or shortages if the company runs out of resources or capacity after serving customer A. Customer C will receive the lowest customer service level, as the company will fill its orders last, after customer A’s and B’s orders are completed. Customer C may face longer delays or higher shortages if the company has exhausted its resources or capacityafter serving customer A and B. Therefore, the impact of prioritizing customers A, B, and C is that customer B has a higher service level than customer C. References := How to Prioritize Customer Requests - Gladly, Support Ticket Prioritization - 6 Best Practices to follow, [Customer Service Level: Definition & Calculation]

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 theresource to process, regardless of any fluctuations or disruptions in the upstream or downstream processes.

References: Theory of constraints - Wikipedia; Drum Buffer Rope and Theory of Constraints - opexlearning.com.

 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. References: 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.

 Safety capacity in lean environments is where take time is greater than cycle time. Take time is the average time between the start of production of one unit and the start of production of the next unit1. Cycle time is the average time it takes to complete one unit of a product or service2. Safety capacity is the amount of capacity that is reserved to deal with unexpected events or fluctuations in demand or supply3.

In lean environments, the goal is to minimize waste and maximize value by producing only what the customer wants, when the customer wants it, and in the exact amount4. This means that the production system should be synchronized with the customer demand, and the take time should match the cycle time. However, in reality, there may be variations or uncertainties in the demand or supply, such as changes in customer preferences, seasonal patterns, quality issues, equipment breakdowns, or supplier delays. These variations or uncertainties can cause disruptions or imbalances in the production system, leading to stockouts, overproduction, waiting, defects, or rework5.

To cope with these variations or uncertainties, lean environments may use safety capacity as a buffer or contingency plan. Safety capacity is where take time is greater than cycle time, meaning that the production system has some extra capacity to produce more than what the customer currently demands. This extra capacity can be used to absorb the variations or uncertainties and maintain a smooth and stable production flow6. However, safety capacity should not be confused with excess capacity, which is where take time is much greater than cycle time, meaning that the production system has a lot of idle or underutilized resources. Excess capacity is a waste that should be eliminated or reduced in lean environments7.

Therefore, safety capacity in lean environments is where take time is greater than cycle time.

References: 1: Take Time Definition 1 2: Cycle Time Definition 2 3: Safety Capacity Definition 3 4: Lean Manufacturing Definition 4 5: The Seven Wastes of Lean 5 6: Capacity Planning Tools 6 7: Excess Capacity

Finished goods inventory is a type of inventory that consists of the final products that are ready for sale to the customers. Finished goods inventory investment is the value of the finished goods inventory held by the company. Service level is a measure of customer satisfaction that indicates the percentage of customer orders that can be fulfilled from the available inventory. Service level typically will increase when finished goods inventory investment is increased, because more inventory means more ability to meet the customer demand. However, the relationship between service level and finished goods inventory investment is not linear, but rather asymptotic. This means that service level will increase at a decreasing rate as finished goods inventory investment increases. In other words, the marginal benefit of increasing finished goods inventory investment will diminish as the service level approaches 100%. This is because there is a limit to how much inventory can improve the service level, and beyond a certain point, the additional inventory will not have a significant impact on customer satisfaction.

References: CPIM Exam Content Manual Version 7.0, Domain 5: Plan and Manage Inventory, Section 5.1: Develop Inventory Plans, Subsection 5.1.2: Describe how to develop an inventory policy (page 44).

Landed cost represents the total cost of a product on its journey from the factory floor to the buyer’s door. It includes the price of goods, shipment costs, insurance fees, customs duties, and any other charges incurred along the way1. Therefore, purchasing and delivering a purchased product to its final destination is the best representation of landed cost among the given options.

Combining smaller shipments to take advantage of bulk efficiencies is not a representation of landed cost, but rather a strategy to reduce it. Bulk efficiencies are the benefits or savings that result from purchasing or shipping large quantities of goods at once, such as lower unit prices, transportation costs, or handling fees. Combining smaller shipments to take advantage of bulk efficiencies can help lower the landed cost by reducing some of the charges involved in the delivery process2.

Supplier absorbing freight charges is not a representation of landed cost, but rather a condition or term of sale. Freight charges are the fees paid to transport goods from one place to another by land, sea, or air. Supplier absorbing freight charges means that the supplier pays for the freight charges and does not pass them on to the buyer. This can affect the landed cost depending on whether the sale is based on free on board (FOB) or cost, insurance, and freight (CIF) terms. FOB means that the buyer is responsible for the freight charges and other costs after the goods are loaded on board the carrier at the point of origin. CIF means that the supplier is responsible for the freight charges and other costs until the goods reach the point of destination3.

Duties levied on imports and exports are not a representation of landed cost, but rather a component or factor of it. Duties are taxes or fees imposed by a government on goods that are imported or exported across its borders. Duties can affect the landed cost by increasing the price of goods or adding extra charges to the delivery process. Duties can vary depending on the type, value, origin, or destination of the goods4.

References := Landed Cost: Meaning & Calculator | Freightos, Landed Cost | Definition, Calculation, Formula & Price, What Is Landed Cost? Definition And Examples, What is Landed Cost? - Definition | Meaning | Example

 A product family is a group of products that share common characteristics, components, or functions, and that satisfy a similar customer need or market segment1. A bill of material (BOM) is a list of all the materials, components, and subassemblies required to manufacture a product2. A BOM can have different levels, depending on the complexity and structure of the product. The most common levels are:

• Final assembly level: This is the highest level of the BOM, where the finished product is shown as a single item. This level contains the basic information about the product, such as its name, description, quantity, and unit of measure2.
• Subassembly level: This is the intermediate level of the BOM, where the subassemblies or modules that make up the final product are shown as separate items. A subassembly is a group of components or parts that are assembled together to perform a specific function within the final product3. This level contains the information about the subassemblies, such as their names, descriptions, quantities, units of measure, and relationships to the final product2.
• Component level: This is the lowest level of the BOM, where the individual components or parts that make up the subassemblies or the final product are shown as separate items. A component is a basic element or material that is used to manufacture a subassembly or a final product4. This level contains the information about the components, such as their names, descriptions, quantities, units of measure, and relationships to the subassemblies or the final product2.

The most appropriate level of the BOM to forecast for a product family depends on several factors, such as the demand variability, production lead time, inventory cost, and customer preference of each level5. However, in general, it is advisable to forecast at the highest possible level of aggregation that still meets the customer requirements and expectations5. This is because forecasting at a higher level can reduce the forecast error and uncertainty, improve the forecast accuracy and reliability, and simplify the forecasting process5.

Therefore, for a product family that consists of 46 items, each having 5 features available and 6 options available, it would be most appropriate to forecast at the final assembly level items. This is because forecasting at this level can capture the overall demand pattern and trend of the product family, without getting into too much detail or complexity. Forecasting at this level can also allow for more flexibility and responsiveness in meeting customer needs and preferences by using postponement strategies6. Postponement strategies involve delaying some aspects of production or customization until after receiving customer orders6. For example, instead of forecasting and producing each item with each feature and option in advance, which would result in 46 x 5 x 6 = 1380 different combinations, the company can forecast and produce only 46 items at the final assembly level and then add features and options later according to customer orders.

The other options are not as appropriate as forecasting at the final assembly level items. Forecasting at the subassembly level items may be too detailed and complex for a product family with many features and options available. Forecasting at this level may result in higher forecast error and uncertainty, lower forecast accuracy and reliability, and more complicated forecasting process. Forecasting at this level may also reduce flexibility and responsiveness in meeting customer needs and preferences by committing resources too early in production. Forecasting at the component level items may be even more detailed and complex than forecasting at the subassembly level items. Forecasting at this level may have all the disadvantages mentioned above, as well as increase inventory cost and risk by holding too many components in stock.

References : Product Family Definition; Bill of Materials (BOM) – An Essential Guide with Examples; Subassembly Definition; Component Definition; Forecasting for Bill of Materials Inventory - EazyStock; Postponement Strategy: Definition & Benefits.

The percentage of defective parts is the proportion of units that do not meet the specification limits. The process capability index (Cpk) is a measure of how well the process can produce within the specification limits. Both the percentage of defective parts and the Cpk depend on the specification range and the process variation1.

If the supplier changes the tolerance range from + 0.3 mm to + 0.5 mm, the specification range becomes wider, which means that more units will fall within the specification limits and fewer units will be defective. Therefore, the percentage of defective parts decreases.

However, if the process variation remains unchanged, the Cpk will decrease, because Cpk is inversely proportional to the specification range2. A wider specification range means a lower Cpk, which indicates a lower process capability. A lower Cpk also implies a higher percentage of defective parts in relation to the process variation3.

Therefore, the correct answer is D. The percentage of defective parts decreases, and the process capability index decreases.

References:

• Understanding Process Capability Index (Cpk) [With Calculator]
• [Process Capability Index - an overview | ScienceDirect Topics]
• Converting A Capability Index to PPM Defective - Accendo Reliability

In a lean environment, the batch-size decision for planning “A” items would be done by lot-for-lot (L4L). A lean environment is a production system that aims to eliminate waste and maximize value by applying the principles and practices of lean manufacturing1. “A” items are the most important items in an inventory system, based on the Pareto principle or the 80/20 rule, which states that 80%of the effects come from 20% of the causes2. Lot-for-lot (L4L) is an inventory ordering policy that orders exactly the quantity needed to meet the demand for each period3.

The reason why L4L is the preferred batch-size decision for planning “A” items in a lean environment is because it minimizes the inventory holding costs and reduces the risk of obsolescence or deterioration of the items3. L4L also supports the concept of pull production, which is a key element of lean manufacturing. Pull production is a method of controlling the flow of materials and information by producing only what is requested by the downstream customers or processes4. L4L aligns the production and consumption rates of “A” items, which are typically high-demand and high-value items, and avoids overproduction or underproduction. L4L also enables faster feedback and learning, as well as better responsiveness to customer needs and expectations.

The other options are not as suitable for planning “A” items in a lean environment. Least total cost is an inventory ordering policy that orders the quantity that minimizes the sum of ordering costs and holding costs5. However, this policy does not consider the demand variability or customer service level, and may result in large batch sizes that increase inventory levels and waste. Min-max is an inventory ordering policy that orders a fixed quantity whenever the inventory level falls below a minimum level6. However, this policy does not reflect the actual demand or consumption rate, and may result in excess inventory or stockouts. Periodic order quantity is an inventory ordering policy that orders a variable quantity at fixed time intervals. However, this policy does not synchronize the production and consumption rates, and may result in mismatched supply and demand.

References: Lean Manufacturing - Definition & Principles - ASQ; Pareto Principle - Definition & Examples - Investopedia; Lot-for-Lot (L4L) Definition | Operations & Supply Chain Dictionary; Pull Production - Definition & Examples - ASQ; Economic Order Quantity (EOQ) Definition - Investopedia; Min-Max Inventory Management: Definition & Examples - Video & Lesson Transcript | Study.com; [Periodic Order Quantity (POQ) Definition | Operations & Supply Chain Dictionary].

Option overplanning is a technique used in an assemble-to-order (ATO) environment to address uncertainty in the product mix. An ATO environment is a production strategy where products are assembled from components or subassemblies after receiving customer orders1. Option overplanning is the practice of planning and stocking more components or subassemblies than the expected demand, based on historical data or forecasts2. The purpose of option overplanning is to increase the flexibility and responsiveness of the production system, by allowing the manufacturer to meet a variety of customer orders with different options or features. Option overplanning can help reduce the risk of stockouts, improve customer service, and capture new market opportunities.

Option overplanning is not used to verify appropriate inventory levels, schedule detailed production, or compensate for forecast bias. Verifying appropriate inventory levels is a function of inventory management, which involves monitoring and controlling the quantity and quality of materials and products in stock. Scheduling detailed production is a function of detailed scheduling, which involves allocating resources and setting priorities for specific tasks or orders in the production process. Compensating for forecast bias is a function of demand management, which involves adjusting the forecasts based on the difference between the actual and predicted demand.

References: Assemble-to-Order (ATO): Overview, Examples, Pros and Cons - Investopedia; Assemble-to-Order - Overview, How It Works, Advantages; [Assemble-to-Order (ATO) Definition | Operations & Supply Chain Dictionary]; [Assemble-to-Order (ATO) - MBA Skool-Study.Learn.Share.]; [InventoryManagement - Definition, Types, Objectives and Examples]; [Detailed Scheduling - an overview | ScienceDirect Topics]; [Forecast Bias - an overview | ScienceDirect Topics].

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.

References: 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 sales and operations planning (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. In a repetitive manufacturing environment, where the same or similar products are produced continuously or at regular intervals, the production plan can be stated in terms of the number of products planned for shipment. This unit of measure reflects the volume and mix of products that are expected to be sold and delivered to the customers. The number of products planned for shipment can also be used to calculate the capacity requirements, material requirements, and inventory levels for each product family.

References: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section 4.1: Develop Supply Plans, Subsection 4.1.2: Describe how to develop a production plan (page 36).

The bullwhip effect is a supply chain phenomenon that causes fluctuations in demand to amplify as they move upstream, from the consumer to the retailer, to the distributor and then to the producer1. The bullwhip effect can result in inefficiencies and costs such as excess inventory, lost revenues, superfluous capacity and poor customer service1.

One of the activities that would be effective to mitigate the bullwhip effect is to reduce lead times, which are the time intervals between placing an order and receiving the goods2. Reducing lead times can help to reduce the uncertainty and variability in demand, as well as improve the responsiveness and flexibility of the supply chain2. By reducing lead times, the supply chain partners can order less frequently and in smaller quantities, while still meeting customer demand. This can reduce the need for safety stock, cycle stock and pipeline stock, and thus lower the inventory carrying costs and risks2.

The other options are not effective activities to mitigate the bullwhip effect. Implementing track and trace technology, which is a method for tracking the origin, history, location and status of a product or its parts throughout the supply chain3, may help to improve the visibility and transparency of the supply chain, but it may not reduce the demand fluctuations or inventory imbalances caused by the bullwhip effect. Using a push system, which is a production system where goods are produced based on forecasted demand rather than actual customer orders4, may increase the risk of overproduction or underproduction, as well as create more inventory and waste in the supply chain. Increasing inventory, which is the stock of goods or materials held by a company to meet customer demand5, may increase the inventory carrying costs and risks, as well as tie up cash flow and working capital.

References : Lead Time Reduction: Definition & Benefits; The bullwhip effect: causes, intensity, and mitigation - Academia.edu; What is Traceability in Supply Chain Management?; Push vs Pull System: What Is The Difference?; Inventory Definition.

A control chart is a tool that shows process changes and random variation over time. A control chart is a graph that plots data points over time and shows the mean and the upper and lower control limits of the process. The mean is the average value of the data, and the control limits are the boundaries of the normal variation of the process. A control chart can help monitor the stability and performance of a process by detecting any unusual or non-random patterns in the data, such as trends, cycles, or shifts. A control chart can also help identify the sources of variation in the process, whether they are common causes (inherent to the process) or special causes (external factors). A control chart can be used for both variable data (measured on a continuous scale) and attribute data (counted or categorized).

A check sheet is a tool that collects and summarizes data in a structured way. A check sheet is a simple form that records the frequency or occurrence of specific events or problems during a process. A check sheet can help organize and analyze data by showing patterns, trends, or relationships among the data. A check sheet can also help identify potential causes of problems or areas for improvement.

A histogram is a tool that displays the distribution of data in a graphical way. A histogram is a type of bar chart that shows how many times each value or range of values occurs in a data set. A histogram can help describe and compare data by showing the shape, center, spread, and variation of the distribution. A histogram can also help identify outliers, gaps, or clusters in the data.

A Pareto analysis is a tool that prioritizes problems or causes based on their frequency or impact. A Pareto analysis is based on the Pareto principle, which states that 80 percent of the effects come from 20 percent of the causes. A Pareto analysis uses a combination of a bar chart and a line graph to show the relative importance of different factors in a process. The bars represent the frequency ormagnitude of each factor, and the line represents the cumulative percentage of the total effect. A Pareto analysis can help focus on the most significant problems or causes and allocate resources accordingly.

References := Control Chart - Statistical Process Control Charts | ASQ, A Guide to Control Charts - iSixSigma, 2 Tools to Understand Variation in Your Improvement Journey, Understanding variation | Turas | Learn

 Establishment of goals and baselines prior to entering the plan-do-check-act (PDCA) cycle allows improvement teams to determine whether an effective change was made in the process. Goals are the desired outcomes or targets that the improvement teams want to achieve by implementing changes in the process1. Baselines are the current or initial performance levels of the process beforeimplementing any changes2. By establishing goals and baselines, improvement teams can have a clear direction and a reference point for their improvement efforts.

In the PDCA cycle, improvement teams follow four steps: plan, do, check, and act. In the plan step, they define the problem, analyze the root cause, and propose countermeasures. In the do step, they test the countermeasures on a small scale. In the check step, they measure and evaluate the results of the test and compare them with the goals and baselines. In the act step, they standardize and sustain the successful countermeasures or revise and repeat the cycle if needed3.

By comparing the results with the goals and baselines in the check step, improvement teams can determine whether an effective change was made in the process. An effective change is one that improves the performance of the process and meets or exceeds the goals set by the improvement teams4. If the results show that an effective change was made, improvement teams can move to the act step and implement the change on a larger scale. If not, improvement teams can go back to the plan step and identify new or revised countermeasures5.

Therefore, establishment of goals and baselines prior to entering the PDCA cycle allows improvement teams to determine whether an effective change was made in the process.

References: 1: Goal Setting Definition 1 2: Baseline Definition 2 3: What is an A33 4: How to Use an A3 Report for Problem Solving 4 5: The A3 Problem Solving Method