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CPIM Module ONE: BSCM Quick preview questions:

1, What are the functional components of a supply chain?

2, Push systems are triggered by…

3, What is the ultimate goal of SCM?

4, Decisions involved in SCM can generally be classified into four major areas, which are:

5, What are the major kinds of supply chain modeling approaches?

6, What does the SCOR model describe?

7, What is SCI all about?

8, What does “professional ethics” deal with?

9, What are covered by the concept of GSCM?

10, Briefly compare high volume/low margin products with low volume/high margin items.

11, Briefly describe how staffing works for work cell arrangement.

12, What are the two major types of FMS?

13, What does perfect fill rate tell?

14, Explain BOM explosion.

15, What is the primary drawback of PERT and CPM?

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16, Why would you want to conduct Core Competence Analysis?

17, How does APP work?

18, What are the goals of implementing JIT in a manufacturing process?

19, Briefly describe Kanban square.

20, What factors should be considered when determining the sample size?

21, What is a balanced score card?

22, Describe ISO 9001.

23, What does SPC measure?

24, What does "Zero Defects" refer to?

25, What is a C chart?

26, Briefly compare the scope of MRP versus that of MRP-II.

27, How would MRP processing work?

28, Describe MTO and MTS.

29, What is Demand Planning?

30, What is RSFE?

31, What is the relationship between VMI and QR?

32, Describe uniform plant loading.

Quick answers:

1, Supply chains usually include four functional components: demand planning; manufacturing planning and scheduling; supply planning; and transportation planning.

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2, Push systems are triggered by interpretation of the expected demand and scheduling of supply to meet that demand.

3, The ultimate goal is to reduce inventory without sacrificing product availability.

4, Decisions involved in SCM may be grouped into four major areas, including location decisions, production decisions, inventory decisions, and transportation decisions.

5, There are three major kinds of supply chain modeling approaches. They are Network Design methods, Rough Cut methods, and simulation based methods.

6, It describes the business processes essential for satisfying a customer’s demands.

7, It involves the use of advanced computing capabilities to extract, sense, and analyze information about a supply chain.

8, Professional ethics deal with how we agree to relate to one another.

9, It covers every stage in manufacturing, from product design to recycle, or from cradle to grave.

10, In general, high volume/low margin products are mostly commodities with very elastic demand, while low volume/high margin and designer items are demand in-elastic.

11, Work cells are usually staffed by team members who have a strong sense of quality: they are employees who are well empowered.

12., FFS Flexible Flow System and GFMS General Flexible Machining System.

13, It reflects product availability.

14, The explosion process involves the determination of an item's gross requirements from the MPS for immediate parents that are end items, the planned order releases for parents below the MPS level, as well as any other requirements.

15, The primary drawback of PERT and CPM is that since estimations are used in the calculation of times, the whole analysis could be flawed if a single yet significant mistake is made in estimating any of the involved values.

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16, With Core Competence Analysis you assess your core competencies - those capabilities that are critical to your business achieving competitive advantage.

17, It works by linking higher-level facility planning to lower level scheduling decisions within a medium-term planning horizon (say, in the range of 2 to 18 months).

18, The goals of implementing JIT in a manufacturing process consist of the avoidance of idle items waiting to be processed as well as the elimination of idle workers and equipment waiting for items to process.

19, Kanban square is used on an assembly line or work cell with a square drawn on the bench or floor between two operators.

20, It is believed that the sample size required really depends on the nature of the analysis, the desired precision of the estimates, the kind of statistical comparisons to be made, the number of variables to be examined and the heterogeneity of the sampled universe.

21, The balanced scorecard is a concept "for measuring a company's activities in terms of its vision and strategies".

22, ISO 9001:2008 aims to provide a set of standardized requirements for a quality management system, without considering what the user organization does, its size, or whether it is in the private, or public sector.

23, SPC measures variation in manufacturing output and sets control limits based on observations of variations arising solely from common causes.

24, "Zero Defects" refers to the notional quality standard developed by Phil Crosby which has been primarily adopted within industry supply chains wherever large volumes of components are being purchased for further production use.

25, A C chart is a data analysis technique you may use for determining if a measurement process has gone out of statistical control.

26, The term MRP is often being used to refer specifically to planning for assembly, fabrication and production. MRPII, on the other hand, is broader in that it may be applied towards all business processes.

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27, MRP processing would work this way: first it would determine the gross material requirements, then it would subtract out the inventory on hand, and finally it would add back in the safety stock in order to compute the net requirements.

28, MTO Make to order means you have manufacturing process fully geared for satisfying customer-requirements upon receiving a customer's order. With MTS Make to Stock, products are manufactured solely based on demand forecasts.

29, Demand Planning refers to the planning process for predicting the demand of products and services based on forecasts.

30, Running Sum of Forecast Error (RSFE, aka Sum of Deviations SOD) refers to the cumulative sum of forecast error, plus or minus, over time. You may think of it as a measure of bias.

31, VMI is said to have originated from QR (Quick Response), which emphasizes the sharing of retail sales across chain members to facilitate the putting together of the right product assortment.

32, Uniform plant loading (heijunka in Japanese) means creating uniform load on all work centers via constant daily production.

Additional Practice Questions and Answers for Module 1 can be downloaded via this link: http://www.examreview.net/cpimbook/pqbscm.zip

After download you need to unzip the file and then open the PDF document via the Acrobat Reader software.

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CPIM Module TWO & THREE: MPR & DSP Combined Unit

We combine MPR and DSP because there are too many overlapping areas. We recommend that you study both together. Since these modules and module One have many topics in common, for your convenience certain module One material has been reprinted here.

Additional Practice Questions and Answers for Module 2 and 3 can be downloaded via this link: http://www.examreview.net/cpimbook/pqmprdsp.zip

After download you need to unzip the file and then open the PDF documents via the Acrobat Reader software.

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Quick previewquestions

1. Seasonality refers to:

2. Queuing Theory deals with what kinds of problems?

3. What can reduce the impact of the bullwhip effect?

4. What is an Executive S&OP?

5. Compare make-to-stock with assemble-to-order.

6. MRP is said to be driven by what?

7. What is a master schedule?

8. What are time fences?

9. What is a frozen zone?

10. What is the use of lot-sizing algorithms?

11. What is Backflushing?

12. What does Low level code describe?

13. Why is cycle counting preferable?

14. What does a lead capacity strategy entail?

15. How does Routing-based RCCP work?

Quick answers:

1. Seasonality refers to the pattern that repeats for each period.

2. Queuing Theory deals with problems which involve queuing and waiting.

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3. To reduce the impact of the effect, better communication and cooperation among chain members is the key.

4. Executive S&OP is the executive portion of the overall Sales & Operations Planning set of processes. It aims at balancing demand and supply at the aggregate level and aligning operational planning with financial planning.

5. With make-to-stock, customer orders are satisfied from inventory. With make-to- order or assemble-to-order environments, demand is satisfied from productive capacity - as customers orders are received, they consume the available capacity.

6. MRP is said to be driven by MPS.

7. A master schedule is a time-phased planning chart that can help the master scheduler create the MPS.

8. They are boundaries between different periods in the planning horizon.

9. Frozen zone is where capacity and materials are committed to specific orders.

10. Lot-sizing algorithms are for determining production schedules and planned inventory levels so to take full advantage of economies of scale.

11. Backflushing means you are not issuing the materials until production is posted against the operation.

12. Low level code describes the lowest level a part occupies under a BOM.

13. With cycle counting a small subset of the entire inventory is counted on any given day. Cycle counts are way less disruptive to normal operations

14. Lead capacity strategy entails adding capacity in anticipation of an increase in demand.

15. Routing-based RCCP calculates and compares required capacity to available capacity for the individual resources you assign to operations on your routings.

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A quick overview

The terms and topics introduced in this guide could be confusing. Therefore we have a short and quick overview here which serves to clarify their relationships and get you less confused

l Sales forecast determines the proper production levels for developing a viable and realistic Production Plan. Sales forecast serves as input to your Sales & Operation Plan; through the forecast you may more accurately determine the resource requirement for production.

l Demand Management creates MPS for determining the quantity and expected completion date of products that are in need.

l Inputs to a MRP system typically include MPS, BOM and inventory records. Inventory record information includes planning factors and individual item status. A product tree is a simple form of BOM mostly for education purpose. Single-level bills are simple to use and can avoid record duplication. Multiple-bill is appropriate when multiple different products share identical components. Planning bills are mostly used for planning. A where-used report finds the parent of a component while a BOM does the exact opposite. A pegging report finds parents that have existing requirements.

l MRP develops Material Plan which describes the planned orders for material to be purchased and transferred. MRP also determines what has to be done to fulfill the requirement of your MPS.

l MRP sends orders to the production function as Work Orders. Each Work Order includes a list of material from the BOM.

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Demand Managementand forecasting

Quick Summary

There are different sources of demand for a product and its component items. The requirements for these items can be classified broadly as dependent and independent demands. Independent demand refers to the demand for an item that is unrelated to the demand for other items. Demand for finished goods is one such example. On the other hand, dependent demand refers to the demand that is directly related to or derived from the BOM structure for other items or products. Dependant demands can be calculated, while independent demands have to be forecasted.

Demand Planning refers to the planning process for predicting the demand of products and services based on forecasts. By accurately forecasting customer demand, one can improve the level of customer service while decreasing costs through reducing demand uncertainty. One primary goal of demand planning is to avoid artificially induced demand instability. Demand Chain Management, on the other hand, refers to the effective management of upstream and downstream relationships between suppliers and customers for delivering the best value to the customer at the least cost to the demand chain as a whole. It is a broader concept different from the demand management discipline alone.

In a situation where your preparation effort cannot match the incoming loads due to forecasting errors or other reasons, you can either make changes to your capacity or manipulate the demand. Making changes to your capacity may be costly and time consuming, and may not be a possible option for small firms. Therefore, demand has to be “managed” in order to cope with the changes and smooth the production. To artificially “calm down” the market demand for your goods, you may raise the prices. On the other hand, if you want to increase the demand, you may lower the prices. Sales promotion and seasonal discounts are good ways to cut prices without losing face. When you manipulate the demand this way, you must also know what your competitors are doing. If they sell similar goods at lower prices, they may eat your lunch altogether.

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CPIM Module FOUR: ECO Additional Practice Questions and Answers for Module 4 can be downloaded via this link: http://www.examreview.net/cpimbook/pqeco.zip

After download you need to unzip the file and then open the PDF document via the Acrobat Reader software.

Quick preview questions:

1. A job is typically characterized by:

2. What is the key issue in deciding how and when to schedule jobs?

3. Management policies and objectives are the basis for scheduling decisions.

4. Briefly describe the physical layout of a job shop.

5. Why is line balancing necessary?

6. What is finite scheduling?

7. How does backward scheduling work?

8. How do you calculate rated capacity?

9. What is a dispatch list?

10. What is the use of operation splitting?

11. What is a Deming cycle?

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Quick answers:

1. A job is typically characterized by its route, its processing requirements, and its priority.

2. It is the mix of products that is the key issue in deciding how and when to schedule jobs.

3. Management policies and objectives are the basis for scheduling decisions.

4. The physical layout of a job shop usually groups equipment performing similar functions in the same area.

5. Line balancing is often necessary. The intent is to look for a cycle time in which each workstation can complete its tasks on time so that at the end of this time every workstation can pass its part on to the next workstation.

6. Finite scheduling considers the previous load and assumes that capacity is limited according to previous commitments.

7. Backward scheduling establishes a schedule backward from an estimated completion date to an appropriate start date.

8. Rated capacity = productive capacity (used for producing goods as well as in process and product improvement efforts) + nonproductive capacity (uses of capacity which do not produce goods, such as set-ups, maintenance, waste, and standby) + idle capacity (capacity that is not marketable or not in demand)

9. A dispatch list is a document that lists the jobs in a work center.

10. Operation splitting can reduce total lead time by reducing the processing run time.

11. Also called a Deming cycle or a Shewhart cycle, the plan–do–check–act cycle is a four-step model for carrying out change.

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Shop Scheduling & Control

Controlling production activity on the shop floor is essential to a company's productivity. Better scheduling, dispatching, and tracking of work orders through the shop can improve that productivity dramatically.

Quick Summary

l A job shop is a manufacturing process structure. This structure has small batches of a variety of custom products built. In this special process flow, most products require a unique set-up and sequencing of processing steps.

l The acceptance of a job will result in a quantity of work that needs to be done. The specification of the due date will determine the amount of slack in performing the job.

l Job release is what determines when a job enters the shop floor. The time between job entry and job release can be used for performing preparation activities. Prior to release, a job is noting other than a plain paperwork.

l Work-In-Process inventory is the primary concern in job shop production. Final good inventories are almost always restricted to jobs completed ahead of due dated.

l Machine capacity can be restrictive but worker capacity is usually way more restrictive.

l Throughput time tends to relate strongly to work-in-process levels. A high work-in- process level in job shops is usually linked to a high shop floor throughput time.

l Through controlling release to the shop floor, waiting time on the shop floor may be replaced by waiting time before release.

l Delivery reliability can be assured when there is a well estimate of the throughput times for a job when promising a delivery time. Proper controlling of job progress is also important.

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Quick overview of the characteristics of a job shop

In a job shop, similar equipment or functions will be grouped together to minimize material handling, cost, and work in process inventories. Many job shops use general purpose equipment - job shops need flexibility in changing set-ups very quickly. Speed of product delivery and customization are possible at the expense of economy of scale.

When an order arrives, the part being worked on have to travel according to a sequence of operations in a jumbled routing. It is possible for the part to return to the same machine for processing multiple times. Employees are highly skilled and can confidently operate several different kinds of machinery. Due to the skill level, job shop employees typically require way less supervision.

A job is typically characterized by its route, its processing requirements, and its priority. It is the mix of products that is the key issue in deciding how and when to schedule jobs. Capacity is never easy to measure due to factors such as varying lot sizes, job complexity, the mix of jobs already scheduled, the ability to properly schedule, the number and condition of machinery, and the quality of labor.

Management at the shop floor level

When we talk about manufacturing, we are dealing with the planning interfaces and the execution interfaces. In terms of planning interfaces, we have:

l Business Planning

l Sales and Operations Planning

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CPIM Module FIVE: SMR Overviewof the module

SMR is the final module to take. Is it tough? Well, in a sense, yes. It is tough because there is no fixed answer to the test questions. You are asked to choose the best possible answer among all potentially OK answers. Also, most questions are long and with complicated scenarios to confuse you. To pick up the “politically correct” answers you have to use your business sense to make judgment on a case by case basis. I would say SMR is an advanced scenario-format BSCM. SMR is all about supply-side management at a higher global and strategic level. What is serious supply management all about? Accenture has developed seven principles of supply-chain management:

1. Segment customers based on their service needs.

2. Design the logistics network based on service requirements.

3. Listen to the signals of market demand and plan accordingly.

4. Differentiate products based on actual consumer demand.

5. Strategically manage the sources of supply.

6. Develop a supply-chain-wide technology strategy.

7. Adopt measures that apply to every link in the supply chain.

Because of advances in manufacturing and distribution, the cost of developing new products and services is dropping, and time to market is speeding up. This has resulted in increasing customer demands, local and global competition, and increased pressure on the supply chain. To stay competitive, companies must reinvent themselves so that the supply chain—sourcing and procurement, production scheduling, order fulfillment, inventory management, and customer care—is no longer a cost-based back-office

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exercise, but rather a flexible operation designed to effectively address today's challenges. If you have been specializing in manufacturing or shop floor functions, it is now the time to move yourself to a managerial position – you need to see things from a broader MBA style perspective.

Quickreview questions:

1. What types of information may be shared with supply chain partners? Give some examples.

2. What is data mining?

3. Briefly describe VPN.

4. What are the typical drawbacks of ERP systems?

5. What can be provided by Open Buying on the Internet?

6. Describe CPFR.

7. What is special about the win/win negotiation style?

8. Define “Channels”.

9. What are the pros and cons of a centralized warehouse?

10. What are culture bound products?

11. What are the possible global pricing policies?

12. What is an export processing zone?

13. How to determine contribution margin?

14. What is a bill of lading?

15. What is the role of an international freight forwarder?

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16. What is the primary objective of distribution requirements planning?

17. Describe the purpose of Risk Assessment.

18. What is the SMART criteria?

19. What is significant about the DCM concept?

20. Describe the Unified Demand Planning process.

21. What does process alignment refer to?

22. What is the ultimate goal of strategic resource management?

23. What can be achieved through Organization Development?

24. What does SIPOC refer to?

25. What are the possible ways to gather VOC information?

26. What is SWOT Analysis?

27. What is the management philosophy of MBE?

28. Describe the preventive route to managing uncertainty.

Quick answers:

1. There are several types of information that can be shared, including inventory, sales, demand forecast, order status, and production schedule.

2. Data mining is the process of analyzing data from different perspectives and summarizing it into useful information that can be used to increase revenue, cuts costs, optimizing operations ...etc.

3. A VPN is a network that is constructed by using public wires to connect hosts in different geographic locations.

4. ERP systems have been criticized for lengthy and expensive installations, as well as for being too large and monolithic to support the rapid pace of business change.

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5. Open Buying on the Internet provides buyers with direct access to catalogue data hosted at the web sites of individual suppliers.

6. CPFR is all about working with network members to forecast demand, develop production plans, and coordinate shipping, warehousing, and stocking activities.

7. With the win/win negotiation style you negotiate based on the merits of the situation to obtain a satisfactory result. You would attack the problem, not each other.

8. Channels refer to the organized structures of buyers and sellers which bridge the gap of time and space between the manufacturer and its customers.

9. A centralized warehouse means centralizing inventory – you can simplify order processing and incur less outbound transport cost given load consolidation. The drawback is that inbound transport cost can be higher, and that time to market may be lengthened.

10. Products or services that are culture bound may include those that are generally indigenous by nature and/or of relatively small value and very common.

11. The possible global pricing policies include extension (ethnocentric), adaptation (polycentric) and invention (geocentric).

12. Export processing zones (EPZ) may serve as an entry into a foreign market. They are basically a form of investment incentive, although still being capable of providing employment for the host country as well as making skills transfer possible.

13. Contribution margin is the difference between sales and variable costs, while unit contribution margin is the difference between selling price per unit and the variable cost per unit.

14. A bill of lading (BOL) is a document issued by the carrier for acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery to the named consignee.

15. An international freight forwarder is an agent for the exporter in moving cargo to an overseas destination.

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16. One primary objective of distribution requirements planning is to provide an accurate requirement plan for manufacturing.

17. Risk Assessment is the process of identifying risk, its root causes, and potential outcomes.

18. MBO introduced the SMART criteria - that is, all objectives must be Specific, Measurable, Achievable, Realistic, and Time-Specific.

19. The DCM concept signals a major move from a push to a pull approach (that is, from SCM to a DCM).

20. Unified Demand Planning UDP is a process which is all about collective and centralized decision making for accomplishing demand planning activities.

21. Process alignment refers to the alignment between what is on paper and what is actually practiced.

22. The ultimate goal of strategic resource management is the building of sustainable competitive advantage for your manufacturing operation.

23. Organization Development (OD) aims at systematically bringing planned change to the organization to promote higher quality of work-life, productivity, adaptability, and effectiveness.

24. A SIPOC refers to a high-level process map consisting of Suppliers, Inputs, Process, Output, and Customers.

25. There are many possible ways to gather VOC information, such as focus groups, individual interviews, contextual inquiry, ethnographic techniques, etc.

26. SWOT Analysis is a useful strategic planning tool for evaluating the Strengths, Weaknesses, Opportunities, and Threats involved in your activities.

27. With Management By Exceptions (MBE), you pay attention primarily to items that are exceptional - you may think of an exception as the breaching of predefined assumption of your operation processes.

28. The preventive route to managing uncertainty aims at reducing the likelihood of occurrence of an undesirable deviation or disruption.

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Getting Strategic

Overview

In order to design a successful supply chain strategy, one has to understand and balance the competing demands of:

l the higher organizational strategies, such as mission, corporate and business strategies ...etc.

l the business environment and all the associating external factors

l the internal factors within the organization

We have virtually no control over the external environment, so the only option we have is to adjust the internal features of our organization to work within the external environment. The goal is to achieve internal harmony and external adaptation to the environment. Strategic competencies exist when we can perform key activities better than our competitors.

Supply chain synthesis, BRM, SCM and DCM

All the organizations and entities, from the initial supplier to the final customer together form a complete supply chain. The concept of a synthesized supply chain is a strategy for managing a global and customer driven supply chains. This is all about synthesizing individual entities into an integrated supply chain despite of issues such as conflicting objectives, mismatched incentives and constraints of each individual entity.

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In the 80s, Business resource management BRM had the focus of making better use and integration of interdepartmental resources and processes, with the main resources of men, materials, machines and money plus a new resource known as information. Supply chain management SCM had evolved as a response to the necessity of improving and extending cooperation between chain partners. With this concept, relationships in the supply chain had moved from adversarial transactions to different levels of integration. Then there is the Demand Chain Management DCM concept. It signals a major move from a push to a pull approach (that is, from SCM to a DCM). The focus is shifted from supplier-driven mass production to market-driven mass customization and even one-to- one marketing.

Unified Demand Planning

Unified Demand Planning UDP is a process which is all about collective and centralized decision making for accomplishing demand planning activities. The ultimate goal is to satisfy consumer demand and that understanding/clarifying the source of information correctly is highly crucial. In fact, the application of UDP encourages the entire supply chain to act synchronized.

The UDP process is usually started with an analysis of the ultimate consumer demand via quantitative methods. With UDP it is recommended that sales data be collected into a common pool so that the collaborative evaluation of data can be made possible. Carrying information from retailer to supplier over the same channel and across geographical/organizational borders is desirable if true collaboration is to be successful.

The establishment of trust can take place through technological ways and legal ways. Building trust through legal obligations as set forth in agreements is necessary. The tracking and keeping of proof data of all transactions is highly important too.

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Core business processes and alignments

A business entity in a supply chain has three core processes, which are time-to-cash, time-to-market, and customer creation and retention. The time-to-cash process deals with materials, information and payment flows. Time-to-market is all about the creation, development and improvement of products and services. Customer creation and retention process involves creating and retaining customer relations from first contact, after-sales, to follow-up and continuous improvement.

Process alignment refers to the alignment between what is on paper and what is actually practiced. Business process alignment often involves translating business objectives into process indicators and monitoring them via a management mechanism. Business process redesign involves reorganizing and improving procedures, while business performance management deals with the organization of a steering mechanism for performance measurement and improvement.

Relationship marketing has evolved into customer relationship management CRM. The primary goal is to allow one to target the customers more closely. This is all about implementing one-to-one marketing and aligning closer with SCM. To be successful you need to bring together SCM knowledge with expertise in marketing. Internally, this is all about getting a common demand chain strategy based on both the marketing/sales function and the logistics/SCM strategies so that demand creation can be synchronized with demand fulfillment. Externally, the perceived customer values and the relevant market segments have to be defined, together with the relevant value chain processes and network structure.

Strategic Planning Models

The Basic Strategic Planning model is typically followed by those who are small and resource-limited. Planning is usually done by top-level management. The planning process includes: