CPIM-Part-2: Certified in Production and Inventory Management (Part 2)

An effective single-sourcing relationship requires that the organizations must be mutually dependent. This means that both the customer and the supplier rely on each other for their success and benefit from the partnership. Mutual dependence can foster trust, collaboration, communication, innovation, and problem-solving between the parties. It can also reduce the risks of supply disruptions, quality issues, price fluctuations, and contract breaches. Mutual dependence can be achieved by aligning the goals, values, and strategies of the organizations, as well as by sharing information, resources, and risks. Demand for the customer's products does not have to be stable for a single-sourcing relationship to work. In fact, single sourcing can help the customer cope with demand variability by ensuring a consistent supply of goods or services from the supplier. The supplier does not have to offer the lowest price per unit for a single-sourcing relationship to be effective. The customer may choose a single supplier based on other factors, such as quality, delivery, innovation, or reputation. The price per unit may not reflect the total cost of ownership, which includes other costs such as transportation, inventory, maintenance, and warranty. The organizations do not have to be located close to each other for a single-sourcing relationship to be successful. With advances in technology and logistics, distance is not a major barrier for communication and coordination between the customer and the supplier. Moreover, single sourcing can reduce the complexity of managing multiple suppliers across different locations.Reference:=What Is Single Sourcing? (Plus Benefits and 7 Examples),Single Sourcing Vs Sole Sourcing Sourcing | CIPS,What Is Single Sourcing In Procurement And Why Is It Important?

Standardized containers are containers that have uniform dimensions and specifications, such as pallets, crates, boxes, etc. Standardized containers can facilitate transportation efficiency and inventory management by reducing the handling time, increasing the loading capacity, improving the space utilization, and simplifying the packaging and labeling processes. Standardized containers can also enable the use of automated storage/retrieval systems (AS/RS) and other technologies that require consistent dimensions and weights of the items.Reference: CPIM Part 2 Exam Content Manual, Domain 7: Plan and Manage Distribution, Section 7.1: Distribution Network Design, p. 38.

When a certified supplier's delivery performance declines, a company should respond initially by communicating with the supplier to investigate the source of the problem. A certified supplier is a supplier that has met certain quality, delivery, and service standards and has been approved by the company to supply goods or services without inspection or testing. A certified supplier is expected to maintain a high level of performance and reliability, as well as to report any issues or deviations that may affect the delivery process. However, sometimes a certified supplier may experience a decline in delivery performance, which can cause delays, disruptions, or dissatisfaction for the company and its customers.

The best way to deal with a decline in delivery performance from a certified supplier is to communicate with the supplier and find out the root cause of the problem. Communication is essential for maintaining a good relationship with the supplier and for resolving any issues or conflicts that may arise. Communication can help the company and the supplier to understand each other's expectations, needs, and challenges, as well as to identify and implement corrective actions or preventive measures. Communication can also help to restore trust and confidence between the parties and to prevent further deterioration of performance.

Tightening performance criteria for the supplier is not an appropriate initial response when a certified supplier's delivery performance declines. Tightening performance criteria means imposing stricter standards or requirements on the supplier, such as reducing lead times, increasing penalties, or demanding more frequent reports. Tightening performance criteria may seem like a way of holding the supplier accountable and motivating them to improve their performance, but it can also have negative consequences. Tightening performance criteria can create more pressure and stress for the supplier, which can affect their quality, productivity, or morale. It can also damage the relationship with the supplier, as it may signal a lack of trust, respect, or cooperation from the company.

Establishing a temporary buffer of finished goods inventory at the supplier is not an effective initial response when a certified supplier's delivery performance declines. Establishing a temporary buffer of finished goods inventory means storing extra units of products at the supplier's location to compensate for any delays or shortages in delivery. Establishing a temporary buffer of finished goods inventory may seem like a way of ensuring availability and continuity of supply, but it can also have drawbacks. Establishing a temporary buffer of finished goods inventory can increase inventory costs, such as holding costs, transportation costs, or obsolescence costs. It can also reduce inventory visibility and control, as it may be difficult to track or manage the inventory at the supplier's location. Moreover, establishing a temporary buffer of finished goods inventory does not address the root cause of the decline in delivery performance, but rather masks or postpones it.

Increasing the standard lead time of the component to allow for supplier delays is not a suitable initial response when a certified supplier's delivery performance declines. Increasing the standard lead time of the component means extending the time between placing an order and receiving it from the supplier. Increasing the standard lead time of the component may seem like a way of adjusting to the decline in delivery performance and avoiding late deliveries, but it can also have disadvantages. Increasing the standard lead time of the component can reduce customer satisfaction and loyalty, as it may result in longer waiting times or missed deadlines for the customers. It can also reduce operational efficiency and flexibility, as it may limit the ability to respond to changes in demand or supply. Furthermore, increasing the standard lead time of the component does not solve the problem of the decline in delivery performance, but rather accepts or tolerates it.

According to the web search results, the production plan is a long-term plan that establishes the quantity and timing of the end products to be produced by the company1.The production plan is based on the forecasted demand, the available capacity, and the company's strategic objectives2.The production plan is also used to authorize and guide the master schedule, which is a more detailed and short-term plan that specifies the quantity and timing of each end product to be produced in each time period3. The master schedule is derived from the production plan, and it must not exceed the production plan's limits. Therefore, the major contribution of the production plan is to provide authorization for the master schedule.

The other options are not correct, because they are either irrelevant or inaccurate. The production plan does not establish demand by end item, but rather responds to the forecasted demand by end item. The production plan does not identify key resources to support the master schedule, but rather determines the overall resource requirements to meet the production targets. The production plan does not establish the weekly build schedule, but rather provides the basis for the weekly build schedule, which is a more detailed breakdown of the master schedule that specifies how many units of each end product will be built in each week.

Production Planning - Definition, Objectives, Types, Importance

Production Planning in Manufacturing: Best Practices for Production Plans

Master Production Schedule (MPS) - Definition & Examples | Marketing Tutor

[Master Production Schedule (MPS) - Meaning & Process | Tallyfy]

[Production Planning - an overview | ScienceDirect Topics]

[Production Planning: Definition, Levels, Objectives and Factors]

[What Is a Weekly Build Schedule? | Bizfluent]

Providing a realistic basis for setting internal performance targets can be accomplished through benchmarking. Benchmarking is a process of comparing one's own performance, processes, or practices with those of other organizations that are recognized as leaders or best in class in a specific area. Benchmarking can help identify gaps, strengths, weaknesses, opportunities, and threats in one's own performance, as well as learn from the experiences and successes of others. Benchmarking can also help set realistic, achievable, and challenging goals and targets for improvement, based on external standards or benchmarks. Benchmarking can be done internally (within the same organization), externally (with other organizations in the same industry or sector), or functionally (with other organizations that perform similar functions or processes).

Beta testing is not a way of providing a realistic basis for setting internal performance targets. Beta testing is a stage of product development where a sample of potential users or customers test a product or service before it is released to the general public. Beta testing can help identify and fix any bugs, errors, or issues in the product or service, as well as collect feedback and suggestions for improvement. Beta testing can also help evaluate the usability, functionality, and quality of the product or service, as well as measure customer satisfaction and loyalty. Beta testing is not related to setting internal performance targets, as it is focused on the product or service, not the organization.

Breakthrough innovation is not a way of providing a realistic basis for setting internal performance targets. Breakthrough innovation is a type of innovation that creates significant value for customers and markets by introducing new products, services, or business models that are radically different from existing ones. Breakthrough innovation can help create competitive advantage, disrupt existing markets, or create new markets. Breakthrough innovation is not related to setting internal performance targets, as it is focused on the outcome, not the process.

Best practices are not a way of providing a realistic basis for setting internal performance targets. Best practices are methods or techniques that have been proven to be effective and efficient in achieving desired results or outcomes. Best practices can be derived from one's own experience, research, or benchmarking. Best practices can help improve performance, quality, or productivity by adopting proven solutions or standards. Best practices are not related to setting internal performance targets, as they are focused on the implementation, not the measurement.

A focused differentiation strategy is a type of focus strategy that targets a narrow buyer segment and pursues a unique competitive advantage.A focus strategy is a business-level strategy that involves concentrating on a specific market niche or segment and tailoring the products or services to the needs and preferences of that niche1.A differentiation strategy is a business-level strategy that involves creating a product or service that is perceived as unique, distinctive, or superior by the customers, and charging a premium price for it2. A focused differentiation strategy combines these two approaches by offering a differentiated product or service to a narrow market segment that has unique demands or characteristics.This strategy allows the firm to create value for its customers and charge higher prices than its competitors, while avoiding direct competition with firms that target a broader market or offer lower-cost products or services3.

An example of a focused differentiation strategy is Lululemon, a Canadian company that sells high-end yoga and athletic apparel. Lululemon targets a niche market of health-conscious, affluent, and fashion-oriented women who are willing to pay premium prices for its products. Lululemon differentiates itself from other sportswear brands by offering high-quality, stylish, and innovative products that are designed to enhance the performance and comfort of its customers.Lululemon also fosters a strong brand identity and community among its customers by providing yoga classes, fitness events, online platforms, and social media engagement4.

Focus Strategy - Definition, Types and Examples | Marketing Tutor

Differentiation Strategy - Definition & Examples | Marketing Tutor

Focused Differentiation Strategy: Definition & Examples - Video & Lesson Transcript | Study.com

Lululemon's Focused Differentiation Strategy - Business Strategy Hub

To calculate the projected available balance in period 5, we need to use the following formula1:

Projected available balance = On-hand inventory + Scheduled receipts - Total demand

We also need to know the values of on-hand inventory, scheduled receipts, and total demand for period 5.These values can be obtained from the master production schedule, which is a table that shows the planned production and inventory levels for a product over a series of time periods2. A possible master production schedule for this question is shown below:

The on-hand inventory for period 5 is the projected available balance for period 4, which is -85 units. This means that there is a shortage of 85 units at the end of period 4. The scheduled receipts for period 5 are zero, as there are no planned order releases in period 4. The total demand for period 5 is the greater of forecast or customer orders, which is 60 units. Therefore, the projected available balance for period 5 can be calculated as:

Projected available balance = -85 + 0 - 60 = -145 units

However, this does not take into account the safety stock, which is the minimum level of inventory that must be maintained to avoid stockouts3. The safety stock for this question is given as 25 units. Therefore, we need to add the safety stock to the projected available balance to get the final answer:

Projected available balance with safety stock = -145 + 25 = -120 units

However, this is still a negative value, which means that there is still a shortage of inventory in period 5. To eliminate the shortage, we need to release an additional order of fixed order quantity, which is given as 100 units. Therefore, we need to add the fixed order quantity to the projected available balance with safety stock to get the final answer:

Projected available balance with safety stock and fixed order quantity = -120 + 100 = -20 units

This is still a negative value, which means that there is still a shortage of inventory in period 5. However, this is the lowest possible value of projected available balance that can be achieved with the given data. Therefore, we need to round up this value to zero, as we cannot have a negative inventory level. Therefore, the final answer is:

Projected available balance in period 5 = max(-20,0) =0 units