APICS CPIM-Part-2 Practice Test - Questions Answers, Page 10

Scrap allowance is a percentage or quantity of material that is expected to be lost or wasted during the production process. Scrap allowance is usually applied to the component items in a bill of materials (BOM), which is a document that lists the materials, quantities, and relationships required to produce an end item. An increase in the scrap allowance in an assembled item will result in replanning of the component items in material requirements planning (MRP), which is a system that calculates the timing and quantity of materials and resources needed to meet the production plan. Replanning of the component items in MRP means that the system will adjust the planned order releases, order quantities, and due dates of the component items to account for the increased scrap allowance. Replanning of the component items in MRP will ensure that enough material is available to meet the demand for the assembled item, and to avoid shortages or excess inventory.

Replenishment lead time is the time between placing an order and receiving the goods1. Reducing replenishment lead time will result in lower inventory levels, as it will allow the company to order less frequently and in smaller quantities, while still meeting customer demand. This will reduce the safety stock, cycle stock, and pipeline stock that the company needs to hold, and thus lower the inventory carrying costs and risks.

The other options will not result in lower inventory levels.Level loading the MPS means producing at a constant rate regardless of demand fluctuations2. This will result in higher inventory levels, as the company will need to build up inventory during periods of low demand and draw down inventory during periods of high demand.Increasing customer service level means improving the ability to meet customer expectations and requirements3. This will also result in higher inventory levels, as the company will need to hold more safety stock to avoid stockouts and ensure high fill rates.Decentralizing inventory locations means distributing inventory across multiple warehouses or facilities4. This will also result in higher inventory levels, as the company will need to maintain more safety stock at each location to account for demand variability and uncertainty.

When deciding what to report externally regarding sustainability performance, a company should disclose its past results and future strategies. This will help the company to demonstrate its progress, achievements, challenges, and commitments in relation to its environmental, social, and governance (ESG) goals. Disclosing past results and future strategies will also enhance the company's transparency, accountability, and credibility with its stakeholders, such as investors, customers, employees, regulators, and the public.

Disclosing results of poor performance or acceptable performance alone is not sufficient, as it does not provide a complete picture of the company's sustainability performance. Moreover, disclosing only poor performance may damage the company's reputation and trust, while disclosing only acceptable performance may raise doubts about the company's honesty and reliability. Disclosing why current regulations are too costly is irrelevant and inappropriate, as it does not reflect the company's sustainability performance or efforts. It may also imply that the company is not willing or able to comply with the regulations or improve its sustainability practices.

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.

Available capacity is the difference between the required capacity and planned operating capacity1.It refers to how capable the resources in an organization are in formulating and implementing strategy1.To calculate available capacity, factors such as the number of machines or workers, the number of shifts, utilization, and efficiency are considered1. Efficiency, in particular, is a crucial factor as it measures how effectively resources are used to produce output.It is calculated as the ratio of actual output to standard output within a specific time period1. Therefore, efficiency directly impacts available capacity by determining how much output can be produced with the available resources and time.

The other options, while important in production and operations management, are not directly used to calculate available capacity:

Productivity measures the output per unit of input and is more about overall performance rather than available capacity.

Load refers to the amount of work assigned to a resource or facility but does not directly indicate available capacity.

Yield measures the percentage of products that meet quality standards out of total units produced but does not directly calculate available capacity.

The cumulative available-to-promise (ATP) method is based on an assumption that available inventory in a period can be committed to demand in that period and any future period in the planning horizon.The planning horizon is the time span for which plans are made and executed1.The cumulative ATP is a running total of the ATP figure in the master schedule, which shows the planned production or purchase of a product over a series of time periods2.The cumulative ATP method allows the company to account for future shortages and build up inventory for large or seasonal orders3.

The other options are not correct.The demand time fence (DTF) is a point in the near future, usually equal to the cumulative lead time, beyond which changes to the master schedule are not allowed4. The cumulative ATP method does not depend on the DTF, as it considers all future periods in the planning horizon, regardless of whether they are inside or outside the DTF.Future periods with a planned receipt are periods where there is an expected supply of inventory from production or purchase orders2. The cumulative ATP method does not only commit inventory to these periods, but also to any other periods where there is demand.

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.

An organization's immediate industry and competitive environment includes the factors that directly affect its ability to compete and achieve its goals.These factors are often analyzed using Porter's Five Forces model, which identifies five competitive forces that shape the industry: threat of new entrants, power of suppliers, power of buyers, threat of substitute products, and rivalry among existing competitors1. Among these forces, substitute products are the most relevant component of the immediate industry and competitive environment, as they represent the alternative solutions that customers can choose instead of the organization's products.Substitute products can reduce the demand and profitability of the organization's products, as well as increase the price sensitivity and bargaining power of customers1.

The other options are not components of the immediate industry and competitive environment, but rather components of the general or macro environment.The general or macro environment includes the broader factors that affect all organizations in a society or a market, such as political, economic, social, technological, environmental, and legal factors2.These factors are often analyzed using PESTEL analysis, which helps organizations identify the opportunities and threats arising from the external environment2.Among these factors, political factors include the government policies, regulations, and stability that affect the organization's operations and decisions2.Interest rates are part of the economic factors that include the market conditions, growth, inflation, unemployment, and exchange rates that affect the organization's performance and profitability2.Sociocultural forces are part of the social factors that include the demographics, values, beliefs, lifestyles, and preferences of the customers and society that affect the organization's demand and customer satisfaction2.

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.