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CSCP: Certified Supply Chain Professional
APICS
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A company finds that one of its warehouses is out of capacity to store products. Expanding the physical size of the warehouse is not an option. The most appropriate solution would be to increase the:
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A company's annual cost of goods sold is $350 million, and inventory carrying cost is 18%. The company averages four inventory turns. The cost savings resulting from increasing inventory turns from four to six would be:
Explanation:
To calculate the cost savings from increasing inventory turns, we first need to determine the current inventory level and the inventory carrying cost.
Calculate the average inventory level:
Current inventory turns = 4
Cost of Goods Sold (COGS) = $350 million
Average inventory = COGS / Inventory turns = $350 million / 4 = $87.5 million
Calculate the inventory carrying cost:
Inventory carrying cost rate = 18%
Current carrying cost = $87.5 million * 18% = $15.75 million
Calculate the new inventory level with increased turns:
New inventory turns = 6
New average inventory = COGS / New inventory turns = $350 million / 6 = $58.33 million
Calculate the new inventory carrying cost:
New carrying cost = $58.33 million * 18% = $10.5 million
Determine the cost savings:
Cost savings = Current carrying cost - New carrying cost = $15.75 million - $10.5 million = $5.25 million per turn
Since inventory turns increase from 4 to 6 (an increase of 2 turns), total savings:
Total cost savings = $5.25 million * 2 = $29 million
Thus, the cost savings from increasing inventory turns from four to six would be $29,000,000.
Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. J. (2016). Supply Chain Management: A Logistics Perspective. Cengage Learning.
Stevenson, W. J. (2018). Operations Management. McGraw-Hill Education.
Which of the following measures would be an appropriate indicator of the marketing and sales organization's support of the sales and operations planning (S&OP) process?
Explanation:
S&OP Process: The Sales and Operations Planning (S&OP) process aims to balance supply and demand, aligning production with market requirements.
Revenue Metric: Total revenue as a percent of planned revenue is a direct measure of how well the marketing and sales organization supports the S&OP process by achieving sales targets.
Other Metrics: While finished goods inventory, product introductions, and new customers are important, they do not directly indicate how marketing and sales efforts align with the overall revenue goals set in the S&OP process.
Wallace, T. F., & Stahl, R. A. (2008). 'Sales & Operations Planning: The How-To Handbook.' T. F. Wallace & Company.
Lapide, L. (2004). 'Sales and Operations Planning (S&OP) Mindsets.' Journal of Business Forecasting, 23(3), 17-19.
A company considers moving a portion of its production to a distant country to support a major customer. Which of the following actions is most effective in mitigating the risk of financial loss in the event of a global economic downturn?
Which of the following tools would help a team of operators to prioritize causes of equipment failures?
Which of the following forecasting techniques is most appropriate when data is scarce?
Explanation:
When data is scarce, the Delphi method is the most appropriate forecasting technique. This method involves:
Expert Judgment: Gathering insights and opinions from a panel of experts through multiple rounds of surveys.
Iterative Process: Experts revise their responses based on feedback until a consensus is reached.
Scarcity of Data: Ideal for situations where historical data is limited or unavailable, relying instead on expert knowledge and experience.
'Forecasting: Principles and Practice' by Rob J Hyndman and George Athanasopoulos
'Business Forecasting' by John E. Hanke and Dean W. Wichern
Which of the following statements defines the function of the bill of lading (B/L)?
Which of the following activities is an aspect of proper demand management?
Cash-to-cash cycle time is a measure of a firm's:
Explanation:
Cash-to-cash cycle time is a critical measure of a firm's working capital utilization. It calculates the time taken between outlaying cash for raw materials and receiving cash from product sales. Key points include:
Definition: Cash-to-cash cycle time = Days of Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding.
Working Capital Efficiency: It measures how efficiently a company is managing its working capital. Shorter cycles indicate better utilization of cash resources.
Impact on Liquidity: A shorter cash-to-cash cycle improves liquidity, as the company can quickly turn its inventory into cash.
Operational Performance: This metric reflects overall operational efficiency, including procurement, production, and sales processes.
Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. J. (2016). Supply Chain Management: A Logistics Perspective. Cengage Learning.
Bragg, S. M. (2010). Business Ratios and Formulas: A Comprehensive Guide. Wiley.
A company produces and distributes a family of soft drinks in a single country. It has developed and will introduce a new family of soft drinks for weight- and health-conscious individuals. There currently are no competitors with nationwide distribution for this category of soft drinks. Which of the following supply chain strategies would be most appropriate for the two product families?
Explanation:
Given the context of introducing a new product family with no existing competitors and uncertain demand patterns, the most appropriate strategy is to:
Current Product Family (To Forecast): Continue producing the established product family based on demand forecasts. This approach leverages historical sales data and existing market understanding to maintain efficient production and distribution.
New Product Family (To Order): Produce the new product family only after receiving orders from distributors. This minimizes the risk associated with overproduction and inventory holding costs for a new product with uncertain demand.
Producing both product families to forecast (A) or to order (B) does not account for the differing levels of market maturity and demand predictability. Producing the new product family to forecast (D) would be risky due to the lack of historical data and demand uncertainty.
'Supply Chain Management: Strategy, Planning, and Operation' by Sunil Chopra and Peter Meindl.
APICS Dictionary, 16th edition.
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