APICS CSCP Practice Test - Questions Answers, Page 22

Improving the cash-to-cash cycle time involves reducing the time taken to convert resources into cash flows. Implementing vendor-managed inventory (VMI) with key suppliers can significantly improve this cycle by reducing inventory holding costs and improving inventory turnover. In a VMI setup, suppliers manage the inventory levels of their products at the customer's location, ensuring optimal inventory levels and reducing stockouts and excess inventory. This arrangement improves cash flow as it reduces the amount of capital tied up in inventory. Finding suppliers with lower TCO, implementing VMI with customers, or targeting promotions, while beneficial, do not have as direct an impact on the cash-to-cash cycle time as VMI with suppliers.

Pfohl, H.-C. (2010). Logistics Management: An International Journal. Springer.

Watson, M., & Gallego, G. (2013). Revenue Management and Pricing Analytics. Springer.

Building a collaborative supply chain relies heavily on establishing strong, trust-based relationships among all parties involved. Mutual trust is the foundation of collaboration, fostering open communication, shared goals, and a willingness to work together for mutual benefit. When trust is present, partners are more likely to share critical information, coordinate activities, and support each other during disruptions. While investing capital, integrating information systems, and developing a common culture are important, they are secondary to the fundamental requirement of trust, which enables all other collaborative efforts to be more effective.

Barratt, M., & Oliveira, A. (2001). Exploring the Concept of Supply Chain Collaboration. International Journal of Logistics Management.

Simatupang, T. M., & Sridharan, R. (2005). The Collaboration Index: A Measure for Supply Chain Collaboration. International Journal of Physical Distribution & Logistics Management.

Make-to-stock (MTS) is a manufacturing strategy where products are produced based on anticipated customer demand and then held in inventory until sold. The primary risk associated with MTS is the possibility of overestimating demand, which can lead to excess inventory. If the forecasted demand does not materialize, the unsold inventory may become obsolete, leading to increased costs associated with storage, depreciation, and potential disposal. In contrast, the other strategies---assemble-to-order (ATO), make-to-order (MTO), and engineer-to-order (ETO)---are more demand-driven, producing goods in response to actual customer orders, thus reducing the risk of holding obsolete inventory.

Reference:

Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation. Pearson.

Stevenson, W. J. (2021). Operations Management. McGraw-Hill Education.

The cash-to-cash cycle time is calculated as the sum of days' sales outstanding (DSO), days' inventory outstanding (DIO), and minus days' payables outstanding (DPO). Given:

Cash-to-cash cycle time = 60 days

DSO = 35 days

DPO = 25 days

First, determine the DIO: =60+2535=50daysDIO=60+2535=50days

If inventory is reduced by 20%, the new DIO is: =50(10.20)=40daysDIOnew=50(10.20)=40days

Now, calculate the new cash-to-cash cycle time: Newcash-to-cashcycletime=+Newcash-to-cashcycletime=DSO+DIOnewDPO Newcash-to-cashcycletime=35+4025=50daysNewcash-to-cashcycletime=35+4025=50days

Therefore, the new cash-to-cash cycle time will be approximately 50 days.

Reference:

Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. (2016). Supply Chain Management: A Logistics Perspective. Cengage Learning.

Jacobs, F. R., & Chase, R. B. (2020). Operations and Supply Chain Management. McGraw-Hill Education.

Leveraging group purchasing power involves combining the purchasing requirements of multiple entities to negotiate better terms and prices with suppliers. This approach can result in significant cost savings due to economies of scale, as larger purchase volumes typically attract discounts and better terms. While other options like conducting a supplier review, renegotiating contracts, and standardizing items can also contribute to cost reductions, the collective bargaining power and resulting bulk discounts from group purchasing usually yield the greatest savings.

Reference:

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2020). Purchasing and Supply Chain Management. Cengage Learning.

Burt, D. N., Petcavage, S., & Pinkerton, R. (2010). Supply Management. McGraw-Hill Education.

Implementing a supplier certification program involves setting quality standards and certifying suppliers that meet these standards consistently. This proactive approach ensures that suppliers are capable of delivering quality products, reducing the occurrence of quality issues that disrupt production. Tightening quality tolerances and implementing inspection at the receiving dock are reactive measures that address issues after they occur, while charging back rework costs may strain supplier relationships. A supplier certification program promotes long-term quality improvement and fosters a collaborative relationship between the company and its suppliers.

Reference:

Krajewski, L. J., Malhotra, M. K., & Ritzman, L. P. (2019). Operations Management: Processes and Supply Chains. Pearson.

Heizer, J., Render, B., & Munson, C. (2020). Operations Management: Sustainability and Supply Chain Management. Pearson.

Establishing direct relationships with lower-tier suppliers allows a manufacturer to gain critical insights and information that may not be available through tier 1 suppliers alone. Lower-tier suppliers often have a closer connection to the raw materials market and can provide early warnings about impending shifts in the economy, such as changes in raw material availability, price fluctuations, and other economic indicators. This information is invaluable for strategic planning and risk management. Options like smaller lot sizes, short lead times, and Just in Time (JIT) deliveries are operational benefits that typically arise from the tier 1 supplier relationships.

Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation. Pearson.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2016). Purchasing and Supply Chain Management. Cengage Learning.

Variation in upstream requirements can be significantly reduced by increasing demand visibility. When all partners in the supply chain have clear and accurate information about actual demand, they can better align their production schedules and inventory levels, thus reducing the variability and uncertainty that lead to inefficiencies. Improved demand visibility helps in forecasting accuracy, better planning, and more responsive supply chain operations. Increasing production capacity, product features, or safety stock does not address the root cause of demand variability; instead, they are reactive measures that do not improve upstream stability.

Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies. McGraw-Hill.

Christopher, M. (2016). Logistics & Supply Chain Management. Pearson.

Order-fill rate performance is a key metric for assessing supply chain reliability. It measures the ability of the supply chain to meet customer orders in full and on time, which directly reflects the reliability and effectiveness of the supply chain processes. A high order-fill rate indicates that the supply chain can consistently fulfill customer orders as expected, which is crucial for gaining a competitive advantage. Metrics like cash-to-cash cycle time, supply chain response time, and value-added productivity per employee are important but do not directly capture the reliability aspect as clearly as the order-fill rate.

Harrison, A., & Van Hoek, R. (2011). Logistics Management and Strategy: Competing through the Supply Chain. Pearson.

Mentzer, J. T. (2004). Supply Chain Management. Sage Publications.