APICS CSCP Practice Test - Questions Answers, Page 42

Understanding the Issue: The company has identified that products sold to a large, strategic customer have low variable margins, which is not sustainable for profitability.

Strategic Importance: Since the customer is large and strategic, ending the relationship (Option A) could have significant negative implications on overall business.

Balanced Scorecard (Option B): While implementing a balanced scorecard can help in measuring performance, it is not a direct solution to improving product margins.

Low Labor Cost Location (Option D): Moving production might reduce costs, but it involves significant changes and potential risks which might not address the pricing/value issue directly.

Value-Based Pricing (Option C): Evaluating the products' value to the customer and adjusting prices accordingly ensures the company aligns its pricing strategy with the perceived value, potentially increasing margins without losing the customer. This approach can also help in identifying and highlighting the value proposition, enhancing customer satisfaction and loyalty.

Reference: Supply Chain Management Principles and Concepts, Pricing Strategy literature, Customer Value Management studies.

Definition of Value Stream Mapping (VSM): VSM is a lean-management method for analyzing the current state and designing a future state for the series of events that take a product or service from its beginning through to the customer.

Purpose of VSM: The primary aim of VSM is to identify and eliminate waste (non-value-added activities) in the process.

Non-Value-Added Activities: These are steps in a process that do not add value to the customer, such as unnecessary movement, waiting times, excess inventory, and overproduction.

Benefit of VSM in Identifying Non-Value-Added Activities: By mapping out the entire process, VSM helps in pinpointing areas of waste and inefficiency, allowing the company to streamline operations and improve overall efficiency.

Reference: Lean Manufacturing and Six Sigma methodology, Value Stream Mapping guides.

Purpose of Distribution Warehouses: They are meant to store products closer to customers, thus improving delivery times and service levels.

Impact of New Warehouse: Adding a new warehouse reduces the distance products need to travel to reach customers.

Primary Factor: Reduced travel time from the distribution warehouse to the customer leads to faster deliveries.

Supporting Factors: While new material handling equipment and increased safety stock (Options A and B) can contribute to efficiency, the primary reason for reduced lead times is the proximity of the new warehouse to the customer (Option C).

Reference: Distribution Network Design, Logistics Management textbooks.

Service Levels: These are measures of the quality of service provided to customers, often including factors like on-time delivery, order accuracy, and product availability.

Product Variety: Having too many product variants can complicate inventory management, production scheduling, and forecasting, leading to inefficiencies.

Impact of Reducing Product Variety: Simplifying the product range can lead to better inventory management, easier forecasting, and more focused production efforts, which in turn can improve overall service levels.

Alternative Options: Increasing promotions or market penetration (Options A and B) do not directly address service level improvements. Reducing profit-margin expectations (Option D) might not sustainably improve service levels and could hurt profitability.

Reference: Inventory Management studies, Product Line Simplification literature.

Demand Time Fence (DTF): This is a period within which no changes are typically made to the master schedule because it could disrupt production.

New Order within DTF: Receiving a new order within this time frame poses a risk to the existing schedule.

Impact Assessment: The best practice is to assess how the new order will affect current orders and operations.

Escalation: If the impact is significant, it should be escalated to higher management for a decision. Simply accepting or rejecting the order (Options A and B) without analysis could lead to service issues or missed opportunities.

Adjusting Due Dates: Accepting the order but changing the due date (Option D) may not meet customer needs and might not always be feasible.

Reference: Master Scheduling and Planning, Demand Management guidelines.

Cash-to-cash cycle time is a key metric for measuring supply chain asset efficiency. It represents the time taken between outlaying cash for raw material purchases and receiving cash from product sales. A shorter cash-to-cash cycle time indicates a more efficient use of assets, as it means the company is quicker in converting its investments in inventory into cash flow. This metric directly reflects how well a company manages its inventory, payables, and receivables. Return on equity (ROE) and net present value (NPV) are broader financial metrics, while upside flexibility measures responsiveness, not efficiency.

Reference: Supply Chain Council, 'Supply Chain Operations Reference (SCOR) Model'; Christopher, M. (2016). 'Logistics & Supply Chain Management.'

In a period of rising raw material costs, the First In, First Out (FIFO) inventory accounting method would maximize reported company assets. FIFO assumes that the oldest inventory items are sold first, which means the cost of goods sold (COGS) is based on the older, lower costs of raw materials. Consequently, the remaining inventory on the balance sheet is valued at the more recent, higher costs, thus reflecting higher asset values. Last In, First Out (LIFO) would do the opposite, and Activity-based cost and Moving average cost do not specifically take advantage of rising prices in this manner.

Reference: Horngren, C. T., Datar, S. M., & Rajan, M. V. (2015). 'Cost Accounting: A Managerial Emphasis.'

In the Supply Chain Operations Reference (SCOR) model, the metric that measures responsiveness of a supply chain is the Order Fulfillment Cycle Time. This metric indicates the average time taken to fulfill customer orders from the moment they are placed until delivery. It directly measures how quickly the supply chain can respond to customer demand. On-time delivery and perfect order fulfillment measure reliability, while total inventory days of supply measures efficiency.

Reference: Supply Chain Council, 'Supply Chain Operations Reference (SCOR) Model.

When determining inventory levels for each product, especially for a company focusing on product differentiation with unique features targeted at various customer groups, the first activity should be identifying and documenting each market segment's needs. Understanding specific customer requirements and demand patterns is crucial for setting appropriate inventory levels that align with market expectations. Planning equivalent inventory levels, setting price points, and determining inventory levels at retail outlets are subsequent steps that depend on the initial assessment of market needs.

Reference: Kotler, P., & Keller, K. L. (2016). 'Marketing Management.'