Question 117 - CPIM-Part-2 discussion

Full pegging is a method of tracing the relationship between supply and demand in a manufacturing system. Full pegging shows the link between each demand and its corresponding supply, as well as the link between each demand and the highest-level order that triggered it. Full pegging helps to identify the impact of changes in demand or supply on the production plan, and to make adjustments accordingly. Full pegging is most beneficial in an assemble-to-order (ATO) environment, where products are customized by assembling standardized components or modules according to customer specifications. In an ATO environment, full pegging can show the connection between the finished products, the components or modules, and the customer orders. This can help to optimize the inventory level, reduce lead time, and improve customer service.

Full pegging is not very useful in the other production environments. Distribute-to-order is a production strategy that delivers finished products from inventory to customers based on their orders. There is no customization or assembly involved in this strategy, so full pegging is not needed. Make-to-order is a production strategy that produces customized products from raw materials or components after receiving customer orders. There is no standardization or modularization involved in this strategy, so full pegging is not applicable. Make-to-stock is a production strategy that produces standardized products in advance of customer demand, and stores them in inventory until they are sold. There is no customization or assembly involved in this strategy, so full pegging is not relevant.Reference: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section 4.1: Supply Planning Concepts, p. 23;Full Pegging; Assemble to order.