APICS CPIM-8.0 Certified in Planning and Inventory Management (CPIM 8.0) Online Training

Question #51

The horizon for forecasts that are input to the sales and operations planning (S&OP) process should be long enough that:

A . cumulative forecast deviation approaches zero.
B . planned product launches can be incorporated.
C . required resources can be properly planned.
D . supply constraints can be resolved.

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Question #52

A low-cost provider strategy works best when which of the following conditions are met?

A . Price competition among rivals is similar.
B . Buyers are more price sensitive.
C . There are many ways to achieve product differentiation.
D . There are few industry newcomers.

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Correct Answer: B
B

Explanation:

A low-cost provider strategy is a business strategy where a company aims to become the most cost-efficient player in its industry, often by producing goods or providing services at a lower cost than its competitors. The overall goal is to increase market share or achieve higher profitability. The low-cost leader in an industry often sets the price that other companies have to match or beat to stay competitive12.

A low-cost provider strategy works best when buyers are more price sensitive, meaning they are more likely to switch to cheaper alternatives if the price of a product or service increases. This condition creates a strong demand for low-priced products or services, and gives the low-cost leader a competitive advantage over rivals who have higher costs and prices.

Buyers are more price sensitive when34:

• The product or service is standardized or undifferentiated, and there are few switching costs.

• The product or service represents a significant portion of the buyer’s budget or income.

• The product or service has low quality, performance, or image attributes that limit the buyer’s satisfaction or loyalty.

• The product or service is not crucial to the buyer’s well-being or enjoyment.

The other options are not correct because:

• A. Price competition among rivals is similar. This condition does not favor a low-cost provider strategy, because it implies that the industry is already highly competitive and there is little room for differentiation. A low-cost leader would have to lower its prices even further to gain an edge over rivals, which could erode its profitability and sustainability.

• C. There are many ways to achieve product differentiation. This condition does not favor a low-cost provider strategy, because it implies that the industry is diverse and dynamic, and there are many opportunities for innovation and value creation. A low-cost leader would have to invest more in research and development, marketing, and customer service to keep up with the changing customer preferences and expectations, which could increase its costs and reduce its efficiency.

• D. There are few industry newcomers. This condition does not favor a low-cost provider strategy, because it implies that the industry is mature and stable, and there are few threats from new entrants. A low-cost leader would have to rely on its existing customer base and market share, which could limit its growth potential and expose it to the risk of obsolescence.

References:=

1 Low-cost leadership strategy: Explained with examples2

2 Low-Cost Producer: Definition, Strategies, Examples – Investopedia4

3 Low Cost Strategy – Definition, Factors & Example – MBA Skool5

4 Generating Advantage C Strategic Management – Open Educational Resources1

Question #53

Which of the following planning modules considers the shortest-range planning goals?

A . Capacity requirementsplanning(CRP)
B . Input/output analysis
C . Resource planning
D . Rough-cut capacity planning (RCCP)

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Correct Answer: A
A

Explanation:

Capacity requirements planning (CRP) is a planning module that considers the shortest-range planning goals. CRP is a process of determining the amount of available capacity and comparing it with the required capacity to execute the planned orders in the master production schedule (MPS) and the material requirements planning (MRP). CRP is usually done at the work center level and for a time horizon of a few weeks or months. CRP helps to identify and resolve capacity issues, such as overloads or underloads, and to adjust the production plan accordingly. CRP is the most detailed and accurate method of capacity planning, as it considers the actual routings, lead times, and lot sizes of the orders. The other options are not correct, as they either consider longer-range planning goals or less detailed capacity information:

• Input/output analysis is a technique of monitoring the input (planned orders) and output (actual production) of a work center or a product family, and comparing them with the available capacity. Input/output analysis is usually done at the aggregate level and for a time horizon of a few months or quarters. Input/output analysis helps to measure the performance of the production plan and to identify and correct deviations from the plan.

• Resource planning is a process of determining the long-range capacity requirements for labor, equipment, facilities, and other resources, based on the sales and operations plan (S&OP). Resource planning is usually done at the aggregate level and for a time horizon of a few years. Resource planning helps to support the strategic decisions and investments related to the resource capacity.

• Rough-cut capacity planning (RCCP) is a process of verifying the feasibility of the master production schedule (MPS) in terms of the available capacity of critical resources, such as key machines or labor skills. RCCP is usually done at the product family level and for a time horizon of a few months or quarters. RCCP helps to validate the MPS and to identify and resolve potential capacity bottlenecks or gaps.

References:

• [CPIM Part 2 – Section A – Topic 2 – Capacity Planning]

• Capacity Requirements Planning (CRP)

• Input/Output Control

• Resource Planning

• Rough Cut Capacity Planning (RCCP)

Question #54

Which of the following outcomes Is a benefit of mixed-model scheduling?

A . Increased inventory
B . Improved demand response
C . Fewer setups
D . Fewer material shortages

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Question #55

An advantage of applying ABC classification to a firm’s replenishment items is that:

A . it distinguishes independent demand from dependent demand.
B . it allows planners to focus on critical products.
C . it provides better order quantities than the economic order quantity (EOQ).
D . it allows the firm to utilize time-phased order point (TPOP).

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Correct Answer: B
B

Explanation:

ABC classification is a method of inventory management that categorizes items based on their annual consumption value, which is the product of the annual demand and the unit cost. Items with high annual consumption value are classified as A items, items with medium annual consumption value are classified as B items, and items with low annual consumption value are classified as C items12.

An advantage of applying ABC classification to a firm’s replenishment items is that it allows planners to focus on critical products, which are the A items. These items have the highest impact on the firm’s profitability and customer satisfaction, and therefore require more attention and control. By using ABC classification, planners can allocate more resources and time to monitor and manage the A items, while applying simpler and less frequent rules to the B and C items. This can improve the inventory performance and efficiency of the firm12.

The other options are not correct because:

• A. it distinguishes independent demand from dependent demand. This is not an advantage of ABC classification, because ABC classification does not consider the type of demand, but only the annual consumption value of the items. Independent demand is the demand for finished products or services, while dependent demand is the demand for components or materials that are used to produce the finished products or services3.

• C. it provides better order quantities than the economic order quantity (EOQ). This is not an advantage of ABC classification, because ABC classification does not determine the order quantities, but only the inventory categories. EOQ is a formula that calculates the optimal order quantity that minimizes the total inventory costs, such as ordering costs and holding costs.

• D. it allows the firm to utilize time-phased order point (TPOP). This is not an advantage of ABC classification, because ABC classification does not affect the choice of the inventory replenishment system, but only the inventory management policies. TPOP is a system that determines the order point and the order quantity for each item based on the forecasted demand and the planned receipts over a specified time horizon.

References: = 1 ABC Inventory Analysis & Management | NetSuite1 2 What Is ABC Inventory Classification? | Business.org2 3 Independent Demand vs Dependent Demand: What’s the Difference? Economic Order Quantity (EOQ) – Overview, Formula, and Example Time-Phased Order Point (TPOP) – an overview | ScienceDirect Topics