CPIM Exam 1 Questions With Correct Answers

Line Haul Cost - Answer The cost to operate the vehicle, whether it is half empty or full, is the same basic cost. What does alter is the distance that is traveled. Terminal Handling - Answer The cost of handling a shipment several times. When full loads are shipped there is no extra handling thus no extra cost. The shipment can go direct to the required destination. Supplier - Answer A company from which you purchase parts or material Customer - Answer The person or organization that receives a product, service, or information. Supply Chain Conflicts - Answer 1) Disruption of supply 2) Synchronizing supply with demand 3) Minimizing inventory investment and maximizing customer service 4) Managing total cost Organization Conflicts - Answer Problems between finance, sales, production, marketing, engineering, and planning functions within a business. Average Inventory Calculation - Answer = (1/2 Order Quantity) + Safety Stock The UN Global Compact - Answer Address corporate sustainability in the world economy by asking companies to embrace, support and enact a set of core values in the areas of human rights, labor standards, the environment, and anti-corruption. It is a voluntary initiative. It is not designed to monitor or measure participants' performance, but assures that the ___ ___ is safeguarded at all times. There are 10 principles 1) Businesses should support and respect the protection of internationally proclaimed human rights (respecting, supporting, addressing) 2) Businesses should make sure they are not complicit in human rights abuses 3) Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining 4) Businesses should uphold the elimination of all forms of forced and compulsory labor 5) Businesses should uphold the effective abolition of child labor 6) Businesses should uphold the elimination of discrimination in respect of employment and occupation 7) Businesses should support a precautionary approach to environmental challenges 8) Business should undertake in initiatives to promote greater environmental responsibility 9) Businesses should encourage the development and diffusion of environmentally friendly technologies 10) Businesses should work against corruption in all its forms, including extortion and bribery Definition and Impact of the Operating Environments - Answer The global, domestic, environmental, and stakeholder influences that affect the key competitive factors, customer needs, culture, and philosophy of each individual company. Depends on the customer expectations, cumulative lead times, inventory, sustainability, product design, and life cycles. Cumulative Lead Time - Answer The longest planned length of time to accomplish the activity in question. It is found by reviewing the lead time for each BOM path below and the parent item; whichever path adds up to the greatest number defines this. Sustainability - Answer The ability of an organization to meet the needs of the present without compromising the ability of future generations to meet their own needs (environmental, social, and economic) Design for Manufacturability approach - Answer A design approach that requires all parties to be involved in the total project from start to finish. The aims include the simplification of parts, products, and processes to improve quality and reduce manufacturing costs. Early Manufacturing Involvement (EMI) Concurrent Engineering or Participative Design/Engineering - Answer A design team approach that includes design engineers, marketing, manufacturing, value and quality engineers, materials, costing, and planners. Value Engineering - Answer A disciplined approach to the elimination of waste from products or processes via an investigative process, focuses on the functions to be performed and whether such functions add value. Product Life Cycle - Answer Made of six stages: 1) Pre-Product Development: not aiming to produce a specific project, but doing research into properties and facilities of materials, the result of which will allow new products to be produced 2) Product Development: once the market has been identified and examined, when will the product be accepted in the market and what will its life be? 3) Testing and Introduction 4) Rapid Growth 5) Steady State: trends and seasonality 6) Phasing Out: can be intentional or non-intentional Process Choices for Products and Services - Answer Flow: the production of high volumes of individual products produced on an assembly or flow line - Fixed rate - Rate based scheduling - Supplies from a supplier - Material issues recorded by back flushing - Main assembly line is scheduled using finite capacity loading and the feeder lines by infinite capacity loading - Continuous flow does not have MOs Intermittent (or lot or batch): involves the production of a certain part with a certain amount of repitition. The full quantity is produced Project: the manufacture of one-off major capital equipment. It would include the design time plus the purchasing lead time for the material and special equipment Engineer to Order - Answer The final product design includes a major piece of equipment made up of standard units and teh manufacturer waits until the customer specifies his exact needs before ordering Make to Order - Answer Standard products are modified into a particular customer's requirement Assemble or Package to Order - Answer Final assembly operation only starts when a customer's order is received Make to Stock - Answer Manufactured either against a master schedule created from a forecast, or replenishment orders to replenish the finished goods warehouse and distribution network Balance Sheet - Answer Assets, liabilities, and owner's equity A statement of the financial situation at a point of time and shows the current situation Assets: fixed assets (buildings/computer equipment) and current assets (inventory, debtors/AR, cash on hand or in the bank) Liabilities: accounts payable, provisions for tax OE: the difference between assets and liabilities (A - L) Inventory should be valued at the lower of cost or net relizable value Income Statement - Answer A list of a firm's revenue, and the expenses incurred by the firm to generate that revenue. The difference between revenue and expense determines profit and loss Includes sales, COGS, direct labor, overheads Cash Flow Statement - Answer A financial statement that shows the flow of cash and its timing into and out of an organization or project There is no prescribed format Timing is an essential input into the statement Financial Reporting - Answer Must take into account: - Cost of goods sold (DL, IL and OH) - G&A costs: cost of general managers, computer systems, research and development, admin activities - Fixed versus variable costs Total Cost = Total Fixed Cost + 1 Unit of Variable Cost Standard Unit Cost = (Total Fixed Cost / # of Products) + 1 Unit of Variable Cost Cash Flow - Answer An analysis that compares the timing of money being received with expenses being paid. Gross Profit - Answer Earnings from an ongoing business after direct COGS have been deducted from sales revenue for a given period Operating Profit - Answer Earnings or income after all expenses (selling, admin, depreciation) have been deducted from gross profit Net Profit - Answer Earnings or income after adjusting for miscellaneous income and expenses (patent royalties, interest, capital gains) and tax from operating profit Gross Margin - Answer Sales revenue less manufacturing costs, both fixed and variable Profit Margin - Answer Sales revenue less all of the company's fixed and variable costs Throughput - Answer The rate at which product is produced during a defined period of time = Sales Revenue - True Variable Costs Throughput Accounting - Answer A management accounting method that is based on the belief that because every system has a constraint that limits global performance, the most effective way to evaluate the impact that any proposed action will have on the system as a whole is to look at the expected changes in the global measures of throughput, inventory and operating expense AKA the result of the action taking place on a production facility can be estimated by looking at the impact that action will have on the throughput, the inventory and the operating costs Is measured by throughput, investment, and operating expense Stock Turns - Answer = Annual COGS / Average Inventory COGS = selling price - profit Enterprise Resource Planning (ERP) - Answer A framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so that it can use its internal knowledge to seek external advantage. The objective for using ERP is the cross-functional integration of planning, executing, controlling and measuring functions required to effectively operate a business organization to meet customer expectations An information system made up of several modules, which assists in the running of an organization The sales and operations planning meeting - Answer Where does the ERP process begin? Rough Cut Capacity Planning - Answer The module used by the master scheduler to verify the balance and fit of the proposed master production schedule (MPS) Material Requirements Planning (MRP) - Answer Plans the manufacturing orders and purchase orders in accordance to the planning rules entered into the system. Manufactured Item's Cost - Answer = material labor + overhead Assembled Product's Cost - Answer = individual componsnets standard costs + assembly cost Sales and Operations Planning (S&OP) Meeting - Answer Where the senior management jointly plans the future activity of the business Strategic Plan - Answer Where the production process begins. The major inputs are the marketing plan and the financial plan. Strategic Business Plan - Answer Purpose: it should be in line with the company's mission statement and should consider 1) what the competition is doing 2) growth plans 3) market share 4) new products 5) organizational structure Planning Horizon: longer horizon Level of Detail: usually in dollars and products defined in families Planning Frequency: every six months or annually Sales and Operations Plan (AKA Production Plan) - Answer Inputs: the forecast, the strategic plan, the financial plan, the resources available Outputs: the sales plan and the production plan Purpose: to provide an overall plan of products and quantities per time period that must be produced to meet the agreed sales plan Planning Horizon: undefined Level of detail: groups of products/manufacturing families. Created in months and quarters Planning Frequency: monthly Resource Availability: recource requirements planning is used Master Production Schedule - Answer Purpose: what will be shipped to the FG store by time period Planning Horizon: dependent upon the manufacturing and purchasing lead times and the batching periods used for purchased items Level of detail: daily or weekly periods and product quantities are shown by end time Planning Frequency: every month Resource Availability: 5 Basic Steps of Planning - Answer 1) Strategic Business Plan 2) Sales and Operations Plan / Production Plan 3) Master Schedule 4) Material Requirements Plan 5) Production Activity Control The Master Scheduler - Answer The person responsible for the creation and maintenance of the MPS and usually the coordinator of a joint process to satisfy customers' requirements in a practical manner Closed-Loop MRP - Answer A system built around material requirements planning, that includes the additional planning processes of production planning (sales and operations planning), master production scheduling, and capacity requirements planning. The term implies not only that each of these elements is included in the overall system, but also that feedback is provided by the execution functions so that the planning can be kept valid at all times. Simulation - Answer The technique of using representative or artificial data to reproduce and model various conditions that are likely to occur in the actual performance of a system What-If Analysis - Answer The process of evaluating alternate strategies by answering the consequences of changes to forecasts, manufacturing plans, inventory levels, and so forth Lean - Answer A philosophy that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value adding activities in design, production, supply chain management, and dealing with customers Continuous Process Improvement (CPI) - Answer A never-ending effort to expose and eliminate root causes of problems: small-step improvement as opposed to big-step improvement Two Ways to Improve Processes - Answer 1) The use of control charts to identify and remove assignable causes in order to create a stable process, which produces consistent, predictable output 2) Improve the process itself, which changes to the system made up of the man, machine, material, method, measurement, and environment Key Characteristics - Answer Include flow manufacturing, process flexibility, quality at the source, supplier partnerships, employee involvement, total productive maintenance, pull systems, and work cells Process Flexibility - Answer The design of manufacturing system, including operators and machinery that allows quick changeovers to respond to near-term changes in product volume and mix Examples include: - Total Volume Flexibility (increasing capacity) - Product Mix Flexibility (switching from one part, model or product family member to another) - Labor Flexibility (cross-training, the opposite of specialization) - New Product Flexibility Quality At The Source - Answer A producer's responsibility to provide 100% acceptable quality material to the consumer of the material. The objective is to reduce or eliminate shipping/receiving quality inspections and line stoppages as a result of defects Supplier Partnership - Answer The establishment of a working relationship with a supplier organization whereby two organizations act as one Total Productive Maintenance (TPM) - Answer Preventive maintenance plus continuing efforts to adapt, modify and refine equipment to increase flexibility, reduce material handling, and promote continuous flows. It is operator-oriented maintenance with the involvement of all qualified employees in all maintenance activities Pull System - Answer The production of items only as demanded for use or to replace those taken for use Brand Name Kanban - Answer Authorizes both WHAT to replenish (an identical item) and WHEN to replenish it (immediately). This type of kanban is useful in environments where usage is frequent and routine Generic Kanban - Answer Authorizes WHEN to replenish (immediately) but does not provide the WHAT information, which comes from a plan. This type of kanban is useful in environments where usage is intermittent Quality Management - Answer Focuses on customer needs using a variety of tools and techniques. The objective of this is to increase profitability and customer satisfaction