APICS CPIM Exam 1 Key Terms Questions With Correct Answers

ABC classification - Answer Process of classifying items in descending order based on annual dollar volume or some other criteria. The list is then split into 3 classes - A, B, and C. A represents 10-20% of items but 50-70% of dollar volume; B represents 20% of items and 20% of dollar volume; C represents 60-70% of items but 10-30% of dollar volume. This principle states that effort and money can be saved by applying looser controls to the low dollar volume items (C class) than the higher dollar volume items (A & B classes) and applies to inventory, purchasing, sales, etc. Advance ship notice (ASN) - Answer Electronic data interchange (EDI) notification of shipment of goods Andon - Answer Electronic board that provides visibility of floor status and gives info to help coordinate efforts linked to work centers; green light = running, red light = stop, yellow light = needs attention Anticipation inventories - Answer Any additional inventory above basic pipeline stock to cover projected trends of increased sales, planned promo programs, seasonal fluctuation, plant shutdowns, and vacations Assemble-2-order - Answer Production environment where a good or service can be assembled after receipt of a customer's order. The key components (or ingredients) used in assembly or finishing process are planned and stocked in anticipation of a customer order. Receipt of order initiates assembly of the customized product. Useful strategy when a large number of end products can be assembled from common components Assembly line - Answer Assembly process in which equipment and work centers are laid out to follow the sequence in where raw materials and parts are assembled Assignable cause - Answer Source of variation in a process that can be isolated, especially when its significantly larger magnitude or different origin readily distinguishes it from random causes of variation Available inventory - Answer On-hand inventory balance minus allocations, reservations, backorders, and quantities held for quality problems Average inventory - Answer One-half the average lot size plus safety stock when demand and lot sizes are expected to be relatively uniform over time; when not uniform, stock level vs. time can be graphed to determine average Backflush - Answer Method of inventory bookkeeping where the book inventory is automatically reduced after completion of activity on component's upper-level parent item based on what should have been used as specified on the BOM and allocation records; disadvantage is difference between book inventory and physical OH inventory Backhauling - Answer Process of transportation returning from original destination point to point of origin; can be full, partial, or empty load Backlog - Answer All customer orders received but not yet shipped (open orders or order board) Backorder - Answer Unfulfilled customer order or commitment. An immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand Back scheduling - Answer Technique for calculating operation start dates and due dates; start with order due date and work backwards to calculate required start date and/or due dates for each operation Balance sheet - Answer A financial statement showing the resources owned, the debts owed, and the owner's share of a company at a given point in time Bar code - Answer Series of alternating bars and spaces printed or stamped on parts, containers, labels, or other media representing encoded info that can be read by electronic readers; used to facilitate timely and accurate input of data to a computer system Batch - Answer Qty scheduled to be produced or in production; type of mfg process used to produce items with similar designs & cover wide range of order volumes; items ordered are of a repeat nature Batch picking - Answer Method of picking orders where order requirements are aggregated by product across orders to reduce movement to & from product locations; aggregated qty's are transported to common area where individual orders are made Bias - Answer Consistent deviation from the mean in one direction (high or low) Bill of lading - Answer Carrier's contract and receipt for goods carrier agrees to transport from one place to another and deliver to designated person; basis for filing freight claims Bill of material (BOM) - Answer Listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly; used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released; list of all the materials needed to make one production run of a product, by a contract manufacturer, of piece parts/components for its customers Bonded warehouse - Answer Buildings or parts of a building designated by Sec of Treasury for storing imported goods, operated under supervision of US Customs Bottleneck - Answer Facility, function, department, or resource whose capacity is less than the demand placed upon it; machine or work center Break-bulk - Answer Dividing truckloads of homogenous items into smaller, more appropriate qty's for use Break-even point - Answer Level of production or volume of sales at which operations are neither profitable nor unprofitable; intersection of total revenue and total cost curves Buffer - Answer Qty of materials awaiting further processing; can refer to raw materials, semi-finished stores or hold points, or a work backlog that is purposely maintained behind a work center; in TOC, it can be time or material and support thruput and/or due date performance maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points Buffer management - Answer In TOC, process where all expediting in a shop is driven by what is scheduled to be in the buffers (constraint, shipping, or assembly); by expediting into buffers, system avoids idleness at the constraint and prevents missed due date Bullwhip effect - Answer Extreme change in supply upstream in a SC caused by small change in demand downstream in the SC; caused by lack of communicating orders up the SC with the inherent delays in getting goods down the SC Business plan - Answer Statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement; document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business Capable-2-promise - Answer Process of committing orders against available capacity as well as inventory. May involve multiple manufacturing or distribution sites. Used to determine when a new or unscheduled customer order can be delivered. Employs a finite-scheduling model of manufacturing system to determine when an item can be delivered. Includes any constraints that might restrict production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, current manufacturing environment, and future order commitments. Objective is to reduce time spent by planners in expediting orders and adjusting plans because of inaccurate delivery-date promises Capacity available - Answer Capability of a system or resource to produce a qty of output in a particular time period Capacity control - Answer Process of measuring production output and comparing it with the capacity plan to determine if variance exceeds pre-established limits and taking action to get back on plan if limits are exceeded Capacity management - Answer Function of establishing, measuring, monitoring, and adjusting limits of capacity in order to execute all mfg schedules; executed at 4 levels: resource requirements planning, rough-cut capacity planning, capacity requirements planning, and input/output control Capacity planning - Answer Process of determining amount of capacity required to produce in the future; may be performed at aggregate or product-line (RRP), master-schedule level (R-CCP), and materials requirements planning (CRP) Capacity required - Answer Capacity of a system or resource needed to produce a desired output in a particular time period Capacity requirements planning (CRP) - Answer Process of determining in detail amount of labor and machine resources required to complete task of production; inputs are open orders and planned orders; checks against all time periods Carrying cost - Answer % of dollar value of inventory per unit of time (generally one year); depends mainly on the cost of capital invested as well as such costs of maintaining the inventory as taxes and insurance, obsolescence, spoilage, and space occupied; varies from 10% to 35% annually, depending on type of industry Cash flow - Answer Net flow of dollars into or out of the proposed project; algebraic sum, in any time period, of all cash receipts, expenses, and investments Cause-and-effect diagram - Answer Tool for analyzing process dispersion (Ishikawa diagram/fishbone diagram) Cellular manufacturing - Answer Mfg process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell Centralized inventory control - Answer Inventory decision making for all SKUs are exercised from one office or department for an entire company Certified supplier - Answer Status awarded to a supplier who consistently meets predetermined quality, cost, delivery, financial, and count objectives Chase production method - Answer Production planning method that maintains stable inventory level while varying production to meet demand Closed-loop MRP - Answer System built around MRP that includes additional planning processes of production planning (S&OP), MPS, and CRP; term implies each process is included in overall system and feedback is provided by execution process so planning is kept up-to-date at all times Common carrier - Answer Transportation available to public that does not provide special treatment to any one party and is regulated as to rates charged, liability assumed, and services provided; must obtain certificate of public convenience and necessity from FTC for interstate traffic Competitive advantage - Answer Advantage a company has over its rivals in attracting customers and defending against competition; advantage include having characteristics that can't be duplicated without substantial cost and risk Component - Answer Raw material, part, or subassembly that goes into a higher level assembly, compound, or other item; may include packaging materials for finished goods Consignment - Answer Shipment that is handled by a common carrier; process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold Constraint - Answer Element or factor that prevents a system from achieving a higher level of performance with respect to its goal; can be physical, such as a machine center or lack of material, but can also be managerial, such as a policy or procedure; one of a set of equations that cannot be violated in an optimization procedure Continuous Process Improvement (CPI) - Answer Never-ending effort to expose and eliminate root causes of problems: small-step improvements as opposed to big-step improvements Continuous production - Answer Production system where productive equipment is organized and sequenced according to steps involved to produce product; term denotes material flow is continuous during production process; routing of jobs is fixed and seldom changed Continuous replenishment - Answer Process by which supplier is notified daily of actual sales or warehouse shipments and commits to replenish without OOS and without receiving replenishment orders; result is lower costs and improved turns Contract carrier - Answer Carrier that does not serve the general public but provides transportation for hire for one or limited # of shippers under a contract Control chart - Answer Graphic comparison of process performance data with predetermined computed control limits; primary use is to detect assignable causes of variation in the process (as opposed to random ones) Control limit - Answer Statistically determined line on a control chart (upper control limit or lower control limit); if value occurs outside this limit, process is deemed to be out of control Cost of goods sold - Answer Accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time Cost of poor quality - Answer Costs associated with providing poor quality products or services; four categories of costs: (1) internal failure costs (costs associated with defects found before the customer receives the product or service); (2) external failure costs (costs associated with defects found after the customer receives the product or service); (3) appraisal costs (costs incurred to determine the degree of conformance to quality requirements); and (4) prevention costs (costs incurred to keep failure and appraisal costs to a minimum) Critical chain method - Answer In TOC, network planning technique for analysis of project's completion time used for planning & controlling project activities; based on technological & resource constraints; strategic buffering of paths & resources is used to increase project completion Critical path method (CPM) - Answer Network planning technique for analysis of project's completion time used for planning & controlling the activities in the project; by showing each activity and associated time to complete identifies those elements that actually constrain the total project time, determining the critical path Cross-docking - Answer Concept of packing products on the incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destinations; items are carried from incoming vehicle docking point to outgoing vehicle docking point without being stored in inventory in the warehouse Cumulative lead time - Answer Longest planned length of time to accomplish the activity in question; found by reviewing the lead time for each bill of material path below the item and whichever path adds up to the greatest number defines it Customer relationship management (CRM) - Answer Marketing philosophy based on putting the customer first; collection and analysis of information designed for sales and marketing decision support (as contrasted to enterprise resources planning information) to understand and support existing and potential customer needs; includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions Customer service - Answer Ability of a company to address the needs of and inquiries and requests from customers; measure of the delivery of a product to the customer at the time the customer specifies Cycle counting - Answer Inventory accuracy audit technique where inventory is counted on a cyclic schedule rather than once a year; usually taken on a regular, defined basis (often more frequently for high-value or fast-moving items and less frequently for low-value or slow-moving items); most effective systems require the counting of a certain number of items every workday with each item counted at a prescribed frequency; key purpose is to identify items in error, thus triggering research, identification, and elimination of the cause of the errors Cycle stock - Answer One of the two main conceptual components of any item inventory, it is the most active component; it depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received Cycle time - Answer In materials management, it refers to the length of time from when material enters a production facility until it exits; in industrial engineering, the time between completions of two discrete units of production. Days of supply - Answer Inventory on-hand metric converted from units to how long the units will last. Ex: 2000 units on-hand and company uses 200 units/day, then there are 10 days of supply Decentralized inventory control - Answer Inventory decision making exercised at each stocking location for SKUs at that location Decoupling inventory - Answer Amount of inventory kept between entities in a mfg or distribution network to create independence between processes or entities; objective is to disconnect the rate of use from the rate of supply of the item Delivery lead time - Answer Time from receipt of a customer order to the delivery of the product Demand - Answer Need for a particular product or component; can come from any number of sources (e.g., a customer order or forecast, an interplant requirement, a branch warehouse request for a service part or the manufacturing of another product); at the finished goods level, it is different from sales data because it does not necessarily result in a sale; there are up to four components of demand: cyclical component, random component, seasonal component, and trend component Demand lead time - Answer Amount of time potential customers are willing to wait for the delivery of a good or service Demand management - Answer Function of recognizing all demands for goods and services to support the marketplace; involves prioritizing it when supply is lacking; if done properly, it facilitates the planning and use of resources for profitable business results; in marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs Demand planning - Answer Using forecasts and experience to estimate demand for various items at various points in a supply chain; several forecasting techniques may be used during the planning process; often, families of items are aggregated (geographical region or by life cycle stage) Demand pull - Answer Triggering of material movement to a work center only when that work center is ready to begin the next job; in effect eliminates the queue from in front of a work center, but it can cause a queue at the end of a previous work center Demonstrated capacity - Answer Proven capacity calculated from actual performance data, usually expressed as the average # of items produced multiplied by standard hours per item Demurrage - Answer Carrier charges and fees applied when rail freight and ships are retained beyond a specified loading or unloading time Density - Answer Measure of weight of an item compared to its volume; can influence the # of units that can be carried by a particular truck (impacts transportation charges) Dependent demand - Answer Demand that is directly related to or derived from the bill of material structure for other items or end products; it is calculated and need not and should not be forecasted Detention - Answer Carrier charges and fees applied when truck trailers are retained beyond a specified loading and unloading time Direct labor - Answer Labor applied to the good being manufactured or used in performance of service Direct material - Answer Material that becomes a part of the final product in measurable qty's Discrete manufacturing - Answer Production of distinct items such as autos, appliances, or computers Discrete order picking - Answer Method of picking orders in which items on one order are picked before items on next order is picked Dispatching - Answer Selecting and sequencing of available jobs to be run at individual workstations and the assignment of those jobs to workers Distribution - Answer Activity associated with movement of material (FG or parts) from the mfg to customer; encompass transportation, warehousing, inventory control, material handling, order administration, site & location analysis, industrial packaging, data processing, and communications necessary for effective mgmt; includes all activities related to physical distribution, as well as return of goods to mfg; systematic division of a whole into discrete parts with different characteristics Distribution center - Answer Warehouse with FG and/or service items Distribution channel - Answer Distribution route, from raw materials thru consumption, that products travel Distribution inventory - Answer Inventory, usually spare parts and finished goods, located in the distribution system (e.g., in warehouses, in transit between warehouses and the consumer) Distribution requirements planning (DRP) - Answer Function of determining the need to replenish inventory at branch warehouses; time-phased order point approach is used where the planned orders at the branch warehouse level are ""exploded"" via MRP logic to become gross requirements on the supplying source; In multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule; demand on the supplying sources is recognized as dependent, and standard MRP logic applies; replenishment inventory calculations, may be based on other planning approaches such as period order quantities or ""replace exactly what was used,"" rather than being limited to the time-phased order point approach Distribution warehouse - Answer Facility that receives items in large lots, stores them temporarily, and breaks them into smaller lots destined for a variety of locations Dock-2-stock - Answer Program where specific quality and packaging requirements are met before the product is released; prequalified goods are shipped directly into the customer's inventory; eliminates costly handling of components (receiving & inspection) and enables them to move into production Dojo - Answer Hall Drop ship - Answer Take title of goods but not actually handle, stock, or deliver it (supplier ships directly to another supplier or supplier ships directly to buyer's customer) Drum-buffer-rope (DBR) - Answer TOC method for scheduling and managing operations that have an internal constraint or capacity-constrained resource Drum schedule - Answer Detailed production schedule for a resource that sets the pace for the entire system; must reconcile the customer requirements with system constraint(s) Economic order quantity (EOQ) - Answer Type of fixed order qty model that determines amt of item to be purchased or manufactured at one time; intent is to minimize combined costs of acquiring and carrying inventory Efficiency - Answer Measurement of actual output to the standard output expected (usually a %); measures how well something is performing relative to existing standards Electronic data interchange (EDI) - Answer Paperless (electronic) exchange of trading documents, such as purchase orders, shipment authorizations, advanced shipment notices, and invoices, using standardized document formats Employee empowerment - Answer Practice of giving non-managerial employees the responsibility and the power to make decisions regarding their tasks or jobs; associated with the practice of transfer of managerial responsibility to employees Employee involvement (EI) - Answer Concept of using the experience, creative energy, and intelligence of all employees by treating them with respect, keeping them informed, and including them and their ideas in decision-making processes appropriate to their areas of expertise; focuses on quality and productivity improvements Engineer-2-order - Answer Products whose customer specifications require unique engineering design, significant customization, or new purchased materials; each customer order results in a unique set of part numbers, bills of material, and routings Enterprise resource planning (ERP) - Answer Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage Explode - Answer Perform BOM explosion External failure costs - Answer Costs related to problems found after the product reaches the customer. Includes such costs as warranty and returns External setup time - Answer Time associated with elements of a setup procedure performed while process or machine is running Extrinsic forecasting method - Answer Forecast method on a correlated leading indicator, such as estimating furniture sales based on housing starts; tends to be more useful for large aggregations, such as total company sales, than for individual product sales Field service - Answer Functions of installing and maintaining a product for a customer after the sale or during the lease; may also include training and implementation assistance