CPIM Part 1 Section M Exam with
Complete Solutions
Distribution (physical distribution) - ANSWER-The activities associated with the
movement of material, usually finished goods or service parts, from the manufacturer to
the customer. These activities encompass the functions of transportation, warehousing,
inventory control, material handling, order administration, site and location analysis,
industrial packaging, data processing, and the communications network necessary for
effective management. It includes all activities related to physical distribution, as well as
the return of goods to the manufacturer. In many cases, this movement is made through
one or more levels of field warehouses.
Physical Distribution Objectives - ANSWER-to add value to the product by moving it
from a place where it is less in demand to a place where it is more in demand and thus
increase the product's utility or usefulness.
to provide this increase in value in a profitable manner, meaning that the increase in
price for offering the good at a time and place convenient to the customer is greater
than the cost of offering this service.
Distribution channel - ANSWER-The distribution route, from raw materials through
consumption, along which products travel.
Factory warehouse, DC, Central DC, Regional DC, Wholesaler DC, Retailer, Local
Deliver, Customer
Transaction Channel - ANSWER-A distribution network that deals with change of
ownership of goods and services including the activities of negotiation, selling, and
contracting.
Corporate HQ, Regional Sales Offices, Wholesaler, Retailer, Ownership to customer,
cash to retailer
Drop ship - ANSWER-to take the title of the product but not actually handle, stock, or
deliver it (i.e., to have one supplier ship directly to another or to have a supplier ship
directly to the buyer's customer).
Physical Distribution Activities - ANSWER-Transportation
Managing Distribution Inventory
, Managing Distribution Centers (warehouses)
Inventory Control
Materials Handling
Order Administration
Protective Packaging
Reverse Logistics
Postponement
Transportation - ANSWER-The physical movement of goods via road, air, water, rail, or
pipeline. This is usually the largest part of distribution costs.
Managing distribution inventory - ANSWER-This is the value of all finished goods at any
point in the physical distribution channel(s). It is often the second largest part of
distribution costs.
Managing distribution centers (warehouses) - ANSWER-These inventory storage
locations may reduce net costs by reducing transportation costs and/or increase time
and place utility for customers. The customer must be willing to pay more for this
increase in one or both types of utility.
Inventory control - ANSWER-This involves securing distribution inventory, release
procedures, and auditing inventory records.
Materials handling - ANSWER-This is the movement of goods to and from storage
locations and vehicles within and around a DC. It is one part of inventory carrying costs
and is often the largest part of warehousing costs. Investing more in equipment and
automation can reduce labor costs. Choices in this tradeoff between labor and handling
equipment relate to labor rates as well as the return on investment for the equipment.
High volumes may be required to justify the investment. Subsets include picking,
packing, sorting, etc.
Order administration - ANSWER-These are the costs of customer orders, order status
tracking, credit terms, billing, collections, and service. These add cost, and order-taking
increases lead time. Good communication with intermediaries and customers is a vital
component of any distribution system.
Protective packaging - ANSWER-Wrapping or covering of material that provides
containment, protection, and identification of inventory in a warehouse. The material
must be contained in such a way that will support movement and storage and will fit into
the dimension of storage space and transportation vehicles.
Complete Solutions
Distribution (physical distribution) - ANSWER-The activities associated with the
movement of material, usually finished goods or service parts, from the manufacturer to
the customer. These activities encompass the functions of transportation, warehousing,
inventory control, material handling, order administration, site and location analysis,
industrial packaging, data processing, and the communications network necessary for
effective management. It includes all activities related to physical distribution, as well as
the return of goods to the manufacturer. In many cases, this movement is made through
one or more levels of field warehouses.
Physical Distribution Objectives - ANSWER-to add value to the product by moving it
from a place where it is less in demand to a place where it is more in demand and thus
increase the product's utility or usefulness.
to provide this increase in value in a profitable manner, meaning that the increase in
price for offering the good at a time and place convenient to the customer is greater
than the cost of offering this service.
Distribution channel - ANSWER-The distribution route, from raw materials through
consumption, along which products travel.
Factory warehouse, DC, Central DC, Regional DC, Wholesaler DC, Retailer, Local
Deliver, Customer
Transaction Channel - ANSWER-A distribution network that deals with change of
ownership of goods and services including the activities of negotiation, selling, and
contracting.
Corporate HQ, Regional Sales Offices, Wholesaler, Retailer, Ownership to customer,
cash to retailer
Drop ship - ANSWER-to take the title of the product but not actually handle, stock, or
deliver it (i.e., to have one supplier ship directly to another or to have a supplier ship
directly to the buyer's customer).
Physical Distribution Activities - ANSWER-Transportation
Managing Distribution Inventory
, Managing Distribution Centers (warehouses)
Inventory Control
Materials Handling
Order Administration
Protective Packaging
Reverse Logistics
Postponement
Transportation - ANSWER-The physical movement of goods via road, air, water, rail, or
pipeline. This is usually the largest part of distribution costs.
Managing distribution inventory - ANSWER-This is the value of all finished goods at any
point in the physical distribution channel(s). It is often the second largest part of
distribution costs.
Managing distribution centers (warehouses) - ANSWER-These inventory storage
locations may reduce net costs by reducing transportation costs and/or increase time
and place utility for customers. The customer must be willing to pay more for this
increase in one or both types of utility.
Inventory control - ANSWER-This involves securing distribution inventory, release
procedures, and auditing inventory records.
Materials handling - ANSWER-This is the movement of goods to and from storage
locations and vehicles within and around a DC. It is one part of inventory carrying costs
and is often the largest part of warehousing costs. Investing more in equipment and
automation can reduce labor costs. Choices in this tradeoff between labor and handling
equipment relate to labor rates as well as the return on investment for the equipment.
High volumes may be required to justify the investment. Subsets include picking,
packing, sorting, etc.
Order administration - ANSWER-These are the costs of customer orders, order status
tracking, credit terms, billing, collections, and service. These add cost, and order-taking
increases lead time. Good communication with intermediaries and customers is a vital
component of any distribution system.
Protective packaging - ANSWER-Wrapping or covering of material that provides
containment, protection, and identification of inventory in a warehouse. The material
must be contained in such a way that will support movement and storage and will fit into
the dimension of storage space and transportation vehicles.
