The trade-off of increasing safety stock to improve customer fill rate would be a decrease in:
Answer(s): C
Increasing safety stock to improve customer fill rate would result in a decrease in inventory turns. Inventory turns, or inventory turnover, is a metric measuring how fast the inventory is replaced over time. It is calculated as the cost of goods sold divided by the average value of inventory during the period covered. A higher inventory turnover ratio indicates that the company sells its inventory quickly and efficiently, while a lower ratio implies that the company holds too much inventory or has difficulty selling it. Safety stock is an extra quantity of a product stored in the warehouse to prevent an out-of-stock situation. It serves as insurance against fluctuations in demand, longer lead times, and price fluctuations. Increasing safety stock means increasing the average value of inventory, which lowers the inventory turnover ratio. This also increases the inventory carrying costs, such as storage, insurance, taxes, and obsolescence. Therefore, there is a trade-off between increasing safety stock to improve customer fill rate and decreasing inventory turns to reduce inventory costs.
1 Inventory Turnover Ratio: What It Is, How It Works, and Formula 4 2 What is safety stock? | Definition, Importance, Formula - Zoho 5 3 CPIM Exam Reference - Association for Supply Chain Management 6
A firm that currently produces all items to stock is implementing the concept of postponement in all new product designs. Which of the following outcomes is most likely to result?
Postponement is a strategy whereby the final configuration of a product is delayed as much as possible, usually until a customer order is received. Postponement reduces the risk of overproduction, obsolescence, and inventory holding costs, as well as increases the responsiveness and customization of the products. A firm that currently produces all items to stock is implementing the concept of postponement in all new product designs. This means that the firm will produce generic or family products that can be differentiated into specific end-products later. This will result in a decrease in the number of finished items stocked, as the firm will only stock the generic or family products and not the final products. The firm will also be able to offer more product variety and flexibility to the customers, as it can customize the products according to the customer orders. Therefore, the most likely outcome of implementing postponement in all new product designs is a decrease in the number of finished items stocked.
1 Postponement - Wikipedia 2
In the design and development of a manufacturing process, process engineers would most likely be responsible for decisions relating to:
Answer(s): D
Process engineers are responsible for designing, implementing, controlling, and optimizing industrial processes, especially continuous ones such as the production of petrochemicals. One of the decisions that process engineers would most likely make is the routing sequence, which is the order of operations or activities that are performed on a product or material as it moves through the production process. The routing sequence affects the process performance, efficiency, quality, and cost, and it requires careful planning and analysis by the process engineers. Option A is not correct, because lead times are the time intervals between the initiation and completion of a process or a project. Lead times are influenced by many factors, such as demand, capacity, inventory, scheduling, and supply chain management, and they are not solely determined by the process engineers. Option B is not correct, because production capacity is the maximum amount of output that a process or a system can produce within a given period of time. Production capacity depends on the availability and utilization of resources, such as materials, labor, equipment, and facilities, and it is not only decided by the process engineers. Option C is not correct, because product reliability is the probability that a product will perform its intended function without failure for a specified period of time under specified conditions. Product reliability is affected by many aspects, such as product design, quality control, testing, maintenance, and customer feedback, and it is not the sole responsibility of the process engineers.
1 Process engineering - Wikipedia 6 2 Routing (production) - Wikipedia 7 3 Lead Time: Definition, Formula, and Examples 8 4 Production Capacity:Definition, Calculation, and Examples 9 5 Product Reliability: Definition, Measurement, and Improvement
A company confirms a customer order based on available capacity and inventory, even though the current production plan does not cover the entire order quantity. This situation is an example of what type of order fulfillment policy?
Answer(s): B
Capable-to-promise (CTP) is a type of order fulfillment policy that confirms a customer order based on the available capacity and inventory, as well as the current production plan and schedule. CTP calculates the earliest possible delivery date for a customer order, considering the existing demand and supply situation. CTP allows a company to accept an order that exceeds the current available inventory, as long as it can produce the remaining quantity within the customer's requested delivery time. CTP helps to improve customer service, reduce inventory costs, and increase production efficiency.
1 Capable to Promise (CTP) - Definition, Calculation, and Examples 3 2 CPIM Exam Reference - Association for Supply Chain Management
Which of the following actions best supports a company's strategic focus on delivery speed to improve competitive advantage?
Developing flexible operations best supports a company's strategic focus on delivery speed to improve competitive advantage. Delivery speed is the time it takes for a company to deliver its products or services to the customers after receiving an order. Delivery speed is a key factor in customer satisfaction, retention, and loyalty, as well as a source of differentiation and value creation in the market. Developing flexible operations means having the ability to adapt to changes in demand, supply, technology, and environment, and to respond quickly and efficiently to customer needs and expectations. Flexible operations can improve delivery speed by reducing lead times, increasing responsiveness, enhancing quality, and minimizing costs.
1 The Shipper's Competitive Advantage of Delivery Speed to Market 4 2 Operations Strategy, 4th ed., 2015, Slack, N., Lewis, M., ISBN: 978-0273776208 3 CPIM Exam Reference - Association for Supply Chain Management 1
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