QUESTION: 13

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

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

Answer(s): 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 items.
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 firm.
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 services.
* 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.

Reference:

1 ABC Inventory Analysis & Management | NetSuite. 2 What Is ABC Inventory Classification? | Business.org. 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

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QUESTION: 14

Which of the following situations is most likely to occur when using a push system?

Work centers receive work even if capacity is not available.
Work centers are scheduled using finite capacity planning.
Work centers operate using decentralized control.
Work centers signal previous work centers when they are ready for more work.

Answer(s): A

Explanation:

A push system is a production system that operates based on forecasts and schedules, rather than actual customer demand. A push system pushes products to the market regardless of the current demand, and often results in excess inventory and waste. A push system does not consider the capacity constraints of the work centers, and therefore may send work orders to them even if they are not able to process them. This can create bottlenecks, delays, and inefficiencies in the production process.
The other options are not correct because:

* B. Work centers are scheduled using finite capacity planning. This is not a characteristic of a push system, but rather a pull system. Finite capacity planning is a method of scheduling that takes into account the actual capacity of the work centers, and only releases work orders when there is enough capacity to process them. This reduces the risk of overloading the work centers and improves the flow of production.
* C. Work centers operate using decentralized control. This is not a characteristic of a push system, but rather a pull system. Decentralized control is a method of management that gives more autonomy and decision-making power to the work centers, and allows them to adjust their production according to the actual demand and capacity. This increases the flexibility and responsiveness of the production system.
* D. Work centers signal previous work centers when they are ready for more work. This is not a characteristic of a push system, but rather a pull system. This is a common practice in a pull system that uses kanban cards as visual signals to trigger the production or replenishment of a product. The work centers only request more work when they have enough capacity and demand for it, and avoid overproduction and waste.

Reference:

1 Push System vs. Pull System: Adopting A Hybrid Approach To MRP1
2 Push Systems vs. Pull System: Definitions and Differences.
3 Finite Capacity Planning - an overview | ScienceDirect Topics
4 Centralized vs. Decentralized Manufacturing | IndustryWeek
5 Kanban - an overview | ScienceDirect Topics

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QUESTION: 15

In choosing suppliers, a company wishes to maintain maximum leverage to reduce costs.
Which of the following supply chain strategies would provide this opportunity?

Single sourcing
Multisourcing
Long-term agreement
Service-level agreement (SLA)

Answer(s): B

Explanation:

Multisourcing is a supply chain strategy that involves sourcing from multiple suppliers, rather than relying on a single supplier. Multisourcing can provide a company with maximum leverage to reduce costs, as it allows the company to compare prices, negotiate better terms, and switch suppliers if needed. Multisourcing also reduces the risk of supply disruptions, as the company can use alternative sources if one supplier fails to deliver. Multisourcing can also increase the quality and innovation of the products or services, as the company can benefit from the best practices and capabilities of different suppliers.
The other options are not correct because:

* A. Single sourcing. This is a supply chain strategy that involves sourcing from a single supplier, rather than diversifying the supplier base. Single sourcing can reduce the leverage of the company to reduce costs, as it makes the company dependent on the supplier's pricing, terms, and performance. Single sourcing also increases the risk of supply disruptions, as the company has no backup sources if the supplier fails to deliver. Single sourcing can also limit the quality and innovation of the products or services, as the company has no access to the variety and expertise of different suppliers.
* C. Long-term agreement. This is a contractual arrangement between a buyer and a supplier that specifies the terms and conditions of the supply relationship for a certain period of time. Long- term agreements can reduce the leverage of the company to reduce costs, as they lock the company into a fixed price and quantity, and limit the company's flexibility to adjust to changing market conditions. Long-term agreements can also reduce the incentive of the supplier to improve the quality and innovation of the products or services, as the supplier has no competition or threat of losing the contract. .
* D. Service-level agreement (SLA). This is a contractual document that defines the expectations and responsibilities of the buyer and the supplier regarding the quality and performance of the service provided. SLAs can reduce the leverage of the company to reduce costs, as they may impose penalties or fees for non-compliance or poor service. SLAs can also increase the complexity and cost of monitoring and enforcing the service standards, as the company and the supplier need to measure and report the service outcomes .

Reference:

1 Single Sourcing vs. Multiple Sourcing: Which Is Better?
2 Single Sourcing vs. Multiple Sourcing: What's the Difference?
3 Long-Term Agreements: What Are They and Why Do They Matter?
4 Long-Term Agreements: Benefits and Risks What Is a Service-Level Agreement (SLA)? Service-Level Agreement (SLA) - an overview | ScienceDirect Topics

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QUESTION: 16

When starting an external benchmarking study, a firm must first:

determine the metrics which will be measured and compared.
identify the target firms with which to benchmark against.
understand its own processes and document performance.
determine its areas of weakness versus the competition's.

Answer(s): C

Explanation:

External benchmarking is a strategic tool where a company compares its processes and performance metrics to industry bests or competitors. Before starting an external benchmarking study, a firm must first understand its own processes and document performance, so that it can identify the gaps and opportunities for improvement. This is also a requirement for regulatory compliance. Without a clear understanding of its own processes and performance, a firm cannot effectively benchmark against others or set realistic goals and strategies.

Reference:

* What Is External Benchmarking? (with picture) - Smart Capital Mind
* 5 Strategies for Effective ASC External Benchmarking - Becker's ASC

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