QUESTION: 9

A reduction in purchased lot sizes will reduce which of the following items?

Inventory levels
Frequency of orders
Reorder points (ROPs)
Setup times

Answer(s): A

Explanation:

A reduction in purchased lot sizes will reduce inventory levels. Purchased lot sizes are the quantities of inventory that a stage of the supply chain either produces or purchases at a given time1. Inventory levels are the amount of stock available throughout the distribution network2. By reducing the purchased lot sizes, a company can lower the amount of inventory it holds, which can reduce the inventory costs, such as holding costs, shortage costs, and order costs3. Holding costs are the costs associated with storing and maintaining inventory, such as rent, utilities, insurance, taxes, depreciation, and obsolescence4. Shortage costs are the costs incurred when demand exceeds supply, such as lost sales, customer dissatisfaction, and backorder costs4. Order costs are the costs involved in placing and receiving orders, such as transportation, inspection, setup, and administrative costs4.
Reducing the purchased lot sizes can lower the holding costs by decreasing the average inventory in the supply chain due to either production or purchases in lot sizes that are larger than those demanded by the customer1. This is also known as cycle inventory1. Reducing the purchased lot sizes can also lower the shortage costs by increasing the frequency of orders and decreasing the lead time between orders5. This can help avoid stockouts and meet customer demand more consistently. Reducing the purchased lot sizes can also lower the order costs by optimizing the order quantity based on the trade-off between holding costs and order costs. This is also known as economic order quantity (EOQ).
Therefore, a reduction in purchased lot sizes will reduce inventory levels and inventory costs.

Reference:

1: Chapter 11 Flashcards by Amy Horton 3 2: Optimal Inventory Levels: Calculate & Manage Your Stock Levels 2 3: Inventory Levels Explained: The Highs & Lows Of Optimal Stock 1 4:
Economic Order Quantity Model in Inventory Management 4 5: Dual sourcing: Advantages and disadvantages : Economic Order Quantity: What Does It Mean and Who Is It For5

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QUESTION: 10

Which of the following strategies can improve the effectiveness of a company's customer value proposition and enhance its differentiation in the market?

Relocate high-cost activities to other geographic areas.
Outsource activities to outside vendors or contractors.
Invest in productivity enhancing technological improvements.
Adopt best practices that improve product design.

Answer(s): D

Explanation:

A customer value proposition (CVP) is a statement that summarizes the benefits that a product or service offers to a target customer segment1. A CVP can help a company differentiate itself from its competitors by highlighting its unique value proposition (UVP), which is the main reason why customers should choose its product or service over others2. A CVP can also help a company communicate its value to its customers, increase customer satisfaction and loyalty, and improve its market position3.
One of the strategies that can improve the effectiveness of a CVP and enhance its differentiation in the market is to adopt best practices that improve product design. Product design is the process of creating a new product or service that solves a customer problem or fulfills a customer need4. By improving product design, a company can create products or services that are more desirable, feasible, and viable for its customers5. Some of the best practices that can improve product design are:
Understanding the customer: conducting research and analysis to identify the customer segments, their jobs, pains, and gains, and their expectations and preferences. This can help create products or services that are tailored to the customer needs and wants, and deliver value that exceeds their expectations.
Using the Value Proposition Canvas: a tool that helps design, test, create, and manage products and services that customers actually want. The Value Proposition Canvas consists of two parts: the Customer Profile, which describes the customer segment in terms of their jobs, pains, and gains; and the Value Map, which describes how the product or service creates value for the customer by addressing their jobs, relieving their pains, and creating their gains. The Value Proposition Canvas can help align the product or service with the customer needs and wants, and create a fit between them. Applying design thinking: a human-centered approach to innovation that integrates the needs of people, the possibilities of technology, and the requirements of business. Design thinking involves five phases: empathize, define, ideate, prototype, and test. Design thinking can help create products or services that are desirable for the customers, feasible for the technology, and viable for the business.
Incorporating feedback loops: collecting and analyzing data from customers and stakeholders to measure the performance and impact of the product or service. Feedback loops can help validate the assumptions and hypotheses about the customer needs and wants, test the effectiveness of the value proposition, and identify areas for improvement or innovation. Therefore, by adopting best practices that improve product design, a company can create products or services that deliver superior value to its customers, and differentiate itself from its competitors in the market.

Reference:

1: Customer Value Proposition Definition 3 2: Unique Value Proposition Definition 4 3:

How to Write a Value Proposition (+ 6 Modern Examples) 5 4: Product Design Definition 5: What is Product Design? : Customer Discovery: The Ultimate Guide : Value Proposition Canvas Download the Official Template 3 : What is Design Thinking? : Feedback Loop Definition

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QUESTION: 11

Up-to-date information about production order status is required to do which of the following tasks?

Calculate current take time.
Determine planned orders.
Replenish kanban quantities.
Calculate the cost of work in process (WIP).

Answer(s): D

Explanation:

Up-to-date information about production order status is required to calculate the cost of work in process (WIP). WIP is the inventory of unfinished goods or partially completed products that are still in the production process1. The cost of WIP is the sum of the costs of the materials, labor, and overhead that have been incurred in the production process but have not yet been transferred to the finished goods inventory2. To calculate the cost of WIP, we need to know how much of each production order has been completed and how much remains to be done. This information can be obtained from the production order status, which is a report that shows the current status of each production order in terms of its quantity, start date, end date, completion percentage, and variance3. By using the production order status, we can determine the amount of WIP for each production order and for the entire production process. This can help us monitor and control the production efficiency, profitability, and quality4.

Reference:

1: Work In Progress (WIP) Definition 2 2: Work-in-Process (WIP) Accounting 3 3:
Production Order Status Report 5 4: How to Calculate Work in Process Inventory 6

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QUESTION: 12

A machine is suddenly having excessive downtime.
Which of the following tools would be used in a root cause corrective action process to determine the problem?

Failure mode effects analysis (FMEA)
Standardized work analysis chart
Balance chart
A3 method

Answer(s): D

Explanation:

A3 method is a tool that can be used in a root cause corrective action process to determine the problem of a machine that is suddenly having excessive downtime. A3 method is a structured problem-solving approach that follows the Plan-Do-Check-Act (PDCA) cycle and uses a single sheet of paper (A3 size) to document the problem, analysis, countermeasures, and results1. A3 method can help identify the root cause of a problem by using tools such as the 5 Whys or the fishbone diagram, and then develop and implement effective corrective actions to prevent recurrence2. A3 method can also help communicate the problem and the solution to stakeholders, as well as monitor and evaluate the outcomes3.
The steps of the A3 method are4:
Step 1: Define the problem and its impact. Describe the current situation, the gap between the actual and the desired state, and the scope and magnitude of the problem. Step 2: Identify the root cause of the problem. Use tools such as the 5 Whys or the fishbone diagram to analyze the factors that contribute to the problem and drill down to its root cause. Step 3: Propose countermeasures to address the root cause. Generate possible solutions that can eliminate or reduce the root cause, and evaluate their feasibility, effectiveness, and costs. Step 4: Implement countermeasures. Select the best solution and plan how to execute it. Define the roles, responsibilities, resources, timeline, and expected outcomes of the implementation. Step 5: Check results and process. Measure and compare the results before and after the implementation, and verify if the problem has been solved or improved. Also check if the process has been followed correctly and document any deviations or issues. Step 6: Standardize successful processes or identify unresolved issues. If the results are satisfactory, standardize the new process and ensure that it is sustained. If not, identify the remaining or new issues and repeat the A3 method.
Therefore, A3 method is a tool that can be used in a root cause corrective action process to determine the problem of a machine that is suddenly having excessive downtime.

Reference:

1: What is an A31 2: How to Use an A3 Report for Problem Solving 2 3: The A3 Problem Solving Method 4 4: The A3 Report A Simple Tool for Complex Problems 5

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QUESTION: 9

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QUESTION: 10

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QUESTION: 11

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QUESTION: 12

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