2008 CPIM Exam Content Manual

CPIM Ex am Con Co n t en t Man Man u al This m anual is i n effect f rom ro m January Janu ary 1, 2008 2008,, through December 31, 2008.

The references in this manual have been selected solely on the basis of their educational value to the APICS CPIM certification program and on the content of the material. APICS does not endorse an y services or other materials that may be offered or recommended by the authors or publishers of books and publications listed in this manual. ©2008 APICS The Association for Operations Management 5301 Shawnee Road Alexandria, VA 22312-2317 (703) 354-8851 (800) 444-2742 Fax: (703) 354-8106 No portion of this document may be reproduced under any circumstances. CPIM is a registered trademark of APICS. Stock #09051

CONTENTS

Page

Introduction

Letter to Candidates ..................................................... ................................................................................ ..................................................... .......................... i Introduction Introduction .................................................. .............................................................................. ....................................................... ........................................ ............. iii About the the CPIM Examinations Examinations ..................................................................... ......................................................................................... .................... iii Code of Ethics ..................................................... ................................................................................ ...................................................... ................................. ...... vi CPIM Certification Practice Questions Questions ................................................. .......................................................................... ........................... .. vii Additional Additional Resources Resources for CPIM CPIM Candidates Candidates .................................................................... .................................................................... vii CFPIM .................................................. ............................................................................ .................................................... ............................................. ..................... .. viii Scope of the Subject Matter

Basics of Supply Supply Chain Management Management .................................................. ............................................................................. ............................. 1 Master Planning of Resources Resources ........................................................................... ........................................................................................ ............. 10 Detailed Scheduling Scheduling and Planning Planning .................................................... ............................................................................... ............................. .. 16 Execution Execution and Control of Operations Operations .................................................... ............................................................................. ......................... 27 Strategic Strategic Management of Resources ............................................................. ............................................................................. ................ 34 Answ An sw ers to Sample Samp le Ques ti on s

Basics of Supply Chain Chain Management Management Answers Answers .................................................. ............................................................. ........... 41 Master Planning Planning of Resources Resources Answers Answers ................................................... ........................................................................ ..................... 42 Detailed Scheduling Scheduling and and Planning Answers Answers ................................................... .................................................................. ............... 42 Execution Execution and Control Control of Operations Operations Answers Answers ...................................................... .............................................................. ........ 44 Strategic Strategic Management of of Resources Answers Answers ...................................................... .............................................................. ........ 45

Contents

CPIM CPIM Exam Content Manu al

Dear Candidate: For more than 30 years, the Certified in Production and Inventory Management (CPIM) program has been recognized as the international standard for indi vidual assessment in the field of production and inventory management. Initiated by APICS in 1973, it provides a c ommon basis for individuals and organizations organi zations to evaluate their knowledge of this evolving evolvin g field. APICS has administered more than 820,000 tests in 40 countries, and nearly 87,000 people have earned the CPIM designation—3,000 of these at the Fello w level. The mission of the CPIM program is to be the premier professional certification for operations m anagement that tests the candidate’s knowledge and understanding of the pr inciples and practice of production and inventory management. The CPIM program is designed to educate individuals in the concepts, tools, terminology, and integration of topics within the operations management function and test candidates’ in-depth knowledge of these concepts. APICS has worked to ensure that CPIM exams are consistently reliable and that the highest professional standards are used to develop and administer the program. Because organizations operate in a dynamically cha nging international world, the APICS body of knowledge continues to grow to include recognized concepts co ncepts and tools to improve organizational com petitiveness. The CPIM Exam Content Manual is updated regularly to reflect these changes in the body of knowledge and to assist candidates in their understanding of the scope of material covered in the program. Using a typical business process orientation, the CPIM program integrates individual modules in a progression of increased understanding as follows: 1. Entry module—Basics module—Basics of Supply Chain Management: Terminology and basic concepts concepts related to managing the complete flow of materials from suppliers to customers. 2. Core competency modules—Master modules—Master Planning Planning of Resources, Detailed Detailed Scheduling and Planning, Execution and Control of Operations: Available methodologies and techniques to drive processes and the application of these techniques. 3. Capstone module—Strategic Management Management of Resources: Choosing the appropriate structures structures and methodologies to achieve organizational strategic objectives and an understanding of the integration of operations within the context of the organization. The integration is presented here and represents a suggested sequence for the exams. Following is a summary of each of the CPIM modules.

CPIM CPIM Pro Progr gram am

Basics of Supply Chain Chain Management An introduction for production production and inventory management personnel and CPIM candidates, this module provides basic definitions and concepts for planning and controlling the flow of products or services into, through, and out of an organization. It explains fundamental relationships among the activities that occur in the supply chain from suppliers to customers. In addition, the module covers types of manufacturing and service systems, forecasting, master planning, material requirements planning, capacity management, production activity control, purchasing, inventory management, distribution, quality management, and Just-inTime/lean operations.

Introduction

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Master Planning of Resou rces In this module, candidates explore processes used to develop sales and operations plans; identify and assess internal and external demand and forecasting requirem ents; and gain an understanding of the importance of producing achievable master schedules that are consistent with business policies, objectives, and resource constraints. The module focuses on developing and validating a plan of supply, relating management of demand to environment, and developing and validating the master schedule. In addition, the module encompasses concepts for transforming sales, marketing, and business requirements into a feasible and economic operations plan in various business environments. It also addresses concepts and methodologies for managing projected and actual demands from distribution networks and external customers. Finally, the module presents methods for integrating s ales and operations plans, demand forecasts, and customer demand into a specific master schedule.

Detailed Scheduling and Planning In this module, candidates focus on the various techniques for material and capacity scheduling. The module includes detailed descriptions of material requirements planning (MRP), capacity requirements planning (CRP), inventory management practices, and procurement and supplier planning. New techniques are discussed, including material and capacity constrained scheduling, which are applicable to multiple industries including the service sector. Candidates will also become familiar with supplier partnerships, lean inventory principles, and outsourcing strategies and techniques.

Executio n and Control of Operations This module focuses on three main areas: execution of operational plans and schedules, control of the release of work to the operational area assigned, and reporting the measurement of the performance. The module explains techniques for scheduling and controlling operations. ECO deals with the execution of quality initiatives and continuous improvement plans. Finally, the m odule presents techniques for collecting data and m easuring performance for feedback.

Strategic Management of Resources In this module, candidates explore the relationship of existing and emerging processes and technologies to operations strategy and supply chain-related functions for both m anufacturing and service organizations. The module addresses three main topics: aligning resources with the strategic plan, configuring and integrating operating processes to support the strategic plan, and implementing change. For maximum comprehension of course content, candidates should be familiar with the information and concepts presented in the other CPIM modules before taking this course. The CPIM program continues to evolve, incorporating relevant and current concepts and techniques into the body of knowledge, such as supply chain management, lean, service industries, globali zation, theory of constraints, project management, outsourcing, critical chain, and new approaches in qualit y management. CPIM is an outstanding educational program and APICS relies on your comments and suggestions to maintain and improve the program for future candidates. We wish you success in your pursuit of your operations management knowledge.

Paul Pittman, Ph.D., CFPIM CPIM Program Chair Indiana University Southeast

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CPIM Exam Content Manual

Introduction This exam content manual provides assistance for those studying in the production and inventory management field, developing and conducting education courses and workshops, and preparing for the certification examinations. The objective of this manual is to outline the CPIM body of knowledge, which the APICS Body of Knowledge Council has organized into five modules: Basics of Supply Chain Management Master Planning of Resources Detailed Scheduling and Planning Execution and Control of Operations Strategic Management of Resources.

About the CPIM Examinations All CPIM exams are administered using a lineartesting approach. Linear testing is a prov en testing methodology based on the same concept as traditional paper-and-pencil exams. Candidates answer a predetermined number of questions to assess their knowledge in key areas.

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In this manual, each module begins with a statement of the scope of the subject matter, followed by a descriptive outline of the curriculum. Key terminology for the particular module is provided, as well as a bibliography of primary and additional references. Each module concludes with sample questions typical of those that a ppear on the examinations. The correct answers for the sample questions, with brief explanations of why they are correct, appear at the end the m anual.

Each of the CPIM exams (except Basics) consists of 75 multiple-choice questions. The Basics exam consists of 105 multiple-choice questions. There is a three-hour time limit for each CPIM exam. For more information about testing and registration policies and procedures, call APICS Customer Support at (800) 444-2742 or (703) 354-8851 and request a current CPIM Certification Bulletin. Candidates who plan to test in North America should request stock #09053, and candidates testing outside North America should order stock #09055.

The recommended procedure for mastering the subject matter is to review the curriculum outline, which defines the material, and then to stud y each topic, using the references. Candidates should understand the definitions of the key terms in the curriculum outline, as well as the outlined techniques—why and how to apply them and which ones to select. New developments in the state of the art m ay be described in current literature. Sufficient references are given for each topical area t o provide different approaches to material covered in each module and different styles of presenting it. Reading the available APICS periodical material, including APICS magazine, Production and Inventory Management Journal , and the Journal of Operations Management, will help you to maintain an awareness of changes in the state of the art.

Introduction

iii

Question Format Several types of questions are used in CPIM examinations. (This manual includes examples of many of these types of questions in the sample questions. A review of all of these types of questions is recommended to ensure maximum preparedness.) For each question, one and onl y one of the four choices represents the correct answer. It is important that you make a choice even if you are not certain of the correct answer, because the omission of an answer will be counted the same as an incorrect answer. Examples 1 and 2 are samples of an incomplete statement or a question, followed by four suggested completions or answers. In Example 1, you are to choose the one option—A, B, C, or D— that completes the statement correctly. In Example 2, you are to choose the option that best answers the question. Example 1: The key to a successful

production plan is (A) capacity requirements planning (B) material requirements planning (C) dynamic priority planning (D) adequate production capacity (The correct answer is D.) Example 2: Which of the following

approaches allows MRP techniques to be used for planning and controlling independent demand items? (A) pegged orders (B) two-bin system (C) time-phased order point (D) reorder point (The correct answer is C.) Example 3 is different. All the choices given are correct EXCEPT one. You are to choose the option that does not correctly complete the statement. Example 3: Group technology identifies the similarities among all of the following EXCEPT

(A) costs (B) parts (C) shapes (D) processes (The correct answer is A.) Example 4, another type of multiple-choice question, includes two or more statements or possibilities. The question and the statements or possibilities are always followed by four answer choices labeled A, B, C, or D. When answering multiple-choice questions of this type, read the iv


question and the statements or possibilities carefully. Then determine whether each of statements I through IV is true or false. Next, look at the four choices. In Example 4, you should pick option A if you believe statements I and III are true. You should pick option B if you believe statements I and IV are true. You should pick option C if you believe statements II and III are true. You should pick option D if you believe statements II and IV are true. Example 4: If a company changes from

make-to-stock to assemble-to-order, the effects on inventory levels are which two of the following? I. Lower finished-goods inventory II. Higher finished-goods inventory III. Lower work in process IV. Higher work in process (A) I and III (B) I and IV (C) II and III (D) II and IV (The correct answer is B.) Example 5 is similar to Example 4, but the number of possible combinations is greater. The best strategy for answering these questions is to consider each statement, decide whether it is true, and then search for the correct combination. If the combination you seek is not given, reconsider each statement carefully. Example 5: Management policies and

decisions about which of the following have a direct impact on investment? I. Customer service levels II. Intracompany transportation modes III. Placement of distribution centers IV. Types of production processes (A) I and II only (B) III and IV only (C) I, II, and IV only (D) I, II, III, and IV (The correct answer is D.) Examples 6 and 7 ask for a judgment or evaluation of the MOST or LEAST appropriate choice. The judgment is not one person’s opinion, but is the accepted choice according to the APICS body of knowledge. Example 6 asks for the MOST appropriate choice. Example 7 calls for the LEAST appropriate choice.

Example 6: The MOST significant

disadvantage of aggregating demand data before they are stored is that (A) information about demand is lost (B) there is risk of input error in the aggregation process (C) data will usually be inconsistent with financial information (D) the processing time required to aggregate is extensive (The correct answer is A.)

knowledge about a particular question, you ma y be able to eliminate one or more choices as incorrect. Your score on the test will be base d on the number of questions you answer correctly, with no penalty for incorrect answers; therefore, it is to your advantage to guess rather than not answer a question. Avoid changing an answer unless you are absolutely certain that you marked the wrong answer the first time.

Interpreting Test Scores

Example 7: Which of the following lot-sizing calculations would be LEAST sensitive to

The CPIM scaled score range is 265–330:

changes in unit costs? (A) least total cost (B) period order quantity (C) part period balancing (D) lot-for-lot (The correct answer is D.)

265–299 Fail 300–330 Pass

Takin g th e Test You should read each question carefully and thoroughly. Take care to avoid assuming information not given, assuming you know what is being asked without reading the question completely, or “second guessing” the question. Every effort has been made to avoid mis leading wording and to provide sufficient information for each question. Each of the questions is based on the outline in this exam content manual. The test is designed to evaluate a candidate’s knowledge of the subject matter. Therefore, the key to success is a thorough understanding of the subject matter. When you start your exam, read all the directions carefully. Be sure you understand the directions before you begin to answer any questions. Read each question carefully. If a question includes stimulus material such as a table or graph, be sure to study it before you answer the question. Choose the best answer from the choices given. You may believe that a different answer is correct but was not provided. Care has been taken to avoid misleading choices. Do not look for hidden tricks or exceptions to the norm. All questions are based on the current APICS body of knowledge as defined in the exam content manual. Once you begin the test, approach the questions in order, but do not waste time on those that are unfamiliar or seem difficult to you. Go on to the other questions and return to the difficult ones later if you have time. If you have some

For each examination, you receive a score for the total test. All candidates will also receive diagnostic information on their performance. A total scaled score of 300 or higher is required to pass an exam.

Suggested Study Materials Bibliography Section. Each of the modules in this

manual contains a bibliography section that lists primary and additional references. Although all of these references contain excellent material that will assist in test preparation, the prim ary references usually contain the most comprehensive treatment of the subject matter included in the module. Those concepts and subjects covered by the additional references, limited to the scope of the curriculum outline, are a part of the APICS body of knowledge and are subject to examination questions. A candidate may discover that the material covered in the chapters of one primary reference duplicates material covered in another primary reference. Both sources are included as primary references to allow candidates some discretion in selecting test preparation materials that they find accessible and understandable. For instance, a candidate who uses a specific reference in preparing for a certification exam that he or she passed may feel comfortable using that same reference to prepare for other certification exams. In deciding if a single primary reference is sufficient, candidates should assess their own level of knowledge against both the descriptive examination specifications and the detailed topic list contained in the curriculum outline. If there are any areas of weakness, the candidate should consult another primary reference or an additional reference as part of the test preparation process.

Introduction

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It is not practical to list all texts that contain excellent material. The serious student of operations management who wishes to stay current with the state of the art will take advantage of publications such as those listed in the APICS Educational Resources Catalog (stock #01041), a comprehensive catalog featuring APICS reference materials. To receive the catalog, call APICS Customer Support at (703) 354-8851 or (800) 444-2742. Curriculum outline. The curriculum outline for

each module provides a detailed overview of the major topics included in that module. Each major topic is denoted by a roman numeral and is followed by a list of the references that are particularly relevant to that topic. th

APICS Dictionary . The APICS Dictionary , 12

edition, is an essential publication that applies to the exam content manual and exams. Within the profession, terminology varies among industries, companies, and the academic community. Each examination uses standard terminology as defined in the APICS Dictionary. Recognizing the terms and understanding their definitions are essential. Reprints. The committee responsible for the

development of the exam content manual and the examination selects articles that are particularly applicable to the curricula and the candidates’ preparation for the examination. These articles are then reprinted in module-specific collections. These reprints are included in the primary references for each module. Other resources. In addition to the references

cited, it may be helpful for you to pursue chaptersponsored courses, college courses, APICS seminars, or self-study courses as a means of learning the body of knowledge that is tested in the certification program. A wide variety of courses is available. As with any other investment of time and money, you should research various courses before investing in one. Please visit the Chapter Locator on the APICS Web site (www.apics.org) or call APICS Customer Support at (703) 354-8851 or (800) 444-2742 to obtain contact information for your local chapter. Please refer to the most current APICS Educational Resources Catalog for further information.

Terminology In studying for the CPIM certification, candidates may discover multiple terms used to denote the same technique. Examples of this include sales vi


and operations planning versus production planning and master production schedule versus master schedule. APICS has attempted to provide

consistency across all modules with recognized and preferred terminology. However, synonyms are often used by authors in the various references used to compile the body of knowledge. Candidates are encouraged to be familiar with all terms and concepts listed within each outline and key terminology section, using the APICS Dictionary as the primary guide for definitions. Supplemental glossaries are offered in this manual wherever the committees feel that additional information is needed.

Code of Ethics When you start an examination, you will be asked to pledge to abide by the APICS Code of Ethics. Once certified, you pledge to continue your education to increase your contribution to the operations management profession. After achieving the higher level of certification (CFPIM), you pledge also to share your CPIM knowledge with others by participating in APICS research and educational activities at local, regional, and national levels. The Code of Ethics: To maintain and improve sound business practices and foster high standards of professional conduct. To hold in professional confidence any information gained of the business of a fellow member’s company, and to refrain from using such information in an unethical manner. To seek success without taking unfair advantage or utilizing questionable acts that would compromise one’s self-respect. To neither engage in nor sanction any exploitation of one’s membership, company, or profession. To encourage and cooperate in the interchange of knowledge and techniques for the mutual benefit of the profession. To be careful with one’s criticisms and liberal with one’s praise; to build and not to destroy. Whenever a doubt arises as to the right or ethics of one’s position or action, to resolve such doubt according to generally accepted standards of truth, fair dealing, and good taste. To maintain high personal standards of moral responsibility, character, and business integrity. •

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To uphold the high ideals of the association as outlined in the bylaws.

CPIM Certification Practice Questions The practice questions for each module include a sampling of questions covering the APICS body of knowledge and display the various test question formats used in the exams. The questions were selected or reviewed by the individual committees of the Body of Knowledge Council. Basics of Supply Chain Management

Practice Questions Booklet Practice Questions CD-ROM

Stock #09205 Stock #09215

Master Planning o f Resources



Detailed Scheduling and Planning



Execution and Control of Operations



Strategic Management of Resourc es



Complete Set of Practice Question s Bookl et

Stock #09210 Complete Set of Practice Questions CD-ROM

Stock #09220 Note: A Practice Questions CD-ROM is included

in each participant workbook for each module. Although these practice questions may be helpful in preparing for exams, they should be used only to augment a comprehensive program of study and preparation.

Additional Resources for CPIM Candidates APICS offers a number of resources to help individuals prepare for the CPIM examinations.

CPIM References The APICS Certification Committees have identified a number of references for each CPIM module. These references include texts and reprints of pertinent articles and case studies. For a complete list of CPIM references, visit our W eb site at www.apics.org, or call APICS Customer Support at (800) 444-2742 or (703) 354-8851.

CPIM Review Courses Available for each module of the CPIM process, the review courses are designed for classroom review of the key principles and concepts for each content area. The review course participant workbook is not a stand-alone reference nor comprehensive single source and should be used only by a participant attending an instructor-led review course. For more information, visit our

Web site at www.apics.org or call APICS Customer Support at (800) 444-2742 or (703) 354-8851 and request a complimentary APICS Educational Resources Catalog (stock #01041).

Independent Study Courses APICS correspondence courses offer professionals a unique home-study alternative. Correspondence courses are designed and conducted for APICS by the MGI Management Institute. For more information on course availability, call APICS Customer Support at (800) 444-2742 or (703) 354-8851.

Educational Programs APICS offers a variety of educational programs, including workshops in operations management essentials and integrated resource management and an international conference and exposition. For a complete list of APICS learning opportunities and information on course availability, call APICS Customer Support at (800) 444-2742 or (703) 354-8851.

Chapter Certification Review Classes Many chapters offer certification review classes. For more information, contact your local chapter. If you need a list of chapters in your area, visit our Web site at www.apics.org, or call APICS Customer Support at (800) 444-2742 or (703) 354-8851.

Introduction

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For a complete list of APICS resources, call APICS Customer Support and request a free copy of the APICS Educational Resources Catalog (stock #01041).

To obtain copies and a more detailed explanation of the CFPIM guidelines and application, contact APICS Customer Support at (800) 444-2742 or (703) 354-8851 and request stock #09052.

CFPIM

Certification Maintenance Continuing Professional Development

The distinguishing characteristic of a Certified Fellow in Production and Inventory Management (CFPIM) is the willingness to share acquired knowledge with others through presenting, teaching, publishing, and participating in APICS educational activities. This knowledge sharing must take place above and beyond a candidate's normal job duties and be directly related to the CPIM body of knowledge. To obtain the CFPIM designation, an application form must be filled out and submitted to APICS Headquarters. Points are awarded based on the following criteria: CPIM exams passed, presentations, high scores on CPIM exams, published works, classroom teaching, and various volunteer/practitioner activities.

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To promote professional growth and lifelong learning, CPIM and CFPIM designees must complete the Certification Maintenance program every five years. Complete details on ho w to maintain the CPIM and CFPIM designations will be mailed to candidates upon successful completion of the certification requirements. To learn more about the Certification Maintenance program, call APICS Customer Support at (800) 444-2742 or (703) 354-8851 and request a copy of the Certification Maintenance Bulletin (stock #09033) or visit the APICS Web site at www.apics.org and download a copy of the bulletin.

Basics of Supply Chain Management Effecti ve for January 1, 2008–December 31, 2008, Exams. EXAMINATION COMMITTEE

Jim Caruso, CPIM, CSCP (Chair), Covidien Carol Bulfer, CPIM, Parker Hannifin Corp. Jim Cox, Ph.D., CFPIM, CIRM, Jonah’s Jonah, TOCICO-certified, Professor Emeritus, University of Georgia William Leedale, CFPIM, CIRM, IFS Mike Roman, CPIM, Manufacturing Practices, Inc. Angel A. Sosa, CFPIM, University of Puerto Rico at Bayamon

Scope of the Subj ect Matter This module covers basic concepts in managing the complete flow of materials in a supply chain from suppliers to customers. It emphasizes basic terminology and covers relationships among activities in the supply chain. Knowledge of the material in this module is assumed as a prerequisite for the other CPIM modules, which cover similar topics but in much greater depth. The Basics module is divided into four major sections: 1. Business Wide Concepts 2. Demand Planning 3. Transformation of Demand into Supply 4. Supply The first section of the content outline covers basic business wide concepts, including an understanding of the various production environments used for the transformation process. Three common companywide management approaches—Enterprise resources planning (ERP), Just-in-Time (JIT/Lean), and total quality management (Quality Systems)—and their interrelationships are presented. Some financial fundamentals are also covered. The second section of the outline covers demand planning, including a basic understanding of markets and customer expectations, the definition of value, and a fundamental overview of demand forecasting. This information about demand serves as the primary input to the third section of the outline, which includes the design, management, and control of the transformation process itself.

The first part of the third section includes the design of products, processes, and information systems used for planning. The rest of the section includes fundamentals of planning systems, execution controls, and performance measures. The fourth and final section of the content outline is devoted to supply issues. Specifically, this section covers concepts in inventory, purchasing, and physical distribution.

Basics of Supply Chain Management Curriculum Four topics have been used to organize the domain of Basics of Supply Chain Management. The relative importance of a topic is not necessarily reflected by its level in the outline. The relative importance of these topics will var y among industries, but for study purposes the percentage figures given below can be used as guidelines. DIAGNOSTIC PART

MAIN TOPIC

PERCENTAGE OF EXAM

I

Business Wide Concepts

24%

II

Demand Planning

17%

III

Transformation of Demand into Supply

32%

IV

Supply

27%

Curriculum Outline I. Busin ess Wide Concepts This section of the outline covers basic business wide concepts, including the various production environments used for the transformation process and financial fundamentals. Also in this section, three of the more common companywide management approaches (ERP, JIT/Lean, and Quality Systems) are individually presented, together with their interrelationships. A. Organization Fundamentals: The basic concept of a supply chain includes all activities and processes used to provide a product or service to the ultimate customer. It also includes internal organization dynamics, such as the traditional conflicts between functional areas. Basics of Supply Chain Management

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1. Elements of the supply chain a. supplier b. producer c. distributor d. retailer e. customer f. service and support 2. Internal organizational dynamics B. Operating Environments: Environments are the individual market and manufacturing factors that combine to determine the specific operating conditions. 1. Definition and impact of a. customer expectations b. cumulative lead time c. inventory d. product life cycle e. product design 2. Process choices a. project b. lot/batch/intermittent c. line/repetitive d. continuous 3. Production environment a. design/engineer-to-order b. make-to-order c. assemble- or package-to-order d. make-to-stock e. remanufacture C. Financial Fundamentals: Basic financial statements define the financial reporting common to most businesses. Underlying costs and analysis terms provide further understanding of statement information and often serve as the basis for management decisions. 1. Statements a. balance sheet b. income statement c. cash flow statement 2. Costs a. cost of goods sold b. general and administrative c. fixed and variable costs 3. Analysis a. cash flow b. profit c. margin d. inventory turns D. Enterprise Resources Planning (ERP): ERP is a fully integrated planning and control information system that serves as a master game plan for the business. (MRP II is a subset of ERP for manufacturers). 1. Objectives 2. Key principles and characteristics a. top-management planning tool 2


b. c. d. e. f.

integrated planning structure cross-functional integration closed loop (feedback) what-if simulations financial data E. Just-in-Time (JIT/Lean): JIT and Lean can be understood as philosophies embodying certain objectives and as sets of manufacturing techniques described by specific characteristics. 1. Objectives 2. Key principles and characteristics a. flow manufacturing b. process flexibility c. quality at the source d. continuous improvement e. supplier partnerships f. employee involvement g. total productive maintenance h. pull systems i. work cells j. elimination of waste 3. Concepts of waste and value-added activity F. Quality Systems: Quality systems focus on customer needs including a specific set of tools to improve products, services, and production processes through the use of such techniques as employee empowerment. 1. Objectives 2. Key principles and characteristics a. problem-solving tools b. costs of quality c. customer focus d. employee empowerment e. process improvement G. Impact of Environment on System Design and Deployment: The production environment can be significantly improved by JIT/Lean and Quality Systems. This in turn simplifies ERP system operation and improves business performance. 1. JIT/Lean using ERP 2. Quality Systems impact Reference: 1; 3 (chapters 1, 2, 14-16); 4

II. Demand Planning This section covers demand planning, including a basic understanding of markets and customer expectations, the definition of value, and a fundamental overview of demand forecasting. A. Marketplace-Driven : Customer needs and alternative competitive sources determine the type of product demand experienced by supplying firms.

1. Customer 2. Competitors 3. Economy and regulatory policy B. Customer Expectations and Definition of Value: A firm must determine the primary characteristics of products and services that are attractive to customers. This understanding can then be exploited through appropriate market plans and production processes. 1. Order winners/qualifiers a. quality b. delivery c. pre-sale and post-sale service d. price e. flexibility 2. Marketing strategy C. Customer Relationships Management : To develop effective customer relationships, ongoing interaction and communication with customers is essential with both product design and production deliveries. 1. Expanding product/service offerings 2. Design assistance 3. Information/communications D. Demand Management: Demand management is the recognition of demand, either as forecast or actual customer orders. Forecasting is complex, but it involves a variety of standard terms. Once recognized, demand is met through a combination of inventories and the master production schedule. Distribution requirements planning (DRP) improves demand management by directly linking distribution system demand to central demand. 1. Sources of demand 2. Forecast management a. characteristics of demand b. principles of forecasting c. methods d. forecast error measurement and response Reference: 3 (chapters 8, 9)

III. Transformation of Demand in to Supply This section includes the design, management, and control of the transformation process itself. The first part of this section includes the design of products, processes, and information systems used for planning.

The rest of the section includes fundamentals of planning systems, execution controls, and performance measures. A. Design: Design affects product and process, the resulting framework of planning system parameters, and the requirement for data appropriate in source, content, and accuracy. 1. Manufacturing feasibility a. new product design and introduction b. process choices c. process flexibility 2. Planning parameters a. manufacturing and purchasing lead time b. order quantity/lot size/batch c. safety stock and/or capacity 3. Data sources and data accuracy a. bills of material/formulas/recipes b. planning bill of material c. item master (material master) d. routing/process e. work center/flow line 4. Functional responsibilities B. Capacity Management: The fundamentals of capacity management include the required resources, the various methods of measuring capacity, the levels and stages of planning capacity, and the impact of bottlenecks and constraints. 1. Resources 2. Measuring capacity 3. Capacity planning 4. Bottlenecks/constraints C. Planning (purposes, inputs, and outputs) : The purpose and structure of the planning process are the basic inputs, data sources, and necessary outputs. Functional trade-offs are resolved in effective higher-level planning. Other plans at all levels must remain consistent with one another and with the overall plan. 1. Strategic planning and business planning 2. Sales and operations (S &OP) planning/production planning 3. Master scheduling and rough-cut capacity planning (RCCP) 4. Material requirements planning (MRP) and capacity requirements planning (CRP) 5. Final assembly scheduling (FAS) D. Execution and Control: Fundamental definitions and structures of execution and control techniques are widely known. Understanding them requires a thorough comprehension of scheduling and workBasics of Supply Chain Management

3

in-process techniques and how they interrelate to meet the master production schedule. Customer service activities and quality assurance further affect execution and control. 1. Customer service a. order processing b. order promising c. push/pull 2. Linkages to the master schedule 3. Scheduling techniques a. forward/backward b. finite/infinite 4. Work-in-process a. capacity control b. priority control c. production reporting 5. Quality assurance a. measuring quality b. process variation c. process control E. Performance Measurements: There are several types of key performance indicators , each with specific reasons f or their use. Some are strategic in nature, while others are operational or tactical in nature. It is important to have an appropriate mixture of both types for an effective evaluation of organizational performance. 1. Strategic 2. Tactical Reference: 1; 3 (chapters 2-6)

IV. Suppl y This section is devoted to supply issues. These include the concepts of inventory, purchasing, and physical distribution. A. Inventory: Inventory can be described by its various categories and functions and whether it meets dependent or independent demand. There are several approaches to inventory management, order system interrelationships, and inventory cost analysis. 1. Categories a. raw materials b. work-in-process c. finished goods d. service parts e. maintenance, repair, and operating supplies (MRO) 2. Functions a. transit/pipeline b. cycle/lot size c. anticipation d. safety stock 4


3. Dependent versus independent demand systems 4. Management a. ABC analysis b. tracking inventory c. cycle counting d. record accuracy e. physical inventory 5. Order systems a. time-based b. quantity-based 6. Cost analysis a. costs b. economic order quantity (EOQ) c. safety stock level versus customer service B. Purchasing: There are several important components of purchasing, especially regarding suppliers and order management, and ultimately including receiving and invoice payment. 1. Receiving and analyzing notification of need a. requisition b. MRP output 2. Selecting suppliers a. source (single/multiple) b. supplier partnering c. vendor-managed inventory 3. Supplier agreements a. price b. terms c. delivery d. quality e. quantity 4. Order management a. ordering/releasing b. monitoring and controlling open orders c. receiving and accepting orders d. approving invoices for payment 5. Monitoring supplier performance C. Physical Distribution System: The components of a physical distribution system should be recognized, as well as the interfaces with production, marketing, and finance. 1. Transportation 2. Warehousing 3. Distribution inventory 4. Interfaces with production, marketing, and finance Reference: 1; 3 (chapters 7, 10-13); 4

Key Terminolog y An understanding of the following list of terms is recommended. The list is intended to be thorough,

but not exhaustive. The candidate is also expected to be familiar with the definitions of terms identified in the curriculum outline. A r eview of the list and study of the topics in the outline may reveal other important terms. Definitions of these terms can be found in the APICS Dictionary , 12th edition, or in the references listed in the bibliography.

Customer service Customer service ratio Cycle Cycle counting Cycle stock Cycle time

D Decoupling Demand Demand management Demand pull Demonstrated (measured) capacity Dependent demand Direct labor Direct material Discrete manufacturing Dispatching Distribution inventory Distribution requirements planning (DRP) Distribution resource planning (DRP II) Distributor Due date

A ABC inventory control Actual costs Aggregate lead time Anticipation inventories Assemble-to-order Assembly line Asset Available inventory Available-to-promise (ATP) Average cost per unit

B Backflush Backlog Backorder Backward scheduling Balance sheet Barcode Batch Batch processing Bias (to be consistent with MAD and random variation) Bill of material (BOM) Blanket orders Bottleneck Buffer Bullwhip effect Business plan

C Capacity Capacity available Capacity management Capacity required Capacity requirements planning (CRP) Carrying cost Cash flow Cellular manufacturing (work cells) Changeover Chase (demand matching) method Closed-loop MRP Competitive analysis Component Consignment Constraint Continuous flow (production) Control chart Cost of goods sold Cost of (poor) quality Cumulative lead time Customer Relationship Management (CRM)

E Economic order quantity (EOQ) Efficiency Electronic data interchange (EDI) Employee empowerment Employee involvement (EI) Engineer-to-order Enterprise Resources Planning Expedite Explode Extrinsic forecast

F Feedback Fill rate Final assembly schedule (FAS) Finished goods Finish-to-order Finite forward scheduling Finite loading Firm planned order (FPO) Five Ss Fixed order quantity Flexible manufacturing system (FMS) Flow manufacturing Flow shop Fluctuation inventory Forecast error Forecasting Formula Forward scheduling

G General and administrative expenses Gross margin Gross requirements

Basics of Supply Chain Management

5

Master production schedule (MPS) Master schedule Material requirements planning (MRP) Materials management Mean absolute deviation (MAD) Move time Multilevel bill of material Multisourcing

I Income statement Independent demand Infinite loading Infinite scheduling Input/output control Inspection Intermittent production Interplant demand In-transit inventory Intrinsic forecast Inventory Inventory adjustments Inventory control Inventory issues Inventory management Inventory returns Inventory turnover Inventory turns Item master record

N Net requirements

O On-hand balance Open order Operation Order entry Ordering costs Order point Order promising Order qualifiers Order quantity Order winners Overhead Owner’s equity

J Job costing Job order Job shop Job shop layout Job shop scheduling Just-in-Time (JIT)

K Kaizen Kanban

L Leading indicator Lead time Lead-time offset Lean Level of service Level production plan (level schedule) Liability Line manufacturing (assembly line) Load Load leveling Lot Lot control Lot-for-lot Lot size Lot-size inventory

M Maintenance, repair, and operating supplies (MRO) Make-to-order Make-to-stock Manufacturing lead time Manufacturing process Manufacturing resource planning (MRP II) Market driven Marketing research Market share Master planning 6


P Package-to-order Packing and marking Parent item Pegging Performance measurement system Perpetual inventory record Physical distribution Physical inventory Pipeline inventory Planned order Planned order receipt Planned order release Planning horizon Poka-yoke Priority control Process Process layout Product differentiation Product family Production activity control (PAC) Production line Production plan Production planning Productivity Product layout Product life cycle Profit Profit margin Projected available inventory (balance) Pull (system) Purchase order Purchase requisition Purchasing Push (system)

Q

T

Quality Quality at the source Quality control Queue

Takt time Throughput time Time bucket Time fence Theory of Constraints (TOC) Total acquisition costs Total productive maintenance (TPM) Total quality management (TQM) Tracking signal Transit time Transportation inventory Trend Two-bin system

R Radio Frequency Identification (RFID) Random-location storage Random variation Rated capacity Raw material Receipt Record accuracy Remanufacturing Reorder point Reorder quantity Repetitive manufacturing Replenishment lead time Request for quotations Required capacity Requirements explosion Requisition Resource planning Reverse Logistics Rough-cut capacity planning (RCCP) Routing Run time

S Safety stock Sales and operations planning (S & OP) Sales plan Scheduled receipt Scheduling Seasonality Service industry Service parts Service parts demand Setup Setup lead time Shop calendar Shop order Simulation Single-level bill of material Single-source supplier Six Sigma Split lot Standard costs Standard hours (time) Start date Statistical process control (SPC) Stockkeeping unit (SKU) Stockout costs Strategic plan Subcontracting Supplier Supplier lead time Supplier partnering (partnership) Supplier Relationship Management (SRM) Supply chain

U Unit of measure Utilization

V Value added Value analysis Value stream mapping Variance Vendor Vendor-managed inventory (VMI) Visual review system

W Wait time Warehousing Waste Where-used list Work cell Work center Work-in-process (WIP) Work order

Supplemental Glossary The following concepts not found in the APICS Dictionary, will be helpful in preparing for the Basics of Supply Chain certification examination. Value stream mapping: Maps created to

document current and future processes. The current state map identifying steps that add or do not add value. A future state map then details how to minimize or eliminate non-value added processes. Total acquisition cost: represents the total cost of

a purchased item that includes price per unit, charges, handling, transportation and delivery cost to get the product to production.

Bibliography All test candidates should familiarize themselves with the following primary references for this examination. The text Introduction to Materials Basics of Supply Chain Management

7

Management covers the majority of the material

for this module. The additional references provide further coverage of some of the topic areas and can enhance candidates’ understanding of the body of knowledge. Those concepts and subjects covered by the additional references, limited to the scope of the curriculum outline, are a part of the APICS body of knowledge and are subject to examination questions. All of the references are available from the APICS Bookstore.

Primary References 1. APICS CPIM Basics of Supply Chain Management Reprints, 2006. 2. APICS Dictionary, 12th ed., 2008. 3. Arnold, J.R. Tony, S.N. Chapman and LM. Clive, Introduction to Materials Management, 6th ed., Prentice Hall, 2008.

Additi onal Reference 4. Feld, W.M., Lean Manufacturing: Tools, Techniques, and How to Use Them , St. Lucie Press, 2001.

Sample Questions Following are 10 questions that are similar in format and content to the questions on the exam. These questions are intended for practice—that is, to enable you to become familiar with the way the questions are asked. The degree of success that you have in answering these questions is not related to your potential for success on the actual exam and should not be interpreted as such. Read each question, select an answer, and check your response with the explanation on page 41. 1. Which of the following situations reflects the best supplier/customer partnership? (A) the supplier commits to the customer’s requests. (B) the company buys a part from the supplier even though the company could make the part. (C) the customer and supplier implement electronic data interchange. (D) the customer and supplier share problemsolving responsibilities. 2. Which of the following is the most appropriate definition of an “order winner”? (A) a product characteristic that causes customers to choose the product over that of a competitor (B) a product characteristic that qualifies the product to compete in a market 8


(C) a product that has the highest profit margin (D) a product that generates the highest dollar sales volume 3. Which of the following is the primary purpose of forecasting? (A) projecting product demand (B) estimating safety stock (C) determining resource requirements (D) loading the master production schedule 4. The production plan is used to establish which of the following? (A) customer service level (B) gross sales volume (C) the business plan (D) product family rates of production 5. Order promising uses which of the following elements of the master schedule? (A) projected available balance (B) available-to-promise (C) safety stock (D) forecast demand 6. Monitoring the statistical process control of an established, stable process should be done by which of the following? (A) process operators (B) supervisors (C) manufacturing engineers (D) quality engineers 7. Which of the following types of inventory is used to protect against variations in supply and/or demand? (A) cycle stock (B) common stock (C) safety stock (D) seasonal stock 8. Dependent demand items are most accurately described as which of the following? (A) finished goods awaiting final sale (B) service parts (C) products with a market-sensitive price (D) raw materials, component parts, and subassemblies 9. In backward scheduling, which of the following is used as the first date to determine the schedule? (A) early start date (B) late start date (C) start date (D) due date

10. The bill of material in a material requirements planning (MRP) system serves which of the following functions? (A) provides the basis for the gross-to-net calculation (B) guides the explosion process (C) guides the assembly process (D) provides lot-sizing information (Answers listed on page 41.)

Basics of Supply Chain Management

9

Master Planning of Resources Effecti ve for January 1, 2008–December 31, 2008, Exams. EXAMINATION COMMITTEE

Mark K. Williams, CFPIM, CSCP, (Chair), Williams Supply Chain Group, Inc. Lynn Boyd, Ph.D., CPIM, University of Louisville Murray R. Olsen, CFPIM, CIRM, ATK Launch Systems Josie Vigil, CPIM, CSCP, B. Braun Medical, Inc.

Scope of the Subj ect Matter Please read the introductory material in this m anual for essential information about the examination. This module evaluates knowledge of both supply and demand planning for mid- to long-term independent demand. Major topics include demand management, sales and operations planning, and master scheduling. It addresses both priority and capacity planning. Demand Management is the function of recognizing

all demands for goods and services to support the marketplace. It includes forecasting, order servicing and customer relationship management, as well as distribution planning. Sales and Operations Planning is a process that

brings together all the plans for the business (e.g., operations, sales, sourcing, marketing, product development, and finance). The result is an integrated set of plans for each product family. Master Scheduling is the process of disaggregating

the production plan into an executable schedule which links shipment of customer orders to m aterial management. In each of these areas collaboration within the organization and with direct customers and suppliers will be addressed.

Master Planning of Resources Curriculum Three main subject topics have been used to organize the domain of Master Planning of Resources. A topic’s relative importance is not necessarily reflected by its level in the outline. Relative importance of these topics varies from industry to industry, but for study purposes the 10


percentage figures given below can be used as guidelines. DIAGNOSTIC PART

MAIN TOPIC

PERCENTAGE OF EXAM

I

Demand Management

30%

II

Sales and Operations Planning

25%

III

Master Scheduling

45%

Curriculum Outline I. Demand Management This section addresses the interrelationship of strategic and business planning with the management of demand. The three primary aspects of demand management (forecasting, order servicing/customer relationship management, and distribution planning) are addressed. Exam questions covering this area will include elements related to the following: A. General Concepts and Purposes : Successful planning requires an understanding of how components, concepts, and linkages of the strategic plan, the business plan, and the master planning of resources interact. Knowledge in this area encompasses: 1. The planning hierarchy 2. Relating the planning process to the environment B. Forecasting Demand: Effective demand forecasting requires an understanding of the uses of a forecast, methods of forecasting, fitting a forecast to the situation, and tracking its performance over time. Knowledge in this area encompasses: 1. Demand forecasting concepts 2. The relationship between the timeliness and accuracy of the data and the requirements of the forecast 3. Management considerations related to forecast selection 4. How to select a time horizon and interval, and a level of aggregation 5. The fit of basic qualitative techniques 6. The fit of basic intrinsic quantitative techniques. Specific techniques that should be understood include: a. Simple averages b. Single level exponential smoothing c. Time Series Decomposition 7. The fit of basic extrinsic quantitative techniques 8. Evaluating forecasting performance

C. Management of the Customer Interface : Effective management of the customer interface requires an understanding of how to make realistic order delivery promises and maintain positive customer relationships. This area of the exam covers topics related to ensuring effective customer communication; handling actual orders; and measuring the performance of your order management system. Knowledge in this area encompasses: 1. Customer Relationship Management (CRM) concepts 2. How to set customer service policies safety stock, and performance target 3. Methods for calculating and using Available-to-promise (ATP) and Capable-to-promise (CTP) quantities 4. How to maintain effective customer communications 5. Techniques for measuring order delivery performance D. Distribution Planning: Effective distribution planning requires being aware of the various methods for disseminating products or services to customers and the relative strengths and weaknesses of those alternatives. Knowledge in this area encompasses: 1. The various distribution strategies and network configurations 2. How to select between various transportation methods 3. Where to locate inventory within the network 4. How to link the distribution network to customer demand and master scheduling 5. How to measure the performance of the distribution system References: 1; 2; 3 (chapters 1, 3-9, 11, 12); 4 (chapters 2, 8); 5 (chapters 1, 2, 5, 8); 6 (chapter 4); 7; 8 (chapters 1, 16); 9 (chapters 5, 11)

II. Sales and Operations Planni ng This section addresses the processes, concepts, and techniques used to link strategic goals to operations and coordinate the various planning efforts of the functional areas (i.e., operations, sales, sourcing, product development, marketing, and finance) in a variety of business environments. Exam questions covering this area will include elements related to the following: A. General Concepts and Purpose: Sales and operations planning (S&OP) coordinates

the various business functions to ensure they support the overall organization strategy and enhance customer service. At the center of the process are two fundamental issues. First, what is the best way to balance supply and demand? Second, what is the appropriate production volume and mix between product families? The answers to these issues are heavil y dependent on the type of business environment in which the business operates. Knowledge in this area encompasses: 1. The key linkages to the S&OP process 2. The different methods for balancing supply and demand 3. The trade offs related to different volume/mix combinations 4. How to carry out the S&OP process in different business environments B. Management Considerations: S&OP is the process top management uses to control and guide the business. It integrates the multiple plans developed within a business and provides direction for more detailed short-term to medium planning. Knowledge in this area encompasses: 1. How to evaluate alternative plans 2. How to assess the financial implications of the plan 3. How to identify: a. The various stakeholders in the process b. The planning horizon c. The S&OP Process owner 4. How to establish: a. Customer service levels b. Inventory levels c. Backlog levels C. The Sales and Operations Planning Process: There are several steps involved in the process of establishing a sales and operations plan. Effective S&OP requires proper execution of each of these steps. Knowledge in this area encompasses: 1. The various levels of management involved and their roles 2. The five steps involved in S&OP 3. The various inputs and outputs of each step a. Month-end reports b. Statistical forecasts c. Field sales worksheets d. Management forecasts e. Capacity constraints D. Developing and Validating the Production Plan: A key output of S&OP is the production plan. Effective S&OP requires an understanding of this key planning Master Planning of Resources

11

document. Knowledge in this area encompasses: 1. How to develop and validate a production plan in a variety of production environments 2. How to carry out resource planning 3. How to assess the desirability of alternative production plans References: 1; 2; 4 (chapters 3, 12); 5 (chapters 1, 3, 4, 10, 13; Appendices A, D); 6 (chapters 1-6, 8-11, 14-17); 7 (chapters 1-3, 6, Appendices A, G); 8 (chapter 13); 9 (chapters 1, 6)

III. Master Scheduling This section addresses the processes of translating higher level aggregate plans into feasible schedules that operations and suppliers can execute. Exam questions covering this area will include elements related to the following: A. General Concepts and Purpose: The master scheduling process disaggregates production plan into an executable schedule which links shipment of customer orders to material management. Knowledge in this area encompasses: 1. The role of master scheduling in the planning and control hierarchy 2. The linkages with other planning processes within the planning and control hierarchy 3. The relationship between master scheduling, capacity management, and materials management B. Linking the Master Scheduling Process to the Business Environment: The mechanics of master scheduling vary according to the business environment. Nevertheless, in every environment it is necessary to li nk the master scheduling process with the production plan and the S&OP process. Knowledge in this area encompasses: 1. The relationship between the manufacturing environment and product structure 2. How to determine the level in the bill of materials where the master schedule should be developed. C. Management Considerations: The master scheduling process is the point where higher level plans are converted into executable actions. As such, it is essential that the output of the process (i.e. the master schedule) be consistent with the overall goals of the organization. Knowledge in this area encompasses: 12


1. Senior executive responsibility related to managing the master schedule 2. The role of the master scheduler 3. How to plan and coordinate changes in: a. Inventory levels b. Backlog c. Capacity d. Major customer orders e. Time fences f. Product or process designs g. Suppliers 4. How to maintain the integrity of the master schedule 5. How to deal with the consequences of an unrealistic master schedule: a. overloaded work centers b. poor customer service c. meaningless priority system D. The Master Scheduling Process : The process of developing a master schedule involves numerous decisions related to the mechanics and the selection of techniques and tools. Effective master scheduling requires significant insights into each of these choices. Knowledge in this area encompasses: 1. How to identify and quantify sources of demand to be considered in the master scheduling process 2. The mechanics of the master scheduling process, including: a. Disaggregating the production plan b. Determining projected on-hand balances and consuming the forecast c. Identifying available-to-promise quantities using both the cumulative and discrete methods d. Working with time-phased order records e. Working with time-fence, and rescheduling f. Determining master scheduling lot sizes 3. How to structure, interpret, and use a bill of materials 4. Reviewing capacity requirements and the role of rough-cut capacity planning (RCCP) 5. Developing and using a final assembly schedule (FAS) E. Measuring Master Schedule Performance: As with demand management and sales and operations planning, measuring the success of master scheduling is necessary to using and improving the process. Knowledge in this area encompasses: 1. How to validate the master schedule 2. Relating the master schedule to:

a. S&OP performance b. Customer service levels c. Marketing/sales performance d. Purchasing performance 3. Maintaining data accuracy

Delphi method Demand filter Demand time fence (DTF) Design-to-order Deviation Distribution center Distribution channel Distribution network structure Distribution of forecast errors Double order point system

References: 1; 2; 3 (chapters 1, 5, 6, 9, 11, 12); 4 (chapter 6); 5; 6 (chapters 3-5, 7, 9, 11, 13, 16, Appendix D); 7 (chapters 6, 7, Appendices A, E, G); 8; 9 (chapters 6, 7)

E

Key Terminolog y An understanding of the following list of terms is recommended. The list is intended to be thorough but not exhaustive. The candidate is also expected to be familiar with the definitions of terms identified in the curriculum outline and those definitions found in the Key Terminology for Basics of Supply Chain Management. A review of the list and study of the topics in the outline may reveal other important terms. Definitions of these terms can be found in the APICS Dictionary, 12th edition, or in the references listed in the bibliography.

Econometric model Exponential smoothing forecast Extrapolation

F Feature Finishing lead time First-order smoothing Focus forecasting Forecast consumption Forecast horizon Forecast interval Forecast management Frequency distribution

H

A Abnormal demand Actual demand Adaptive smoothing Aggregate forecast Aggregate plan Allocation Alpha factor

Hedge Hybrid production method

I Interplant demand

L Lean production Least-squares method Level schedule Life cycle analysis

B Base series Benchmarking Bill of distribution (BOD) Bill of resources Bottom-up replanning Bucket versus bucketless system By-product

M Manufacturing environment Mass customization Master planning of resources Master schedule item Master scheduler Mean Mean absolute percent error (MAPE) Mean squared error (MSE) Median Mix forecast Mixed-model scheduling Mode Modular bill of material Moving average Multilevel master schedule

C Capable-to-promise (CTP) Capacity planning using overall factors (CPOF) Chase production method Collaborative planning, forecasting, and replenishment (CPFR) Common parts bill of material Consuming the forecast Continuous production Co-product Correlation Curve fitting Customer relationship management (CRM) Customer-supplier partnership

D Decomposition Delivery lead time

N Noise Normal distribution

O Option Option overplanning Outlier Overstated master production schedule Master Planning of Resources

13

P

W P:D ratio Planning bill of material Planning horizon Planning time fence Point of sale (POS) Postponement Priority Probability Probability distribution Process flow production Process manufacturing Product configuration catalog Product group forecast Product line Product load profile Product mix Product positioning Product/service hierarchy Production forecast Production level Production rate Production schedule Project manufacturing Pyramid forecasting

Q Qualitative forecasting techniques Quantitative forecasting techniques

R Random sample Regression analysis Resource profile Running sum of forecast errors

Warehouse demand Weighted moving average

Bibliography All test candidates should familiarize themselves with the following primary references. The additional references provide further coverage of some of the topic areas and can enhance a candidate’s understanding of the body of knowledge. The concepts and subjects covered in the additional references, limited to the scope of the curriculum outline, are part of the recognized APICS body of knowledge and may be included in examination questions. Also, candidates who have not yet passed the suggested first module—Basics of Supply Chain Management—should familiarize themselves with the basic concepts of materials management presented in Introduction to Materials Management. All of these references are available from the APICS Bookstore.

Primary References 1. APICS CPIM Master Planni ng of Resources Reprints, October 2007. 2. APICS Dictionary, 12th ed., 2008. 3. Ross, D.F., Distribution Planning and Control, 2nd ed., Kluwer Academic Publishers, 2004. 4. Vollmann, T.E., W.L. Berry, D.C. Whybark, and F.R. Jacobs, Manufacturing Planning and

S Safety capacity Sales promotion Sample Sampling distribution Scatter chart Seasonal index Second-order smoothing Service function Single smoothing Smoothing constant Smoothing factor Standard deviation Strategic planning Substitution Super bill of material

T Tactical planning Time-phased order point (TPOP) Time series analysis Traceability Trend forecasting models Two-level master schedule

14


5.

Control Systems for Supply Control Management, 5th ed., McGraw-Hill, 2005. Wallace, T.F., and R.A. Stahl, Master Scheduling in the 21st Century, T.F. Wallace &

Co., 2003. 6. Wallace, T.F., Sales & Operations Planning: The How-to Handbook , 2nd ed., T.F. Wallace & Co., 2004. 7. Wallace, T.F., and R.A. Stahl, Sales Forecasting: A New Approach, T.F. Wallace & Co., 2002.

Addi ti onal References 8. Proud, J.F., Master Scheduling, 3rd ed., John Wiley & Sons, 1999. 9. Williams, B.R. Manufacturing for Survival, Addison-Wesley, 1996.

Sample Questions Following are 10 questions that are similar in format and content to the questions on the Master Planning of Resources exam. These questions are intended for practice—that is, to enable you to become familiar with the way the questions are asked. The degree of success that you have in

answering these questions is not related to the potential for success on the actual exam and should not be interpreted as such. Read each question, select an answer, and then check your response with the explanation on page 42. 1. Which of the following demands is generally NOT considered a part of demand management? (A) dependent demands (B) interplant transfers (C) service parts requirements (D) branch warehouse requests

3. Producing exactly to demand should result in (A) minimum change in inventory (B) least total cost (C) minimum capacity requirements (D) maximum machine utilization Lot Size: 30

Demand Time Fence: 3

On Hand: 15

Planning Time Fence: 7

Safety Stock: 6

PERIOD

1

2

3

4

5

Forecast

10

22

20

24

28

Customer Orders

5

26

15

6

6. The ability to notify a customer that his or her order will be delayed because of a mechanical breakdown is dependent on (A) demand filters (B) pegging (C) safety stock (D) outliers 7. Which of the following is LEAST likely to be used as the value for alpha in an exponential smoothing forecast when the company believes recent history to be most important? (A) .8 (B) .6 (C) .4 (D) .3

2. Normal uses of a master schedule include which of the following? I. To provide a means of planning future production II. To drive rough-cut capacity planning III. To establish the production plan (A) I only (B) I and II only (C) II and III only (D) I, II, and III

Lead Time: 2

5. Using that same table, what is the projected available balance for period 5? (A) 30 (B) 35 (C) 5 (D) 7

30

Projected Available Balance Available-toPromise Master Production Schedule

8. The following are true of meaningful performance measurements EXCEPT (A) they relate to the organization’s strategic goals (B) they relate principally to financial performance (C) they are communicated and understood at all organizational levels (D) they drive improvements in business processes 9. The sales and operations planning process brings together all of the following EXCEPT (A) sales plan (B) capacity requirements plan (C) marketing plan (D) new product development plan 10. The production plan is performed at which level? (A) product family (B) work center (C) end-item level (D) product option level (Answers listed on page 42.)

4. For the master schedule above, what is the available-to-promise for period 4 if the discrete method is used? (A) 22 (B) 24 (C) 35 (D) 37

Master Planning of Resources

15

Detailed Scheduling and Planning Effecti ve for January 1, 2008–December 31, 2008, Exams. EXAMINATION COMMITTEE

Ann K. Gatewood, CFPIM, CIRM (Chair), Gatewood Associates Sarah W. Klunk, CFPIM, CSCP, CIRM, C.P.M., Andrew Corporation Donna M. Schmoll, CPIM, Flow International Blair Williams, CFPIM, CSCP, Jonah, Polytechnic University, Tech. Ed., Inc.

Scope of the Subj ect Matter Please read the introductory materials in this manual for essential information pertaining to the examination. The subject matter of Detailed Scheduling and Planning includes inventory management, material requirements planning, capacity requirements planning, and procurement and supplier planning for both producing goods and providing services. Recognizing the importance of supply chain management, this module also covers deployment of supply chain strategies. The emphasis is on applied- and higher-thinking questions. Inventory planning concepts, policies, methodologies, and techniques determine partstocking levels, order quantities, safety stocks, forecasts, and handling and storage requirements. Material requirements planning (MRP) deals with the thousands of dependent demand parts and interrelationships that require planning at any given time; it also includes independent demand planning for service, matching supply with demand, managing demand at aggregate and disaggregate levels, and other parts not encompassed b y the master production schedule (MPS). MRP combines the following three principles: 1. calculation, as opposed to forecast, of dependent demand for component items 2. netting of requirements for all items 3. time phasing (that is, adding the dimension of timing to material requirements and status data). Capacity is defined as the ability to perform work to produce goods or provide services. Capacity requirements planning (CRP) provides a check that the material plan is achievable based on existing backlog and available capacity. Capacity management encompasses planning, establishing, measuring, monitoring, and adjusting levels of 16


capacity so that sufficient capacity is a vailable to execute the master schedule and related materials plan. CRP closes the loop based on the quantity and scheduled output from MRP. For providing services, uncertainty planning is also covered, including variability and capacity. Procurement and supplier planning encompass planning and evaluation activities that companies employ to qualify suppliers and establish effective communication channels. Emphasis is on defining mutual business needs, as well as defining the materials, information, product, process, and quality management and planning communications required of the ongoing business relationship. Detailed Scheduling and Planning translates product-level plans and schedules generated at the master planning level into requirements that can be procured or produced, in all types of environments, including process and service industries. This process supports the strategies and objectives established by the company, as constrained by lead time, cost, equipment, personnel, or other constraints. The subject matter therefore encompasses anything required to bridge the master planning area with the execution and control area of the CPIM body of knowledge. This is includes understanding the commonalities and differences between producing goods and providing services. Relevant strategy-level implications are also considered.

Detailed Scheduling and Planning Curriculum This table identifies the three major Detailed Scheduling and Planning subject areas. The percentages provide a guideline for study purposes. DIAGNOSTIC PART

MAIN TOPIC

PERCENTAGE OF EXAM

I

Planning Material Requirements to Support the Master Schedule

50%

II

Planning Operations to Support the Priority Plan

30%

III

Planning Procurement and External Sources of Supply

20%

Curriculum Outline I. Planning Material Requi rements to Support the Master Schedule This section addresses the techniques and practices for managing item-level inventories

within manufacturing and the distribution network. A. Recognizing Techniques and Practices of Inventory Management : This segment covers item-level techniques used within the detailed material planning process. These include the effect of inventory accounting decisions on material planning calculations, as well as financial management and accuracy. Cost objectives that apply to inventory are evaluated with respect to balancing the desired customer service level with inventory reduction techniques. Measures of inventory performance are assessed. 1. Types and classifications of inventory— such as raw materials; work in process; finished goods; maintenance, repair, and operating supplies; excess; surplus; inactive; obsolete; scrap; and hard and perishable inventory in service industries—are assessed from their different requirements and impacts on the planning processes. The scope includes the entire product life cycle, as well as different types of business environments, including lean manufacturing and services industries. 2. Order review methodologies such as MRP, reorder point, visual review and kanban/pull system triggers to MRP are assessed with regard to different types of inventory and inventory strategies. This applies to both manual and computerized processes. 3. Lot-sizing techniques, including the effect of order quantity constraints, are assessed as they apply to different types of production and service environments in support of inventory investment strategies. 4. Safety stock techniques are assessed as they apply to different types of inventory in support of customer service objectives. 5. Inventory valuation such as first in, first out (FIFO), last in, first out (LIFO), transfer, standard and actual cost, and project and process cost, are assessed as they affect inventory investment and related replenishment and justification decisions in various types of business environments. 6. Inventory accuracy methodologies such as cycle counting, physical inventory, and use of dedicated containerization are assessed as alternatives for improving and sustaining part count and inventory investment accuracy.

7. Inventory policies related to stocking level, customer service and inventory accuracy targets, trade-offs, and emphasis in different types of business environments are assessed. 8. Dependent and independent demand are assessed as they relate to types of inventory and sources of demand. This includes demand planning for services at aggregate and disaggregate levels. 9. Inventory performance such as inventory turns, customer service, lean techniques, inventory accuracy, and others are assessed as they relate to higher-level business metrics. 10. Inventory management in services industries, including hard and perishable inventories. B. Identifying Information Used in the Material Planning Process: This section describes the inputs used in calculating requirements for inventory items and their importance to the detailed material planning process. Item master data include information used for planning time-phased requirements and product costing. Bills of material define the parent/component relationships and data used by detailed material planning processes to determine requirements for replenishing inventory. Effective management of engineering changes, open order status, and master schedules are critical to the effectiveness of the process. 1. Inventory data describe parts, define current usage rates and stock balances, and track historical demand as required to support the policies, methodologies, and techniques of the material planning process. 2. Master schedule data describe types, quantities, sources, priorities, and timephasing of product demand generated as a result of the master planning process as required to initiate part-level planning. 3. Engineering data describe the product structure and production routings related to part interdependencies, quantities, and lead times as required for the aggregate planning, ordering, safety stock, and engineering change processes. 4. Data accuracy, timeliness, and completeness are assessed as they affect material planning decisions in different types of environments. C. Identifying the Desirable Characteristics of the Detailed Material Planning Process : This section addresses those Detailed Scheduling and Planning

17

characteristics that enhance capabilities of the users to plan and control system output. Traceability of the sources of demand is useful in evaluating the impact of system action messages. Safety policies are used to recognize the impact of uncertainty on the planning process. 1. Design characteristics address the required and desirable features and functions that facilitate material planning, establish requirements traceability through pegging relationships, and support other decision functions and productivity measures based on the type of environment. 2. Performance characteristics address the speed with which changes to the material plan can be assessed and alternative courses of action generated and evaluated for feasibility. 3. Operational characteristics address the ease of use, types of operator actions, related system and process features, and requirements for education and training. D. Mechanics of the Detailed Material Planning Process: This section addresses the use of planning data as the basis for performing the gross-to-net calculations by exploding bills of material to calculate the time-phasing of inventory requirements. The requirements are exploded level by level, accounting for order quantity, safety stock, and allocations at each level. 1. Initializing data accounts for inventory already allocated to requirements, establishing available stock balances and scheduled receipts, and establishing safety stock availability, kanban quantity, cycle times, or the need for replenishment. 2. The explosion process addresses the mechanics of the gross-to-net dependent demand aggregation process. This can be via MRP, order configurators, or other means, in conjunction with various ordering and safety stock techniques. 3. Generating time-phased requirements creates a material plan that supports the company’s and supplier’s needs for longer-range planning and shorterrange tactical information. This is in terms of firm-planned, planned, and released orders at each bill of material level and part. In a lean enterprise pull systems are then integrated with ERP/MRP systems. 18


E. Maintaining the Validity of the Material Plan: This section describes how the output from the process recommends the placement of supply orders. It also includes making recommendations to replan open supply orders to maintain the validity of order priorities. The effects of planning parameters upon the process are identified. 1. Maintaining priorities accounts for the effect of changing demand priorities on inventory allocation and replenishment order timing. 2. Replanning accounts for demand/supply mismatches through a process of bottom-up replanning, expediting, and de-expediting. This includes related actions that resynchronize the material plan with the current material requirements. 3. Revising planning parameters addresses the options of revising the lead time, lot size, safety stock quantity, kanban quantity, cycle times and related parameters to reflect current conditions and company strategy. 4. What-if analysis and modeling address the tools, methodologies, and techniques planners use to evaluate viable alternatives within the constraints of the material plan for producing goods, and within the scheduling and queuing constraints for providing services Interactions with Other Systems (i.e., F. closing the loop) : This section identifies the interrelationships between this process and other planning and control subsystems. The master schedule or actual customer orders drive the detailed material planning process. Output from the process provides input to purchasing and production control to release supply orders and control open orders. Capacity planning is used to verify capacity availability, which enables the planner to balance projected loads with planned available capacity for producing goods and providing services 1. Business planning interactions close the demand/supply loop with the master planning, final assembly, and configuration processes to ensure that material availability matches demand quantities, timing, and priorities. In a services business, this includes matching supply with demand. 2. Detailed scheduling and planning internal interactions close the material/capacity loop with the capacity planning process to ensure that self-

manufactured materials and parts will be available in the required quantities and at the required time, and that services will be provided as and when they are required 3. Execution and control interactions close the material/supply loop with the purchasing processes to ensure that purchased materials and parts will be available in the required quantities and at the required time. Material planning/capacity processes are integrated with customer demand, takt time and pull systems to align shop floor activity and WIP with planning and scheduling systems. References: 1; 2; 3 (chapters 4, 9-11); 5 (chapters 13, 14); 7 (chapters 2-5, 8, 9)

II. Planning Operations to Suppor t the Priorit y Plan This section addresses the approaches for balancing the material plans with available internal resources and supporting activities. It addresses the mechanics and application of capacity requirements planning, constraint management, and line and flow balancing. A. Recognizing the Characteristics and Techniques of the Detailed Capacity Planning Process: This section addresses

the approaches for applying the process within different production and services environments. The system design specifications and techniques applicable to balancing capacity with demand and timing availability with due dates are identified. Techniques such as infinite and finite capacity planning, constraint-based finite schedulers and optimizers, load balancing for scheduling manufacturing operations, and establishing projected load on manufacturing resources are described. The segment gives attention to flow production and process trains by addressing process flow scheduling. Also covered is uncertainty planning for services, including variability and capacity. B. Identifying Information Used in the Detailed Capacity Planning Process : This section addresses the use of work center and routing data to schedule orders and establish resource load by time period. Efficiency and utilization are used to determine the rated capacity of each work center. The use of the material requirements plan to establish release and required dates for open and planned

manufacturing orders that provide the basis of projecting resource load by time period are described. The impact of unplanned work and quality problems on resources is identified. Also included are scheduling, queuing, and throughput management in service industries. 1. Capacity definition and availability, as defined in terms of theoretical, demonstrated, and rated, and as qualified by efficiency and utilization factors, are assessed in different types of environments. 2. Sources of load, as they relate to planned and released orders, repetitive schedules, mill schedules, work in process, level of rework, effect of scrap, and effect of backlog, are assessed. 3. Definitions of process flows such as routings, production models, and process trains provide the sequence and interdependencies of production operations as they relate to capacity and material timing. 4. Impacts of rework, scrap, and quality on capacity management are assessed with respect to how scheduling and capacity can be affected by anomaly or industry-specific conditions such as byproducts and recycled materials. C. Identifying Techniques of the Detailed Capacity Planning Process : This section presents algorithms, simulation, and modeling techniques that affect scheduling and loading of manufacturing resources. This section also covers how to apply manufacturing concepts and techniques to increase productivity in service industries. 1. Simulation and modeling techniques enable a variety of scheduling and loading conditions to be assessed with respect to the type of production processes experienced in various environments. 2. Scheduling manufacturing operations provides the feedback to material planning required for synchronizing order releases with available capacity. 3. Scheduling logistics operations provides the feedback to purchasing required for synchronizing order receipts with material requirements. 4. Planning and scheduling horizons provide the degree of forward planning required to optimally or level-load operations, and plan for capacity reductions or increases as required to support the volume of business and customer service targets. Detailed Scheduling and Planning

19

5. Queuing, sequencing, and scheduling techniques provide insight into scheduling principles, mechanics, issues, and limitations of capacity planning. 6. Infinite and finite loading techniques have different impacts on order releases with available capacity. Finite loading techniques and algorithms begin those used for advanced planning and scheduling. Finite loading algorithms help in understanding the important sequencing rules. D. Uses of the Detailed Capacity Planning Process: This section identifies the basis for adjusting the levels of capacity or load to achieve scheduled required dates. The use of safety capacity to compensate for unplanned work is addressed. Tooling requirements are scheduled to assure availability at time of need. Managing capacity is an important prerequisite for successful operations planning and controls systems. 1. Impacts of capacity management are assessed based on the level of detail required to produce effective load and priority plans, including the use of safety capacity in environments that must accommodate unplanned load variability. 2. Capacity planning outputs are assessed in different environments as they relate to formulating capacity plans, determining tooling requirements, and identifying overload and underload conditions. 3. Methods of balancing capacity and load are assessed in a variety of environments as they relate to rescheduling orders, splitting orders, changing capacity through workforce changes and subcontracting, and modifying order quantities and priorities. E. Measuring the Performance of the Detailed Capacity Planning Process : This section identifies opportunities to assure success of this process in achieving operational objectives. 1. Planned workload to available capacity measures the degree to which the capacity planning process has maintained the workload at or under the available capacity. 2. Past-due load measures the degree to which the capacity planning process and conditions such as subcontracting

20


and overtime have failed to support ontime performance. 3. Work in process measures the ability of the production processes to minimize work in process as a function of sales. F. Interactions with Other Systems: This section addresses how the detailed planning processes interact with the other operations planning, control, and related processes. 1. Business planning interactions close the demand/supply loop with the master planning, final assembly, and configuration processes to ensure that capacity availability matches or exceeds demand quantities, timing, and priorities. 2. Detailed operations-planning internal interactions close the material/ capacity loop with the material planning process to ensure that self-manufactured materials and parts will be available in the required quantities and at the required time. 3. Execution and control interactions close the capacity/supply loop with production processes to ensure that manufactured materials and parts will be available in the required quantities and at the required time. Pull systems are integrated with MRP/ERP systems, to align the shop floor activity and WIP with customer demand and takt time. References: 1; 2; 3 (chapters 5, 6, 14); 4; 7

III. Planning Procurement and External Sources of Supply This section addresses relationships with suppliers and the approaches to communicating requirements and schedules. A. Establishing Relationships with Suppliers: This section addresses the formation and definition of the mutual relationship. The focus is on the necessity of building trust and establishing contractual relationships in order to ensure a competitive advantage and continuous improvement. Moving from a supply chain strategy and vision to actual techniques used by businesses today will also be addressed. 1. A review of the principles of partnership with suppliers addresses the varying degrees of involvement and mutual commitment of people in the company and at the supplier. It considers strategic alliances at a business level, technical and commercial partnering at

a product level, and operational partnering at a part or material level. 2. Relationship choices are made on the basis of the company’s needs for single or multiple sources of supply. Related ramifications in the initial supplier selection, as well as such special services as vendor-managed inventories and on-site representation, are addressed. Additional supply chain links may exist, depending on the supply chain strategy, including retail, packaging and transportation companies. 3. Effective communication between the company and the supplier must take into account the ongoing or unique needs of the business relationship— specifically with regard to products, processes, and technologies. Principles and strategic elements of effective communication are addressed, as are such other considerations as language differences, high engineering content, commercial versus government interests, and support by information technologies. Data necessary for collaboration includes risks, supply chain inventories, and future demand. CPFR techniques can be used to formalize communication. B. Techniques and Concepts for Supplier Partnerships: This section explores the formal and informal elements of company/supplier interrelationships in different competitive environments and markets, and at different levels of cooperation and involvement. 1. Product development and production processes examine the value to companies and suppliers of mastering the process of simultaneous engineering and the logistics of timephased and coordinated production and delivery of goods and services. 2. Purchase order approaches consider the specific means of establishing a contract for the procurement and delivery of materials, parts, products, and services, as supported by the planning and execution systems. Alternative approaches such as kanban, JIT/lean, blanket orders, consignment, and special contracts are evaluated with respect to the company’s production process and operating philosophy. Techniques deployed by large retail companies with extensive supply chain needs are

included, including SRM principles and activities, demand forecasting, direct shipment, RFID and e-commerce. Strategies and techniques of outsourcing will also be covered. 3. Delivery approaches examine alternatives used by companies to shorten lead time and minimize their delivery costs to the line. This includes normal and expediting procedures, batch size and packing, third-party logistics, cross-docking, and point-ofuse and point-of-fit delivery. 4. Company billing processes address alternatives and concepts that relate to accounts receivable and accounts payable. Representative contracts consider free on board (FOB) point, payment timing, holdback percentages, methods of payment, penalties for late payment, and so on. 5. The supplier rating system definition encompasses the definition of supplier evaluation and performance requirements via quantitative methods, as supported by the company through on-time and clearly defined demand. C. Implementing the New Relationship to Support the Company’s Operational Objectives: This section addresses the

need to examine the quality of the supplier partnership process. This includes any related supplier or company training requirements, with special emphasis on modifications and continuous improvement. 1. Planning techniques encompass procurement planning, new product introduction, and engineering change control as they relate to the effective management of the company’s inventory investment, acceleration of the supply chain and the total cost relationship with suppliers. 2. Information used in the procurement process is key to achieving the goals defined for the company/supplier relationship. The tools necessary for effective information exchange are surveyed. There is a special emphasis on information technologies and whether the two firms interact in the most effective and flexible mode for information exchange. Certain obstacles must be overcome, including: responsibility and accountability of all partners, any migration to new technology required, quality and availability of data to be shared, relationship management issues, and Detailed Scheduling and Planning

21

decision-making procedures, such as delivery timelines, quality targets, and performance metrics. 3. Supplier and company-related training addresses the need to provide training and education in the areas of product design, quality, production processes, related technologies, and delivery and accounting processes. 4. Supply chain partnerships bring many benefits to all parties. Some of these benefits include: Reducing inventory while reducing stockouts. improved customer service through customer focus and responsiveness, B2B and Ecommerce capabilities, improved visibility and value-chain forecasting, cost reductions, damage and loss prevention, elimination of redundant supply chain assets and processes, customer and marketplace insight, access to or penetration of new markets, reducing time to market, streamlined management of order fulfillment, and shorter overall lead times

C Calculated capacity Capacity available Capacity control Central point scheduling Collaborative Planning, Forecasting and Replenishment (CPFR)

D Decentralized inventory control Decoupling inventory Decoupling points Dedicated capacity Dedicated line Drum-buffer-rope (DBR)

E Effectivity date Engineer-to-order Excess capacity

F First in, first out (FIFO) Flexibility Forward flow scheduling

G Gateway work center

I Idle capacity Idle time Inventory accounting Inventory buffer Inventory investment Inventory policy

References: 1; 2; 3 (chapter 7); 5 (chapter 13); 6, 7

Key Terminolog y An understanding of the following list of terms is recommended. The list is intended to be thorough, but not exhaustive. The candidate is also expected to be familiar with the definitions of terms identified in the curriculum outline and those definitions found in the Key Terminology for Basics of Supply Chain Management. A review of the list and study of the topics in the outline may reveal other important terms. Definitions of these terms can be found in the APICS Dictionary, 12th edition, or in the references listed in the bibliography.

J Joint replenishment

L Last in, first out (LIFO) Load profile Load projection Lot sizing Lot splitting Low-level code

M Machine center Machine hours Machine loading Manufacturing order Material-dominated scheduling Min-max system Mixed-flow scheduling

A Action message Activation Advanced Planning and Scheduling Allocation Alternate routing Availability Available time

B Budgeted capacity Buffer management Buffer stock Business-to-business commerce (B2B) By-product

22


O Operations sequencing Order policy

P Period order quantity Perpetual inventory Phantom bill of materials Planned load Probable scheduling

Process flow scheduling Process manufacturing Processor-dominated scheduling Process train Productive capacity Protective capacity

S Safety capacity Safety lead time Scheduled load Scrap Semifinished goods Setup time Shelf life Shrinkage

Q Quantity discount Queue time

R

T Rescheduling Rework Risk pooling

Target inventory level Theoretical capacity

Y Yield

MRP Grid Many valid variations are used to display the MRP time-phased data. The following chart is the abbreviated grid that is sometimes used in texts and work problems.

The MRP Grid Technique

Order Quantity Safety Stock Allocated Quantity Low Level Code Lead Time

x

50 8 5 3

Gross Requirements Scheduled Receipts Projected Available Net Requi rements Planned Order Receipts Planned Order Releases

PERIODS

140

1

2

3

4

5

6

7

8

40

10

50

50

20

30

40

95

85

30 50 105

55

55 3 50

35

Bibliography All test candidates should familiarize themselves with the following primary references for this examination. The additional references provide further coverage of some of the topic areas and can enhance candidates’ understanding of the body of knowledge. Those concepts and subjects covered by the additional references, limited to the scope of the curriculum outline, are a part of the APICS body of knowledge and are subject to examination questions. Also, candidates who have not yet passed the suggested first module—Basics of Supply Chain Management—should familiarize themselves with the basic concepts of materials management presented in Introduction to Materials

50 Management. All of these references are available

from the APICS Bookstore.

Primary References 1. APICS CPIM Detailed Scheduling a nd Planning Reprints, October 2001. 2. APICS Dictionary, 12th ed., 2008. 3. Arnold, J.R. Tony and S.N. Chapman, Introduction to Materials Management, 6th ed., Prentice Hall, 2008. 4. Blackstone, J.H. Jr., Capacity Management, South-Western Publishing Co., 2002. 5. George, Michael, Lean Six Sigma: Combining Six Sigma Quality with Lean Production Speed,

McGraw-Hill, 2002.

Detailed Scheduling and Planning

23

6. Simchi-Levi, D., P. Kaminsky, and E. SimchiLevi, Designing and Managing the Supply Chain, 3rd ed., McGraw-Hill, 2008.

Additi onal References 7. Vollmann, T.E., W.L. Berry, D.C. Whybark, and F.R. Jacobs, Manufacturing Planning and Control Systems for Supply Chain Management, 5th ed., McGraw-Hill, 2005.

Sample Questions Following are eight questions that are similar in format and content to the questions on the exam. These questions are intended for practice—that is, to enable you to become familiar with the way the questions are asked. The degree of success that you have in answering these questions is not related to your potential for success on the actual exam and should not be interpreted as such. Read each question, select an answer, and check your response with the explanation on page 42. 1. Service level = Number of stockouts 1 Number of replenishment cycles −

___________________________________ _____________________________ ______________________________ ____________________________ ___

The expression above is used to measure historical service levels in terms of a percentage for which of the following statistical control procedures?

24


(A) (B) (C) (D)

line items shipped on time total quantity filled orders filled complete ordering periods not out-of-stock

2. An organization using time-phased requirements planning has the following net requirements for an item: WEEK

NET REQUIRED

2 5 7 11 Lead Time Unit Cost Setup Cost Carrying Cost

350 1,200 1,000 1,500 1 Week $1 $30 0.5% Per Week

If it is assumed that sufficient capacity is available in weeks 1 through 11 to order any amount in any period, which of the following is the most economical ordering plan? (A) Week 1 4 6 10 Order 350 1,200 1,000 1,500 (B) Week 1 6 Order 1,550 2,500 (C) Week 1 4 Order 350 3,700 (D) Week 1 4 10 Order 350 2,200 1,500

3. Lot Size: On Hand: Allocated: Safety Stock: Lead Time:

Lot-for-lot 500 0 0 4



PERIODS 1

x


500

2

3

4

5

100

300

200

400

100

6

7

8

400

The chart shows the gross requirements for an item in an MRP system. Stock on hand is 5 00, and there is nothing on order. The item has a lead time of four periods and is being ordered lot-for-lot. Which of the following would be the correct planned order release for the item? (A) 100 in Period 1, 400 in Period 3 (B) 100 in Period 4, 400 in Period 6 (C) 100 in Period 5, 400 in Period 7 (D) 500 in Period 5 4. Calculation of rated capacity of a work center includes consideration of which of the following? (A) efficiency and utilization (B) utilization, setup, and run time (C) utilization and available work time (D) efficiency, utilization, and available work time 5. All of the following are part of the CRP process EXCEPT (A) determining capacities of work centers (B) determining the planned order release (C) calculating load on each work center (D) comparing work center load and capacity 6. To create an effective customer-supplier partnership, we need to (A) establish stability in schedules that enable suppliers to react within their lead time (B) evaluate the suppliers based on price and then send the purchase order (C) establish a delivery schedule with a corresponding purchase order and send them to the suppliers

(D) establish a preventive maintenance program to avoid quality problems due to machine troubles 7. A drill press operates at 50 percent efficiency and 80 percent utilization. How many clock hours must be worked to produce 80 standard hours? (A) 32 (B) 100 (C) 160 (D) 200 8. Which of the following might the planner use to solve an overload problem? (A) multiple setups (B) alternate routings (C) infinite loading (D) adjust loading factors 9. Given the following purchase cost data for product Z: 100 @ $10 = $1,000 (December 28) 10 @ $11 = $110 (January 3) 10 @ $8 = $80 (January 10), Detailed Scheduling and Planning

25

if the company is using an annual standard costing method and 110 units were sold on January 11, the cost per unit for the sa le is: (A) $9.17 (B) $10.00 (C) $9.91 (D) $8.00

10. The major uses of the bills of material include all of the following except: (A) engineering change control (B) planning of assemblies and components (C) costing of the end product (D) preventive maintenance schedule (Answers listed on page 42.)

26


Execution and Control of Operations Effecti ve for January 1, 2008–December 31, 2008, Exams. EXAMINATION COMMITTEE

Jorge E. Calaf, CPIM, CIRM (Chair), Kingfisher Air Services, Inc. John M. Burnham, PE, Ph.D., CFPIM, Professor Emeritus Tennessee Technological University Carol Davis, CPIM Quentin K. Ford, CFPIM, Manufacturing Control Associates, Inc. Barry Griffin, Ph.D., CFPIM, Griffin Data Perspectives, Inc. Paul Schönsleben, Ph.D., Swiss Federal Institute of Technology ETH Zurich

Scope of the Subj ect Matter Please read the introductory materials in this manual for essential information pertaining to the examination. Execution and Control of Operations (ECO) encompasses the principles, practices, and the techniques to schedule, control, measure, and evaluate the effectiveness of operations. ECO provides feedback about how well plans are being executed and provides information for customers and suppliers about the status of work in process (WIP). The importance and emphasis of the principles, approaches, and techniques addressed are relative to the operations environment, the labor environment, and the physical organization of the facility, brought about through effective people management and leadership.

Executio n and Control of Operations Curricul um Three major subject areas define the discipline of Execution and Control of Operations. The relative importance of these topics will vary among industries, but the percentages given in the following table can be used as guidelines for study purposes.

DIAGNOSTIC PART

MAIN TOPIC

PERCENTAGE OF EXAM

I

Prioritizing and Sequencing Work to Be Performed

25%

II

Executing Plans, Implementing Physical Controls, and Reporting Results of Activities Performed

40%

III

Performance Reporting and Feedback

35%

Curriculum Outline I. Prioriti zing and Sequencing Work to Be Performed This section deals with interfaces for the planning and execution of operation activities. The focus will be on the techniques of scheduling, monitoring, and controlling operations in various environments and an understanding of how facility layout alternatives affect the operation’s scheduling approach and the execution of processes. A. Interfaces: This topic requires an understanding of the interfaces between execution systems and other key functional elements in a closed-loop system. These interfaces allow for input from upstream planning activities and outputs to the execution organization. They also provide paths for feedback of transactional data necessary to maintain valid schedules throughout the system. B. Operational Environment: Understanding how the organization’s environment supports the processes, products and/or services is an important aspect of execution and control of operations. Typical environments include lean, repetitive, intermittent, projects, remanufacturing, team-based groupings, and service. C. Understanding Schedule Development : This segment covers how plans are converted into operational tools that provide the execution organization with a timetable that includes suppliers and distribution. 1. Understanding schedule development requires knowledge about forward or backward scheduling, mixed model or rate-based scheduling, infinite versus finite capacity, preventive maintenance, and how material,


27

labor, processes, or projects are scheduled. 2. Management of the schedule is essential throughout its execution. Queues and priorities need to be managed through effective use of input/output controls. Techniques such as lot splitting, overlapping, lot size, runtime, and reducing move/transit time may be used to maintain priorities, including equipment and labor elements. 3. Timely transactional feedback will enable adjustments to the schedule when applicable. References: 3 (chapters 1, 4-7, 9-10); 5 (chapters 2, 4-6, 8-9, 11); 6 (chapters 9-11, 13, 15-16, 18); 7 (chapters 1, 5-7); 8 (chapters 1, 13-14, 16, 18-19)

II. Executi ng the Plans, Implementing Controls, and Reporti ng Result s of Acti viti es Perform ed This section encompasses the application and control of internal and external resources to accomplish near-term plans. It also addresses implementing quality initiatives, continuous improvement plans, and physical control of inventories. An understanding of the different methods for authorizing and reporting work accomplished and resources consumed is outlined in this section. Knowledge of the approaches and techniques used to reduce or eliminate nonvalue-added activities within the ECO processes is required. A. Understanding the Operations of Push Systems: This section focuses on the methods for authorizing work and reporting work accomplished in a system where work is authorized by means of work orders and/or schedules. 1. Authorizing activities include processes that assess the material, labor and capacity availability, as well as the sequence, routing, and release of orders to work centers. 2. Execution activities include staging of materials and work in process throughout the supply chain. 3. Reporting activities include documentation and communication of the operation’s results, work in progress, work completed, parts scrapped, and items that have been, or need to be, reworked. 28


B. Understanding the Operations of Pull Systems: This section focuses on the methods for authorizing work and reporting work accomplished, when applied in a system where work is authorized by means of readily understood visual signals. An understanding of lean methodology is necessary. 1. Visual techniques are used to authorize the movement and/or production of materials or the provision of service. 2. Understanding what execution activities are required in a pull system as well as the effect on work in process is necessary to determine the number and character of visual signals. 3. Understanding the reporting activities in a pull system is essential, and may include visual elements or information relating to corrective action, scrap, rework, order completion, and/or shipments. C. Communicating Internal Information consists of transaction reporting or collecting data at a count point for scheduling, finance, engineering, quality, and other internal users. D. Communicating External CustomerSupplier Information focuses on the methods of sharing information throughout the supply chain from the supplier’s supplier to the customer’s customer. E. Material Flow and Location: This section deals with the methods of managing operations, inventory and material flow to achieve the goals of the organization. Recognition and understanding of the environment is required. 1. Material location and flow concerns include containerization, point of use or manufacture, and material handling. 2. Material flow and movement is dependent upon the environment and can be different in push or pull environments. F. Quality Initiatives, Eliminating Waste, and Implementing Continuous Improvement Plans requires an understanding of the

philosophies, approaches, concepts, and practices of quality management and lean concepts. 1. Quality initiatives include process improvement tools that help to obtain Six-Sigma process reliability,

capability, and standardization. Included in the set of process improvement tools are statistical tools that diagnose chronic and sporadic problems alike, as well as managerial tools useful for small group improvement activities. 2. The practice of continuous improvement and waste elimination includes improved housekeeping and workplace organization, paperwork and transactions reductions. Timely problem resolution at the point of occurrence is fundamental to this process. Lead-time, lot size, move time, and throughput time reductions are additional benefits. References: 3 (chapters 5, 7, 10); 4 (chapters 1, 3, 5-6, 8-11, 16); 5 (chapters 1, 3-12, 14); 6 (chapters 5, 9, 11, 13, 15-17, 19); 7 (chapters 4-7); 8 (chapters 9, 14, 17-18)

III. Performance Reporting and Feedback This section requires an understanding of the approaches and techniques used to evaluate performance and collect data for effective feedback. The structure of data collection and concepts of analysis are defined, along with commonly used techniques to evaluate an operation’s performance. Data captured enables comparison of performance to preset standards, past performance, objectives, goals, and actual results. Many levels of the organization use data to identify problems and initiate corrective action An understanding of specific evaluation criteria for operations, data collection techniques, analyses, and reporting methods is necessary. The ability to apply this knowledge results in timely recognition of the need for corrective action, in addition to the use of performance information for costing, budgeting, and calculating the impact of proposed changes throughout the organization. A. Quality Management Processes monitor and evaluate the effectiveness of quality management initiatives as well as continuous improvement efforts. Typical decisions resulting from the above can include changes in standards or tolerances, modifications to, or acquisition of machinery, improved methods or measurement approaches, material or supplier changes, and revised resource strategies.

1. Understanding the effects of process variation, whether the variation is special or common will determine the breadth, character, cost, and effectiveness of ensuing operational decisions. 2. Statistical process control seeks to diagnose and correct undesirable variation in processes through identification, updates, maintenance, or relevant data. 3. Process capability determines whether the variation in a process is sufficiently controlled in order to ensure that the process meets, and will continue to meet, quality and output objectives. Collection, maintenance, and updates of the relevant data is key. B. Measuring Supplier Performance: An understanding of the reporting requirements to support both the organization and supplier goals is necessary. 1. Specifications and standards are used to test the acceptable range of values of product and process variation. 2. Quality audits are an evaluation process that an organization or external qualifying body uses to decide whether supply chain partners can maintain process quality at levels sufficient to ensure final product quality, including delivery and aftermarket performance in addition to the basic unit. 3. Inspection of supplier product on receipt may not be required if supplier qualification has been achieved. If the supplier has not been qualified, sampling and full inspection are two of the techniques that may be employed. 4. Performance metrics to support operations are monitored and reported. C. Measuring Operations Performance: This section covers the collection and maintenance of data to support operational decisions. 1. Data sources and requirements are affected by the environment, and require an understanding of how to measure the results. 2. Performance reporting is vital to measure operations. D. Cost Management Process : Knowledge of the different costing methods and their Execution and Control of Operations

29

impacts on the organization is essential. An understanding of actual and standard costs is necessary, as well as the knowledge of causes of variances. Individuals and work groups need to understand how they are measured and how operational variables affect the costvolume-profit relationship. 1. Cost management and control of operations can be accomplished by a variety of methods. 2. Periodic audits and cost controls ensure that operations remain in compliance and variances are identified. References: 3 (chapters 1, 9, 12); 4 (chapters 2-3, 5, 8-11, 13-19, 22-23); 5 (chapters 1, 3-4, 8-14); 6 (chapters 4-5, 16-17); 7 (chapters 1, 4); 8 (chapters 5-6, 9, 17-18, 21); 9 (chapters 2-3, 7, 10-11)

Critical characteristics Critical path method Critical point backflush Critical ratio Critical-to-quality characteristics (CTQ)

D Decision matrix Delivery schedule Design for manufacture and assembly (DFMA) Design-measure-analyze-improve-control (DMAIC) Design of experiments (DOE) Direct costs Downtime Drum-buffer-rope (DBR)

E External setup time

F Failsafe techniques Failure mode effects analysis (FMEA) Feeder workstations Five why’s (5 Ws) Floor stocks Flowchart Flow control Flow rate Focused factory

Key Terminolog y An understanding of the following list of terms is recommended. The list is intended to be thorough, but not exhaustive. The candidate is also expected to be familiar with the definitions of terms identified in the curriculum outline and those definitions found in the Key Terminology for Basics of Supply Chain Management. A review of the list and study of the topics in the outline may reveal other important terms. Definitions of these terms can be found in the APICS Dictionary , 12th edition, or in the references listed in the bibliography.

G Gantt chart Gateway work center Green belt Group technology (GT)

H Histogram House of quality (HOQ) Hypothesis testing

A Acceptable quality level (AQL) Acceptance sampling Actual cost system Allocation Alternate operation Analysis of variation (ANOVA) Andon Anticipated delay report Assignable cause Attribute data Average outgoing quality limit (AOQL)

B Backflush costing Back scheduling Black belt Block scheduling

C Capability study Cause-and-effect diagram Certified supplier Common causes Count point 30


I Inbound stockpoint Indirect costs Internal setup time Interoperation time

K Kit

L Lean enterprise Lean metric Lean production Level schedule Linearity Line balancing Lot splitting Lot traceability

M Machine-limited capacity Manufacturing execution systems (MES) Master black belt Mixed-model production Move card

N

T Network planning Non-value-added

Throughput Time series Time standard Total quality control (TQC)

O One less at a time Operation due date Operation duration Operation/process yield Operations scheduling Operations sequencing Operation start date Order release Outbound stockpoint Overlapped schedule Overload

P Pareto analysis Plan-do-check-action (PDCA) Point-of-use delivery Point-of-use storage Post-deduct inventory transaction processing Pre-deduct inventory transaction processing Preventive maintenance Primary work center Process capability Process costing Production card Program evaluation and review technique (PERT) Project costing

Q Quality costs Queue time

R Random causes Rate-based scheduling Released order Rework

S Scheduled downtime Scheduling rules Scrap factor Setup time Shop packet Shortest processing time rule (SPT) Single-minute exchange of die (SMED) Supplier, Input, Process, Output, Customer (SIPOC) Slack time rule Special causes Specification Staging Standard containers Standard cost accounting system Statistical quality control (SQC) Stockless production Supplier scheduling Synchronized production

V Variable costing Visual control

W Workplace organization

Y Yield

Bibliography All test candidates should familiarize themselves with the following primary references for this examination. The additional references provide further coverage of some of the topic areas a nd can enhance candidates’ understanding of the body of knowledge. Those concepts and subjects covered by the additional references, limited to the scope of the curriculum outline, are a part of the APICS body of knowledge and are subject to examination questions. Also, candidates who have not yet passed the suggested first module— Basics of Supply Chain Management—should familiarize themselves with the basic concepts of materials management presented in Introduction to Materials Management. All of these references are available from the APICS Bookstore.

Primary References 1. APICS CPIM Execution and Cont rol of Operations Reprints, 2000. th 2. APICS Dictionary, 12 ed., 2008 3. Blackstone, J.H. Jr., Capacity Management, South-Western Publishing Co., 2002. 4. Gryna, F.M., Juran’s Quality Planning & Analysis for Enterprise Quality , 5th ed., McGraw-Hill, 2007. 5. Sandras, W.A., Just-in-Time: Making It Happen, John Wiley & Sons, 1989. 6. Vollmann, T.E., W.L. Berry, D.C. Whybark, and F.R. Jacobs, Manufacturing Planning and Control Systems for Supply Chain Management, 5th ed., McGraw-Hill, 2005.

Addi ti onal References 7. Feld, W.M., Lean Manufacturing: Tools, Techniques, and How to Use Them , St. Lucie Press, 2001. 8. Fogarty, D.W.N., J.H. Blackstone Jr., and T.R. Hoffmann, Production and Inventory Management, 2nd ed., South-Western Publishing Co., 1991. Execution and Control of Operations

31

9. Garrison, R.H., E.W. Noreen, and P.C. Brewer, Managerial Accounting, 11th ed., McGraw-Hill, 2004.

Sample Questions Following are 10 questions that are similar in format and content to the questions on the exam. These questions are intended for practice—that is, to enable you to become familiar with the way the questions are asked. The degree of success that you have in answering these questions is not related to your potential for success on the actual exam and should not be interpreted as such. Read each question, select an answer, and then check your response with the explanation on page 44. 1. Which of the following is the most viable approach to automating repetitive assembly processes? (A) simplify the processes prior to automation (B) concurrently establish visual inspection stations and automation implementation (C) implement automation throughout the processes simultaneously rather than work cell by work cell (D) apply automation to the final assembly processes first 2. Cause-and-effect analyses are made with the help of which of the following? (A) fishbone chart (B) statistical process control method (C) critical path method (D) Pareto analysis 3. Data collection using bar-code technology can provide which of the following? I. Ability to determine throughput time in real time II. Simplified data recording III. Increased data accuracy IV. Cost reductions (A) I and III only (B) I, II, and IV only (C) II, III, and IV only (D) I, II, III, and IV 4. Company X, a job shop, is a supplier to Company Y, which produces a product continuously. The companies agree to begin a Lean program to reduce lead times through all operations in both facilities. To implement the program, which of the following actions should be taken? I. Company X should reduce the shipment quantities to Company Y. 32


II. Company X should reduce its manufacturing lot size. III. Company Y should transfer the inspection procedure to Company X. (A) I only (B) II only (C) I and II only (D) I, II, and III 5. Part number 762-4521 is being processed as an order for a lot of 50 pieces due on day 200. The lot is currently in queue at Operation 3. The facility is currently running one eight-hour shift. Based on routing and status information for part number 762-4521 below, what is the priority for Operation 3 on day 195 calculated on the basis of slack time (in days) per remaining operation?

OPERATION

STANDARD HOURS PER PIECE

PIECES PRODUCED THROUGH DAY 195

1 2 3 4 5

0.05 0.15 0.10 0.20 0.02

51 50 0 0 0

(A) (B) (C) (D)

-3.70 0.58 1.00 3.00

6. Which of the following actions is most appropriate for resolving a capacity shortage at the initial or gateway work center that was detected during order release? (A) add a shift at the gateway work center (B) expedite in-process orders (C) hire additional staff for the work center (D) reschedule orders due for release 7. Which of the following is a significant factor in determining the level of work-in-process inventory when a pull system is employed? (A) number of open shop orders (B) quantity of parts represented by each signal (C) number of workstations in the process (D) takt time required for the process 8. A benefit of non-significant part numbers is: (A) one part number can be used for several similar items (B) they can include numbers and letters (C) responsibility can be assigned

(D) they support faster and more accurate entry by people 9. Capture of inventory transactions is (A) more accurate when done promptly (B) not required when using a bar-code system (C) best done by data entry clerks (D) more important for perishable stock

10. Which of the following would be used to take a group of information and organize it in a way that new trends or patterns of information are easily recognized? (A) run chart (B) cause-and-effect diagram (C) Pareto chart (D) flow chart (Answers listed on page 44)


33

Strategic Management of Resources Effecti ve for January 1, 2008–December 31, 2008, Exams. EXAMINATION COMMITTEE

Stephen Chapman, Ph.D., CFPIM (Chair), North Carolina State University Craig Gustin, Ph.D., CFPIM, CIRM, CSCP, CGR Management Consultants Frank Montabon, Ph.D., CPIM, CIRM, Iowa State University Rebecca Morgan, CPIM, Fulcrum ConsultingWorks, Inc. Andy Nourse, CPIM, BD Biosciences, Discovery Labware David Rivers, CFPIM, CIRM, CSCP, Axtin

Scope of the Subj ect Matter Please read the introductory material in this manual for essential information pertaining to the examination. The subject matter in the Strategic Management of Resources module includes higher-level thinking on strategic planning and implementation. This requires an understanding of how market requirements drive the resources and processes of all organizations. The strategic management of resources has the potential to dramatically increase any organization’s competitive position. Operations strategy is the foundation upon which operations planning and control decisions should be based. Strategic decision-making significantly affects the organization and often requires widespread changes. To contribute to this effort, it is important to understand how an organization develops its strategic goals, and how it configures its systems and technologies to address strategic objectives. This examination focuses on the relationship of existing and emerging systems and concepts to the strategy and the functions related to operations planning and control. Understanding how Strategic Management of Resources relates to the CPIM body of knowledge as defined b y the other CPIM modules is important.

34


While the curriculum outline provides an overview of the key concepts and subject matter, it is also important to have the ability to move from a modular view to an integrated systemic vie w of the CPIM body of knowledge. Effective strategic decision making requires an ability to understand the dynamic interrelationship of concepts, the nonlinear nature of complex systems, and an ability to see the long-term implication of decisions. By itself, this outline cannot s ufficiently capture these important aspects of the strategic decision-making process.

Strategic Management of Resourc es Curric ulum This table identifies the three major Strategic Management of Resources subject categories. The percentages provide a guideline for study purposes.

DIAGNOSTIC PART

MAIN TOPIC

PERCENTAGE OF EXAM

I

Aligning the Resources with the Strategic Plan

46%

II

Configuring and Integrating the Operating Processes to Support the Strategic Plan

23%

III

Monitoring Performance and Implementing Change

31%

Curriculum Outline I. Align ing the Resourc es with the Strategic Plan This area focuses on developing knowledge of those factors that can change an organization’s competitive position and understand distinctive competencies. This knowledge, matched with a clear understanding of the strategic environment, structure, and infrastructure, will enable organizations to more effectively align resources with the strategic plan to create a competitive advantage. A. Strategic Issues: In this section, a broad range of strategic issues is explored to set the stage for identifying the environment within which the operations professional must perform. An understanding of the factors that can change an organization’s competitive position is required. 1. The need for a company strategy— Understand the integration of processes with overall company objectives.

2. The strategic planning model— Identify and select strategic components. 3. The need for distinctive competencies—Understand how an organization can select and display distinctive competencies to support strategic objectives. B. Choices Affecting Operations Structure: This section focuses on the operational aspects of the strategic plan. Choices include an understanding of product decisions and product characteristics related to volume and variety. The structural choices governing operations strategy are also covered. Structural choices typically involve capital investments that are difficult to reverse. 1. Operations strategy introduction— Understand the concepts and purpose of an operations strategy. 2. Product and process decisions— Understand the effect of production volume and variety on the configuration of a factory. 3. Product life cycle—Recognize the interactions of product life cycle and operations strategy. 4. Structural decisions—Align operations strategy and the structural choices of organizational design, capacity strategies, facility decisions, and technology. Choices Affecting Operations C. Infrastructure : This section focuses on the operational aspects of the strategic plan. Choices include an understanding of the types of infrastructure decisions of operations systems configuration, workforce, and organizational development. Infrastructural choices are typically easier to reverse. 1. Infrastructure choices and productivity—Understand the impact of infrastructure choices on organizational productivity. 2. Workforce involvement—Understand the alignment of human resource policies and practices with strategies. 3. Organizational design—Understand the alignment of organizational design with strategies. 4. Quality systems—Understand how the quality tools and processes are used to implement the strategic choices. 5. Information systems—Understand how information systems influence and support operations strategy.

References: 1; 2; 3; 4; 5 (chapters 3-4); 6 (chapters 1, 2, 4, 6, 8-12, and supplement); 7 (chapters 1-7, 10); 8 (chapters 1-7); 9 (chapters 1-2); 10 (chapters 10-12)

II. Configuri ng and Integrating the Operating Processes to Suppo rt the Strategic Plan The elements that comprise the production and inventory management (P&IM) system must work in an integrated manner if the system is to operate effectively. It is important to understand the interrelationships between these elements and be able to analyze and configure P&IM systems for specific strategic and operational situations. A. Implementing the Strategic Plan: This section focuses on aligning operating processes with selected strategies to support the strategic business objectives. It addresses the fit of approaches and methods to specific strategic and operational situations and the alignment and integration with those strategies. 1. Operations management system— Understand the relationships between the operational management processes and the other business choices. 2. Operations management system configuration—Understand the characteristics of the operations management processes that are consistent with each position on the volume and variety matrix. 3. Supporting dimensions of competitive advantage—Understand how the characteristics of the operations planning and control process support each dimension of competitive advantage. 4. Supporting combinations for competitive advantage—Understand how processes can be combined to support specific combinations of volume and variety positions and dimensions of strategic advantage. B. Emerging Concepts and the Supply Chain: This section focuses on the linkages between the strategic plan, the structure of the organization’s supply chain, and how those structures are evolving. It addresses the fit of methods to specific strategic and operational situations as well as the alignment and integration with the other supply chain

Strategic Management of Resourc es

35

management processes and other emerging concepts. 1. Supply chain management and scope—Define the supply chain (design, planning, execution, control, and monitoring), and the value chain. 2. Global sourcing and outsourcing— Understand global sourcing, outsourcing, insourcing, and other supply chain management issues. 3. Technology and the supply chain— Recognize how the choices and development of information technology affect the supply chain. 4. Time-based competition—Understand how time-based competition and cycle-time reduction improve customer response time and provide competitive advantage. 5. Strategic implications and relationships of concepts such as lean, Just-in-Time (JIT), agile, theory of constraints (TOC), total quality management (TQM), and six sigma. 6. Value stream mapping—Recognize how value stream mapping provides prioritization for improvements in the value stream. C. Configuring and Integrating Design and Development and Cost Management Processes: This section focuses on two

sets of processes that are typically outside the scope of operations but influence the effectiveness of operations. Understanding the scope of the processes and the demands placed on them is important. Design and development employ a set of processes that extends from the initial investigation of a concept through the selection of concepts to implement and support the resulting products and processes through their life spans. Cost management processes support external reporting of financial results, asset valuation, operational control, and product costing. These processes capture, organize, and retain data used in making decisions that influence current operations and the future competitive position of the organization. 1. Design and development processes— Recognize tools that can be employed to improve these processes, understand how the processes can provide competitive advantage, and understand the management of product and process changes. 36


2. Cost management processes— Understand cost composition and its relationships with technology and process choices, cost accounting methods and their application, asset valuation methods and their application, and methods for financial settlement with customers and suppliers. References: 1; 2; 3; 6 (chapters 1, 6, 7, 10, 13, and supplement)

III. Monito ring Perform ance and Implementing Change Recognizing, understanding, and applying the methods used to implement change of various operational management systems is important. These systems of change are required to enable people to either continuously improve or revolutionize the processes in which they are involved. B y properly monitoring and measuring operations and taking appropriate action, cost, quality, cycle time, and related goals and objectives can be achieved. A. Project Management: This section focuses on the concepts, approaches, and methods for defining, selecting, and managing projects. It addresses the process of defining the current situation and the proposal for the target situation, justifying the proposal, and planning and controlling the project. It also addresses the approaches and techniques for evaluating proposed projects and selecting them for implementation. 1. The project evaluation and selection process—Understand the various methods of determining a project’s value and justifying the adoption of a project. 2. The project planning process— Understand the various items that make up a project plan, including a statement of work, work breakdown structure, project schedule, responsibility matrix, resource requirements, and budget. 3. The project implementation phase— Understand that this phase includes the selection of a project management structure, the project team formation, the scheduling of the work, team dynamics, and managing the schedule and budget. 4. The closeout phase—Understand that this phase includes documentation of

the project, a post-implementation audit, customer approval, closing the operations, and the final report. B. Measuring Organizational Performance: This section focuses on the various methods of developing, deploying, and evaluating measurement processes that are central to effective management and leadership of the organization. It addresses concepts that are fundamental to the effective use of measurement strategies and techniques of organizational performance, as well as the selection of measurements that are appropriate in the alignment of specific strategic and operational situations to the expected results. 1. Fundamental concepts of measurement—Identify why we measure what we measure. 2. Organizational measurements and the design of measurement systems—Understand appropriate measurements of the various functional areas such as manufacturing, finance, engineering, sales, marketing, and overall organizational performance. 3. Strategic implications of measurement—Understand that what we are measuring aligns with what we should measure and the performance of the organization matches the interpretations of the various performance measurements. C. Change Management : This section addresses the elements of successful organizational change and sound methodologies to gain management and employee commitment. The scope of change management begins at the point where the areas for change have been identified and extends through the institutionalization of the change. 1. Organizational change concepts— Recognize why organizations change, the phases of organizational change, and individual and group responses to change. 2. Change process—Understand the steps in successful organizational change and tools that can assist the organization in executing each step. 3. How to lead change—Recognize the differences between management and leadership and the roles of leaders in implementing organizational change.

4. Preparing employees for change— Recognize the tools that can help prepare employees for change and the ways to gain commitment to change efforts. References: 1; 2; 3; 4; 5 (chapters 1-2, 5-9, 11, 13); 6 (chapter 14 and supplement); 7 (chapters 8, 14); 9; 10 (chapters 1-9, 14)

Key Terminolog y An understanding of the following list of terms is recommended. The list is intended to be thorough, but not exhaustive. The candidate is also expected to be familiar with the definitions of terms identified in the curriculum outline. A r eview of the list and study of the topics in the outline may reveal other important terms. Definitions of these terms can be found in the APICS Dictionary , 12th edition, or in the references listed in the bibliography.

A Absorption costing Acceptance sampling Activity-based cost (ABC) accounting Activity-based management (ABM)

B Backward integration Baseline measures Benchmarking Benchmark measures Break-even chart Break-even point Bullwhip effect Business process reengineering (BPR)

C Capacity strategy Cash conversion cycle Cash-to-cash cycle time Competitive advantage Computer-aided design (CAD) Computer-aided engineering (CAE) Computer-aided manufacturing (CAM) Computer-assisted software engineering (CASE) Computer-integrated manufacturing (CIM) Concurrent engineering Continuous manufacturing Core competencies Core process Corporate culture Critical chain Critical path method (CPM)

D Database management system Decision support system (DSS) Strategic Management of Resourc es

37

Delivery lead time Depreciation Design for manufacturability Discounted cash flow

Project costing Prototyping

Q Quality costs Quality function deployment (QFD)

E Economic value added Enterprise resources planning (ERP) Expert system

R

Flexibility Focused factory Forward integration

S

Residual income Return on investment (ROI)

F

Strategic drivers Sunk cost Surge capacity Synchronized production Systems thinking

G Gantt chart Generally accepted accounting principles (GAAP) Global measures Group technology (GT)

H House of quality (HOQ) Hurdle rate

I

Theory of constraints accounting

V Value chain Value stream Variable costing Vertical integration Voice of the customer (VOC)

Information system architecture Internal rate of return ISO 9000 series standards ISO 14000 series standards

Supplemental Glossary

Job enlargement Job enrichment

The following concept, not found in the APICS Dictionary, will be helpful in preparing for the Strategic Management of Resources examination.

Knowledge-based system

Insourcing: A strategic decision to utilize internal

J K L Lean enterprise Learning curve Learning organization Life-cycle costing Local measures

N Net present value Network planning

O Operations strategy

P Participative design/engineering Participative management Payback Performance measure Pilot test Preventive maintenance Process capability Process control Process costing Process focus Product focus Product profiling Program evaluation and review technique (PERT) 38

T


(in-house) rather than external processes or resources.

Bibliography All test candidates should familiarize themselves with the following primary references for this examination. The additional references provide further coverage of some of the topic areas a nd can enhance candidates’ understanding of the body of knowledge. Those concepts and subjects covered by the additional references, limited to the scope of the curriculum outline, are a part of the APICS body of knowledge and are subject to examination questions. Also, candidates who have not yet passed the suggested first module— Basics of Supply Chain Management—should familiarize themselves with the basic concepts of materials management presented in Introduction to Materials Management. All of these references are available from the APICS Bookstore.

Primary References 1. APICS CPIM Strategic Management of Resources Reprints, July 2005.

2. APICS Dictionary, 12th ed., 2008. 3. Garrison, R.H., E.W. Noreen, and P.C. Brewer, Managerial Accounting, 12th ed., Irwin/McGraw-Hill, 2007. 4. Harvard Business Review: Strategic Management of Resources Readings , 2000. 5. Meredith, J.R., and S.J. Mantel Jr., Project Management: A Managerial Approach, 5th ed., John Wiley & Sons, Inc., 2003. 6. Slack, N., and M. Lewis, Operations Strategy with APICS Special Edition Supplement, Prentice Hall, 2003.

Additi onal References 7. Evans, J.R., and W.M. Lindsay, The Management and Control of Quality, 6th ed., South-Western Publishing Co., 2004. 8. Hayes, R.H., G. Pisano, D. Upton, and S.C. Wheelwright, Pursuing the Competitive Edge, John Wiley & Sons, 2005. 9. Project Management Institute Standards Committee: A Guide to the Project Management Body of Knowledge, PMI, 2000. 10. Senge, P.M., The Dance of Change , Currency

Doubleday, 1999.

Sample Questions The following ten questions are similar in format and content to the questions on the exam. These questions are intended for practice—that is, to enable you to become familiar with the way the questions are asked. The degree of success that you have in answering these questions is not related to your potential for success on the actual exam and should not be interpreted as such. Read each question, select an answer, and check your response with the explanation on page 45. Questions 1 through 4 are based on the following information: Barnyard Plows is a multinational manufacturer of farm implements. Using its own dealer network, it sells “anything you can drag behind a tractor” in the mature, competitive farm implement aftermarket. The firm has decided to centralize its operations in Belgium. Each of the current plants in France, Germany, Switzerland, Italy, and Sweden will be converted from manufacturing many end products and components to manufacturing high volumes of only a subset of the components. Final assembly of all end products will be done in Belgium, but without dedicated assembly lines. In addition, the

product line will be standardized, eliminating older, unprofitable products and reducing the number of variations in the remaining products. Marketing believes that the standard product line will cover 95 percent of the market’s needs (anything you can drag behind a tractor). 1. The changes in manufacturing are being made to address which of the following orderwinning criteria? (A) quality conformance (B) price/cost (C) delivery reliability (D) flexibility 2. Which of the following types of manufacturing processes is being implemented at the component manufacturing locations? (A) jobbing (B) batch (C) line (D) continuous 3. The firm currently has an excellent closedloop MRP II system and is implementing Justin-Time (JIT) in all the component plants. Which of the following activities is LEAST appropriate for the component plants? (A) workplace organization (B) quality programs (C) pull systems (D) work order control 4. At the assembly plant in Belgium, all of the following techniques are appropriate EXCEPT (A) sales and operations planning (B) mixed-model scheduling (C) forward integration (D) resource requirements planning 5. In which of the following areas can manufacturing contribute the most to the product development process? (A) product demand forecasting (B) manufacturing process innovation (C) bill of material structuring (D) product technology selection 6. The selection of a flexible manufacturing system (FMS) should be considered only when (A) a high level of reactive control has been established by plant personnel (B) a high level of responsiveness to product mix and feature changes is required (C) the number of parts assigned for production can be reduced to a small number Strategic Management of Resourc es

39

(D) the savings in manufacturing costs exceed the cost of the new system 7. In an engineer-to-order company, which of the following is essential to the successful implementation of rough-cut capacity planning? I. Education of system users and management in capacity management concepts II. Successful implementation of a material requirements planning system III. Accurate work-in-process inventory and job routing data IV. A method of associating planned production with the amount of capacity available (A) (B) (C) (D)

I and III only I and IV only II and IV only I, II, and III only

8. The key advantages to be gained from group technology are (A) reduced lead times and lower work-inprocess inventory (B) increased flexibility in scheduling and more reliable customer service (C) reduced machine run times and more reliable customer deliveries (D) faster introductions of new products and improved product quality

40


9. When considering the adoption of new manufacturing technology, a firm should take the following actions. What is the most effective sequence of the following actions? I. Prepare a requirements definition. II. Study the technology in a similar environment. III. Get input from workers in the current process. (A) I, II, III (B) II, III, I (C) III, I, II (D) III, II, I 10. Which of the following measures properly considers the financial impact of subcontracting a family of parts that are currently being fabricated? (A) benchmarking (B) direct labor efficiency (C) baselining (D) total factor productivity (Answers listed on page 45.)

Answers to Sample Questions Note: References to the curricu lum out line appear in parentheses.

Basics of Supply Chain Management 1. D (IE) An effective supplier/customer partnership is based on a mutual commitment to produce a profitable product that meets market demand. This includes sharing problem-solving activities to ensure that the product is delivered. (A) is incorrect because the customer’s requests may not be profitable or possible for the supplier to meet. (B) is incorrect because the supplier may be able to make the part less expensively and/or of higher quality than can the customer. (C) is incorrect because EDI does not ensure feasible schedules for either the customer or the supplier. 2. A (IIB) An order winner is defined as a product characteristic that causes customers to choose the product over that of a competitor. (B) is incorrect because it does not suggest that the product characteristic leads to success in the market. (C) and (D) are incorrect because they refer to profitability and sales dollar volume rather than to the specific characteristics of the product that lead to an individual sale. 3. A (IID) The primary purpose of forecasting is projecting product demand. Three of the secondary uses of forecasting are (B) in estimating safety stock, (C) in determining resource requirements, and (D) in loading the master production schedule. 4. D (IIIC) The production plan is used to determine rates of production for product families. (A) is incorrect because customer service level depends on the availability of a specific product for a customer on a specific requested delivery date. (B) is incorrect because gross sales volumes are estimated during business planning, not during production planning. (C) is incorrect because the production plan is established from the business plan, not vice versa. 5. B (IIID) Available-to-promise quantities are used during order promising to commit master schedule product to individual customer orders. (A) is incorrect because the projected available balance is used by the master scheduler to balance total demand (including

6.

7.

8.

9.

10.

forecast) with the master schedule supply. (C) is incorrect because safety stock is inventory maintained to protect against fluctuations in demand or supply and is not necessarily a part of order promising. (D) is incorrect because forecast demand may be used to plan the master schedule; however, order promises are based on the existing master schedule. A (IIID) Through employee empowerment, statistical process control of an established stable process should be monitored by the individuals directly performing this process. (B), (C), and (D) are inappropriate answers because these individuals oversee production but do not directly perform the operations. C (IVA) Safety stock is used to protect against variations in supply and/or demand. (A) is incorrect because cycle stock is consumed by demand and replenished through replenishment orders. It is the inventory carried to cover expected demand. (B) is incorrect because “common stock” is a financial term for ownership in a company. (D) is incorrect because seasonal stock is inventory built up to smooth production in anticipation of a peak seasonal demand. D (IVA) Dependent demand items are raw materials, component parts, and subassemblies. The demand for these items is calculated (through the bill of material) based on the demand for their parent items. (A) is incorrect because finished goods represent independent demand. (B) is incorrect because service part demand is not necessarily dependent on a parent demand. (C) is incorrect because price sensitivity of a product is not a factor in the dependent demand concept. D (IIID) In backward scheduling, the due date is initially used to calculate the schedule. The early start date (A) and the late start date (B) represent actual results achieved during production. (C) is derived by scheduling backward from the due date, using replenishment lead time. B (IIIC) The bill of material is used during MRP to guide the explosion process, thereby calculating gross requirements for components. (A) is incorrect because the net requirements calculation depends on existing replenishment orders for the components. (C) is incorrect because guiding the assembly process is not part of the MRP calculation. (D) is incorrect because the bill of material does not specify lot-sizing information. This is generally carried on the item master.

An sw ers to Samp le Ques ti on s

41

Master Planning of Resou rces 1. A (IA) Demand management is the function of recognizing and managing all of the demands for products to ensure that the master scheduler is aware of them. Generally, dependent demands are managed through material requirements planning. The other demands listed are independent demands, and these fall within the function of demand management. 2. B (IIIB) The master schedule is a plan of future production and drives the rough-cut capacity plan. The production plan is used as a basis for the master schedule, rather than the master schedule being used as a basis for the production plan. 3. A (IID) Producing exactly to demand will maximize capacity requirements. Capacity will be required to meet the highest demand levels, yet this capacity (including machine time) will go unused when the demand is low. Costs will be high due to low utilization of capacity. However, producing exactly to demand will minimize average inventory, because the inventory level will not rise during slack periods. 4. B (IIID) ATP for period 4 is the MPS of 30 for that period, less the customer orders of 6 for that period. Because another MPS of 30 will occur in Period 5, demand for that period is not considered by the ATP for period 4. 5. B (IIID) PAB for period 5 uses the greater of customer orders or forecast since it is after the demand time fence. The prior period PAB of 35, plus the MPS of 30, less the orders of 30, results in a PAB of 35 for period 5. 6. B (IIIC4) Pegging ties source of supply and demand, thus allowing a manufacturing reschedule to be tacked to the customer order affected by change. 7. D (IB) A higher value for alpha is used when one wants the forecast to be more responsive to recent actual demand values. 8. B (IC) While many traditional measurements were financially based, proactive metrics should consider a much wider scope than simply financial performance. 9. B (IIA) The capacity requirements plan is created after both S&OP and master scheduling are complete. 10. A (IIC) The production plan, an output of the S&OP process, specifies the overall manufacturing output level to be produced, usually as a monthly rate for each product family.

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Detailed Scheduling and Planning 1. D (IE) The percentages of line items shipped on time (A), of the total quantit y filled (B), and order filled complete (C) are all wrong because the formula does not include any of these statistics. The formula (D) includes the number of stockouts that have occurred during some number of replenishment cycles (i.e., lead times). One minus the proportion of replenishment cycles in which a stockout occurs is the percentage of ordering periods not out-of-stock, i.e., service level. 2. D (IA) Total Cost = Setup Cost + Carryi ng Cost Setup Cost = Number of Setups × Cost per Setup Carryi ng Cost = Units × Unit Cost × Number of Period s × Carryi ng Cost per Period The costs are calculated as follows :

A. Setup Cost = $120 = $30 × 4 Carrying Cost = $0 Total Cost = $120 B. Setup Cost = $60 = $30 × 2 Carrying Cost = $48 = (1,200 × $1 x 3 × .005) + (1,500 × $1 x 4 × .005) Total Cost = $108 C. Setup Cost = $60 = $30 × 2 Carrying Cost = $55 = (1,000 × $1 × 2 × .005) + (1,500 × $1 × 6 × .005) Total Cost = $115 D. Setup Cost = $90 = $30 × 3 Carrying Cost = $10 = (1,000 × $1 × 2 × .005) Total Cost = $100

3. A

(ID)

Lot Size: On Hand: Allocated: Safety Stock: Lead Time:

Lot-for-Lot 500 0 0 4



PERIODS 1

x


500

100

2

3

4

5

6

7

100

300

200

400

400

100 100 100

400 400

8

400

------------------------------------------------------------------------------------------------------------------------------------------------

4. D (IIB) Setup and run time are used to calculate required capacity. The rated capacity = time available × efficiency × utilization. 5. B (ID) The scheduled receipts and planned orders receipts are inputs to CRP. The planned order release is used in the MRP explosion. 6. A (IIIA) Partnerships require a commitment to stability within the agreed-upon response parameters. (B) and (C) are short-term and tactical in nature. (D) is really something that needs to be done without any regard to partnering. 7. D (IIB) Standard hours = (clock hours) × (utilization × efficiency). Therefore, clock hours = (standard hours)/(utilization × efficiency) = 80/(0.80 × 0.50) = 200 hours. (A) is incorrect because 32 = (standard hours) × utilization × efficiency. (B) and (C) are incomplete applications of the correct formula, dividing standard hours by utilization alone to arrive at 100 (B), and by efficiency alon e to arrive at 160 (C). 8. B (IIC) If the planner had an alternate route, it could be used to distribute or divide the load between two choices, which makes (B) the correct answer. Multiple setups (A) add to the load, making it an incorrect choice. Infinite loading (C) detects the overload but does not solve the overload problem. Loading factors

should reflect reality. Adjusting accurate loading factors (D) to address an overload will only hide reality from the planner; therefore, it is also incorrect. 9. B (IA) Standard costing is a method of setting a new standard based on the last cost for the unit at the end of the year. The only exceptions would be if the suppliers had set a new cost for the upcoming year. (A) is wrong because of average cost. (C) is wrong because this is LIFO. (D) is wrong because this is the last cost paid for the item. 10. D (IB) Reference Arnold, pages 85-86. (A) is a major use of the BOM because engineering sometimes changes the design of the products and a record is required to know what to change. (B) is a major use of the BOM because when planning the end item the required components and their relationship must be used to determine the plan’s start and due dates. (C) is a major use of the BOM because to cost the end item all components and their quantities and costs must be identified. (D) does not use the BOM.

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Executio n and Control of Operations 1. A (IB) The effectiveness of automation depends on improving the manufacturing process before you begin automating the process. The approach is to first simplif y the process, then to automate the process in order to eliminate work and improve quality. (B), (C), and (D) are incorrect. (B) improving inspection does not improve the process, overlooking the first step of simplifying the process. (C) (D) implementing automation prior to simplifying the process significantl y increases the chance of making mistakes. 2. A (IIIA) The fishbone chart is a diagram of the possible causes of a problem. The causes are determined with the aid of brainstorming techniques. The diagram resembles a fish skeleton. (B), (C), and (D) are incorrect. SPC (B) focuses on the continuous monitoring of a process. The critical path method (C) is a technique used to plan and control the activities of a project. Pareto analysis (D) is a technique to rank order the relative frequency of occurrences. 3. D (IIIC) Increased data accuracy is the correct answer because bar coding eliminates the possibility of typing or transposition errors when entering data. (A), (B), and (C) are individually incorrect because they do not include all of the options. 4. D (IIF) I, II, and III are all ways to reduce lead time and improve performance. I. Reduced shipment quantities, requiring greater frequency of delivery, will reduce queues in Company Y and also reduce intransit inventory between X and Y. II. Reduction of lot sizes in Company X is a way to reduce queues in Company X and therefore reduce total lead time. III. Elimination of receiving inspection reduces lead time and, by inspecting at the source (or closer to it), downstream problems can be reduced. (A), (B), and (C) are all incorrect, because each one excludes one or two correct options. 5. C (IC) The slack time per remaining operation formula is: Date Due – Date Now – Stand ard Processing Days Remainin g

The result is divided by the number of remaining operations.

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OPERATION

STD. HOURS

PIECES PRODUCED

PROCESS REMAINING HOURS

1 2 3 4 5

0.05 0.15 0.10 0.20 0.02

51 50 0 0 0

0 0 5 10 1

The priority of Operation 3 is calculated as follows: (200 - 195) - (16 hrs. ⁄ 8 hrs . per day) 3

=

5-2 3

=1

6. D (IIA) Because the capacity shortage was detected during order release and at a gateway work center, the corrective action needs to be implemented in the very nearterm. Since the capacity shortage was not detected at the higher levels of capacity planning, it is likely to be a short-lived imbalance. Rescheduling orders that have not yet been released can be done quickly and will provide immediate relief at the gateway work center. (A), (B), and (C) are incorrect. (A) and (C) Adding a shift or hiring employees would increase capacity, but it is unlikely that either could be accomplished in time to address the short-term and immediate problem. (B) Expediting in-process orders will have no effect on the capacity available or capacity required at a gateway work center. 7. B (IIB) The level of work-in-process inventory when a pull signal is employed is a function of the number of pull signals and the quantity represented by each pull signal. (A), (C), and (D) are incorrect. (A) Shop orders are characteristic of a push system and are not relevant in a pull system. (B) The number of workstations in the process determines the minimum work-in-process level, but does not determine the total work-in-process level. (D) The takt time determines the rate at which the process needs to operate. It does not determine the work-in-process level. 8. D (IIE) Nonsignificant part numbers are usually smaller and therefore will require less time and be more accurate for data entry. (A), (B), and (C) are incorrect. (A) Under no circumstance should a single part number be used for several items, similar or n ot. (B) Significant and nonsignificant part numbers may include numbers and letters (C) You can assign responsibility with either significant or non-significant part numbers. 9. A (IIE) The sooner the transactions are captured, the more accurate the information will be. (B), (C), and (D) are incorrect. (B) A bar-code system facilitates data entry, but does not eliminate data entry. (C) Transactions are best done by the personnel

who are most familiar with the type of transactions one is working with, not data entry clerks. (D) All inventory transactions are important, not just for perishable stock. 10. A (IIIA) Run chart shows the variation trends in a group of information over time. (B), (C), and (D) are incorrect. (B) A cause-and-effect diagram is used to collect brainstorming ideas to establish categories of potential causes to an effect. (C) A Pareto chart is used to sort data into groups from most significant to least significant. (D) Activities that are included on a flow chart identify the relationship to one another and do not identify trends or patterns.

Strategic Management of Resources 1. B (IA) The changes described in the scenario (centralizing assembly in one plant, focusing each component plant, and standardizing the product line) point to price/cost as the dominant order winner. The standardization and plant reorganization decrease the flexibility and don’t contribute significantly to quality conformance. Neither of these changes improves delivery reliability, and may make transportation (hence delivery) more problematic. However, these changes do allow focus on component manufacture (with larger volumes), which should achieve economies of scale exceeding the increased transportation costs. 2. C (IB) The component plants are each focused on a narrower range of parts. Because the demand for all components throughout Europe is consolidated, the volumes are higher, positioning them as a line manufacturing process type. Note that the assembly plant in Belgium would be positioned as a batch process type. 3. D (IC) The benefits of orderly work places and high quality are independent of the use of MRP II and JIT. The demand for all component plants is created by MRP IIcalculated requirements coming from the assembly plant in Belgium. Within the component plants, pull control is appropriate, and the release of specific work orders is not. 4. C (IC) The assembly plant certainly requires sales and operations planning (with the attendant resource requirements planning). The diverse models will be mixed-model scheduled to accommodate the diverse needs of the market and to balance the demands placed on the component plants. The widespread and diverse nature of the market precludes forward integration.

5. B (IIC) The manufacturing organization is not involved in forecasting demand. Its role in developing the bills of material is subordinate to the engineering organization. Although the manufacturing organization is involved with the selection of appropriate product technologies, such choices are governed much more by manufacturing engineering and design engineering. By contrast, manufacturing has a very significant role in suggesting and developing innovative processes. 6. B (IB) An FMS is typically quite expensive— to purchase, to install, and to maintain. It must be justified by its high flexibility and quick changeover. A high level of reactive control doesn’t support such a system (and ma y work against it). If the number of parts could b e reduced to a small number, then alternative, cheaper processes are available (such as work cells), eliminating answer (C). Although benefits greater than cost (answer D) are always desirable as far as this line of thinking goes, it ignores the significant ongoing running, maintaining, and programming costs of an FMS. Even if savings do not exceed costs, the strategic need for flexibility will offset this shortfall. 7. B (IC) Rough-cut capacity planning (RCCP) is often successful in plants that do not have MRP-based scheduling or fully accurate routings through the shop. RCCP uses its own bills of resources; hence IV is needed, as is appropriate training (I). 8. A (IB) Group technology-based work cells tend to collapse operations formerly assigned to several work centers into one tightly coupled cell. This does not affect actual run time, but considerably reduces queue, move, and wait times, hence reducing lead time and work in process. Scheduling may be less flexible because of the need to associate parts with particular cells. There are no direct or significant effects on new product introductions or quality. 9. C (IIIA) A new process shouldn’t be considered before understanding the present one; hence, III is the first step. Preparing the requirements definition narrows the universe of possible technologies. When one or a few have been identified, appropriate users of such technologies may be visited. 10. D (IIIB) Many costs may be incurred in changing parts from internal manufacture to subcontract. Labor factor productivity neglects engineering, transportation, energy, and other potential factors. Baseline and benchmark procedures might be used to establish goals for either fabrication or subcontracting, but do An sw ers to Samp le Ques ti on s

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2008 CPIM Exam Content Manual

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