CPIM.bscm Questions&Answers

Date:09/10/06

PIMprep V6.0

Question Number: 1 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The basic elements of the supply chain include:

A) supply, manufacture, distribution. B) design, manufacture, inventory. C) engineer, design, manufacture. D) supply, engineer, manufacture.

The correct answer is: A

Even though different companies produce different products, the basic elements are the same: supply, manufacture, and distribution. (Arnold, Introduction to Materials Management, Chapter 1).

Copyright 2003, Datachem Software, Westboro, MA

Question Number: 2 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts In order to maximize profit, a company must have all of the following objectives except:

A) Best customer service B) Most accurate production forecast C) Lowest inventory investment D) Lowest distribution cost

The correct answer is: B

A company, to maximize profits, must have the lowest production cost, best customer service, lowest inventory investment, and lowest distribution costs. While an accurate production forecast will contribute to low production costs, it will not guarantee the lowest production costs. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 3 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The inventory turns ratio measures:

A) the amount of inventory needed to support sales growth. B) obsolete inventory as a percent of sales. C) how effectively inventory is being used. D) the amount of space needed to store inventory.

The correct answer is: C

The inventory turns ratio measures how effectively inventories are being used. It is calculated by dividing annual cost of goods sold by average inventory in dollars. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 4 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Process specifications can be best defined as a document which: A) shows how the product will appear. B) shows the steps needed to produce the end item. C) details the capacity available at a work center. D) flow charts various processes.


Process specifications describe the steps needed to make an end product. They are usually printed on a routing sheet or kept in the database for online access. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 5 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A company's strategic plan: A) provides the manufacturing plan for families of end items. B) outlines the sales plan for the next year. C) is a statement of goals and objectives for a long range period. D) outlines new products for the next year.


While strategic plans do provide for manufacturing, sales, and new product plans, they really provide the overall direction for the company. The result is a statement of goals and objectives for 2-5 years, and sometimes 10 years. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 6 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts In which of the following manufacturing environments would consumer products, such as film, food, etc. be classified?

A) Assemble-to-order B) Engineer-to-order C) Make-to-order D) Make-to-stock

The correct answer is: D

Consumer products are generally considered make-to-stock. There are a few standard items assembled from many components. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 7 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Many different end items are made from a small number of components. What manufacturing environment would this be?

A) Make-to-stock B) Make-to-order C) Assemble-to-order D) Engineer-to-order


Make-to-order companies typically make many end items from a small number of components. The schedule is developed from actual customer orders. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 8 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The purpose of a strategic business plan is to:

A) plan production by product family. B) plan for business changes which take a long time. C) establish customer requirements over the long term. D) establish order promising strategies.


Strategic plans are used for long term planning (2-10 years). They are used to allow time to plan for changes which take a long time to occur. These might include new plants or distribution centers. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 9 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Aggregate inventory management is concerned with:

A) managing inventory items and how they are used. B) establishing the production plan. C) the cost and benefits of carrying the different classes of inventory. D) the distribution network and the movement of inventory.


Aggregate inventory management is concerned with the cost and benefit of carrying raw materials, work-in-process, and finished goods inventory. It is financially oriented. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 10 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following are objectives of inventory? I. Maximize customer service II. Efficient transaction III. Low cost plan operations IV. Minimum inventory investment

A) I, II, and III B) I, III, and IV C) I, II, and IV D) II, III, and IV


In order to maximize profits, a company must manage inventories, provide great customer service, and have efficient plant operations, while minimizing the amount of capital used for inventory. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 11 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following would be included in the cost of carrying inventory? I. Heating and lighting a warehouse II. Obsolete inventory III. Labor to move material IV. Damaged inventory

A) I, II, and III B) II, III, and IV C) I, III, and IV D) I, II, III, and IV


All of the above costs would be included in the cost of inventory. Any costs incurred as the result of having inventory should be included. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 12 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following best describes a normal distribution? A) Most values clustered near a central point B) Warehouses centrally located to markets C) Values accumulated at six sigma D) A critical ratio of 1.0


Normal distribution refers to the statistical distribution of values where the majority of values will accumulate around the mean. The resulting graph is shaped like a bell. It is often known as a "bell curve". (Arnold, Introduction to Materials Management, Chapter 11).


Question Number: 13 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Based on the following information, what would the safety stock need to be to ensure product is in stock 99.9999% of the time? MAD = 100 On hand = 200 Weekly demand = 400

A) 100 B) 300 C)

500 D) 600


To ensure coverage of product 99.9999% of the time, it would require 5 MAD for safety stock. Therefore: 5 * 100 = 500. (Arnold, Introduction to Materials Management, Chapter 11).


Question Number: 14 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Each distribution center places orders from central supply as they are needed. This is called:

A) pull system. B) push system. C)

Just-in-Time delivery. D) supply chain management.


When each distribution center orders from central supply or the factory independently of what other distribution centers are doing, it is called a pull system. The advantage is that coordination and communication is less expensive. The disadvantage is that the lack of coordination causes problems with customer service and inventories. (Arnold, Introduction to Materials Management, Chapter 11).


Question Number: 15 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A company makes all decisions regarding forecasting and orders centrally for its distribution network. This company is using which of the following systems?

A) Pull system B) Push system

C) Just-in-Time D) Time phased order point


The push system "pushes" inventory to distribution centers by making stocking decisions centrally. The advantage is that inventory is sent where it is needed most. The disadvantage is that the coordination is more expensive than the pull system. (Arnold, Introduction to Materials Management, Chapter 11).


Question Number: 16 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A company wants to store 15,000 cartons with 20 cartons on each pallet. The warehouse is set up to store pallets 5 high. How many pallet positions are needed?

A) 150 B) 500

C) 750 D) 3000


The number of pallet positions can be calculated by dividing the number of cartons of storage needed by the number of cartons per pallet which equals the total number of pallets needed. Divide the total number of pallets needed by the number of pallets stacked height which equals the number of positions needed. For this problem: 15,000/ 20 = 750 pallets needed; 750/ 5 = 150 positions. (Arnold, Introduction to Materials Management, Chapter 12.)


Question Number: 17 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts All of the following are basic grouping methods to store and locate stock in a warehouse except:

A) Items related functionally B) Items in sequential SKU number C) Items which are physically similar D) Items which are fast moving


The purpose of grouping items in a warehouse is to be more productive in storage and in the picking process. Items which have sequential SKU numbers may have nothing to do with each other. As a result, this would not be a criteria for grouping. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 18 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts What is the major disadvantage of a fixed location warehouse?

A)

Put away time is increased B) Cube utilization is poor C) Dock time is increased D) Material handling costs rise


Fixed location warehouses offer poor cube utilization because pallet locations are left empty when the product assigned to the location is out of stock. Generally, fixed locations are used in small warehouses with low throughput. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 19 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following are advantages of point of use storage? I. Ease of control

II. Material handling is reduced III. Storage costs are reduced IV. Material is accessible at all times



All are advantages of point-of-use storage except ease of control, which is an advantage of central storage. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 20 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following are advantages of using central storage?

I. Ease of control II. Costs are reduced III. Inventory record accuracy is easier to attain IV. Safety stock is reduced

A) I, II, and III B) I, III, and IV C) II, III, and IV D) I, II, III, and IV


Costs are not reduced with central storage. There are labor costs, racking, paper system, and other costs associated with central storage.

(Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 21 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following best describes cycle counting?

A) A process to reduce cycle time B) Set up reduction to shorten the production cycle C) Counting inventory on a pre-determined schedule D) Conducting a time study at a work center


Cycle counting is used to count inventory on a pre-determined schedule for the purpose of identifying errors and taking corrective action so the error will not occur again. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 22 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The movement of finished goods from production to the customer is: A) physical supply. B) supply chain. C) physical distribution. D) conversion cycle.


Physical distribution is the actual movement of goods from production to the customer. Physical supply is the movement of raw material from the supplier to manufacturing. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 23 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts All of the following activities are part of the physical distribution system except: A) Transportation B) Warehousing C) Material handling D) Forecasting of customer orders


Physical distribution includes the activities of transportation, distribution, inventory, warehousing, material handling, packaging, and order processing. Forecasting is not a physical distribution activity. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 24 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Trucks, as a mode of transportation, are best suited for:

A) moving small quantities to widely dispersed markets. B) moving large quantities to widely dispersed markets. C) moving small quantities to narrowly dispersed markets. D) moving large quantities to narrowly dispersed markets.


Trucks are best when there is a need to move small quantities to widely dispersed markets. Trains are better for moving large quantities. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 25 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts For a given product, the line haul cost is $1.50 per mile. The product will move 400 miles. If 40,000 pounds are being shipped, what is the cost per hundred weight?

A) 1.00 B) 1.50 C) 2.00 D) 2.50


The truck will cost $600 to move 400 miles ($1.50 * 400 miles). To calculate the cost per hundred weight: Divide the total cost for the truck by 400. (40,000 pounds divided by 100). Therfore: $600 divided by 400 = $1.50/cwt. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 26 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following best describes the purpose of a distribution warehouse?

A) A warehouse to store goods for long periods of time B) A storage warehouse for floor stock C) A warehouse to move and mix goods D) A supply chain warehouse for regional storage


A distribution warehouse is used primarily to break down large lots into smaller lots for shipment. A general warehouse is used for long term storage. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 27 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following are the roles which warehouses serve?

I. Transportation consolidation II. Inventory efficiency III. Product mixing IV. Customer service



Warehouses serve three important roles: 1) Transportation consolidation - consolidate small shipments (LTL) into large shipments (TL) 2) Product mixing - group a variety of products into one order 3) Customer service - allows products to be placed closer to the customer Inventory will typically rise with an increase in the number of warehouses. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 28 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A market boundary can be defined as the:

A) geographic boundary of a region. B) line where the laid down cost is the same from two supply sources. C) line where shipments in one distribution center equals another. D)

mileage boundary where shipment costs exceed the margin to be gained.


A market boundary is the line where the laid down cost from two supply sources is equal. The laid-down cost is the delivered cost of a product to a geographic point. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 29 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts As a company increases the number of warehouses from one to two, there is an impact on safety stock. Safety stock will:

A) increase by a factor of 2. B) decrease by half. C) increase, and the percent can be calculated. D) decrease by a calculated percentage.


The safety stock will increase by an amount which can be calculated, but it will not double automatically. The amount of the increase will depend on service levels by part, the demand variation, and other factors. As the number of warehouses increases, demand at each will decrease, causing greater variations in product demand. Therefore, safety stock will increase appropriately. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 30 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The Just-in-Time philosophy can be best defined as:

A) Delivering goods just before they are needed B) Fulfilling customer orders just as they are needed C) Manufacturing without inventory D)

Elimination of waste


The Just-in-Time philosophy is concerned with the elimination of waste or non-value activities. Maintaining large inventories is just one of many non-value added activities. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 31 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The Toyota Motor Company identified seven sources of waste in manufacturing. Which of the following represent those sources of waste?

I. Process II. Overproduction III. Wait-time IV. Movement

A) I, II, and III B) I, II, and IV C) II, III, and IV D) I, II, III, and IV


The seven sources of waste identified by Toyota are Process, Methods, Movement, Product Defects, Waiting times, Overproduction, and Inventory. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 32 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts To achieve necessary quality levels in a JIT environment, quality must be:

A) built into the product by operators. B) inspected at multiple points. C) ensured by the quality control lab. D) an inspectors function.


Quality must be the operators responsibility. They are the only ones who can make sure defects are not built into the product. They must be allowed to stop the process when defects are found. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 33 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts In order to reduce the number of transactions which occur in a JIT environment, companies use a system called:

A) transaction prevention. B) pre-deduct. C) backflushing. D) bar coding.


Backflushing is a system for doing inventory and labor transactions based on the finished goods production. With this system, one transaction will create the many issues transactions for inventory. This process works best when the lead time for the product is short and the product flows down a production line. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 34 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts

The annual cost of goods sold for a company is $40 million and the average inventory is $10 million. By how much would the inventory need to be reduced to have annual inventory turns equal 20 turns?

A) $2 million B) $4 million C) $6 million D) $8 million


In order for a company with cost of goods sold of $40 million to turn the inventory 20 times annually, the inventory would have to be valued at $2 million (40/20). Since the average inventory is currently valued at $10 million, the inventory would need to be reduced by $8 million. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 35

BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A company wants to produce 1000 units over the next four months using a level strategy. The months have 20, 21, 19 and 22 working days in each one. Based on this strategy, how much would be produced in the first month?

A) 244 B) 254 C) 260 D) 262


To find the answer: Divide the planned production (1000) by the number of days available in the four months (82) to find the daily production rate (12.2). Multiply the daily production rate (12.2) by the number of days in the first month (20) to obtain the first month's production (244). (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 36 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts System nervousness is caused by:

A) the inability of the planner to remain calm. B) requirements changing rapidly. C) constant demands by manufacturing for long production runs. D) purchased materials which do not arrive on time.


System nervousness is caused by requirements which change rapidly and usually by small amounts. The planner must, in these cases, apply judgement to the situation before changing the plans to accommodate the change. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 37 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A component has a fixed cost of $1,000 and a variable cost of $5.00 per unit to produce. What would the average cost per unit be if the company produces 4,000 units?

A) $5.00 B) $5.10 C) $5.25 D) $5.50


To produce 4,000 units, the total cost would be $21,000. ($5 * 4,000 units + $1,000 fixed cost = $21,000). Divide the $21,000 by the number of units (4000) to find the cost per unit. ( $21,000/4,000 = $5.25). An alternative way to calculate the cost per unit would be to divide the fixed cost ($1,000) by the units produced (4,000) which equals $.25. Add the fixed cost to the variable cost to get the cost per unit. ($5.00 + $.25 = $5.25). (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 38 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following best defines throughput? A) The number of bottlenecks slowing production B) The total capacity which a factory can produce C) The speed of a work center to produce D) The total volume of production passing through a facility


Throughput is the total volume of production passing through a facility. Bottlenecks control the throughput in the facility and must be eliminated in order to increase the throughput. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 39 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Forecasts are typically more accurate for the near future than they are for the longer future. This occurs because:

A) the near term holds less uncertainty than the long term. B) more data is available in the near term. C) aggregate data is easier to forecast. D) the future is more dynamic in the near term.


The near term is more predictable than the long term. Most companies can easily predict what they are going to do next week compared to next year. This allows forecasts to be more accurate in the near term. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 40 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Forecasts are usually wrong but we continue to use them. They are necessary because: A) forecasters provide a service to the organization. B) forecasts are a prelude to business planning. C) the master production schedule (MPS) needs one. D) materials requirements planning (MRP) cannot operate without one.


Forecasts are the prelude to business planning. They provide an estimate of what conditions will look like in the future. So even though we know they are wrong, by measuring how wrong they are, forecasts can be constantly improved for use by the business. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 41 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Even in an intermittent manufacturing shop, certain JIT principles can be applied. Which of the following principles can be used in an intermittent manufacturing shop?

I. Employee involvement II. Total preventive maintenance III. Inventory reduction IV. Continuous flow lines

A) I and III B) II and IV C) I, II, and III D) I, II, III, and IV


An intermittent manufacturer is characterized by processing in batches, and large variation in design and order quantities. At the extreme, every job could be made to customer specification. The product lacks a continuous flow. However, JIT principle can be applied for employee involvement, workplace layout, total quality control, preventive maintenance, setup time reduction, supplier partnerships, and inventory reduction. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 42 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following manufacturing types would typically have the longest delivery time?

A) Make-to-order B) Engineer-to-order C) Make-to-stock D) Assemble-to-order


Delivery time is defined as the time elapsed from receipt of the customer's order to the delivery of the product to the customer. Engineer-to-order companies will generally have the longest delivery time due to the design and engineering time required to create a product. In contrast, make-to-order companies will make a product from existing components after an order is received. Make- to-stock companies will ship to the customer from stock. Assemble-to-order companies will assemble a customer order from existing sub-assemblies. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 43 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following statements would be true regarding the delivery time in an engineer to order company?

A) Delivery time is shorter than a make-to-order company. B) It would be the same as a make-to-stock item. C) It would be longer than an assemble-to-order company. D) It would be shorter than an assemble-to-order company.


Delivery time is defined as the time elapsed between receipt of the customer's order and the delivery to the customer. Engineer-to-order companies have the longest delivery time due to the engineering which must occur before the product can be manufactured for delivery. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 44 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following would be considered a function of physical distribution? A) Material handling B) Routings C) Kanban size D) Pull signal


Physical distribution includes all the activities associated with physically moving goods; from the supplier to the start of production, and from the end of production to the consumer. Material handling is involved with physically moving the goods. The others are functions within manufacturing. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 45 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following would be considered part of the physical distribution system? A) Moving materials between work centers B) Receiving goods from suppliers C) Planning the transfer of goods to outside contractors D) Forecasting inventory levels to support manufacturing


Physical distribution is defined as the physical movement of goods from suppliers to the beginning of production and from the end of production to the consumer. Receiving would be included as part of the function of physical distribution. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 46 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following would most likely be an independent demand item?

A) Inventoried subassembly for a printer B) Manufactured subassembly in a car C) Purchased component for a fork truck D) Spare part for a jet engine


Independent demand is defined as demand for an item which is unrelated to the demand for another item. Service parts would typically be forecast independently from their use during the manufacture of the jet engine. Therefore, the jet engine might have independent and dependent demand. (Arnold, Introduction to Materials Management, Chapter 11).


Question Number: 47 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Production planning is generally a direct input to:

A) material requirements planning. B) purchase order planning. C) capacity load at a work center. D) master production scheduling.


Production plans are agreed upon management plans for manufacturing, shipping and inventory/backlog. These plans are developed at the aggregate level (e.g. monthly, product families). The plan provides management approval for the master scheduler to develop the detailed master schedule (end products, weekly). (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 48 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following would most likely be a dependent demand item?

A) Safety gloves B) Office supplies C) Purchased component D) Item being shipped to customer


Dependent demand is defined as "demand that is directly related to or derived from the bill of material structure for other items or end products." (APICS Dictionary, Ninth Edition) Therefore, a purchased component would be part of a bill of material structure and demand would be related to the demand for other parts in that structure.


Question Number: 49 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts If a company is going to establish a cycle count program, a primary objective should be to:

A) correct the inventory records. B) reduce the headcount. C) identify the causes of inventory errors. D) eliminate the physical inventory.


The primary objective of a cycle count program is to identify the causes of inventory errors and eliminate them permanently. Only by correcting the causes of error will the records stay accurate for the system to operate properly and, perhaps in the future, eliminate the physical inventory. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 50 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A company needs to increase production in the current week to meet a customer request. The quickest way to accomplish this is to:

A) work overtime. B) hire more workers. C) hire temporary workers. D) subcontract the work.


Working overtime allows skilled workers to finish the customers job. This would be quicker than hiring workers which can take a great deal of time. Temporary workers can be hired quickly, however, the quality would suffer, and finding a short term subcontractor would not generally be feasible. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 51 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following does a tracking signal identify in a forecast?

A) Mean absolute deviation B) Standard deviation C) Bias D) Aggregate summarization


Bias occurs when the cumulative actual demand varies from the forecast on a consistent basis. A tracking signal provides a mathematical method to determine if the forecast error is truly biased or if random error is occurring. Random error will correct itself while bias will not. A tracking signal is calculated by dividing the algebraic sum of the forecast errors by the MAD (Mean Absolute Deviation). (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 52 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts An income statement of a company will show which of the following? A) Inventory levels B) Long term debt C) Cost of products sold D) Net cash available


Income statements reflect the revenues and expenses of a company generating either a profit or loss. Cost of products sold is subtracted from the revenue to obtain a gross profit. From the gross profit, expenses are deducted to arrive at a net income or loss.


Question Number: 53 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following is a reason to maintain inventory?

A) Improve customer service B) Reduce transportation costs C) Increase machine operating time D) Reduce costs


One of the primary reasons to maintain inventory is to provide competitive customer service. By having inventory, a company can avoid costly stockouts, lost sales, and lost customers. In some industries, such as consumer goods, it is imperative that the product be in stock when the customer orders. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 54 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following best describes the ABC approach to inventory control?

A) Maintain a high inventory of "A" parts. B) Have plenty of "C" parts. C) Keep the "B" parts to a minimum level. D) Always keep plenty of inventory.


The ABC method of inventory control operates on the assumption that a company's limited resources should be used to maintain the high priority items, or A items. The C parts have less value and should therefore be maintained at a very high level of inventory so inaccuracies will not impact the operation. This would allow less resources to be committed managing the low priority items. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 55 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The law which states that a small percentage of the group usually accounts for a large percent of the results is which of the following?

A) Fredo's law B) Newton's first law C) Pareto's law D) Nielsen's law


Pareto was an Italian economist who developed the observation that 80% of the Italian wealth was concentrated in 20% of the population. This observation can apply to many areas and is used to analyze the inventory for classifying A, B, and C items. Generally, 80% of the inventory dollars rest with 20% of the parts. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 56 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Inventory is used to decouple:

A) production plans from master schedules. B) rough cut capacity from capacity plans. C) supplier orders from supplier deliveries. D) supply from the demand.


Inventory is used to separate supply from demand. This allows the manufacturing to occur smoothly without as much disruption caused by fluctuating demand. The inventory acts like a shock absorber so the spikes in demand are not reflected in the manufacturing schedule. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 57 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A supervisor's primary role in a total employee involvement company is:

A) controlling. B) cheerleading. C) coaching. D) quality control.


Total employee involvement allows employees to participate in decision making which was previously reserved for management. In this environment, the supervisor's role is to help employees succeed by assisting employees in a decision making process rather than telling employees what to do. This coaching process helps employees improve the decisions they make. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 58 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Conformance can be best described as: A) making the highest quality products. B) meeting the specified requirements. C) working together as a team. D) flowing product through cells.


Conformance, as defined by APICS Dictionary, Ninth Edition, is "an affirmative indication or judgement that a product or service has met the requirements of a relevant specification, contract, or regulation." This does not mean that a manufacturer is necessarily making the highest quality products in the marketplace. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 59 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The objective of scheduling is to: A) ensure work centers are properly loaded. B) meet delivery dates. C) provide capable to promise information. D) meet cost targets.


The primary objective of scheduling is to meet delivery dates while utilizing manufacturing resources effectively. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 60 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts If a variety of products are made in a factory, the most common unit of capacity is: A) machine turns. B) inventory turns. C) time. D) dollars.


When factories make a variety of products, the most common unit of capacity is time or hours. In factories which make common units, a measure of capacity will be the unit of output. For example, beer is measured in barrels, automobiles are measured in cars produced, etc. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 61 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following best defines the term break even point? A) The point at which a product fails B) Current assets = current liabilities C) Required capacity = available capacity D) Revenues = total costs


The break-even point occurs when revenues equal total costs. When volume is less than the break even-point, a loss occurs. Conversely, when volume exceeds the break even point, a profit occurs. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 62 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The throughput of a manufacturing process is determined by:

A) overloaded work centers. B) first work center in the process. C) underloaded work centers. D) last work center in the process.


The factory throughput is regulated by the constraint work center. The constraint work center is by definition the work center that has no available capacity. Therefore, the overloaded work center regulates the throughput. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 63 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts In a JIT manufacturing environment, waste can be described as:

A) component scrap. B) overtime. C) any process which does not add value. D) any overhead process.


In Just-in-Time manufacturing, waste can be best described as any process which does not add value. The processes can be overtime, scrap, paperwork, approvals, etc. which do not add any value to the product for the customer. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 64 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A key element in selecting a site for a factory is:

A) availability of water. B) access to rail sidings. C) cost and availability of transportation. D) warehouse space and cost.


In siting a factory, low cost and availability of transportation are key components. This ensures that raw materials to keep the factory supplied are available. Additionally, finished goods leaving the factory can be delivered reliably to customers. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 65 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The particular channel in which goods move describes: A) manufacturing channel. B) marketing channel. C) capacity channel. D) distribution channel.


The distribution channel is the path that goods move through distribution centers, to wholesalers, and retailers. (Arnold, Introduction to Materials Management, Chapter 13).


Question Number: 66 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Inventory areas should be locked except for during normal business hours because: A) people are apt to steal. B) storeroom personnel know where parts are stored. C) transactions might not be completed. D) it's the right thing to do.


Inventory locations should be kept secure so the transactions are completed and inventories are maintained accurately. If people are allowed to access the inventory

without a proper transaction being completed, inventory accuracy will suffer, and the system will become less reliable. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 67 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A company has its warehouse divided so order pickers only pick in their area. This warehouse is operating under which of the following systems?

A) Zone system B) Area system C) Consolidated pick system D) Modified pick system


In a zone system, the warehouse is divided into zones and the order pickers only pick the items in their zone. The items are sent to the marshalling area to be combined with other items from other zones for that customer. An area system allows the picker to pick a complete order by moving through the warehouse. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 68 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts In a fixed location warehouse system, each SKU has an assigned location. While this has many positives, the negative aspect to fixed location warehousing is that:

A) warehouses can get messy. B) cube utilization is poor. C) inventory accuracy suffers. D) items can be damaged in put away.


In fixed location warehouses, cube utilization is poor because if a location has no stock, the space remains empty. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 69 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The balance to cube utilization is: A) pallet positions. B) accessibility. C) put away speed. D) material handling costs.


Cube utilization must always be balanced with accessibility to the goods when they are needed. For example, a warehouse could have one hundred per cent cube utilization but the warehouse pickers could not pick the goods. Therefore, warehouses do not operate at 100% cube utilization. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 70 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A normal distribution can be graphed as a : A) parabolic curve. B) trend seasonal curve. C) positive bias curve. D) bell shaped curve.


In a normal distribution, the actual points are concentrated around the average (mean). The further from the average the data is, the fewer data points emerge. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 71 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Which of the following manufactured product types are best suited for flow manufacturing?

A) Wide range of disparate products B) Limited range of similar products C) Low volume of similar products D) High volume of disparate products


In a flow manufacturing environment, the workstations required to make a product or family of similar products are positioned closely together in the sequence necessary to make the product. Work flows from one work station to the next in a sequential flow. Because they tend to be inherently inflexible, flow lines are best suited to a high volume of similar products.


Question Number: 72 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The key component to quick changeovers is: A) dramatically reduced set up times. B) availability of materials to run when the changeover is complete. C) expensive machines which changeover automatically. D) large enough lot sizes so changeovers are not critical.


Reducing setup times are the key component to making changeovers quicker. The quicker the changeover, the smaller the lot size can be. The smaller the lot size, the less inventory that needs to be maintained. This leads to much lower costs of operations.


Question Number: 73 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts A company which can adapt swiftly to changes in the volume and mix of their products is:

A) good at sales and operation planning. B) forecasting accurately. C) process flexible. D) six sigma certified.


Companies which are process flexible are able to adapt quickly to changes in the product mix and volume. They have modified their sales, manufacturing and supplier processes

so they are machine flexible, have small lot sizes, have constant communication with the sales force, have suppliers who are involved in the planning and design of their products and have developed real time collaboration with all the parties involved. They may not forecast their product at all but are able to adapt to the ongoing changes brought on by market forces.


Question Number: 74 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts The key driver in a Total Quality Management (TQM) company should be: A) lower costs. B) training employees. C) problem solving tools. D) customer needs.


The customer needs should drive all of the focus of employees in a TQM environment. By focusing on the customer, all of the processes to support the customers expectations will be improved. While training and problem solving tools are key methods for developing employee empowerment, the customer should be in the center of all the process improvements.


Question Number: 75 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts Quality can best be defined as: A) job one. B) meeting or exceeding the users' expectations. C) the best product produced. D) zero defects.


Quality is best defined by the user of the product. The user sets the expectation for a company's products and services by buying initially and repeating the purchase. While zero defects is a measure of the quality produced, there are customers who are buying off quality products which are perfect for their ultimate use. Again, it depends on the expectations.


Question Number: 76 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Businesswide Concepts In a flow manufacturing environment, product will generally flow consistently and constantly. As a result, there is little time to do inventory transactions to record the movement of parts through the line. To overcome this, many companies record their inventory by using:

A) pre flushing. B) kanban. C) cycle counts. D) backflushing.


Backflushing is a method for recording the usage of inventory at a standard quantity when the finished unit is completed. Backflushing can also be completed at various points (paypoints) in the routing. This process eliminates the need to record issue transactions for materials and time entry for labor.


Question Number: 77 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Production plans have all of the following except: A) Shipment plan B) Product families C) Inventory plan D) Weekly production


Production plans are generally monthly statements of shipments, production, and inventory (or backlog), broken down by product families, not end items. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 78 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following statements is most correct? A) The MPS shows families of products. B) The MPS has more detail than the production plan. C) The production plan has more detail than the MPS. D) The production plan rolls up to equal the MPS.


The MPS is a weekly build plan that contains more detail than the production plan. However, the MPS should add up to equal the production plan.



Question Number: 79 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning A closed loop MRP system can be best defined as:

A) action taken by a planner to approve planned orders. B) re-planning of capacity to accommodate restraints. C) integrated planning and control system with feedback from the bottom-up. D) integrated systems which include financial software, finite capacity, and logistics.


Closed loop MRP systems operate from the top down with feedback throughout the system. These feedback mechanisms allow changes to occur in the top level planning. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 80 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning You are working as a Master Scheduler in a discrete manufacturing company. A large customer has asked if you can deliver an order, but you have some short term capacity constraints. Which of the following actions could be taken so the order can be delivered?

I. People could be hired II. Overtime could be worked III. Inventory could be built in slow times IV. Work could be subcontracted

A) I, II, and III B) II, III, and IV

C) I, III, and IV D) I, II, and IV


Short term capacity can be increased by overtime, inventory, or subcontracting. Often, hiring qualified people takes much longer than the other three options. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 81 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following are strategies to use in developing a production plan?

I. Chase strategy II. Delphi strategy III. Level strategy

IV. Backlog strategy

A) I and II B) I and III C) II and IV D) III and IV


The chase strategy means production will vary with demand (inventory stays level). The level strategy establishes production at the average demand. Fluctuations in demand are absorbed by inventory. The third strategy is subcontracting. Production is kept at the minimum demand level. Variations in the demand level are absorbed by subcontracting production. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 82 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following are inputs to a realistic MPS?

I. Production plan II. Forecasts for end items III. Product costs for end items IV. Capacity constraints

A) I, II, and III B) I, II, and IV C) II, III, and IV D) I, III, and IV


The production plan, forecasts, and capacity constraints are all inputs to the MPS. While costs are nice to have, they are not a necessary input. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 83 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following are objectives when establishing the MPS? I. Efficient use of resources II. Efficient final assembly III. High customer service levels IV. Efficient use of inventory

A) I, II, and III B) I, II, and IV C) I, II, III, and IV D)

I, III, and IV


The master scheduler, when developing the MPS, must make sure labor, material, equipment, and inventory are being used efficiently in order to maintain high levels of customer service. Efficient final assembly would be developed by a final assembly schedule. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 84 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Final assembly scheduling usually occurs when:

A) a customer order is received. B) planning a build schedule. C) the MPS is established. D)

capacity is constrained.


Final assembly scheduling occurs only after the customer order is received. The FAS is the actual build schedule which ensures that the customers get what they want. Generally, FAS occurs when there are a variety of options for the customer to order. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 85 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning In make to stock requirements, customer orders are satisfied from: A) available capacity. B) work in process inventory. C) finished goods inventory. D) raw material inventory.


Make-to-stock companies ship customer orders from finished goods. Make to order companies ship from available capacity. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 86 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Independent demand can be defined by all of the following except: A) Demand not related to demand from higher level assemblies B) Forecasted demand C) Demand calculated based on present demand D) Demand from customer orders


Demand calculated from present demand would be dependent demand. Its demand is dependent upon a higher level assembly. (Arnold, Introduction to Material Management, Chapter 4).


Question Number: 87 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following would best define dependent demand?

I. Demand which is dependent on the forecast II. Demand which is dependent on demand for a higher level assembly III. Demand which is calculated

A) I

B) I and II C) II and III D) III


Dependent demand is calculated based on demand for higher level assemblies. Forecasted demand is independent. (Arnold, Introduction to Material Management, Chapter 4).


Question Number: 88 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following is not an input to MRP?

A) Master Production Schedule B) Inventory records

C) Bill of materials D) Capacity planning


Capacity planning is not an input to MRP. In fact, MRP assumes infinite capacity is available in its calculation. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 89 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Planning bills can be best described as:

A) bills of material based on forecast demand. B) bills of material for new products. C)

bills of material which represent average products. D) bills of material for expected usage.


Planning bills are an artificial grouping of components established for planning purposes. They are used to simplify forecasting and scheduling. They are not buildable products. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 90 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning A firm planned order is used to: A) freeze the planned order against changes in quantity and time. B) convert the planned order to a scheduled receipt. C) simulate the projected inventory balance.

D) manipulate the data and quantity of the customer order.


Firm planned orders are used by planners when it is necessary to "freeze" the planned order. This might be necessary due to material shortages or capacity problems, e.g., strikes. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 91 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following would be included in demand management?

I. Forecasted requirements II. Service parts requirements III. Branch warehouse requirements IV.

Inter-plant orders



All of the answers would be part of demand management, plus order entry and order promising. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 92 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning

All of the following are principles of forecasting except:

A) Forecasts are usually wrong B) Forecasts are more accurate for end items C) Forecasts should include an estimate of error D) Forecasts are more accurate in the near term


Forecasts are more accurate for product families or groups. The reason is that aggregate numbers tend to be more accurate than detailed numbers. So although the sales forecast error may be very small in a company, predicting the shipments of an end item will have more error associated with it. (Arnold, Introduction to Materials Management, Chapter 8).



When a company has historical data available for use in forecasting future demand, the technique for utilizing this data is called:

A) qualitative forecasting techniques. B) extrinsic forecasting techniques. C) intrinsic forecasting techniques. D) causal forecasting techniques.


Intrinsic forecasting techniques use internal historical data to forecast future demand. It is used based on an assumption that historical patterns can predict future patterns. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 94 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The following formula represents which forecasting technique?

New forecast = (alpha)(latest demand) + (1-alpha)(previous forecast)

A) Weighted moving average B) Double exponential smoothing C) Exponential smoothing D) Focus forecasting


Exponential smoothing uses a smoothing constant called alpha. It smoothes the variation between latest actual demand and the forecasted demand. (Arnold, Introduction to Materials Management, Chapter 8).



The annual demand for a product is 1200 but during July, the product sells 150 units. What is the seasonal index for the product in July?

A) 1.0 B) 1.5 C) 1.75 D) 2.00


The seasonal index is calculated by dividing the period average demand by the average demand for all periods. For this problem: The seasonal index equals 150 units/100 units or 1.5; where 100 units is the average demand for all periods (1200 units/12 months). (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 96 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following best describes the term bias? A) Actual demand consistently varies from forecast; either above or below. B) The standard deviation is consistently positive. C) The mean absolute deviation equals the forecast error. D) The sum of the errors is less than the MAD.


Bias occurs when actual demand varies consistently higher or lower than the forecast. When bias occurs in the forecast, the forecast must be adjusted. (Arnold, Introduction to Materials Management, Chapter 8).



A tracking signal is used to: A) monitor the quality of the forecast. B) determine the variation in the production plan. C) measure whether the schedule is being met. D) measure the material plan.


Tracking signals are used to measure the quality of the forecast to determine whether to adjust the forecast. They usually measure the sum of the errors against a deviation measure such as MAD. (Arnold, Introduction to Materials Management, Chapter 8).



Based on the following information, what is the mean?

Period Demand 1 1000 2 500 3 700 4 600

A) 500 B) 600 C) 700 D) 800


The mean is calculated by adding the values and dividing by the number of periods. For this problem: X= (1000+500+700+600)/4 X= 2800/4 X= 700 (Arnold, Introduction to Materials Management, Chapter 11).


Question Number: 99 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Demand on a work center is caused by the next work center. Product is not made unless signaled by the next work center. This is called:

A) push system. B) pull system. C) demand system. D) MRPII system.


A pull system starts with demand from a customer and signals each preceding operation. Work is not done on a product unless a signal for demand is generated, thus "pulling" a product through the manufacturing process. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 100 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following best describes the Master Production Schedule?

A) It is the actual build schedule for manufacturing. B) It is the final assembly schedule. C) It is driven by materials requirements planning. D) It is the planned build schedule for manufacturing.


The Master Production Schedule is the planned build schedule for manufacturing. A final assembly schedule is generally separate from the MPS and the actual build schedule may vary from what was planned. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 101 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning A company wants to produce at a level rate. Based on the following information, what production rate will provide a projected inventory of 20 at the end of period five?

Period 1 2 3 4 5 Forecast Demand 20 10 15 15 10

Planned Production Planned Inventory 10

A) 14 B) 15 C) 16 D) 17


The total forecasted demand is equal to 70 for the five periods. In addition to the forecasted demand, the company wants to raise the inventory from 10 to 20 by the end of period five, therefore the total requirement is for 80 units. To produce 80 units over five periods in a level manner, the company must produce 16 units per period in order to achieve its objective. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 102 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following are steps in developing a Master Production Schedule?

I. Develop a preliminary MPS II. Check the schedule against the capacity available III. Check MPS against the production plan to ensure they are equal

A) I and II B) I and III C) II and III D) I, II, and III


The three steps in developing a Master Production Schedule are: 1. Develop a preliminary MPS. 2. Check the preliminary MPS against available capacity. 3. Resolve differences between the preliminary MPS and capacity available.



Question Number: 103 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Over the past three months, the demand for a product has been 240, 260, and 280. Calculate the three month moving average forecast for month four.

A) 240 B) 260 C) 280 D) 300


The three month moving average is calculated by adding the demand for the three months (240+260+280 = 780) and dividing by the number of data (3). Therefore: 780/3 = 260.

This would be used as the forecast for the fourth month. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 104 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The material requirements system receives direct input from:

A) production planning. B) capacity requirements planning. C) master production scheduling. D) purchasing.


The master production schedule, once established, is submitted to the MRP system for use in calculating demand for the components.



Question Number: 105 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Based on the following data, what should the monthly production be to achieve level production? Beginning inventory = 300 units Ending inventory = 400 units Sales forecast

Month 1 2 3 4 5 Quantity 300 400 200 300 200

A) 200 B) 250 C) 300 D) 350


The company is beginning with 300 units and wants to increase the inventory level by 100 units. In addition, the sales forecast calls for 1400 units to be sold over the 5 periods. Therefore, 1400 + 100 units need to be produced for a total of 1500 units over 5 periods, or 300 units per period. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 106

BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Based on the following data, what should the monthly production be to level production? Beginning inventory = 500 units Ending inventory = 200 units Sales forecast

Month 1 2 3 4 5 Quantity 400 300 400 400 300

A) 250 B) 300 C) 350 D) 400


The company has a beginning inventory of 500 units and will be decreasing the inventory by 300 units over the 5 periods. During the 5 periods, they will be selling 1800 units. Therefore, the company will need to produce 1800-300 or 1500 units over 5 periods which equals 300 per period. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 107 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following best describes a master production schedule?

A) Product families, monthly B) End items, monthly C) End items, weekly D) Product families, weekly


The master production schedule plans end items on a weekly basis. This detailed production schedule ties directly to the production plan which is a plan for product families, monthly. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 108 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The forecast for a part is 200 units per week. The actual shipments for the last 5 weeks have been 250, 260, 210, 240, and 220. If the MAD is 20, what would the tracking signal equal?

A) 3 B) 6 C) 9 D) 12


Tracking signals measure the bias in a forecast. The above demand would reflect a negative bias in the forecast, as the forecast is consistently less than the actual demand. To calculate a tracking signal, divide the sum of the forecast errors by the MAD. Therefore: 50+60+10+40+20 = 180 180/20 = 9 (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 109 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Based on the following data, what would the projected forecast for month 5 be, using a 3 month moving average?

Month 1 2 3 4 Forecast 200 200

200 200 Actual Demand 190 210 190 170

A) 170 B) 180 C) 190 D) 200


The three month moving average is found by taking the actual demand for the last three months divided by three. Therefore, the calculation would be: (210+190+170)/3 = 570 570/3 = 190 (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 110 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning What is the Mean Absolute Deviation for the following data?

Period 1 2 3 4 5 Forecast 100 100 150 150 150 Demand 90 105 140 160 170

A) 3 B) 9

C) 11 D) 15


The mean absolute deviation is calculated by adding the absolute value of the difference between the actual demand and the forecast, divided by the number of periods. For this example, the absolute deviation is calculated by adding 10+5+10+10+20=55. Divide 55 by the number of periods (5) to equal 11. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 111 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning In order for a forecast to signal negative bias, the tracking signal would be:

A) less than one. B) more than one.

C) equal to one. D) equal to zero.


A tracking signal measures the algebraic deviations of the actual demand to the forecast. It then divides those deviations by the MAD. If the deviations divided by the MAD are greater than one, then the forecast exhibits positive bias; less than one, the forecast exhibits negative bias. Most companies will only adjust the forecast when the tracking signal reaches an arbitrary target, such as +/- 4. (Arnold, Introduction to Materials Management, Chapter 8).


Question Number: 112 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning An anticipated build schedule can be best described as: A) production plan. B)

capacity plan. C) materials requirements plan. D) master production schedule.


As defined by the tenth edition of the APICS dictionary, the master production schedule is "the anticipated build schedule for those items assigned to the master scheduler."


Question Number: 113 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning In which of the following manufacturing environments are forward scheduling and finite loading best suited for providing customer promise dates?

A) Make-to-stock B) Make-to-order C)

Assemble-to-order D) Configure-to-order


Forward scheduling assumes that materials are not ordered and operations are not scheduled until the customer order is received, regardless of the due date. In a make-toorder environment, work does not begin until the order is received from the customer. The order is then scheduled forward from the order date and considers the load on the finite capacity of each work center through which the order must move. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 114 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Planning bills can be best described as: A) grouping like items together for planning. B) products which the factory plans to build.

C) indented bill of materials. D) phantom bill of materials.


A planning bill is an artificial grouping of components for planning purposes. They are used to simplify planning, forecasting, master production scheduling, and material requirements planning. They do not represent products which are buildable. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 115 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The portion of a company's inventory and planned production which is not already committed is:

A) inventory allocation. B) inventory commitment.

C) available to promise. D) multi-plant planning.


Available-to-promise is the portion of inventory and planned production not already committed to orders. It allows accurate delivery promises to be made to the customer. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 116 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The primary reason for a time fence is to:

A) determine how to use the forecast. B) manage schedule changes most effectively. C) provide a stable schedule for the suppliers.

D) maintain a steady shipment schedule.


Time fences are mainly used to manage the changes that invariably occur in the master schedule. The frozen zone usually can be changed only with senior management approval due to the high cost of changes. The liquid zone can routinely have changes made because resources have not been committed. The slushy zone usually requires negotiated trade-offs between marketing and manufacturing. If capacity is available, then changes can usually be made. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 117 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning A bill of materials contains: I. Components used to make a product II. Labor needed to build the product

III. Assemblies at various stages of production IV. Safety stock by item

A) I and II B) I and III C) II and III D) III and IV


A bill of materials contains all of the components used in the manufacture of end items. In addition, the subassemblies at various stages of manufacture are described. Labor is defined in the routing, generally in standard hours, and safety stock is not generally maintained on the bill of materials. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 118 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The term value can be best defined as:

A) total revenue of products and services. B) total inventory available for shipment. C) amount buyers are willing to pay for a product or service. D) gross margin on a product or service.


Value is defined as the amount buyers are willing to pay for a product or service. Total revenue would be the measure of the value. ( Operations Management, Concepts in Manufacturing and Services, Chapter 1).


Question Number: 119 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The term, Value Chain, refers to the:

A) total value generated by a company's activities. B) total revenue for all the products and services. C) supplier network for providing goods and services. D) margin associated with the activities.


The Value Chain refers to the total value generated by a company. It is comprised of value activities and margin. Value activities can be broken into two types; primary and support. Primary activities are those concerned with the physical creation of the product or service which a company sells. Support activities are those which help brace the primary activities such as technology, human resources, accounting, etc.


Question Number: 120 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The primary advantage of the concurrent engineering process is that: A) inventory needs are reduced. B) engineers work with other departments on projects improving communication. C) project costs for the development are accurately accounted for. D) product development time is reduced.


Concurrent Engineering is the process of forming product teams for the purpose of developing a new product(s). Generally the teams are cross-functional and include representatives from all areas in the company. The teams will often include suppliers as well. Because the product team is focused on delivery of a new product and is constantly interacting with each other, products can be delivered faster, with higher quality at a lower cost. Additionally, the manufacturability of the product will be improved, lowering the ongoing cost of quality.


Question Number: 121 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following would NOT be considered a source of demand?

A) Customer orders B) Interplant orders between facilities C) Forecasts D) Goods due in from a supplier


Goods from suppliers would be included as a supply. Demand must incorporate all sources of the demand whether they are forecasts, customer orders, dependent demand, spare parts orders, etc. Only by aggregating all the demands for a part can planning properly occur.


Question Number: 122 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning A responsive company will incorporate the customers' desires for product improvements into their goods and services. The ability to do this effectively is described as listening to the "voice of the customer." The phrase "voice of the customer" can be best described as:

A) conducting focus groups with potential customers to see what features are best. B) obtaining actual customer descriptions in word for the features and functions they desire. C) getting feedback to a survey on the company website. D) sending out surveys to all important customers regarding the goods and services.


The Voice of the Customer is a process for helping customers define their desires for the features and functions of a supplier's goods and services. It involves defining their desires and translating those desires into actual product and service designs. This is done through a series of meetings and cross communication.


Question Number: 123 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following is the primary benefit of a customer partnership?

A) Higher prices can be charged because the customer is not buying from other sources B) Reduced paperwork between the two parties C) Lower costs in the supply chain for both companies because of the mutual sharing of information D) Higher margins for the supplier


A customer partnership (similar to a supplier partnership) will have an overall effect of lowering costs in the supply chain for both partners. These savings can be shared by the companies. The costs are lowered because the partners share information collaboratively. Information on new designs, forecasts, customer orders, consigned inventory, shared contracts, etc. all contribute to the lower costs.


Question Number: 124 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning The attributes of the product or service that cause a customer to buy from a company are called the:

A) order winners. B) order qualifiers. C) buyers criteria. D) order modifiers.


Order winners are the characteristics that cause a customer to purchase from a supplier. These characteristics can vary widely but will generally include delivery speed, delivery reliability, quality, design superiority, education of the employees, customer importance, service, etc.


Question Number: 125 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Many companies will call themselves market driven. This would indicate that they: A) develop strong advertising campaigns. B) established a strong brand image in the market. C) respond to the customers needs. D) conduct market research.


Market driven companies are constantly developing goods and services which provide customers with a reason to buy from them. They are very capable of listening to the market and responding quickly to the market messages.



The primary purpose for forecasting is:

A) estimating safety stock. B) determining resource and capacity requirements. C) projecting product demand. D) level loading the master schedule.


The primary purpose of forecasting is to project product demand. Based on those projections, safety stock can be estimated, resource and capacity constraints can be identified, and the master schedule load strategy can be determined. However, these occur only after projecting what the product demand will be.


Question Number: 127 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning A forecast which is exhibiting a trend will have which of the following patterns?

A) A steady increase or decrease B) A consistent fluctuating pattern based on the time of year C) An inconsistent fluctuation in demand D) A wavelike fluctuation over several years


A forecast trend displays a steady increase or decrease year to year. (Arnold, Introduction to Materials Management, Chapter 8)


Question Number: 128 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning A forecast analyst has just extracted the recent actual sales history and, in reviewing the data, notices several outliers. The analyst should most likely:

A)

rerun the data to ensure there were no errors in the extract. B) rerun the data but remove the outliers. C) ignore the outliers and use the forecasts as is. D) refer to the tracking signal.


Outliers are data that are outside the general data points of the actual data. These outliers occur due to the random events of business. Sometimes they are caused by the actions of the business such as promotions, bonus timing, etc. Generally speaking, outliers should be removed from the data as they are apt to skew the forecast causing demand projection which are less than accurate. There are times when the outliers are left in the data because it results in very little inaccuracy.


Question Number: 129 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning A collaborative forecast is best described as:

A) one where the seasonal demand is dampened by the trend. B) a forecast where the tracking signal is equal to one. C) a forecast where the customer and the supplying firm have reached a consensus about the forecast. D) a forecast which has a MAD of 2.06 or less.


Collaborative forecasting allows the customer and supplier to communicate and adjust the forecast based on the data of both firms. This is usually completed with both firms communicating directly in a formal process leading to an agreed upon forecast.


Question Number: 130 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Demand Planning Which of the following would NOT be considered marketing research?

A)

Market analysis B) Sales analysis C) Consumer research D) Market penetration


Market penetration is the level by which a product has been accepted in the marketplace. This would include the actual market share which a product has obtained.


Question Number: 131 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A company needs to produce 4000 units over the next two months. There are 21 working days in the first month and 19 working days in the second month. What must the daily rate be with a level strategy?

A) 50

B) 75 C) 100 D) 125


The calculation would be as follows: 4000 units/40 work days = 100 units per day (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 132 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The MPS is used to facilitate communication between which two groups? A) Manufacturing and Logistics B)

Sales and Marketing C) Manufacturing and Finance D) Sales and Manufacturing


While the MPS can be used for many purposes, it is primarily a tool for use by Manufacturing and Sales. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 133 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Rough cut capacity planning can be best described as: A) checking to be sure that critical resources are available to support the preliminary MPS. B) making sure warehouse space is available for raw materials.

C) making certain the load at each work center is less than capacity. D) ensuring resources are available by product family.


Rough-cut capacity planning is concerned with making sure that critical resources are available at the preliminary MPS stage before committing to the schedule. Critical resources are bottleneck operations (not every work center), labor, and materials which may be scarce or have long lead times. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 134 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The minimum planning horizon for the MPS should be: A) twelve months in weekly amounts. B) equal to the longest cumulative lead time.

C) as long as it takes to acquire new capacity. D) twice the longest component lead time.


The planning horizon should be equal to the longest cumulative lead time to purchase components and manufacture. This allows visibility for planning. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 135 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply

Week 1 2 3 4 5 Customer Orders

60 30 20 40 MPS 110 110 ATP 20 50

Based on the above, what action can the planner take regarding an order for 60 in week 3?

A) Reject the order for 60; tell the customer 50 are available B) Accept the order for week 4 for 60 C) Accept the order for week 2 for 60 D) Accept the order for week 3 for 60


The order for 60 can be accepted for week 3, as 70 are available; 20 from week 1 and 50 from week 3. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 136 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply In addition to calculating requirements, the major objective of MRP is to: A) keep the order priorities current. B) maintain the bill of material. C) calculate the inventory needed. D) ensure forecasted demand is to be used.


The two major objectives of MRP are to: 1) Calculate the material requirements based on demand and on hand inventory. 2) Keep order priorities current as business needs change. While MRP does calculate projected inventory, it is not its primary objective. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 137 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply In the product structure below, which of the following parts would be considered parents?

A) A, B, C, D B) E, F C) A, C D) B, D, E, F


Part A and Part C would be considered parents since they have components attached. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 138 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Based on the following product structure how many E's are needed for 100 A's?

A) 100 B) 300 C) 400 D) 600


For 100 A's, the product will need 200 C's. Because 3 E's go into each C, 600 E's (200 * 3) will be required. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 139 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A where-used report provides a list of all:

A) work centers where a part is run. B) parents where a component is used. C) components where a parent is used. D) planning bills.


A where-used report provides a list of all parents where a component is used. It is useful for making mass component changes. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 140 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A pegging report is used to: A) trace the origin of demand for a component. B) trace the capacity requirement for a part. C) identify the quantity per for a particular parent. D) establish the demand for a part.


A pegging report is used to trace the origin of demand for a component. It shows only the parents for which demand exists, unlike the where-used report which shows every parent in which a component is used. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 141 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The Bill of Materials is used quite frequently in manufacturing. All of the following are uses of the BOM except:

A) Product costing B) Planning C) Calculating capacity D) Engineering change control


Capacity planning uses the routing file to determine the load on the work centers. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 142 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Net requirements are:

A) Scheduled receipts - available inventory - forecast B) Forecasts - scheduled receipts - customer orders C) Forecasts - customer orders and scheduled receipts D) Gross requirements - scheduled receipts- available inventory


Net requirements are calculated by gross requirements - scheduled receipts - available inventory. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 143 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A low level code is best defined as the:

A) first work center in which the part is processed. B) lowest level on which a part resides in the BOM. C) product family which the part belongs to. D) the most accurate forecast level.


The low-level code tells the MRP system the lowest level in which the part resides. The system uses this information to determine when to total all the requirements for a component. The end item is level 0. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 144 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following best describes the term "load"?

A) Sum of the required times for all actual orders to be run at a work center for a specified time frame B) Sum of the required times for all planned orders to be run at a work center for a specified time frame C) Sum of the required times for all planned and actual orders to be run at a work center for a specified time period D) Sum of the required times for all forecasted orders to be run at the work center for a specified time period


The load on a work center is calculated by adding the required times for all planned and actual orders to be run at a work center for a specified time period. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 145 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply In order to back schedule, which of the following information is necessary?

I. Quantity and due dates II. Bill of materials sequence III. Setup and run times for each operation IV. Queue, wait, and move times

A) I, II, and III B) I, III, and IV C) II, III, and IV D) I, II, and IV


The bill of materials sequence is not needed in order to backward schedule. Backward scheduling involves machine operation sequence as well as move, queue, and wait times. The quantity would directly impact the time taken at each work center. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 146 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Production activity control can be best described as a (an):

A) planning system. B) execution system. C) scheduling system. D) ordering system.


The production activity control system is responsible for executing the materials requirement plan and the master production schedule. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 147 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Dispatching can be best described as: A) routing the factory orders. B) developing the work instructions. C) releasing orders to the shop floor. D) placing purchase orders with suppliers.


Dispatching is the function of releasing orders to the shop floor based on the materials requirements plan priorities. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 148 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply In a certain manufacturing environment, routings are fixed, and work centers are arranged in the order of the routings. The production at each work center takes a similar amount of time. This would describe:

A) project manufacturing. B) intermittent manufacturing. C) flow manufacturing. D) specialty manufacturing.


In a flow manufacturing environment, routings are generally fixed with work centers arranged according to the flow. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 149 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply In a certain manufacturing environment, the flow of work is varied, workers must be flexible, and throughput times are long. This describes:

A) project manufacturing. B) intermittent manufacturing. C) flow manufacturing. D) specialty manufacturing.


With intermittent manufacturing, the flow of work is varied, depending on the design. This causes the work flow to be unbalanced. Machinery and workers need to be flexible and are generally grouped together by function. Throughput times are generally long depending on the work which needs to be done at each work center. As a result, scheduling is very complex. The capacity needed depends on the mix of products moving through the various work centers. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 150 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Of all the times associated with manufacturing lead times, which generally takes the most time in intermittent manufacturing?

A) Run time B) Setup time C) Queue time D) Move time


Queue time usually accounts for 85%-95% of total lead time. As a result, it is critical that production control aggressively manages the queue time. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 151 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Operations are scheduled from the date the order is received. This would best describe:

A) backward scheduling. B) master scheduling. C) capacity scheduling. D) forward scheduling.


Forward scheduling begins when an order is received. The due date for the customer would be calculated based on material purchases and operation scheduling. It is used for developing promise dates for the customer, or determining whether a late order can be delivered on time. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 152 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The last operation is scheduled for completion on the due date. Other previous operations are scheduled so that the due date can be met. This describes:

A) backward scheduling. B) master scheduling. C) capacity scheduling. D) forward scheduling.


Backward scheduling schedules the last operation on the routing so that the completion date is the due date. All previous operations are scheduled back from the last operation. The benefit of backward scheduling is that it schedules back from the customer due date. However, because there is no slack time, on time delivery and service may suffer. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 153 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply When the next operation is allowed to begin before the entire lot is completed on the previous operation, this is called:

A) operation splitting. B) operation overlapping. C) work center overlapping. D) work center splitting.


Operation overlapping allows the next operation to begin even though the whole lot has not been completed through the previous operations. It can be used to expedite an order. However, sometimes costs are increased. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 154 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Bottlenecks can be best defined as:

A) work stations where available capacity is greater than required capacity. B) work stations where measured capacity is greater than required capacity. C) work stations where required capacity is greater than available capacity. D) work stations where the demonstrated capacity is greater than the measured capacity.


Bottlenecks occur when the required capacity is greater than the available capacity. This condition then creates queues in front of the work center. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 155 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The total volume of production passing through a facility is defined as: A) total output. B) finished goods production. C) load. D) throughput.


Throughput is the total volume passing through a facility. Bottlenecks control the throughput, as production can only proceed as quickly as the slowest bottleneck. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 156 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply All of the following are principles of bottlenecks except: A) Using a non-bottleneck 100% of the time does not produce 100% utilization B) The capacity of the production process depends on the capacity of the bottleneck C) Time saved at the bottleneck saves nothing D) Capacity and demand must be considered together


Time saved at the bottleneck is where capacity is saved because the entire production process can only go as fast as the bottleneck.



Question Number: 157 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Managing bottlenecks is extremely important to the throughput of the production facility. All of the following should be done to manage bottlenecks except:

A) Change the schedule frequently to meet customer promises B) Maintain a time buffer before each bottleneck C) Control the feed rate of material to the bottleneck D) Increase the bottleneck capacity as much as possible


The schedule should be changed as a last resort to meet customer deliveries. However, frequent changes will in fact reduce capacity at the bottleneck causing the bottleneck condition to grow worse.



Question Number: 158 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A shop packet will contain all of the following except:

A) Engineering drawings B) Bill of materials C) Route sheets D) Customer information


While the customer might be identified, it is not necessary to include the customer information in the shop packet. The other items listed in Answers A, B, and C would generally be included.



Question Number: 159 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The input rate is controlled by the:

A) material flow from suppliers. B) tooling requirements. C) release of orders to the shop. D) demand from customers.


Releasing orders to the shop controls the input rate. If orders are released faster than they can be produced, then queue, work-in-progress, and lead times will increase. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 160 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply You calculate the critical ratio which is .95 for a particular order. The order is: A) behind schedule. B) ahead of schedule. C) on schedule. D) Critical ratio has nothing to do with order priority.


The critical ratio measures the priority of an order to the other orders at a work center. It is calculated by:

Due date - Present date

Actual time remaining -------------------------= -------------------------Lead time remaining Lead time remaining (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 161 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The lot size rule described as lot-for-lot will do which of the following? A) Order a fixed amount B) Order a lot equal to so many periods C) Order just the amount needed D) Order in fixed intervals


A lot-for-lot ordering rule will order just the amount needed based on the net requirement. (Arnold, Introduction to Materials Management, Chapter 10).


Question Number: 162 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply For a company, quick setup and changeover provide a competitive advantage. Which of the following are advantages created by quick changeovers?

I. Reduced manufacturing lead time II. Improved quality III. Improved maintenance IV. Reduced work-in-process



Quick changeover and setup create many advantages, including reduced work-in-process, reduced lead time, improved quality, and improved flow. While improved maintenance is usually necessary for improved changeover, it is not created by quick setup. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 163 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following is true regarding priority?

A) It refers to the ability of the plan to meet the demand. B) It refers to the capacity to meet production. C) It refers to purchasing's ability to get raw materials in a timely manner. D) It refers to maintaining the correct due dates on orders.


Priority refers to the system's ability to maintain the true due dates for orders. The system constantly evaluates the true due dates for released orders and will expedite or reschedule out the orders. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 164 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following best describes an exception message?

A) A message to the planner that a problem needs attention B) A message that the MRP system is done running C) A message that the system is in balance D) A message to order within lead time


An exception message provides the planner with a notice that a problem needs attention. These exceptions could be late orders arriving, order not needed, reschedule an order out or in, and many others. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 165 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following best describes the term capacity?

A) The quantity of work done B) The rate of doing work C) The amount of inventory produced D) The number of standard hours produced


Capacity is concerned with the rate of doing work. According to the APICS dictionary, capacity is defined as "the capability of a worker, machine, work center, plan, or organization to produce output per period of time". (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 166 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A work center includes four machines working 16 hours per day, five days per week. What is the weekly available time?

A) 80 hours B) 160 hours C) 320 hours D) Not enough information to determine


Available time is calculated by multiplying the number of machines (4), by the number of hours they are available each day (16), by the number of days each week (5). The result would be 4 * 16 * 5 = 320. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 167 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply If a work center has available time of 300 hours per week and the utilization is 80%, how many hours each week is the work center actually producing parts?



The utilization rate measures the percent of time the machines are actually producing parts. The hours actually worked can be calculated by mutiplying the utilization percentage (80%) by the number of hours available (300) which equals 240 hours. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 168 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A work center has 300 available hours, a utilization rate of 80% and an efficiency rate of 90%. What is the rated capacity of the work center?



The rated capacity is calculated by multiplying the available hours (300), by the utilization percentage (80%), by the efficiency rating of the work center (90%). Therefore: 300 * .80 * .90 = 216 (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 169 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A time fence which is included in the frozen zone has which of the following characteristics?

A) Any change can be made as long as it is within the production plan. B) Capacity and materials have been committed to specific orders. C) Changes can be made if capacity is available. D) Costs for changing are not excessive.


The frozen time fence should have the least changes made because capacity and materials have been committed to specific orders. Changes in this zone should have a senior level authorization because of the expense of the changes. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 170 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The time fence zone known as the liquid zone would have which of the following characteristics?

A) Any change can be made to the MPS within the production plan. B) Changes must be minimized due to the expense of changing the MPS. C) Capacity and materials are committed to specific orders. D) Changes should be authorized at the senior manager level.


The liquid zone is characterized by mostly forecast orders and changes can readily be made without an impact to the bottom line. The Master Scheduler can make changes in this zone or the computer will make changes in this zone. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 171 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following are inputs to the Material Requirements Planning system?

I. Master Production Schedule II. Inventory records III. Production plan IV. Bill of materials



The Material Requirements Planning system needs input from the Master Production Schedule, inventory records, and the bill of materials in order to process information properly. The production plan is an input to MPS. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 172 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The amount of time needed for each order can be calculated by adding: A) run time, setup time, queue time, and move time. B) run time, setup time, and queue time. C) run time and setup time. D) run time, move time, and queue time.


The time needed for each order can be calculated by adding run time and setup time. The setup time is a fixed time component and the run time would be represented by a time per unit run. These would then be combined to calculate the time per job. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 173 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The concept of linearity can be best described as: A) balancing the work at each work station. B) capacity available for the line to work. C) scheduling jobs with similar setup times. D) achieving the plan; no more, no less.


The term linearity is used with Just-in-Time to measure the achievement of the plan. This ensures that just the demand is produced and no extra parts are manufactured because time is available (waste of overproduction). (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 174 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply All of the following are benefits of subcontracting EXCEPT: A) Excess capacity is not left unused B) Companies can produce at minimum levels, reducing facilities cost. C) Cost can be minimized. D) Overtime can be reduced.


There are many benefits to subcontracting as needed to support manufacturing. Although short-term subcontracting will most likely increase costs, this may not matter when the lack of capacity is temporary. The additional cost may be worth it if the product cannot be made otherwise. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 175 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following is a characteristic of a bottleneck? A) Available capacity exceeds required capacity B) Required capacity exceeds available capacity C) Demonstrated capacity exceeds required capacity D) Available capacity exceeds throughput


A bottleneck work center is defined as one where the required capacity is greater than the available capacity. When this occurs, work in process inventory grows. Therefore, work must be scheduled at a pace equal to the bottleneck work center. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 176 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following would be true in regards to bottleneck work centers?

A) Capacity is greater than the preceding work center B) Throughput is controlled by the bottleneck C) Demand is less than the capacity D) Bottlenecks eventually go away


Bottlenecks are work centers where demand exceeds capacity. When this occurs, the throughput, or total volume of production, will be limited by the amount which can pass through the bottleneck work center. The bottleneck will only disappear when action is taken to increase the capacity at the work center. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 177 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The primary reason to use operation splitting is to:

A) utilize machinery more effectively. B) increase manpower efficiency. C) reduce the maintenance costs. D) reduce lead time.


Operation splitting can be defined as splitting the lot size over multiple machines. This will reduce the lead time. For example, if a lot size is split over two machines, the lot size is essentially cut in half. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 178 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The primary reason to use operation overlapping is to reduce the:

A) overall manufacturing lead time. B) cost of purchased components. C) machine maintenance. D) labor contribution.


In operation overlapping, the next operation begins work before the lot is completed at the prior operation. This reduces the overall manufacturing lead time because the second operation is producing parts and not waiting for the lot to be finished. The leadtime is reduced by the amount of the overlapped operation time. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 179 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A part made on a work center has a setup time of 50 minutes and run time of two minutes per piece. An order for 600 parts needs to be processed on two machines at the same time. The machines can be set up at the same time. The elapsed operation time will be:

A) 600 B) 650 C) 1200 D) 1250


Elapsed operation time = Setup time + run time per piece divided by the number of pieces per machine. Therefore: Elapsed operation time = 50 + [2(600/2)] = 650 (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 180 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A manufacturer makes tables consisting of a top, 4 legs, and 4 top trims. Demand for the tables is 600 per week. The capacity for the tops is 700 per week, the capacity for legs is 2,000 per week, and the capacity for the trim is 2,500 per week. What is the capacity to produce tables?

A) 400 B) 500 C) 600 D) 1000


The capacity for the legs is 2,000 legs per week. Since each table takes 4 legs, only enough legs for 500 tables can be produced. The bottleneck operation determines the throughput. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 181 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Work center load can be best defined as: A) the schedule of jobs released to a work center. B) a chart to line balance production. C) production at a constant quantity. D) the amount of work released to a work center.


The load on a work center is defined as "the amount of planned work scheduled for and actual work released to a facility, work center, or operation for a specific span of time. " (APICS Dictionary, Tenth Edition).


Question Number: 182 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A manufactured component is going to be late. Which of the following would a planner review to ensure a customer will not be affected?

A) Indented bill of materials B) Pegging inquiry screen C) Open purchase order report D) Work order routing


A pegging report or screen would show the source of demand for a part at each level in the bill of materials. By moving up each level of the bill of materials, the ultimate source of demand can be identified. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 183 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply If a work center is using a pull signal, they are using what manufacturing system? A) Just-in-Time B) Control chart method C) GANT control D) ERP system


In a Just-in-Time system of manufacturing, a work center will provide the previous work center with a signal to "pull" more materials. This method allows the manufacturing system to produce more closely to demand, reducing dramatically the inventory levels needed. (Arnold, Introduction to Materials Management, Chapter 14).


Question Number: 184 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Input/output control is used to manage: A) supplier lead times. B) queues and lead times. C) capacity planning. D) system runtimes.


Input/output control manages the queues by regulating the flow of work into the work centers. By regulating the inflow of work to equal the outflow of work, the work will flow smoothly to meet the lead times needed. Generally, the input/output control is measured in hours. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 185 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following shows the demand for capacity at a work center for a specific period of time?

A) Bill of resources B) Dispatch list C) Net requirements D) Work center load


Work center load report or display shows the demand for capacity at a work center for a specified period of time. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 186 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply If the critical ratio is less than 1, an order is:

A) ahead of schedule. B) on schedule. C) behind schedule. D) already late.


The critical ratio measures the amount of time remaining to the amount of work remaining. It is calculated by:

Due date - Present date Actual time left -------------------------= -------------------------Lead time remaining Lead time left

If the ratio is less than one, it means that the actual time left is less than the lead time left. This causes the order to be behind schedule. A ratio of 1 means the time remaining equals the remaining lead time. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 187 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The function of selecting and sequencing available jobs to be run at each work center is called:

A) sequencing. B) prioritizing. C) dispatching. D) cycling.


Dispatching is the process of selecting and sequencing the available jobs to be run at individual work centers. It is a very important function in that jobs need to be prioritized in order to meet customer due dates. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 188 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply When the MRP requirements change frequently and by small amounts, this is referred to as:

A) replanning. B) nervousness. C) explosion. D) netting.


System nervousness occurs when the requirements change rapidly and by small amounts. This causes the system to create messages to reschedule orders. Following these orders would cause chaos on the manufacturing floor and at the suppliers. The most effective ways to reduce system nervousness are to: 1) use filters to reduce the messages or, 2) use firm orders which cause the system to minimize the replanning. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 189 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Orders which are automatically replanned by the computer are called:

A) firm orders. B) scheduled receipts. C) net requirements. D) planned orders.


Planned orders are replanned by the computer automatically based on the activities which are occurring. Firm orders are not replanned automatically nor are scheduled receipts. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 190 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Often, when placing an order, a customer will ask when the order will ship. The ability to answer this question rests with check of the uncommitted material and available capacity. Which of the following tools will most often be used to answer the question "when will my order ship?"

A) Pegging report to understand where demand is coming from B) Available to promise portion of the MPS C) The resource requirements at the key work centers D) The ability of the supplier to provide materials within lead time


The available-to-promise portion of the Master Production Schedule is the uncommitted inventory and planned production which is available to the customer.


Question Number: 191 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The ABC Manufacturing company has cross functional teams that include manufacturing and design engineers, and representatives from marketing, finance, manufacturing, materials and suppliers. In this cooperative environment, the teams are rewarded according to their ability to bring market driven product designs to customers quickly and at a price that is possible only because they avoid unnecessary costs. This approach to new product design is known as:

A) design for manufacturability. B) quality function deployment. C) voice of the customer. D) engineering change management.


Design for manufacturability employs cross functional teams to move market driven products to customers quickly and at a lower cost. They are able to do this by being able to make the appropriate decisions within the team structure making the design process move quickly.


Question Number: 192 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A plant manager is walking around the factory floor. She identifies a work center as a bottleneck operation. She can tell it is a bottleneck by:

A) the confusion of the operator. B) the large queue of products waiting to be run. C) the idle time on the machine. D) the hour glass shape of the line.


Bottleneck operations are caused by capacity being less than the demand being placed on it. If not scheduled properly, parts to be run will be backed up at the work center waiting to be run. The bottleneck will be the pacing operation and should be scheduled appropriately.


Question Number: 193 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following would best describe the term standard time?

A) Time which operators put in each day B) The cost of the labor to produce the part C) Time it takes a qualified operator to make a part D) The number of hours per day working at the rated efficiency


Standard time is the time it takes for a qualified operator working at a normal pace to complete a job.


Question Number: 194 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following would best describe the purpose of a shop calendar? A) Lets all the workers know when the holidays occur B) Provides time clarity to the shop workers C) Identifies the available capacity on the shop floor D) Provides the manufacturing system with the valid shop days for planning


A shop calendar provides the system with the valid days in which the shop will be operating. Without it the lead times in the system would not be valid as non-work calendar days (like holidays) would be used.


Question Number: 195 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following equals manufacturing lead time?

A) Queue, setup, run, wait, and move times B) Setup, run, wait, and move times C) Queue, run, wait, and move times D) Queue, setup, run and move times


Manufacturing lead time is the sum of the queue, setup, run, wait and move times. The greatest part of the leadtime is usually queue, setup, wait, and move times (the non-value added times).


Question Number: 196 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply If a company is using backward scheduling to schedule manufacturing, which of the following is used as the first date to determine the schedule?

A) Due date B) Start date C) Latest start date D) Earliest start date


When using backward scheduling, the system uses the due date of the order as the first date to begin scheduling. It then schedules backward to determine the start and end date at each work center, completing the schedule at the start date for the order.


Question Number: 197 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following describes the strategic advantage of capacity planning? A) It improves the flow of materials through the factory. B) It provides more realistic due dates to customers. C) It improves the scheduling of materials from suppliers. D) It improves scheduling performance and reduces cost.


Capacity planning provides many benefits to companies. Strategically it improves scheduling performance and, as a result, reduces cost. The improvement in scheduling also allows materials to flow through the facility smoothly, provides better schedules for suppliers to follow, and it does allow more realistic due dates for customers. Without capacity planning, orders would be generated without regard to capability to produce causing higher costs, late deliveries and overloaded work centers.


Question Number: 198 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply In the context of capacity, which of the following best describes the term unit of output? A) A unit of measure common to all products B) An individual part number or SKU C) A bale of scrap generated by the factory D) An individual's output efficiency


When the variety of products produced at a work center or plant is small, then capacity can be measured by a unit of output. It is a common unit by which capacity can be measured. For example, oil refineries measure barrels, paper mills measure tons of paper, automobile manufacturers measure cars.


Question Number: 199 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply When no common unit of measure can be found for measuring capacity, which of the following would be used?

A) Each SKU B) Efficiency C) Time D) Utilization


All products have a common unit to measure when it is time. Standard time to make a product would be used while hours of available capacity would measure the work center's available capacity.


Question Number: 200 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following best describes the term load?

A) Total hours in which product can be manufactured B) Sum of all the required capacities C) Sum of capacity multiplied by the efficiency and utilization D) Total hours a workcenter can be used


The load on the plant is equal to the amount of planned orders and actual orders released to the plant . In other words, it is the sum of all the required capacities. The load on the plant is critical to the success of meeting the schedule. If the plant is overloaded, then delays will occur. If the plant is underloaded, then downtime will occur.


Question Number: 201 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply For a sales and operations planning process, which of the following would most likely be the level of detail used?

A) Each stockkeeping unit B) Each model within a product family C) Major product groups D) Total resource hours


Sales and Operations planning ensures that production can meet market demand. This is done at a high level and will generally include major product groups. Based on the demand data, production management will match the demand by product group with a resource profile for that group to determine if the demand can be met. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 202 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Development of a strategic business plan is the responsibility of which of the following groups?

A) Senior management B) Sales and marketing C) Design and engineering D) Finance


Strategic business planning is the responsibility of senior management. They need to ensure that the plan they devise is one that is sound and achievable. It would include:

Marketing Plan Financial Plan Engineering Plan

Production Plan

All the plans need to mesh in order to establish a cohesive strategic plan. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 203 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply As a planning process, which of the following would have the highest level of detail?

A) Production planning B) Master production scheduling C) Material requirements planning D) Production activity control


Production activity control is responsible for planning and controlling the flow of work through the factory. The time horizon is very short; as little as an hour but usually a day to a month into the future. (Arnold, Introduction to Materials Management, Chapter 2).


Question Number: 204 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The "frozen" zone within the time fence is usually:

A) before the final assembly schedule. B) closest to the due date. C) furthest from the due date. D) in the middle of the zones.


The frozen zone of the time fence is the zone in which changes need high level approval due to the extra costs associated with the change. At this point in the time fence, resources of manpower, machinery and materials have been committed to meet existing due dates. Most often, senior managers need to approve the change. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 205 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The link between production planning and what manufacturing actually builds is called the:

A) business plan. B) production plan. C) final assembly schedule. D) master production schedule.


The master production schedule forms the link between the production plan and what manufacturing builds. It is the plan for the production of individual units. It translates the production plan with its monthly family units into weekly individual units.


Question Number: 206 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply All of the following are basic responsibilities except: A) Release orders to purchasing or manufacturing B) Negotiate supplier contracts C) Reschedule due dates of open orders as required D) Solve critical material shortages


Negotiating supplier contracts would be the buyer's responsibility.


Question Number: 207 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following best describes a planning bill?

A) Artificial groupings of components for planning purposes B) A resource profile for a product family C) A bill structure where there is no lead time and the gross to net explosion occurs through the component to the next level D) A bill used to plan for kits


Planning bills are artificial groupings of components to facilitate the planning process. They are used to simplify forecasting, master production scheduling, and materials requirements planning. They are not buildable products but represent an average product.

(Arnold, Introduction to Materials Management, Chapter 4)


Question Number: 208 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The MRP system has given you, the planner, the message, " Expedite Order 45367" which happens to be for a purchased part. You should:

A) immediately change the order to the recommended date. B) move the order to a later date. C) contact the supplier to see if they can meet the new delivery date. D) leave the order as is.


Because the order is for a purchased part, the ability to change the order as recommended would be dependent on the supplier's ability to complete the order sooner.


Question Number: 209 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Action to correct for changed conditions should occur as low in the product structure as possible. This is called:

A) low level coding. B) bottom-up replanning. C) priority replanning. D) pegging upward.


Adjusting for changing conditions should occur as low in the product structure as possible. If a low level part requires expediting, then every effort should be made to get the part earlier. This allows the change to occur with as little disruption to the schedule as possible. If the low level part cannot be expedited, then the parent item and upper level parts may need to be adjusted. This will complicate the change as many more parts will need to be moved in the schedule.


Question Number: 210 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A Final Assembly Schedule only takes place when: A) MPS is run in final mode. B) a picklist is generated. C) a customer order is received. D) a planned order is firmed.


A Final Assembly Schedule is a schedule of what will be assembled. It is used when there are many options and it is difficult to forecast what the customers will want. The final assembly schedule is developed with actual customer orders.


Question Number: 211 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The quantity calculated as available-to-promise really is meant to answer the question:

A) When can you ship the product? B) What available capacity is left? C) What is the projected available inventory? D) How much is on hand to ship?


Available-to-promise allows the customer service personnel to promise orders to be shipped by a certain date. The available-to-promise quantity represents the uncommitted inventory and available capacity. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 212 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The process of communicating start and completion dates to manufacturing departments is called:

A) priority control. B) capacity control. C) resource control. D) input/output control.


Priority control is the communication of start and completion dates to manufacturing departments in order to execute a plan (APICS Dictionary). The primary method of communication is the dispatch list. It ensures that departments are working on jobs based on the due dates for completion.


Question Number: 213 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The primary method of communicating start and completion dates to the manufacturing departments is the:

A) stock status report. B) input/output report. C) dispatch list. D) resource planning report.


The dispatch list is the method by which priority control is communicated to the manufacturing departments. The dispatch list ensures the manufacturing departments are working on the right jobs to meet the necessary due dates.


Question Number: 214 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following would best describe the technique known as input/output control?

A) Technique for planning capacity B) Technique for input material information to MRP C) Technique for measuring resources D) Technique for capacity control


Input/output control is a technique for capacity control where the planned and actual inputs to a work center and the planned and actual outputs from a work center are monitored (APICS Dictionary). This technique can help identify work centers which are not achieving the plan for input or output. This provides manufacturing management with an opportunity to implement corrective action.


Question Number: 215 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply In a forward scheduling process, the scheduler is trying to determine the: A) preflush dates. B) start date. C) completion date. D) backflush points.


In a forward scheduling technique, the scheduler knows the start date based on the order and must schedule forward through the work centers to determine the completion date for the order..


Question Number: 216 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply The function of maintaining a process within a given range of capability is called:

A) process quality management. B) total process assurance. C) process control. D) customer satisfaction.


Process control is the function of maintaining a process within a specified range of capability. This is usually achieved with a feedback and correction process. Often processes are monitored by control charts and the operator can make adjustments in the process to maintain the process capability.


Question Number: 217 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A work center can be described as a bottleneck work center. Based on this fact which of the following is true regarding this work center?

A) More work released to the work center will increase the flow. B) It controls the throughput of products processed by them. C) The capacity of the bottleneck is greater than the demand. D) A bar code process can alleviate the bottleneck.


Bottleneck work centers are, by definition, a work center whose capacity is equal to or less than the demand placed on it. Bottleneck workcenters control the throughput of all products processed by them. They become the pacing resource which means that the bottleneck workcenter should be the workcenter for scheduling the flow of products.


Question Number: 218 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Suppose a manufacturer makes tables consisting of a top, four legs and two cross bars to support the table. Demand for the table is 600 per week. The table top fabricating capacity is 650 per week, the leg department can fabricate 2000 legs per week and the cross bar assembly department has a capacity of 1400 crossbars per week. What is the capacity of the factory?

A) 500 tables B) 550 tables C) 600 tables D) 650 tables


The leg fabrication department can produce 2000 legs per week which equals the equivalent of 500 tables (4 legs per table or 2000 legs). Therefore, the factory can only produce as much as the bottleneck department or 500 tables.


Question Number: 219 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Utilization of a non-bottleneck resource is determined by:

A) multiplying the utilization times the efficiency. B) the required capacity. C) another constraint in the system. D) the load at the workcenter.


Utilization of a non-bottleneck resource is affected by the constrained resource. Therefore, the utilization measure for the non-bottleneck resource is not a meaningful measure. It is, however, critical that the bottleneck resource have high utilization. It is recommended that a stock buffer be used before the bottleneck resource to ensure that the bottleneck is never starved for materials since it directly impacts the rest of the factory.


Question Number: 220 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply To increase the throughput of a factory, the industrial engineers have made recommendations which will increase the capacity of a non-bottleneck resource by 40%. What impact will this change have in the throughput of the factory?

A) Increase the factory output by 40% B) Depends on the number of work centers C) Depends on the number of employees D) No impact


Increasing the capacity of a non-bottleneck workcenter will have no impact on the capacity of the factory (other than wasting everyone's time with the changes). Unless the capacity of the bottleneck is increased, no gain in factory capacity can be achieved as throughput is controlled by the bottleneck resource.


Question Number: 221 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following rules should be used when managing bottlenecks?

A) Increase the throughput of the operation preceding the bottleneck. B) Feed the bottleneck at a rate equal to its capacity. C) Reduce the rate at the operation preceding the bottleneck. D) Increase the throughput of the operation after the bottleneck.


A bottleneck controls the throughput of the products processed at the bottleneck. A time buffer is needed before the bottleneck to measure the bottleneck resource is never starved for materials. To maintain the buffer before the bottleneck resource, the bottleneck should be loaded at a rate equal to its capacity to maintain a constant buffer. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 222 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A company uses a critical ratio to determine the priority of jobs remaining in the factory. Currently job A-2578 at Work Center 110 is showing a critical ratio of .8. The job is:

A) ahead of schedule. B) on schedule. C) behind schedule. D) already late.


The critical ratio is an index of the relative priority of an order to the other orders at a work center. It is based on the ratio of time remaining to the work remaining. It is usually expressed as: CR= due date - present date / lead time remaining A critical ratio equal to 1 indicates the order is on schedule. A critical ratio less than 1 indicates the order is behind schedule while over 1 indicates the order is ahead of schedule. If the critical ratio is zero or less, than the order is already late. (Arnold, Introduction to Materials Management, Chapter 6.)


Question Number: 223 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Production activity control is responsible for:

A) executing the production plan and master production schedule. B) executing the master production schedule and the material requirements plan. C) executing the forecast and master production schedule. D) executing the material requirements plan and the purchasing plan.


Production activity control is responsible for executing the master production schedule and the material requirements plan. It must also make efficient use of labor and machine resources while minimizing work-in-process inventory. It must also ensure customers are receiving orders as quoted. (Arnold, Introduction to Materials Management, Chapter 6)


Question Number: 224 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A customer has called and requested an order be delivered in one month. Based on this delivery date, production control has determined the order must start in one week. The method of scheduling they used to determine this is:

A) finite scheduling. B) infinite scheduling. C) backward scheduling. D) forward scheduling.


The scheduling technique used was backward scheduling. The production control department started at the due date and calculated backwards through the workcenters to determine when the order could be started. Forward scheduling starts with the order date and determines when the order can be completed, or its ending date. Both finite and infinite capacity are loading techniques for use in scheduling, however, they are not scheduling techniques.


Question Number: 225 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A company uses operation overlapping. This is done to:

A) reduce total manufacturing lead time. B) keep setup times low. C) increase use of an experienced work force. D) reduce the amount of tooling needed.


Operation overlapping allows the next operation to start before the entire lot is completed on the previous operation. This is done to reduce the total manufacturing lead time. There can be some costs to doing this, such as increased move costs by moving smaller lots more frequently.


Question Number: 226 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply A company will use operation splitting in order to:

A) utilize a skilled workforce. B) utilize machines. C) reduce manufacturing leadtime. D) reduce setup times.


Operation splitting splits the order into two or more lots so the order can be run on two or more machines. This effectively cuts the lead time by at least half. Operation splitting is effective when setup time is low compared to operation time; a practical work center is idle; and an operator can run more than one machine at a time.


Question Number: 227 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Why is feedback necessary in a control system? A) Available capacity is accurate. B) Bills of materials will be current. C) Routing files will be accurate. D) Feedback allows planning to always remain current.


Feedback is the flow of information back into the control system so actual performance can be compared with planned performance (APICS Dictionary). This allows adjustments to occur in the planning system so they are up-to-date with the actual occurrence.


Question Number: 228 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply When does a first-article inspection occur?

A) After the setup is complete B) When the order is released C) After the machine is maintained D) After training has occurred


A first-article inspection occurs on the first part produced after a setup has been completed (APICS Dictionary). This is done to ensure that the setup will produce quality parts.


Question Number: 229 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply Which of the following best defines the term quality?

A) Passing 98% of the testing B) Conformance to requirements C) Best in the industry D) Completing ISO documentation


Quality can be defined as conforming to the requirements. Ideally, the customer is defining the requirements to be met. Different customers may have different requirements for the parts they purchase, so quality levels can be different for different customers.


Question Number: 230

BASICS OF SUPPLY CHAIN MGMT (BSCM) :Transformation of Demand into Supply If a supplier is responsible to provide 100% acceptable quality material to the customer, they are defined as providing:

A) outgoing inspections. B) vendor managed inventory. C) quality at the source. D) ISO certified parts.


Quality at the source dictates that the supplier provide 100% acceptable quality materials to the customer. This eliminates the need for incoming inspection, returns, etc. While the supplier may use outgoing inspections as a way to ensure the quality, it is hoped that the supplier will build quality into the product and throughout their supply chain.


Question Number: 231 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply

Which of the following activities is not part of physical supply/distribution? A) Transportation B) Warehousing C) Order entry D) Capacity planning


Physical supply/distribution is concerned with the fulfillment of a customer's order. This would include transportation, order entry, and warehousing. Capacity planning, however, is considered part of the manufacturing process. (Arnold, Introduction to Materials Management, Chapter 1).



All of the following are part of physical supply/distribution except:

A) Supplier inventory B) Material handling C) Order entry D) Finished goods inventory


Physical supply/distribution is involved with the movement of goods from the supplier to the beginning of production, and from the end of production to the final customers. (Arnold, Introduction to Materials Management, Chapter 1).


Question Number: 233 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Available to promise can be best defined as:

A) inventory and planned production not already committed. B) customer orders inside lead time which have been promised. C) inventory not already committed. D) capacity which is not used and therefore is available.


Available-to-promise is the part of inventory and planned production which is available to be promised to customers for delivery. It is calculated by adding scheduled receipts to the beginning inventory and subtracting actual orders scheduled before the next scheduled receipt. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 234 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply All of the following conditions will trigger an exception message except:

A) Changes in timing of a scheduled receipt B) Changes in the inventory on hand balance due to cycle count adjustment C) Changes in the forecast D) Changes in the assigned planner


All of the conditions will trigger an exception message except for changing the planner assignment (number). This will cause the reports to print differently. Any records which cause a change in the gross requirements, inventory, or scheduled receipts, will trigger an exception message. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 235 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Of the following choices, which would be the preferred method to minimize system nervousness?

A) Increase the order quantities B) Increase the lead time C) Use firm planned orders D) Ignore the exception messages


Firm planned orders will reduce system nervousness, especially inside the manufacturing lead time. The planner could ignore the exception messages, however, this could become a dangerous practice. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 236 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Available capacity can be best described as the:

A) ability of a resource to produce a quantity of output for a particular period. B) amount of resource needed to produce the necessary output for a specified time period. C) amount of released work to a facility during a specified time period. D) amount of load on a work center to produce the output necessary.


Available capacity measures the ability of a resource (e.g., machine, plant, etc.) to produce output (e.g., parts) for a specified time frame (e.g., hour, day, week, month, etc.). Answer B defines the required capacity, while Answer C defines the load. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 237 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Capacity requirements planning (CRP) is concerned with which of the following?

I. Labor hours for a product family II. Individual orders and individual work centers III. Calculating work center loads IV. Validating the capacity for the master production schedule

A) I and II B) I and III C) II and III D) III and IV


Capacity requirements planning is concerned with very detailed scheduling for individual orders at each work center to calculate work center loads. Resource planning is concerned with checking the resources available for product families while rough cut capacity planning validates the MPS prior to running the schedule. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 238 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following best describes a routing?

A) The path materials follow from beginning to end. B) The path work follows from work center to work center as it is completed. C) The path information transactions follow to be completed. D) The critical ratio calculated determines whether jobs are on schedule.


A routing shows the steps of manufacture including:

Operations to be completed Sequence of operations Work centers Alternate work centers Tooling necessary

Standard setup and run times

Other activities such as receiving or inventory activities would not typically be on the routing. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 239 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following will affect available capacity?

I. Product specifications II. Product mix III. Quantity of customer order IV. Work pace

A) I, II, and III B) I, II, and IV C) II, III, and IV D) I, III, and IV


Available capacity is affected by many factors including:

Product specification changes will cause work content changes Product mix - a change in product mix to more complicated products will affect available capacity Work pace - if the speed of the work changes, so will available capacity Methods - if the equipment or method of each changes, then so will available capacity.



Question Number: 240 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Sometimes a common unit of measure is not available for use in measuring output. In these cases, what measure would be used?

A) Machine speed B) Number of assemblies C) Standard time D) Acceptable quality parts


Standard time, measured as labor hours, can be used as the common measure of output and work content. It can be used for loading and scheduling. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 241 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Available capacity can be determined in two ways: measurement and calculation. Measured capacity is determined by which of the following methods?

A) Historical data B) Available time C) Machine utilization D) Machine efficiency


Measured capacity is based on historical data, that is, what the machine or operator has produced in the past. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 242 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A work center has 4 machines operating 6 days for 8 hours per day. What is the available time?

A) 24 hours B) 32 hours C) 48 hours D) 192 hours


Available time is the total number of hours a work center can be used. Therefore, 8 * 6 * 4 = 192 hours. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 243 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A work center has 4 machines available 8 hours per day for 5 days per week. During the week, they produce for 128 hours. The utilization is:

A) 70% B) 75% C) 80% D) 85%


Utilization = hours actually worked/available hours. In this example, there are 4 machines * 5 days * 8 hours = 160 available hours. Therefore, 128 hours of actual work divided by 160 available hours = 80% utilization. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 244 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A work center has 4 machines available for 8 hours per day, 5 days per week. The work center is utilized 100 hours but produces 120 hours of standard work. The efficiency of the work center is:

A) 50% B) 62.5% C) 75% D) 120%


Efficiency = standard hours of work produced/hours actually worked * 100%. For this example, 120 standard hours of work was produced, divided by 100 hours of actual work = 1.2 * 100% = 120%. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 245 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A work center has an order to process 500 units of part 1468. It takes .5 hours to setup and 3 minutes for each piece to be run. What is the required time to run the order?

A) 25 hours B) 25.5 hours C) 30 hours D) 35 hours


Required time equals setup time plus run time. For this example, the setup time equals 30 minutes (.5 hours) plus (500 pieces * 3 min./piece). Required time = 30 min. + 1500 min. = 1530 min. = 25.5 hours. (Arnold, Introduction to Materials Management, Chapter 5).


Question Number: 246 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply All of the following are part of manufacturing lead time except: A) Queue time B) Wait time C) Move time D) Purchasing time


Purchasing time is part of the overall lead time of a product; however, manufacturing lead time includes queue time, setup time, run time, wait time, and move time. (Arnold, Introduction to Materials Management, Chapter 6).


Question Number: 247 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply All of the following are objectives of purchasing except:

A) Buy goods and services in the right quantity and quality. B) Buy goods and services at the lowest cost possible. C) Maintain good supplier relations. D) Schedule the suppliers plant so goods arrive on time.


Purchasing objectives are the three answers in A, B, and C. In addition, purchasing must make sure the company receives the best possible service and prompt delivery by the supplier. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 248 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following are factors in selecting suppliers?

I. Technical capability II. Financial reliability III. Location IV. Service after the sale



All of the factors listed should be considered when trying to select a supplier. Other factors include price, credit terms, and quality capabilities. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 249 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The ability to negotiate price is dependent on the type of product. Which of the following products could generally be negotiated?

A) Maintenance, repair, and operating supplies B) Copper, coal, wheat, metal C) Standard electronic components D) Made to order motors


Generally, made to order items which are made to specification and could be obtained from many sources can be negotiated. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 250 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following best describes the advantage of a planner/buyer position? I. Smooth flow of information between supplier and the factory II. Improved coordination of factory requirements and the supplier III. Improved flow of materials through the factory IV. Ability to match material requirements with suppliers capability

A) I, II, and III B) I, III, and IV C) II, III, and IV D)

I, II, and IV


The planner/buyer concept improves coordination between the factory and supplier. By eliminating the extra handoff between planner and buyer, communication will improve. While materials will flow more smoothly into the facility, the flow through the factory is dependent on many other factors. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 251 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In most companies, material purchases represent what percentage of the cost of the product?

A) 30% B) 50% C) 70%

D) 90%


In most companies today, material costs represent 50% or higher of the cost of the product. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 252 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following best describes MRO inventory? A) Raw materials used in production B) Office supplies used in administrative functions C) Inventory in the distribution network D) Items used in production but are not part of the product


MRO's are items used in production but are not part of the product. These items would include hand tools, spare parts, grease, and supplies. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 253 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply All of the following would be reasons for anticipation inventory except: A) Inventory built ahead of the peak season B) A potential strike C) Vacation shutdown D) Price breaks


Inventory accumulated due to price breaks would be considered lot size inventory. Anticipation inventory is accumulated in "anticipation" of an event (future demand). (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 254 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Companies purchase hedge inventory because:

A) they receive quantity discounts. B) supply and demand fluctuates randomly. C) prices fluctuate in worldwide markets. D) transit lead times impact operations.


Hedge inventory is purchased by companies when prices are low in the market. Many commodities such as minerals and grains are traded in open markets with wide fluctuation. Inventory will be bought when prices are low to take advantage of the pricing. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 255 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following are included in the cost of ordering?

I. Receivers who take in material II. Setup costs III. Cost of material planners IV. Cost of buyers



The cost of ordering includes any cost associated with placing orders on the factory or suppliers. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 256 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following conditions will cause the EOQ concept to be invalid? I. Products that are made to order

II. Short shelf life products III. Length of production run is unlimited IV. Raw materials which are on MRP



EOQ assumptions are usually valid for finished goods with independent and uniform demand. However, the assumptions break down in many real-world cases. For example, products which have widely fluctuating demand would not be good candidates for EOQ calculations. (Arnold, Introduction to Materials Management, Chapter 10).


Question Number: 257 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Based on the following information, what is the order point? Lead time = 3 weeks Demand/week = 200 Safety stock = 100

A) 200 B) 300 C) 600 D) 700


Order point = demand during lead time + safety stock For this problem: OP = (200 * 3) + 100 OP = 600 + 100 OP = 700 (Arnold, Introduction to Materials Management, Chapter 11).


Question Number: 258 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Sometimes a periodic review system is the most effective method to manage inventory. For which of the following conditions would this method be used?

I. Raw materials required in production II. Small issues from inventory and transactions are expensive III. Order costs are small IV. Many items are ordered together

A) I, II, and III B) I, III, and IV C) II, III, and IV D)

I, II, and IV


The periodic review system is useful in all cases where there are small issues from inventory, transactions are expensive, ordering costs are small, and many items can be ordered together. For example, supermarkets order by reviewing what is on the shelf. Because there are so many transactions in a supermarket, they are expensive. Additionally, they sell one or two of an item during each cash register transaction. (Arnold, Introduction to Materials Management, Chapter 11).


Question Number: 259 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In operating a warehouse, the major operating cost is: A) fork truck maintenance. B) system costs. C) labor.

D) capital costs.


Labor is the major operating cost for a warehouse. As such, productivity needs to be closely measured and monitored. (Arnold, Introduction to Materials Management, Chapter 12).


Question Number: 260 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following are causes of inventory record inaccuracy? I. Withdrawal of inventory without authorization II. Transaction errors in recording inventory issues III. Poor training of personnel IV. Secured stockroom



Inventory record inaccuracy is caused by many factors, one of which is unsecured stockrooms. (Arnold, Introduction of Materials Management, Chapter 12).


Question Number: 261 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following are the basic responsibilities of a planner?

I. Release orders to manufacturing and purchasing II. Reschedule dates of existing orders as needed III. Solve material shortages by replanning IV. Oversee the cycle counting program



The planner's responsibilities do not include overseeing the cycle counting program although inventory errors greatly impact the planner. (Arnold, Introduction to Materials Management, Chapter 3).


Question Number: 262 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following are required factors in selecting a supplier?

I. Technical capability II. Manufacturing capability III. Advanced systems capability IV. Reliability



The required factors in selecting a supplier are technical ability, manufacturing capability, reliability, service after the sale, supplier location, and price. While having advanced systems capability would be a plus, a supplier would not be eliminated from consideration if their systems were poor. Many good suppliers do not have advanced systems. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 263 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Much of the literature written about purchasing refers to paying a "fair price". Which of the following would best describe the term "fair price"?

A) The price paid at a trade show B) The lowest price in the market place C) A competitive price in the market place at which the supplier and buyer can make a profit D) A price at which the fixed costs are absorbed over the total units produced


A fair price is one which must be competitive in the market place but may not be the lowest. The supplier must be able to make a profit, especially in an ongoing business relationship. Getting the lowest price may put the supplier in a financially weak position. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 264 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A functional specification tells purchasing:

A) when to buy. B) how much to buy. C) where to buy. D) what to buy.


A functional specification tells purchasing what to buy. Functional specifications are concerned with the use of the product and what performance characteristics the product needs to have. Functional specifications are the most difficult to define for a buyer. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 265 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Before a supplier's invoice can be paid, which of the following data must match?

I. Quantity must match the purchase order II. Price must match the purchase order III. Quantity must match the receipt

A) I and II B)

I and III C) II and III D) I, II, and III


Before a supplier's invoice can be paid, there must be a three-way match (computer systems can do this automatically). The price on the purchase order must match the price on the invoice. The quantity received must match the purchase order and the invoice must match the quantity received. Therefore, the price and quantity on all three documents (transactions) must match in order to be paid. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 266 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply If an annual contract is in place with a supplier, the weekly amount to be ordered is done via:

A) purchase order.

B) release. C) blanket order. D) terms statement.


If an annual contract is in place, the weekly amounts would be ordered with a supplier release. Often times this is done by the planner or supplier schedule, not a buyer. The buyer would typically be the one negotiating the contract. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 267 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Purchase requisitions are generally an output from:

A) master production schedule.

B) capacity planning. C) production activity control. D) material requirements planning.


Material requirements planning outputs planned orders for manufacturing and planned requisitions for the purchased components. The requisitions are subsequently turned into purchase orders. (Arnold, Introduction to Materials Management, Chapter 4).


Question Number: 268 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply According to the EOQ formula, if the ordering costs for an item are greatly reduced, what is the likely impact on the quantity ordered?

A) Order multiples will increase

B) Order quantities will increase C) Order multiples will decrease D) Order quantities will decrease


According to the EOQ formula, if ordering costs are reduced, then the quantity ordered will decrease. The EOQ formula finds the lowest total cost by balancing ordering costs with the cost of carrying inventory. If the cost of ordering is reduced, then the quantity needed to balance the order cost could also be reduced. (Arnold, Introduction to Materials Management, Chapter 10).


Question Number: 269 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Given the following annual costs, calculate the cost of creating one order. Purchasing department salaries = $200,000 Operating expenses = $50,000 Number of people in department = 5 Number of orders per year = 5000

A) $25 B) $50 C) $75 D) $100


The cost of placing an order is found by dividing the total costs to operate the department divided by the number of orders placed. In this example, $200,000 + $50,000 divided by 5,000 orders = $50. (Arnold, Introduction to Materials Management, Chapter 7).



Which of the following would be the best measure of supplier performance?

A) Part price B) Method of delivery C) Delivery time D) Scrap rate


Delivery time and being on time are two important measures of supplier performance. The need for fast delivery and on-time delivery allows manufacturers to respond to the market faster. Additionally, on-time delivery and reliable service allows the manufacturer to keep less inventory to offset shortages. As long as the pricing is competitive, delivery is an important measure. (Arnold, Introduction to Materials Management, Chapter 7).



The primary benefit of point of use inventory is: A) reduced material handling. B) lower safety stock. C) better cycle count results. D) improved quality.


Point-of-use inventory results in inventory being stored next to the location which uses the inventory. This method eliminates the material handling related to moving the inventory from the dock to the central storage and then out to the production line. Generally, the inventory will arrive and move directly to the using location. (Arnold, Introduction to Materials Management, Chapter 9).



A blanket order in purchasing can be best described as a(n): A) order covering a variety of suppliers. B) group of operations. C) long term commitment to a supplier. D) supplies order.


A blanket purchase order is a long term commitment to a supplier to purchase a certain quantity of goods over a specified period of time. Short term releases are then made against the blanket order. (Arnold, Introduction to Materials Management, Chapter 7).



Why would a supplier want a long term customer relationship?

A) Reduced transportation costs B) Improved ability to plan C) Reduced packaging cost D) Less material handling


A long term supply agreement with a customer allows the supplier to properly plan raw materials, labor, capacity, and other resources. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 274 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply What is the primary consideration used in selecting a new supplier?

A) Cleanliness of their facility B) Proximity to your factory C) Manufacturing capability and reliability D) ISO certification


In order for the supplier to meet your ongoing needs, they must have the right manufacturing capability and reliability. No matter what other attributes they may have, if they cannot meet your needs on a consistent basis, then the supplier should not be chosen. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 275 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Goods from a supplier are in transit for 15 days. If the annual demand is 5000 units, what is the average annual inventory in transit? (Round to the nearest whole number)

A) 198 B) 205 C) 242 D) 263


The average annual in transit inventory is calculated:

(number of days in transit)(annual demand) Inventory = ----------------------------------------------

Days in a year

15 * 5000 Inventory =

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

365

Inventory = 205.479 or 205


Question Number: 276 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The basic purpose of inventory is:

A)

to decouple supply and demand. B) to supply customers from stock. C) to provide work in process in manufacturing. D) to provide time for quality testing.


The basic purpose of inventory is to decouple supply and demand. The inventory acts as a shock absorber which allows unpredictable variations in demand and supply to be absorbed by the inventory, not by the operations. (Arnold, Introduction to Materials Management, Chapter 9).


Question Number: 277 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following best describes the reason for safety stock? A) Lowers the setup costs per item

B) Lower purchase cost C) Decouple supply and demand D) Maximize customer service by protecting against uncertainty


The primary purpose of safety stock is to maximize customer service by limiting the amount of out of stock situations caused by uncertainty. The customer can be another work center, another factory or the ultimate consumer. While having inventory will in fact allow larger lot sizes to be run lowering setup cost; larger purchases for better pricing; and, allow supply and demand to be independent of each other, the primary purpose of the safety stock is to provide improved customer service. That is the ultimate reason for being in business. (Arnold, Introduction to Materials Management, Chapter 9).



The order quantity is 1600 and the safety stock is 200 units. What is the average annual inventory?

A) 800 B) 900 C) 1000 D) 1200


The average inventory is calculated by the following formula:

Q

Average Inventory = --------+ SS

2

1600 Average Inventory = -----------+ 200

2

Average Inventory = 800 + 200

Average Inventory = 1000


Question Number: 279 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The inventory that exists in moving goods from one location to another is called: A) transportation inventory. B) anticipation inventory. C) lot size inventory. D) fluctuation inventory.


Transportation inventory is the inventory that results from having to move goods from one location to another. This may be transfers of goods from one plant to another or when transporting the goods to the customer.


Question Number: 280 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Items purchased or manufactured in quantities larger than needed result in inventory called:

A) hedge inventory. B) lot-size inventory. C) anticipation inventory. D) transportation inventory.


Lot-size inventory results from producing or purchasing larger quantities than needed. The larger lot size may be necessary to reduce the cost of a long setup or the supplier may require a larger lot size to be purchased.


Question Number: 281 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The EOQ formula for a purchased item would try to balance which of the following?

A) The ordering cost and the setup cost B) The setup cost and the ordering cost C) The ordering cost and the annual inventory demand D) The ordering cost and the inventory carrying cost


The economic order quantity tries to balance the cost of placing the order with the amount of inventory which must be carried. The point at which the lowest total cost is generated is the economic order quantity.


Question Number: 282 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The EOQ formula for a manufactured part would try to balance which of the following?

A) The setup cost and the inventory carrying cost B) The ordering cost and the setup cost C) The setup cost and the item landed cost D) The setup cost and the cost of the annual demand


The economic order quantity for a manufactured item balances the cost of the setup with the cost of carrying the inventory. The point of the lowest total cost is the economic order quantity.


Question Number: 283 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following best describes a purchase requisition? A) A request for a quote from certain suppliers B) A request from a using department to purchase a specific quantity of an item for a specific date C) A purchase order which has not been approved D) A receipt document which contains the quantity and price


A requisition is a request from a using department asking the purchasing department to obtain a quantity of a product by a specific date. Generally, the requisitions are approved prior to reaching purchasing. Based on the approval, the requisition authorizes the purchasing department to make the purchase. The requisitions may be completed by departments or they may be generated from the MRP system and released by the planner.


Question Number: 284 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following best describes a purchase quotation? A) Feedback to the requisitioner regarding possible pricing B) Pricing provided to the customer regarding their purchase C) Terms and conditions placed on the purchase order D) Written inquiry sent to suppliers asking for pricing, quantity levels and delivery times


A quotation (quote) is an inquiry sent to suppliers asking them to provide pricing for various quantity levels and the delivery times associated with the items. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 285 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following best describes the concept VMI?

A) Consignment of the inventory B) Visual management of the inventory levels C) Vertical grouping of the inventory D) Allowing the supplier to manage the day-to-day inventory levels


VMI is an abbreviation for vendor-managed inventory, a methodology whereby the supplier is responsible for the day-to-day management of the inventory at the customer's site. The inventory may or may not be consigned. Given the use of the internet, the capability of the vendors to manage their inventory at the customer site has become much easier to accomplish.


Question Number: 286 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The main benefit of contract buying from a supplier is that:

A) purchase orders can be released automatically. B) suppliers will be more responsive and flexible to customer needs. C) suppliers will know what they will be producing. D) pricing is known for the life of the contract.


The advantage of contract buying is that the supplier will know what to produce over time. As a result, the benefit from that knowledge is that the supplier can be very responsive to the customers needs.


Question Number: 287 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In a traditional MRP system, the production planner releases a requisition to purchasing who would create a purchase order from that release. In recent years, the concept of a buyer/planner has become common. The main reason for this change is a (an):

A) changing schedule can be easily achieved by the supplier. B) improved communication with supplier personnel. C) smoother flow of information and materials between the supplier and the factory. D) reduction in headcount.


Combining the buyer and planner role into a buyer/planner provides a smoother flow of information and materials between the supplier and the factory for several reasons:

The buyer/planner has a better knowledge of the factory needs and the supplier's capability. The buyer/planner can better match the material requirements output to the supplier's capabilities.

There is less chance of miscommunication than having separate planner and buyer positions.

(Arnold, Introduction to Materials Management, Chapter 7)


Question Number: 288 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following would best describe a commodity?

A) Price is based on the catalogue. B) Price can be negotiated aggressively. C) Price is set by market supply and demand and can fluctuate widely. D) Price is set by a willing buyer and seller.


Commodities can be best defined as materials where the prices are set by a market. The prices can fluctuate widely based on the supply/demand equilibrium in the marketplace. Environmental factors can also affect the price because they affect the supply/demand balance. Factors such as war , drought, floods, insects etc. can directly impact price. Materials which are considered commodities are wheat, cotton, oil, meat, coal, etc.


Question Number: 289 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Made-to-order products are usually made to specification. The prices for these items: A) are based on grouping like items together. B) are based on the catalogue. C) are set by a marketplace. D) can generally be negotiated.


Made-to-order items are usually made to a design specification. Often, the specification is sent out for quotation to several suppliers with the capability to engineer the product. These type of products can usually be negotiated.


Question Number: 290 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In selecting a supplier from which to source a product, there are qualitative and quantitative factors affecting the decision. In an attempt to quantify both factors, Tony Arnold, in his Introduction to Materials Management, suggests using a:

A) ranking method. B) supplier results scorecard. C) software program. D) detailed specification.


The supplier ranking method allows a buyer to evaluate several suppliers sourced for the same product on a number of quantitative and qualitative factors. These factors such as function, cost, service, technical expertise and credit terms are given a weighting based on the importance to the buying company. Each supplier is then rated based on the factor criteria with the accumulated score providing the basis for a decision.


Question Number: 291 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In many cases, companies will form a relationship with their supplier whereby the two organizations will act as one. This relationship is called a:

A) supplier assurance. B) supplier collaboration. C) supplier integration. D) supplier partnership.


Supplier partnership is the working relationship between a company and supplier so the two organizations act as one. Partnerships take time to develop and are built on mutual trust and respect . They can encompass design, inventory management, supply chain management, software sharing and many other aspects of the supplier-customer relationship. Partnerships do not come from a larger company leveraging the supplier but must be based on a win-win deal for both companies. Suppliers need to understand "what's in it for them?"


Question Number: 292 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The processes that are linked from the initial raw materials to the final consumption of the finished product is called the:

A) supplier measurement. B) value chain. C) supplier schedule. D) supply chain.


The supply chain as defined by the APICS dictionary are "those processes from the initial raw materials to the ultimate consumption of the finished product linking across supplieruser companies."


Question Number: 293 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The MRP system has generated a planned order for a purchased part. It takes 1 day to approve the planned order, 1 day to approve the requisition created by the approved planned order, 2 days to turn the requisition into a purchase order and have it signed, and 10 days for the supplier to create the product after the receipt of the purchase order. What would the supplier lead time be?

A) 10 days B) 12 days C) 13 days D)

14 days


The supplier lead time is the amount of time that normally elapses between the time an order is received by a supplier and the time the order is shipped. Administrative time and the delivery time would be added to the supplier lead time.


Question Number: 294 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply There are two major sources of specifications. One is a buyer specification in which the buyer develops the specification from "scratch. " The other major source of specifications is:

A) standard specifications. B) government specifcations. C) environmental specifications. D) industry specifications.


According to the "Introduction to Materials Management" by Tony Arnold, there are two major sources of specifications; buyer developed specifications and standard specifications. The standard specifications are usually developed based on government and industry study and testing. The advantage of using standard specifications is that they are widely known and accepted, and as a result are readily available from most sources. Because they are widely available, they are usually lower priced. Finally, they are usually adaptable to a variety of purchasers.


Question Number: 295 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The point where the revenue line intersects with the total cost line is called the:

A) fixed cost line. B) variable cost line. C) break-even point. D)

economic order quantity.


The break-even point is the intersection point of the total cost line with the revenue line. It is at this point where the firm breaks even and profit equals zero. Total cost is equal to the fixed cost of the business plus the variable cost per unit times the number of units.


Question Number: 296 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In a typical sourcing situation, the buyer attempts to buy the product or service for a fair price. The difficulty is in determining the fair price. Prices have upper and lower limits. The upper pricing limit is determined by the:

A) engineers. B) government. C) seller. D) market.


The market for the product determines the upper limit of the pricing. The marketplace (buyers) determines what it is willing to pay for the product based on several factors such as the supply level, the demand for the product, and their needs.


Question Number: 297 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In a typical sourcing situation, the buyer attempts to buy the product or service for a fair price. The difficulty is in determining the fair price. Prices have upper and lower limits. The lower pricing limit is determined by the:

A) engineers. B) government. C) sellers. D) market.


Sellers set the lower limit on their prices based on the cost of manufacturing and their profit expectation. The lower more efficient producers are capable of selling their products at a lower price than the higher cost, inefficient producers.


Question Number: 298 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A company is negotiating with a possible supplier to purchase 5,000 motors. The company estimates that the supplier's variable costs are $4 and the fixed costs are $10,000. The supplier has quoted a price of $8 per unit. What is the supplier's average cost per unit?

A) $2 B) $4 C) $6 D) $8


The per unit fixed costs for the supplier is $10,000 divided by 5,000 units or $2. The variable cost is $4. Therefore the total cost per unit is $4 + $2 = $6. It is important to understand the supplier's costs in order to determine whether the price being quoted has some potential downward negotiation. In this case, the price quoted may be "fair."


Question Number: 299 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply If purchases are 50% of sales and other expenses are 40% of sales, what would the increase in profit be if the purchase cost could be reduced to 45% of sales?

A) 5% B) 10% C) 25% D) 50%


Let's assume the company has sales of $100. That would mean that the cost of goods sold would be $50 and the gross profit is $50 ($100-50). Subtract the $40 of other expenses from the gross profit of $50 and the net profit is $10. If the company lowers the purchase cost to 45%, the gross profit would increase to $55 ($100-45). Subtract the $40 of other expenses and the net profit is now $15 for an increase of 50% ($5 increase divided by $10). The impact to the net profit of a company of improved purchasing is dramatic.


Question Number: 300 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A supplier has placed goods at a customer location without receiving payment for them. This is called:

A) backflush inventory. B) consigned inventory. C)

vendor managed inventory. D) point of use inventory.


Consigned inventory or consignment is the process of the supplier placing goods at the customer's location without receiving payment. The payment is made when the goods are sold or used. The goods may be managed by the customer or the supplier depending on the arrangement.


Question Number: 301 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A three way match ensures which of the following documents agree? A) Purchase order, bill of lading and packing list B) Pick list , receiving document and bill of lading C) Purchase order, receiving document , and invoice

D) Packing list, receiving document and invoice


A three way match is done to ensure the purchase order price agrees with the invoice price; and, the receiving quantity agrees to the invoice quantity. The purpose is to ensure that you get what was ordered and you pay for what you get.


Question Number: 302 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In a single source supplier relationship, what is the best way for purchasing to lower the cost?

A) Negotiate strongly with the supplier. B) Jointly eliminate waste in the supply chain and share the savings. C) Establish rebate programs for volume purchasing. D) Develop annual contracts for defined volumes.


The supply chain has many areas of waste. The best way to lower costs is to jointly identify and eliminate the waste in the supply chain and share the savings with the supplier. Ongoing cost reduction must be a part of every single source partnership agreement. It is not enough to "maintain pricing" each year.


Question Number: 303 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The MRP system is set for lot ordering. As a result, it is generating many orders for small quantities. Which of the following will best alleviate the large quantities of purchase orders being generated while keeping inventory levels low?

A) Change the lot size to increase the quantity ordered. B) Use period of supply instead of lot for lot. C) Establish a long term contract for the item and release against the contract. D) Keep releasing small lot for lot orders to keep inventory low.


The best solution would be to establish an annual contract for the parts and release orders against the contract. This would allow the lot size to remain small while minimizing the amount of purchase orders being generated. Answers A and B would reduce the number of purchase orders but would increase inventory levels. Answer D will not eliminate the purchase order administration.


Question Number: 304 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following is the least important factor in selecting a supplier?

A) Technical ability B) Manufacturing capability C) Location D) ISO 9000 registration


While ISO registration is a plus, a supplier should not be eliminated if they have not become ISO registered. There are very qualified suppliers who have not become ISO registered and the registration does not guarantee a quality product is being produced. It is more important that they have technical ability to produce the products; manufacturing capability to produce the parts consistently and are located close to your manufacturing facility to ensure short lead times are maintained.


Question Number: 305 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The decision of when to order raw materials is the responsibility of: A) manufacturing planning. B) purchasing. C) engineering. D) sales.


It is the responsibility of manufacturing planning to determine when to order raw materials and how much. Purchasing's responsibility is to execute the orders given to them by planning to ensure manufacturing schedules are maintained.


Question Number: 306 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Which of the following is NOT an objective of purchasing?

A) Obtain goods and services of the required quantity and quality. B) Determine the level of inventory to ensure high levels of customer service. C) Obtain goods and services at the lowest cost. D) Ensure the best service and delivery from the supplier.


Manufacturing planning is responsible for maintaining the levels of inventory necessary to ensure high levels of customer service while not over investing in inventory. The other three answers are objectives of purchasing plus developing and maintaining good supplier relations and developing new sources of supply. (Arnold, Introduction to Materials Management, Chapter 7).


Question Number: 307 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Generally speaking, purchasing can have the greatest impact on the net income of a company than any other department. This is due to the fact that:

A) manufacturing relies on purchasing to identify quality suppliers. B) buyers work very hard at sourcing. C) suppliers want to reduce their prices to good customers. D) materials usually represent the largest cost in a company.


Because materials represent the largest cost on the income statement, a reduction in the cost of materials will have the greatest positive impact on the net income.


Question Number: 308 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply If the invoice price does not match the purchase order price, it is purchasing's responsibility to:

A) find out what caused the discrepancy and correct it. B) change the purchase order price to agree to the invoice. C) change the invoice price to match the purchase order. D) not pay the invoice until the supplier sends a corrected copy.


There are times when the invoice price and the purchase order price do not agree. Purchasing needs to identify the cause of the discrepancy and correct the cause of the problem. The purchase order could have been created for the wrong price or the supplier made a mistake. Generally, the invoice would not be paid until the prices matched or it was authorized for payment by purchasing.


Question Number: 309 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In purchasing an item from a supplier, several factors must be considered. Which of the following would most likely be the first factor to consider before others?

A) Functional specifications B) Price requirements C) Quantity to purchase D) Brand description


The demand for the item must be considered before price or quality level can be discussed. Quantity is a key factor in deciding how the part is designed, specified and manufactured. If the quantity needed is just one, then the specification would call for the part to be designed for the least cost; otherwise a standard item would be used. However, if thousands are needed, then the item would be designed to take advantage of economies of scale. (Arnold, Introduction to Materials Management).


Question Number: 310 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply In reviewing the pricing of a part, the buyer must ensure that the price placed on the part by the supplier is related to the:

A) quality of the item. B) cost of the item. C) market price for the item. D) use of the item and its anticipated selling price.


The economic value (what the part is worth) can only be defined by the use of the item and the selling price. In other words, can the customer use the part and make the intended profit when it is sold. If not, then, there is no economic value for the part. For example, there are bolts used in toys and in jet engines. The bolts used to hold toys together require less strength and cost less than those used in jet engines which have greater demands and must be certified by the FAA. The jet engine bolts will cost more because they have greater economic value.


Question Number: 311 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply EDI is a method to:

A) provide supplier information through a website. B) access trading exchanges. C) electronically exchange transaction information. D) electronically reprice purchase orders.


Electronic Data Interchange (EDI) is the electronic exchange of transactional data. The process reduces the paperwork and time necessary to exchange information with trading partners. Transactions often include purchase orders, shipment notification, invoices, etc.


Question Number: 312 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply When purchasing needs to order items of small value, such as supplies, the objective should be to:

A) require a quote process with approvals. B) keep the cost of ordering low. C) negotiate the best price possible. D) find multiple suppliers and have them bid for the business.


With small value items, the objective should be to keep the cost of ordering low. Ideally, one supplier could be found that could supply many items and maintain a very easy ordering process including vendor managed inventories.


Question Number: 313 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply The difference in the price paid and the standard cost is: A) purchase price variance. B) invoice difference. C) planning price variance. D) standard cost variance.


Purchase price variance is the difference between the purchase price paid and the standard cost.


Question Number: 314 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply Deliberately sole sourcing remote suppliers within a small geographic area to facilitate shipments is known as:

A) supply chain grouping. B) supplier scoring. C) transportation supply. D) supplier clustering.


According to the APICS dictionary, supplier clustering is the "deliberate sole sourcing of remote suppliers within a small geographic area to facilitate joint shipments of what would otherwise be less-than-truckload quantities."


Question Number: 315 BASICS OF SUPPLY CHAIN MGMT (BSCM) :Supply A supplier certification verifies that a supplier:

A) has perfect quality built into each part manufactured. B) maintains, improves and documents effective procedures. C) has been ISO certified. D) has had a significant quality audit to verify its quality.


Supplier certification verifies that a supplier operates, maintains, improves and documents effective procedures that relate to a customer's requirements. The process of verification may include ISO certification or a quality audit.


Question Number: 316 MASTER PLANNING OF RESOURCES (MPR) :Demand Management Which of the following functions are included as part of demand management? I. Forecasting II. Order entry III. Approving requisitions



Approving requisitions would be considered part of the manufacturing process, not demand management.


Question Number: 317 MASTER PLANNING OF RESOURCES (MPR) :Demand Management In a distribution resource planning system, the ability to check physical distribution resources exists. These resources would include:

I. Tractor and trailer capacity II. Warehouse storage space III. Finances

A) I and II B) I and III

C) II and III D) I, II, and III


Distribution resource planning allows a resource check on critical resources in distribution, similar to manufacturing resource planning in manufacturing. These critical resources could be physical assets, such as warehouse space, trailer capacity, or finances to ensure the proper capital is available to meet the plan.


Question Number: 318 MASTER PLANNING OF RESOURCES (MPR) :Demand Management A company has a distribution center A, 3000 miles away from the supplying plant and a distribution center B, 1000 miles away. If both turn inventory over with the same velocity, which will require the most in-transit inventory (assuming the inventory moves by rail or truck)?

I. Center A II.

Center B

A) I B) II C) Neither I nor II


Center A would require more product to be in-transit to maintain the velocity due to its distance from the source.


Question Number: 319 MASTER PLANNING OF RESOURCES (MPR) :Demand Management In a distribution requirements planning system, in-transit lead time is accounted for by: A) safety stock in the receiving warehouse.

B) being offset as a gross requirement in the supply warehouse. C) safety stock in the supply warehouse. D) None of the above


In DRP, the lead time between warehouses is offset as the planned shipment to the receiving warehouse becomes the gross requirement in the supply warehouse. This logic is similar to the lead-time offset in an MRP system where the planned order release is offset by the lead time to purchase or make the part.


Question Number: 320 MASTER PLANNING OF RESOURCES (MPR) :Demand Management Which of the following best describes the term logistics in the non-military sense? A) The movement of finished goods to the final customer B)

Obtaining and distributing products and materials C) Demand management and physical distribution D) None of the above


Logistics is the art and science of purchasing, producing, and distributing materials to ensure the products are in the right place and in the proper quantities.


Question Number: 321 MASTER PLANNING OF RESOURCES (MPR) :Demand Management All of the following functions are included in physical distribution EXCEPT:

A) Customer order entry B) Warehousing C) Final assembly scheduling

D) Transportation to customer


Final assembly scheduling is a manufacturing process. Physical distribution begins when the product is completed.


Question Number: 322 MASTER PLANNING OF RESOURCES (MPR) :Demand Management Which of the following are true statements regarding pull systems?

I. Just-in-Time uses pull systems in production II. They are best for distribution systems III. Inventory management in distribution is decentralized with pull systems



In production, a pull system only requires items to be produced as they are pulled by demand. Just-in Time methodology would use a pull system to move product through the manufacturing processes. Centralized "push" systems are best for distribution networks so inventories can be best utilized throughout the distribution network. If a field warehouse is ordering from a central supply, this would be an example of a pull system in a distribution network.


Question Number: 323 MASTER PLANNING OF RESOURCES (MPR) :Demand Management Why is Distribution Resource Planning considered a "push" inventory management system?

A) Inventory is "pushed" to feed warehouses from a central location. B) Inventory is "pushed" to field warehouses when they reach their reorder points. C) Push systems allow decentralized control of inventory. D) None of the above


Inventory is managed throughout the distribution network from a centralized location. It is "pushed" to where it is needed based on demand so the inventory in the whole network is managed.


Question Number: 324 MASTER PLANNING OF RESOURCES (MPR) :Demand Management A company uses a random location storage system in its warehouses. While the inventory balances are accurate, it is plagued by picking problems. Which of the following should be checked?

I. Personnel could need retraining. II. Locations should be cycle counted to verify correct locations on the system. III. Purchase orders may be late.



Whether purchase orders are arriving late really has no bearing on a locator system. Until stock is placed in a location, the system does not know it exists. A review of training would be warranted as new people may not have been trained properly to pick. Also, locations in a warehouse must be cycle counted similar to inventory records to validate procedures.


Question Number: 325 MASTER PLANNING OF RESOURCES (MPR) :Demand Management The product your company manufactures is due for a design change at the end of the model year. Which of the following factors should be considered in planning the production for the current model?

I. The accuracy of the forecast for the remainder of the current model year II. The cost of obtaining parts if demand exceeds the forecast III. The probability of having leftover parts when the model year ends IV. The marketing plans for the new model design

A) I, II, and III B) I, II, and IV C) I, III, and IV D) II, III, and IV


When models change, there are many factors to consider to ensure inventory unique to the old model is used up. At the same time, the components for the new model need to be planned to ensure a smooth transition to the new model. The accuracy of the forecast must be considered to make sure parts are neither over ordered nor under ordered. If the production phase out of the old model is not well planned, there is a danger of having leftover parts or a need to order small lots to support the remaining production. Marketing plans, which identify the sales channels, demographics, etc. for which the new model is targeted would not be considered when planning the production. The sales plans would be developed from the marketing plans and would support the forecast by which production would be planned.


Question Number: 326 MASTER PLANNING OF RESOURCES (MPR) :Demand Management Which of the following factors are utilized in a DRP system? I. Transit time between warehouses II. On hand inventory at each location III. Economic order quantity calculation IV. Forecast of demand by warehouse



Distribution requirements planning is the function of determining the need to replenish inventory at branch warehouses. It does this by using the netting logic similar to MRP to plan inventory at each location based on the lead times to move product to each location. The forecast and customer orders would generate the gross requirements and the inventory is netted at each warehouse location. Economic order quantity calculations would not be part of the DRP system.


Question Number: 327 MASTER PLANNING OF RESOURCES (MPR) :Demand Management

In using a DRP system, aggregate forecasts are often used. These aggregate forecasts are then broken down into detailed forecasts by the distribution center. When this happens, which of the following will most likely occur?

A) The forecast will become more accurate. B) Relative errors will increase. C) Inventory levels at the centers will increase. D) Inventory accuracy will decline.


As aggregate forecasts are broken down into more and more detail, the relative errors will increase. The user must be careful not to adjust the detailed forecasts in such a way that bias enters the forecast. This would cause the aggregate forecast to vary widely.


Question Number: 328 MASTER PLANNING OF RESOURCES (MPR) :Demand Management Which of the following would best describe "in transit" inventory?

A) Parts moving from one operation to another in the same plant B) Parts being put away in a warehouse C) Parts moving from a plant to a distribution center D) Parts moving through a cell in manufacturing


Intransit inventory can be best defined as material moving between geographic locations. This would include plant to distribution centers or movement between warehouses.


Question Number: 329 MASTER PLANNING OF RESOURCES (MPR) :Demand Management Planned orders from the warehouse translate to which of the following in the factory? A) Planned orders in the MRP system

B) Scheduled receipts C) Gross requirements in the MPS D) Inventory in the MPS


Planned orders from the warehouse in a DRP system become gross requirements in the master production schedule at the factory. The logic is similar to the MRP logic.


Question Number: 330 MASTER PLANNING OF RESOURCES (MPR) :Demand Management Which of the following will affect the efficient use of warehouse space? I. Cube utilization II. Rack density

III. Rack accessibility IV. Order picking process

A) I and II B) III and IV C) I, II, and III D) I, II, III, and IV


Warehouse space is usually the largest capital cost in the distribution network. As such, the space needs to be used effectively. This means racks need to be as dense as possible, and the space in those racks needs to be utilized as much as possible without becoming inefficient to operate. Additionally, the operation of the warehouse needs to be efficient, so the picking process and access to the racks must be easy to accomplish.


Question Number: 331 MASTER PLANNING OF RESOURCES (MPR) :Demand Management The mode can be defined as the:

A) average of a group of values. B) middle value of a group of values. C) most common or frequent value in a group of values. D) sum of the deviations divided by the number of values.


The mode is the MOST frequent value in a group of values.


Question Number: 332 MASTER PLANNING OF RESOURCES (MPR) :Demand Management

The mean can be defined as the:

A) average of a group of values. B) middle value of a group of values. C) most common or frequent value in a group of values. D) sum of the deviations divided by the number of values.


The mean is the AVERAGE of a group of values found by adding all the values and dividing by the number of values.


Question Number: 333 MASTER PLANNING OF RESOURCES (MPR) :Demand Management The median can be defined as the:

A)

average of a group of values. B) middle value of a group of values. C) most common or frequent value of a group of values. D) sum of the deviations divided by the number of values.


The median is the MIDDLE value where half the values are above and half the values are below the median.


Question Number: 334 MASTER PLANNING OF RESOURCES (MPR) :Demand Management In a DRP environment, demand from a branch warehouse would result in which of the following at the central supply warehouse?

A) Gross requirement B)

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