Pass the APICS CPIM CPIM-8.0 Questions and answers with CertsForce

Substituting capital equipment in place of direct labor can be economically justified for scenario A, where volumes are forecasted to increase. This is because capital equipment can provide higher productivity, efficiency, and quality than direct labor, especially for large-scale and standardized production. Capital equipment can also reduce labor costs, such as wages, benefits, and training, and avoid labor shortages or turnover. However, capital equipment also involves high initial investment, maintenance, and depreciation costs, and may require more skilled workers to operate and monitor. Therefore, the substitution of capital equipment for direct labor should be based on a careful analysis of the trade-offs between the costs and benefits of both alternatives.

Option B is not correct, because material prices are forecasted to increase. This scenario does not directly affect the decision to substitute capital equipment for direct labor, as both alternatives use the same materials. However, increasing material prices may reduce the profitability of the production, and may require the company to find ways to reduce material usage, such as improving material yield, reducing scrap and rework, or sourcing from cheaper suppliers.

Option C is not correct, because implementing a pull system in production. This scenario does not favor the substitution of capital equipment for direct labor, as a pull system is based on the principle of producing only what is needed by the customer, when it is needed, and in the quantity needed. A pull system requires flexibility, responsiveness, and adaptability to the changing customer demand, which may be better achieved by direct labor than capital equipment. A pull system also aims to minimize inventory, waste, and overproduction, which may reduce the need for capital equipment.

Option D is not correct, because functional layouts are being utilized. This scenario does not support the substitution of capital equipment for direct labor, as functional layouts are based on grouping similar or related processes or machines together, regardless of the product flow. Functional layouts may result in long and complex material flows, high transportation and handling costs, high work-in-process inventory, and low visibility and coordination of the production. Functional layouts may also require more direct labor to move and monitor the materials and machines. Capital equipment may be more suitable for product layouts, where the processes or machines are arranged according to the sequence of operations for a specific product or family of products.

Increasing safety stock to improve customer fill rate would result in a decrease in inventory turns. Inventory turns, or inventory turnover, is a metric measuring how fast the inventory is replaced over time. It is calculated as the cost of goods sold divided by the average value of inventory during the period covered1. A higher inventory turnover ratio indicates that the company sells its inventory quickly and efficiently, while a lower ratio implies that the company holds too much inventory or has difficulty selling it. Safety stock is an extra quantity of a product stored in the warehouse to prevent an out-of-stock situation. It serves as insurance against fluctuations in demand, longer lead times, and price fluctuations2. Increasing safety stock means increasing the average value of inventory, which lowers the inventory turnover ratio. This also increases the inventory carrying costs, such as storage, insurance, taxes, and obsolescence. Therefore, there is a trade-off between increasing safety stock to improve customer fill rate and decreasing inventory turns to reduce inventory costs3. References: 1 Inventory Turnover Ratio: What It Is, How It Works, and Formula 4 2 What is safety stock? | Definition, Importance, Formula - Zoho 5 3 CPIM Exam References - Association for Supply Chain Management 6

A flexibility metric is a measure of how well an organization can adapt to changes in demand, supply, or technology. Flexibility metrics can be classified into three categories: volume flexibility, mix flexibility, and new product flexibility. Volume flexibility is the ability to adjust the output level to meet fluctuations in demand. Mix flexibility is the ability to produce different types of products or services with the same resources. New product flexibility is the ability to introduce new products or services quickly and efficiently. Cycle time is an example of a flexibility metric, as it measures the time required to complete a process or activity, from start to finish. Cycle time can indicate the responsiveness and agility of an organization, as shorter cycle times imply faster delivery, lower inventory, and higher customer satisfaction. Cycle time can also reflect the efficiency and quality of an organization, as shorter cycle times imply less waste, fewer errors, and lower costs. Therefore, cycle time is a relevant metric for assessing the flexibility of an organization. References := CPIM Part 2 Exam Content Manual, Version 8.0, ASCM, 2021, p. 29. CPIM Part 2 Learning System, Version 8.0, Module 3, Section A, Topic 3.

Multisourcing is a supply chain strategy that involves sourcing from multiple suppliers, rather than relying on a single supplier. Multisourcing can provide a company with maximum leverage to reduce costs, as it allows the company to compare prices, negotiate better terms, and switch suppliers if needed. Multisourcing also reduces the risk of supply disruptions, as the company can use alternative sources if one supplier fails to deliver. Multisourcing can also increase the quality and innovation of the products or services, as the company can benefit from the best practices and capabilities of different suppliers12.

The other options are not correct because:

•A. Single sourcing. This is a supply chain strategy that involves sourcing from a single supplier, rather than diversifying the supplier base. Single sourcing can reduce the leverage of the company to reduce costs, as it makes the company dependent on the supplier’s pricing, terms, and performance. Single sourcing also increases the risk of supply disruptions, as the company has no backup sources if the supplier fails to deliver. Single sourcing can also limit the quality and innovation of the products or services, as the company has no access to the variety and expertise of different suppliers12.

•C. Long-term agreement. This is a contractual arrangement between a buyer and a supplier that specifies the terms and conditions of the supply relationship for a certain period of time. Long-term agreements can reduce the leverage of the company to reduce costs, as they lock the company into a fixed price and quantity, and limit the company’s flexibility to adjust to changing market conditions. Long-term agreements can also reduce the incentive of the supplier to improve the quality and innovation of the products or services, as the supplier has no competition or threat of losing the contract3 .

•D. Service-level agreement (SLA). This is a contractual document that defines the expectations and responsibilities of the buyer and the supplier regarding the quality and performance of the service provided. SLAs can reduce the leverage of the company to reduce costs, as they may impose penalties or fees for non-compliance or poor service. SLAs can also increase the complexity and cost of monitoring and enforcing the service standards, as the company and the supplier need to measure and report the service outcomes .

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

 Improvements in an input/output control (I/O control) system will most likely lead to a reduction in queue size and queue time. An I/O control system is a method of managing the flow of work orders in a production system by matching the input rate to the output rate. The input rate is the number of work orders that are released to the shop floor in a given period. The output rate is the number of work orders that are completed and shipped to the customers in a given period. An I/O control system aims to keep the input rate equal to the output rate, or slightly lower, to avoid overloading the system and creating excess inventory. By improving the I/O control system, the production system can achieve a smoother and more balanced flow of work orders, which reduces the queue size and queue time at each work center. Queue size is the number of work orders that are waiting to be processed at a work center. Queue time is the amount of time that a work order spends in the queue before being processed. A reduction in queue size and queue time can improve the production efficiency, quality, and flexibility, as well as the customer service and satisfaction. The other options are not correct, as they are not the most likely outcomes of improvements in an I/O control system, but rather possible effects of other factors or methods:

Flattened bills of material (BOMs) are the result of simplifying the product structure and reducing the number of components or levels in a BOM. Flattened BOMs can reduce the complexity and lead time of the production process, but they are not directly related to the I/O control system.

A change in operation sequencing is the result of altering the order or priority of the work orders or operations in a production system. A change in operation sequencing can affect the production flow and capacity, but it is not necessarily caused by the I/O control system.

Fewer engineering change notifications are the result of minimizing the changes in the product design or specification during the production process. Fewer engineering change notifications can reduce the disruption and cost of the production process, but they are not directly related to the I/O control system. References:

[CPIM Part 2 - Section A - Topic 2 - Capacity Planning]

Input/Output Control | SpringerLink

Input/Output Control - an overview | ScienceDirect Topics

Input/Output Control - InventoryOps.com

Capable-to-promise (CTP) is a type of order fulfillment policy that confirms a customer order based on the available capacity and inventory, as well as the current production plan and schedule. CTP calculates the earliest possible delivery date for a customer order, considering the existing demand and supply situation. CTP allows a company to accept an order that exceeds the current available inventory, as long as it can produce the remaining quantity within the customer’s requested delivery time. CTP helps to improve customer service, reduce inventory costs, and increase production efficiency12. References: 1 Capable to Promise (CTP) - Definition, Calculation, and Examples 3 2 CPIM Exam References - Association for Supply Chain Management

ABC classification is a method of inventory management that categorizes items based on their annual consumption value, which is the product of the annual demand and the unit cost. Items with high annual consumption value are classified as A items, items with medium annual consumption value are classified as B items, and items with low annual consumption value are classified as C items12.

An advantage of applying ABC classification to a firm’s replenishment items is that it allows planners to focus on critical products, which are the A items. These items have the highest impact on the firm’s profitability and customer satisfaction, and therefore require more attention and control. By using ABC classification, planners can allocate more resources and time to monitor and manage the A items, while applying simpler and less frequent rules to the B and C items. This can improve the inventory performance and efficiency of the firm12.

The other options are not correct because:

•A. it distinguishes independent demand from dependent demand. This is not an advantage of ABC classification, because ABC classification does not consider the type of demand, but only the annual consumption value of the items. Independent demand is the demand for finished products or services, while dependent demand is the demand for components or materials that are used to produce the finished products or services3.

•C. it provides better order quantities than the economic order quantity (EOQ). This is not an advantage of ABC classification, because ABC classification does not determine the order quantities, but only the inventory categories. EOQ is a formula that calculates the optimal order quantity that minimizes the total inventory costs, such as ordering costs and holding costs.

•D. it allows the firm to utilize time-phased order point (TPOP). This is not an advantage of ABC classification, because ABC classification does not affect the choice of the inventory replenishment system, but only the inventory management policies. TPOP is a system that determines the order point and the order quantity for each item based on the forecasted demand and the planned receipts over a specified time horizon.

References := 1 ABC Inventory Analysis & Management | NetSuite1 2 What Is ABC Inventory Classification? | Business.org2 3 Independent Demand vs Dependent Demand: What’s the Difference? Economic Order Quantity (EOQ) - Overview, Formula, and Example Time-Phased Order Point (TPOP) - an overview | ScienceDirect Topics

 The production supervisor is the most appropriate person to send the information about the overage in actual run time for one operation. The production supervisor is responsible for overseeing the execution of the production plan and ensuring that the operations are performed efficiently and effectively. The production supervisor can review the actual run time data and compare it with the planned run time, identify the possible causes of the overage, and take corrective actions if needed. The production supervisor can also explain the overage to the cost accountant and other stakeholders, such as the product manager, the quality manager, and the engineering manager, and provide feedback for improving the planning and routing of the operation. References:

APICS CPIM Part 2 Exam Content Manual, p. 30

[APICS CPIM Learning System Version 8.0], Module 4, Section D, p. 4-35