CPIM1 - Quiz Test

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Contents
SECTION QUIZZES 3
SECTION A QUIZ 3
SECTION B QUIZ 15
SECTION C QUIZ 27
SECTION D QUIZ 37
SECTION E QUIZ 47
SECTION F QUIZ 55
SECTION G QUIZ 66
SECTION H QUIZ 79
SECTION I QUIZ 85
SECTION J QUIZ 96
SECTION K QUIZ 110
SECTION L QUIZ 117
SECTION M QUIZ 127
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Section Quizzes
Section A Quiz
Order winners can be a unique capability or quality no competitor has or a combination of price, product features,
quality, and related services that customers will see as a superior value. Adding a feature while still failing to meet
minimum requirements is an order disqualifier.
Order winners usually focus on one (rarely more than two) of the following strategic initiatives: price/cost, quality,
delivery speed, delivery reliability, product design, flexibility, after-market service, and image. Trying to focus on
four of these is likely to result in mediocre results in all of them. Becoming an order winner requires meeting both
needs and expectations.
For more information, refer to Module 1, Section A, Topic 2
Which example of differentiating a product from the offerings of competitors is most likely to result in the
product becoming an order winner?
• Building a product that meets actual customer needs even though it does not meet all expectations
• Changing priorities to focus on price, quality, delivery speed, and flexibility
• Creating a combination of desired capabilities that is unique even though none of the capabilities by
themselves is unique
• Adding one more feature so there are fewer minimum requirements that cannot be provided
Both consumers and industrial customers have become much more demanding, and suppliers have responded by
improving the range of characteristics they offer. Some of the characteristics and selections customers expect in the
products and services they buy are a fair price, higher-quality products and services, better delivery lead time, better
pre- and after-sales service, and product and volume flexibility.
Which of the following entities or conditions impacts demand by providing expectations that products will be
sold at a fair price, that higher quality is required, that delivery lead time is negligible, that before- and after-
sales service is available, and that products and their volumes are flexible?
• Customers
• Competition
• Sales and marketing
• Customs
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Supply chain management is the management process that oversees all of the stated activities related to the supply
chain.
Which of the following terms pertains to the design, planning, execution, control, and monitoring of supply
chain activities with the objective of creating net value, building a competitive infrastructure, leveraging
worldwide logistics, synchronizing supply with demand, and measuring performance globally?
• Supplier relationship management

• Strategic planning
• Supplier partnership
• Supply chain management
Supply chains comprise the various entities from the consumer back to the source of raw materials consumed in the
end product. For more information, refer to Module 1, Section A, Topic 1
What is the definition of the term "supply chain"?
• When supply chain partners interact at all levels to maximize mutual benefits
• Process reference model developed and endorsed by the Supply Chain Council as the cross-industry,
standard diagnostic tool
• Global network used to deliver products and services from raw materials to end customers through an
engineered flow of information, physical distribution, and cash
• Comprehensive approach to managing an enterprise's interactions with the organizations that supply the
goods and services the enterprise uses
A make-or buy decision is the act of deciding whether to produce an item internally or buy it from an outside
supplier. Factors to consider in the decision include costs, capacity availability, proprietary and/or specialized
knowledge, quality considerations, skill requirements, volume, and timing.
A company is debating whether to add production capacity or outsource the additional volume. The process
they must go through is called a:
• core competency evaluation.

• total cost decision.
• capital expenditure request.
• make-or buy decision.
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With concurrent engineering, multiple functional groups work on a new product design at the same time. This
reduces cycle time.
Multiple functional groups work on a new product design at the same time, as opposed to working in
sequence, which reduces cycle time. This is referred to as:
• concurrent engineering.
• collaborative engineering.
• project engineering.
• process engineering.
Risk management is a systematic approach to identifying, analyzing, and addressing an organization's exposure to
uncertainty within the supply chain.
Which of the following terms refers to a systematic approach to identifying, analyzing, and addressing an
organization's exposure to uncertainty within the supply chain?
• Risk management
• Buffer management
• Safety factor calculation
• Producer's risk
Reverse logistics is a complete supply chain dedicated to the reverse flow of products and materials for the purpose
of returns, repair, remanufacture, and/or recycling.For more information, refer to Module 1, Section A, Topic 1
Which of the following best defines reverse logistics?
• Distribution network that deals with change of ownership of goods and services, including the activities of
negotiation, selling, and contracting
• Complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns,
repair, remanufacture, and/or recycling
• Items returned to the manufacturer as defective, obsolete, overages, etc.
• Function of planning, scheduling, and controlling activities related to mode, vendor, and movement of
inventories into and out of an organization
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A feature is a distinctive characteristic of a good or service that may be provided by an option, an accessory, or an
attachment.
What is the term for a distinctive characteristic of a good or service that may be provided by an option, an
accessory, or an attachment?
• Portfolio
• Variable
• Standard
• Feature
When goods are moved between two entities, it is imperative that clarity exists as to who is responsible for what.
Incoterms, developed by the International Chamber of Commerce, are specifically designed to address this need.
A dispute arises over damage to goods shipped between two entities in different countries. Which
international standards, if applied at the time of the shipment, would clearly resolve the dispute?
• Omnibus Foreign Trade and Competitiveness Act

• Incoterms
• Export Trading Company Act
• UN Global Compact.
Electronic equipment usually has relatively short life cycles. With newer models available, customers interested in
the more mature products typically want price reductions and/or faster or more reliable delivery. Quality is
important, but a mature product typically will have demonstrated adequate quality by this point.
A piece of electronics equipment is several years old, and new models with new functionality are common on
store shelves. Which of the following factors are likely to be more important to consumers when choosing this
product?
• Price and quality

• Price and delivery
• Quality and delivery
• Design and availability
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Product design and process design work hand in hand to achieve the design objectives and to produce the product
for the lowest possible cost.
Which of the following is an advantage of simultaneous engineering?
• Multiple designers work on the design at the same time, producing multiple options to consider.
• The product design is worked on at the same time that the process design takes place.
• The product design is a success even if a profit cannot be made.
• The process requires fewer resources and lowers the cost of design.
General economic conditions influence demand by consumers and companies. In times of economic expansion,
demand increases. In times of recession, demand decreases.
Which of the following entities or conditions impacts customer demand due to decisions that consumers and
companies must make regarding financial resources?
• Customers
• Quality
• Competition
• Economy
Value chain analysis is an examination of all links a company uses to produce and deliver its products and services,
starting from the origination point and continuing through delivery to the final customer.
A company losing market share due to price competition should incorporate which of the following
techniques?
• Value chain analysis

• Subcontracting
• Activity-based costing
• Hoshin planning
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Simultaneous engineering is a concept that refers to the participation of all the functional areas of the firm in the
product design activity. Suppliers and customers are often also included.
A company is seeking to design a new product as a low-cost manufacturer. Which of the following design
methods brings product and process design groups together to achieve this objective?
• Simultaneous engineering
• Quality function deployment
• Lean six sigma
• Collaborative planning, forecasting, and replenishment
The bullwhip effect is a situation in which a small change in demand downstream in the supply chain generates an
extreme change in the supply position upstream.
What is the term for an extreme change in the supply position upstream in a supply chain generated by a
small change in demand downstream?
• Bullwhip effect
• Market response effect
• Forecast disconnects
• Supply chain variation
In today's market, quality is an order qualifier and a requirement to do business. Products and services need to meet
or exceed customer expectations.
Which of the following entities or conditions impacts customer demand as a standard that consumers and
companies require of any product?
• Quality
• Competition
• Delivery
• Convenience
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Breaking into a production run typically requires an additional setup, which translates to lost production time,
thereby increasing expenses.
Trying to achieve the lowest production cost possible would likely conflict with which of the following
scenarios?
• Stopping production for a week to install new equipment that will increase production output
• Initiating a new project that will enable setup to be offline, increasing production line uptime
• Reducing setup time by holding a kaizen event
• Breaking into a production run to make product needed for a customer
Order winners are characteristics that cause customers to choose a firm's goods or services over those of its
competitors.
Characteristics that encourage customers to choose one product or service over another are called:
• order winners.
• customer preferences.
• order preferences.
• order qualifiers.
Order qualifiers are those competitive characteristics that a firm must exhibit to be a viable competitor in the
marketplace.
The price for a product must fall within a certain range for a supplier to be considered by potential
customers. This condition is known as an order:
• winner.
• confirmation.
• premise.
• qualifier.
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Level of service is a measure (usually expressed as a percentage) of satisfying demand through inventory or through
a production schedule that satisfies the customers' requested delivery dates and quantities.
Which of the following terms refers to a measure of satisfying demand through inventory or through a
production schedule that satisfies the customers' requested delivery dates and quantities?
• Customer satisfaction
• Order fill rate
• Level of service
• Schedule attainment
Sustainability includes activities that provide present benefit without compromising the needs of future generations.
Recycling wastes, such as plastic, paper, metals, etc., for reuse in today's products and thus minimizing
landfills is an example of:
• sustainability.
• reverse logistics.
• rework.
• cost reduction.
Order qualifiers are competitive characteristics that are required for a firm to be a viable competitor in the
marketplace.
The competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace are
known as:
• customer preferences.
• a competitive advantage.
• order winners.
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A business plan is a statement of long-range strategy and revenue, cost, and profit objectives usually accompanied
by budgets, a projected balance sheet, and a cash flow.
How is a business plan different from a strategic plan?
• A business plan is a near-term projection of a company's financials.

• A business plan focuses on the long-range financial objectives of a company.
• A business plan is tactical in nature.
• A business plan receives input from the sales and operations plan.
Governments establish regulations that can greatly impact market demand for products due to a number of resulting
factors.
Which of the following entities or conditions impacts customer demand through regulations in areas such as
safety, liability, taxes, or the environment?
• Government
• Quality
• Competition
• Economy
An organization in a service industry provides an intangible product (e.g., medical or legal advice).
In its narrowest sense, an organization that provides an intangible product is in the:
• service industry.
• real estate industry.
• hospitality industry.
• health-care industry.
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A strategic plan defines how to marshal and determine actions to support the mission, goals, and objectives of an
organization.
Which of the following statements describes the strategic plan?
• It is a statement of long-range strategy and revenue, cost, and profit objectives and is usually accompanied
• It consists of tactical plans that direct the business to achieve competitive advantage on a continuous basis.
• It defines how to marshal and determine actions to support the mission, goals, and objectives of an
organization.
• It is a time-phased statement of expected customer orders anticipated to be received.
A strategic plan contains the company's vision, mission statement, goals, and objectives.
How is a strategic plan different from a business plan?
• A strategic plan is tactical in nature.

• A strategic plan contains the company's vision, mission statement, goals, and objectives.
• A strategic plan seeks to define priorities.
• A strategic plan contains a capacity resource plan.
After-sales support often separates competitors, when customers know that one company stands behind its products
while the other is only interested in the initial sale.
Two companies offer comparable products with relatively similar quality and pricing, but one company
dramatically leads the market due to its after-sales support. This is an example of:
• order follow-up.
• an order qualifier.
• an order survey.
• an order winner.
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Sustainability includes activities that provide present benefit without compromising the needs of future generations.
A key design factor for today's manufacturers might include taking product back at the end of its life cycle to
dispose of properly. This would be an example of:
• global warming.
• anti-corruption.
• energy efficiency.
• sustainability.
A process is a planned series of actions or operations (e.g., mechanical, electrical, chemical, inspection, test) that
advances a material or procedure from one stage of completion to another.
Which of the following is a planned series of actions or operations that advances a material or procedure
from one stage of completion to another?
• Project
• Process
• Task
• Work-in-process
Which of the following is true of a business plan?
• It is stated in terms of monetary units and grouped by product family.

• It is stated in terms of units and grouped by manufacturing site.
• It is stated in terms of monetary units and detailed by product.
• It is stated in terms of units and grouped by distribution channel.
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An organization's vision describes the organization as it would appear in a future successful state.
The shared perception of the organization's future, or what the organization will achieve, is known as its:
• sales and operations plan.

• mission.
• vision.
• strategic plan.
In today's global environment, manufacturers find foreign competitors selling in their markets, transportation of
goods around the globe easy and affordable, and communications availing customers of goods and services from
around the globe.
Which of the following entities or conditions impacts customer demand by improved communication, global
transportation, and worldwide sourcing?
• Logistics
• Competition
• Quality
• Government
A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets,
a projected balance sheet, and a cash flow is called a:
• business plan.
• strategic plan.
• hoshin plan.
• resource plan.
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Section B Quiz
In an assemble-to-order environment, the delivery lead time would include assembly and ship steps, for a total of
two weeks.
For more information, refer to Module 1, Section B, Topic 1
Assume that design, purchase, inventory, manufacturing, assembly, and ship steps each individually have a
lead time of one week. In which environment would delivery lead time be two weeks?
• Make-to-order
• Assemble-to-order
• Engineer-to-order
• Make-to-stock
Postponement enables specific identification of a product as close to the market as possible.
Which product design strategy shifts product differentiation closer to the consumer by delaying identity
changes, such as assembly or packaging, to the last possible supply chain location?
• Bright packaging
• Postponement
• Deferral
A product family is a group of products with similar characteristics, often used in production planning (or sales and
operations planning).
A group of products with similar characteristics, often used in production planning, is known as a:
• product portfolio.
• product family.
• planning bill of material.
• phantom bill of material.
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In a make-to-order production environment, a good or service can be made after receipt of a customer's order.
A chemical company waits to manufacture batches of products until customers place orders, due to the
products' shelf life. This is an example of which of the following production environment strategies?
• Make-to-stock
• Make-to-order
ERP differs from manufacturing resource planning in that it does not focus on manufacturing alone.
How does enterprise resources planning (ERP) differ from manufacturing resource planning?
• ERP runs on different types of servers.

• ERP does not dwell on manufacturing alone.
• Only the names have changed in order to market the software.
• ERP uses relational databases.
In an assemble-to-order environment, orders specify the variations of the assembly to be produced and therefore
must be received before the product can be assembled and made available for sale.
In an assemble-to-order strategy, when are orders for products received?
• Before the product can be assembled and made available for sale
• After the product is in inventory and available for sale
• Before the product can be engineered, produced, and made available for sale
• Before the product is produced, placed in inventory, and made available for sale
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Data governance is a set of processes that ensures that important data assets are formally managed throughout the
enterprise.
What is the definition of data governance?
• Science of examining raw data with the purpose of drawing conclusions about that information
• Process of ensuring that a database remains an accurate reflection of the universe of discourse it is modeling
or representing
• Practice of examining large databases in order to generate new information
• Overall management of the accessibility, usability, reliability, and security of data used to ensure data record
accuracy
In a make-to-stock environment, orders are expected to be filled from existing inventory and immediately available
for shipment.
In a make-to-stock strategy, when are orders for products typically received?
• After the product can be assembled and made available for sale
ERP depends heavily on accurate and "clean" data. Data governance is critical to ensure that ERP processes
deliver reliable results.
Which of the following statements is true of enterprise resources planning (ERP)?
• Advances in technology have made ERP systems affordable for companies of any size.
• Only a few databases are required, and they seldom relate to one another.
• ERP systems are similar to MRP II systems, as they both deal with manufacturing.
• Large data requirements tend to make these systems expensive and difficult to operate.
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The master scheduler must know what to produce, how much, and when to deliver it in order to align production
schedules.
Master schedulers require the details of a customer order for which of the following production strategies?
• Make-to-order, assemble-to-order, and engineer-to order

• Make-to-order and assemble-to-order
• Make-to-order and engineer-to-order
• Assemble-to-order, engineer-to-order, and make-to-stock
Enterprise resources planning (ERP) delivers an integrated suite of business applications.
Which of the following is a framework for organizing, defining, and standardizing the business processes
necessary to effectively plan and control an organization?
• Advanced planning and scheduling

• Enterprise resources planning
• Manufacturing resource planning
In a flow shop, the machines and the operators process a standard, uninterrupted material flow. The same operations
are performed for each production run. The layout is designed to facilitate a product flow.
A mass production shop with a continuous layout where products follow the same process is also known as:
• discrete.
• intermittent.
• a flow shop.
• a job shop.
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Manufacturing lead time represents the total time required to manufacture an item, exclusive of lower-level
purchasing lead time.
Manufacturing lead time represents the:
• total lead time required to obtain a purchased item.

• longest planned length of time to accomplish the activity in question.
• total time required to manufacture an item, exclusive of lower-level purchasing lead time.
• time from the receipt of a customer order to the delivery of the product.
Customers purchase finished goods in a make-to-stock environment. Raw materials and component inventories are
used to make finished goods and are not normally sold. Work-in-process inventory refers to items in the process of
being converted into finished goods.
When customer orders are received in a make-to-stock environment, they consume:
• raw materials.
• work-in-process.
• finished goods.
• component inventory.
Repetitive manufacturing is dedicated to a single product or a small range of products, where products are passed
through the same sequence of operations.
A vehicle assembly plant would be classified as which type of manufacturing process?
• Continuous
• Job
• Repetitive
• Batch
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Delivery lead time is the time from the receipt of a customer order to the delivery of the product. Since this is
engineer-to-order, the receipt of the order would initiate the design phase.
Delivery lead time in an engineer-to-order environment includes which of the following elements?
• Assemble, ship
• Manufacture, assemble, ship
• Purchase, manufacture, assemble, ship
• Design, purchase, manufacture, assemble, ship
Flow manufacturing produces high-volume, standard products, so work centers are dedicated to producing similar
products.
Which of the following is a characteristic of flow manufacturing?
• The sequence of operations depends on the part being manufactured.

• Planning and control tasks are complicated.
• Workers and equipment must be flexible.
• Work centers are dedicated to producing similar products.
With engineer-to-order products, customer specifications require unique engineering design, significant
customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of
material, and routings.
How does an engineer-to-order product differ from products in other production strategies?
• Once the product is designed, it is typically sold as a standard product offering.

• It is produced upon receipt of the customer order.
• Each customer order results in a unique set of part numbers, bills of material, and routings.
• The demand lead time is comparable to that for assemble-to-order products.
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In project production, each unit or small group of units is managed by a project team created especially for that
purpose.
Which of the following statements refers to project production?
• Engineering schedules and manages production.

• The project schedule is translated into production requirements.
• Oversight of the manufacturing process is defined on a Gantt chart.
• Each unit or small group of units is managed by a project team created especially for that purpose.
EDI is the electronic exchange of trading documents, such as purchase orders, shipment authorizations, advanced
shipment notices, and invoices.
Implementation of electronic data interchange (EDI) will have the most impact on which of the following
costs?
• Quality
• Packaging
• Supplier development
• Transactions
In an assemble-to-order environment, products are assembled from common components based on the specifications
in a customer order.
Which of the following refers to a production environment where a product can be assembled from common
components after receipt of a customer's order?
• Make-to-order
• Make-to-stock
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In the growth phase of a product, rapid expansion and increased production often lead to degradation in quality and
delivery.
A company has developed a new, innovative product that is taking over the market. Early sales consume
everything the company can produce, but things have started to slow down. Both production and sales
continue to grow. What are the typical challenges that would be expected in this growth phase of the
product's life?
• Design and quality

• Design and availability
• Quality and delivery
• Price and delivery
Large, often unique items or structures that require a custom design capability are generally manufactured in an
engineer-to-order environment. Project manufacturing is the process that may be used in this environment.
Which of the following is a type of manufacturing environment used for large, often unique items or
structures that require a custom design capability?
• Custom manufacturing
• Discrete manufacturing
• Project manufacturing
Demand lead time is the amount of time that potential customers are willing to wait for the delivery of a good or a
service.
The amount of time that potential customers are willing to wait for the delivery of a good or a service is
known as the:
• demand lead time.

• service lead time.
• manufacturing lead time.
• cumulative lead time.
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Intermittent production is a form of manufacturing in which the jobs pass through the functional departments in lots
and each lot may have a different routing. For more information, refer to Module 1, Section B, Topic 1
Which of the following terms refers to a form of manufacturing in which the jobs pass through the functional
departments in lots and each lot may have a different routing?
• Project
• Repetitive
• Flow
• Intermittent
Product differentiation as a strategy seeks to create unique product characteristics or selling points that differ from
those of competitors. Postponement, a subtype of an assemble-to-order production environment, is a product design
or supply chain strategy that deliberately delays final differentiation (assembly, production, packaging, tagging, etc.)
until the latest possible time in the process. This shifts product differentiation closer to the consumer to reduce the
anticipatory risk, eliminating excess inventory in the form of finished goods in the supply chain. Note that neither
decoupling nor cellular layouts are terms that refer to a production environment.
An organization is pursuing a product differentiation strategy. Which is a production environment that could
accommodate this strategy while also minimizing related inventories of components and/or finished goods?
• Postponement
• Cellular layout
• Decoupling
• Make-to-stock
APS simultaneously plans and schedules production based on available materials, labor, and plant capacity.
How does advanced planning and scheduling (APS) software differ from other planning systems?
• APS runs in real time in parallel to other system processes.

• APS simultaneously plans and schedules production based on available materials, labor, and plant capacity.
• APS includes the planning processes of production planning, master production scheduling, and capacity
requirements planning.
• APS combines enterprise resources planning with complex spreadsheet workbooks.
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A T logical structure consists of numerous similar finished products assembled from common assemblies,
subassemblies, and parts. An assemble-to-order strategy is useful where a large number of end products (based on
the selection of options and accessories) can be assembled from common components.
Using the VATI analysis terminology, what type of plant would typically be used in an assemble-to-order
manufacturing environment?
• V-plants
• A-plants
• T-plants
• I-plants
Project production is a manufacturing process in which each unit or small group of units is managed by a project
team created especially for that purpose.
What is the term for a production environment in which each unit or small group of units is managed by a
team created especially for that purpose?
• Intermittent
• Continuous
• Flow
• Project
EDI is the electronic exchange of trading documents, such as purchase orders, shipment authorizations, advanced
shipment notices, and invoices. It replaces manual entries, which in turn minimizes data errors.
A benefit of implementing electronic data interchange (EDI) with a supplier is a reduction in:
• buyer involvement.
• postage expense.
• safety stock.
• data errors.
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In an engineer-to-order environment, customer specifications for products require unique engineering design and
significant customization.
The customer is usually very involved in the product design. With assemble-to-order, the product can be assembled
after receipt of a customer's order; with make-to-order, the product is manufactured using a combination of standard
items and custom-modified items after receipt of a customer's order; and, with make-to-stock, products are usually
finished based on forecasts before receipt of a customer order.
Which of the following manufacturing strategies is most appropriate when the customer is heavily involved
in the product design?
• Make-to-stock
• Make-to-order
Automatic release of POs is a significant benefit. The other responses are true but not as significant.
What is a primary benefit to a company of using electronic data interchange for repeat orders with its
suppliers?
• Purchase orders can be released without buyer action.

• Order processing time meets planned lead time.
• Orders can be grouped and sent as a nightly batch.
• Paperwork, postage, and related handling are reduced.
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In a make-to-order environment, orders are the signal to manufacturing to produce a product, and therefore
they must be received before the product can be produced, placed in inventory, and made available for sale.
In a make-to-order strategy, when are orders for products typically received?
• Before the product can be assembled and made available for sale
As the needs of organizations have grown in the direction of a truly integrated approach toward materials
management, the need for integrated systems has arisen. As these systems have grown both in size and in
integration of functionality, they have come to be referred to by the term "enterprise resources planning (ERP)."
As manufacturing planning and control has become more complex, the need for integration of knowledge
and decision making has resulted in which of the following computer systems?
• Manufacturing execution systems

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Section C Quiz
The house of quality is a structured process that relates to customer-defined product attributes, achieved by mapping
certain steps:
1. Identification of customer attributes

2. Identification of supporting technical features
3. Correlation of customer attributes with supporting technical features
4. Assigning priorities to customer requirements and technical features
5. Evaluation of competitive stances and products
6. Identification of technical features to be used in the final design
For more information, refer to Module 1, Section C, Topic 1
Which six-step process that forces designers to consider customer needs can a manufacturer use to support
and generate a customer's desired product attributes?
• Continuous improvement
• Voice of the customer (VOC)
• House of quality (HOQ)
• Total quality management (TQM)
Quality can be defined through five principal approaches:
Transcendent quality is an ideal—a condition of excellence.

Product-based quality is based on a product attribute.
User-based quality is fitness for use.
Manufacturing-based quality is conformance to requirements.
Value-based quality is the degree of excellence at an acceptable price.
There are many ways to measure quality. Which of the following is conformance to requirements?
• Manufacturing-based quality
• Transcendent quality
• Value-based quality
• Product-based quality
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Field service may also include training and implementation assistance for larger and more complex items. Customer
service involves addressing the needs, injuries, and requests of customers as they arise.
A manufacturer of consumer electronics offers customers after-sale installation and maintenance. This is a
way to avoid or reduce external failure costs—that is, problems found after the purchase of the product. This
is known as:
• customer service.
• total quality management.
• field service.
• preventive maintenance.
The next step in QFD is to construct a house of quality that takes the requirements, prioritizes them, and sets the
engineering target values for the new design.
In quality function deployment (QFD), what is typically the next step once the voice-of-the-customer
requirements are known?
• Compare these requirements to existing products in the market.

• Have all the functional areas of the firm participate simultaneously in the product design activity.
• Construct a current reality tree.
• Translate the wants into engineering specifications through a series of well-defined steps.
A Pareto chart is a graphical tool for ranking causes from most significant to least significant.
Which of the following is a graphical tool for ranking causes from most significant to least significant?
• Control chart
• Cause-and-effect diagram
• Pareto chart
• Scatter chart
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The cause-and-effect diagram is a tool for analyzing process dispersion. The diagram illustrates the main causes and
subcauses leading to an effect (symptom).
Which tool is used to analyze process dispersion and illustrate the main causes and subcauses leading to an
effect or symptom?
• Scatter chart
• Pareto chart
• Control chart
Effective quality management originates at the source—the operator at the work center. Management-level quality
departments and material review boards are too far removed from the actual production of products. Inspectors
normally review products after they have been produced; the goal of TQM is to prevent quality errors from
occurring at the source.
In total quality management (TQM), primary responsibility for quality is assigned to:
• the corporate quality assurance department.

• the operators of production equipment.
• the inspectors assigned to the production department.
• the members of the material review board.
Common causes of variation, such as the humidity in a room, are not assignable to any specific cause and are
inherent in processes over time.
Which of the following situations is an example of common cause or chance variation?
• A bill of material does not reflect the latest engineering change.

• The humidity in a room varies from one day to the next.
• An operator improperly adjusts a machine.
• A cutting tool breaks and chips a part.
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User-based quality is based on the expectations of the ultimate user: Does the product function as expected, and is it
reliable and durable? This consideration could also be based on other elements, such as warranty, price, and
perceived quality. For more information, refer to Module 1, Section C, Topic 1
An end customer's expectations of how a product should perform, its features, reliability, and the ease of
maintenance (where applicable) are elements of which measure of quality?
• Product-based
• Transcendent
• User-based
• Value-based
Employee empowerment is the practice of giving non-managerial employees the responsibility and the power to
make decisions regarding their jobs or tasks. It transfers some managerial responsibility to the employee.
Empowerment can range from corporation-level decisions to workstation decisions (e.g., scheduling, quality,
purchasing decisions).
A corporation has decided to give its factory employees more control and flexibility over the execution of
their day-to-day duties. This allows them to decide when to begin certain processes rather than following a
detailed schedule dictated by management. What is this an example of?
• Employee incentives
• Employee empowerment
• Employee involvement
• Diversity management
Quality function deployment (QFD) is a methodology to ensure that all the major requirements of the customer are
identified and met or exceeded. For more information, refer to Module 1, Section C, Topic 1
Involving the customer in the design of a product is part of which methodology?
• Outsourcing
• Group technology
• Concurrent engineering
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The definition for six sigma found in the APICS Dictionary describes it as follows: "A methodology that furnishes
tools for the improvement of business processes. The intent is to decrease process variation and improve product
quality." For more information, refer to Module 1, Section C, Topic 2
How is six sigma best defined?
• The ability of the process to produce parts that conform to specifications

• Mistake-proofing techniques, such as manufacturing or setup activity designed in a way to prevent an error
from resulting in a product defect
• A methodology that furnishes tools to decrease process variation and improve product quality
• A never-ending effort to expose and eliminate root causes of problems
Preventive maintenance ensures that production quality is maintained and that delivery schedules are met. A well-
cared-for machine is also more likely to last longer and suffer fewer problems. Increased investment in prevention
will initially make costs rise, because failure costs will not immediately drop. Investing in quality has a long-term
positive return on investment.
Preventive maintenance—comprising adjustments, replacements, and basic cleanliness—is used to forestall

machine breakdowns. With regular preventive maintenance, what can be expected to happen to the cost of
failure and poor quality?
• It will be reduced in the short term.

• It will increase in the short term.
• It will increase in the long term.
• It will be reduced in the long term.
A value analysis focuses on the functions of an item rather than the methods of producing the present product
design. For more information, refer to Module 1, Section C, Topic 1
Which of the following terms is associated with the systematic use of techniques that identify a required
function, establish a value for that function, and finally provide that function at the lowest overall cost?
• Value analysis
• Value-added
• Value chain analysis
• Value stream
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The voice of the customer (VOC) is the actual customer descriptions in words for the functions and features
customers desire for goods and services. In the strict definition, as relates to quality function deployment, the term
"customer" indicates the external customer of the supplying entity.
What is the term for the actual customer descriptions in words for the functions and features customers
desire for goods and services?
• The voice of the customer

• Simultaneous engineering
• Concurrent engineering
Specification results falling inside a product's tolerance limits are considered acceptable. Results falling outside of
tolerance limits are rejected and require either rework or scrapping. Specification limits are set by customer
requirements and engineers and are usually fixed.
What is the term for an acceptable departure from a target value for a product's ability to function as
established by engineers?
• Tolerance
• Spread
• Specification limits
• Statistical process control
Lean six sigma is a management approach for problem solving and process improvement based on a combination of
the different tools of six sigma and lean manufacturing. For more information, refer to Module 1, Section C, Topic 2
Which of the following is a combined approach for process improvement and problem solving based on
reducing non-value-added activities, decreasing process variation, and improving product quality?
• Total quality management

• Lean six sigma
• DMAIC
• Theory of constraints
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An essential component of TQM is the availability of statistical tools that enable operators to identify, correct, and
record quality issues as they occur in the plant. Effective quality management is performed by individual production
operators during the production process, not by supervisors. Quality efforts must include an entire process, not
separate operations. Inspection is a regressive technique focused on identifying quality problems only after
production has occurred.
Total quality management (TQM) has as its basis which of the following characteristics?
• Numerous inspections by supervisors

• Methods and tools to analyze and solve process problems
• Supervisors who control all aspects of production
• Employee tasks divided into separate, understandable segments
TQM is a management approach to long-term success through customer satisfaction. It is based on the participation
of all members of an organization in improving processes, goods, services, and the culture in which they work.
What is the most important objective of total quality management (TQM)?
• Product performance to specifications

• Decreased internal failures
• Product design quality
• Improved customer satisfaction
A fishbone diagram illustrates the main causes and subcauses leading to an effect (symptom). The cause-and-effect
diagram is one of the seven tools of quality.
A fishbone diagram most often is used to identify:
• a problem.
• the organizational flow.
• a process.
• a cause.
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A histogram is made up of bars that represent a frequency distribution in which groups or classes of items are
marked on the x axis and the number of items in each class is indicated on the y axis. The pictorial nature of the
histogram makes it easier to identify patterns.
Which of the following is a graph of contiguous vertical bars that allows an organization to identify patterns
in measurements of quality data?
• Flowchart
• Statistical process control chart
• Histogram
The Pareto chart is a graphical tool for ranking causes from most to least significant.
Which of the following tools would be most appropriate to use to rank persistent quality problems?
• Affinity diagram
• Process map
• Pareto chart
• Tree diagram
Internal failure costs are accrued when things go wrong before the product reaches the customer. They usually
include the costs of rework, scrap, downgrades, reinspection, retesting, and process losses. They can have the added
impediment of extending lead times or resulting in incomplete shipments.
Rework, scrap, spoilage, and downgrades are examples of:
• internal failure costs.

• a design process.
• external failure costs.
• the product development cycle.
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The primary use of control charts is to detect assignable causes of variation in a process as opposed to random
variations. The control chart is one of the seven tools of quality.
Which quality tool is used to detect assignable causes of variation in a process as opposed to random
variations?
• Pareto chart
• Scatter chart
• Control chart
External failure costs are related to problems found after the product reaches the customer. This usually includes
such costs as warranties and returns.
Which of the following types of costs are related to problems found after the product reaches the customer?
• Internal failure costs

• Prevention costs
• Overhead costs
• External failure costs
Benchmarking is the process of comparing products and/or services to those of another organization thought to
provide superior performance. The benchmark target does not have to be a competitor or operate in the same
industry.
Certain corporations, such as Amazon and Apple, have excellent customer service operations. Which of the
following is the term for an organization looking to such exemplars for inspiration on how best to improve
their own operations?
• Root cause analysis

• Benchmarking
• Corporate espionage
• Market research
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In a scatter chart, two sets of data are plotted on a graph, with the y axis used for the variable to be predicted and the
x axis used for the variable to make the prediction. The graph will show possible relationships.
Which quality tool is used to predict a variable based on a relationship with another variable?
• Scatter chart
• Control chart
• Pareto chart
Continuous improvement is small-scale and therefore sustainable.
While large, exhaustive projects may be needed on occasion, these cannot be conducted without disrupting
operations and taking people away from their regular duties.
Smaller improvements can be built into the regular course of operations and job duties, without major or noticeable
(i.e., potentially costly) disruption.
The usually small-scale, incremental focus of continuous improvement allows for which of the following?
• Considerable performance enhancements

• Considerable increase in production rate
• Minimal disruption to overall functions and duties
• Increased order winners
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Section D Quiz
Value added is the contribution made by an operation or a plant to the final usefulness and value of a product as
seen by the customer. Since waste is what isn’t value added, the key question is what is value added? Value
is defined by customers, both internal and external.
Determining what is valued requires two things: understanding who the customers are and understanding what they
value. In this case, the correct answer indicates what is being produced will be valued as seen by the customer.
Producing using significant overtime or failing to remove variation from a process are examples of what are
considered common root causes of waste in lean.
Producing a high variety of make-to-stock products because one cannot find a product that satisfies multiple
segments would result in high inventory levels, another form of waste.
For more information, refer to Module 1, Section D, Topic 1
In current lean manufacturing terms, which example is most likely to be considered value added?
• Producing the most variations of a type of make-to-stock good in the market because different customer
segments desire different features
• Producing the lowest-cost make-to-stock goods in the market because the primary customer segment
prioritizes low price even if the products have few features
• Producing the highest-volume make-to-order goods in the market using significant overtime because
demand would otherwise be higher than capacity
• Producing the highest-quality make-to-order products in the market through inspection despite the high
variability of the manufacturing process
In general, a push system creates inventory in anticipation of demand.
Which of the following is an example of a push system for replenishing inventory?
• Withdrawing inventory for the shop floor as needed

• Centralized distribution planning
• Kanban
• Producing only enough items to replace those consumed
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Takt time sets the pace of production to match the rate of customer demand and becomes the heartbeat of any lean
production system.
Which of the following sets the pace of production to match the rate of customer demand and becomes the
heartbeat of any lean production system?
• Drum
• Buffer
• Sensei
• Takt time
Kaizen is the Japanese term for improvement. In manufacturing, kaizen relates to finding and eliminating waste in
machinery, labor, or production methods.
Kaizen in a lean environment refers to:
• voluntary study groups.

• continuing improvement involving everyone.
• a statement of objectives.
• visiting the shop floor to observe what is occurring.
In general, a pull system replenishes inventory only when it is needed. A kanban is a pull system in which work
centers signal with a card that they wish to withdraw necessary parts from feeding operations or suppliers.
Which of the following is an example of a pull system for replenishing inventory?
• Kanban
• Producing inventory in advance of need
• Issuing material to a given schedule
• Centralized distribution planning
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Process flexibility is the design of a manufacturing system, including operators and machinery, that allows quick
changeovers to respond to near-term changes in product volume and mix.
What does process flexibility refer to?
• Certification procedures verifying that a supplier operates, maintains, improves, and documents effective
procedures that relate to the customer's requirements
• Manufacturing system that allows quick changeovers to respond to near-term changes in product volume and
mix
• Ease with which current designs can be modified in response to changing market demands
• Training machine workers to perform tasks outside their immediate jobs and in problem-solving techniques
Lean production focuses on increasing flexibility within manufacturing.
A fundamental principle of lean production is to focus on:
• buffering the constraint.

• product-specific work cells.
• operator and process flexibility.
• strict adherence to the master schedule.
In lean manufacturing, costs are reduced by reducing waste within a system.
In lean manufacturing, costs are reduced by reducing:
• mismatches between work pace and machine-designed pace.

• waste.
• interruptions to the product workflow.
• variability.
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In distribution, pull is a system for replenishing field warehouse inventories where replenishment decisions are
made at the field warehouse itself, not at the central warehouse or plant.
In distruction, which of the following terms in refers to a system for replenishing field warehouse inventories
where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant?
• Kanban
• Distribution requirements planning
• Pull
• Push
Continuous process improvement is a never-ending effort to expose and eliminate the root causes of problems,
focusing on small-step improvement as opposed to big-step improvement.
Reducing setup time to enable quick changeovers of products on a manufacturing line is an example of:
• continuous production.
• continuous exchange of products.
• continuous process improvement.
• continuous replenishment.
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A supplier partnership is intended to establish of a working relationship with a supplier organization whereby two
organizations act as one.
Which of the following is a term for the intent to establish a working relationship with a supplier
organization whereby two organizations act as one?
• Six sigma
• Supplier certification
• ISO 9000
Lean involves identifying and eliminating non-value-adding activities in design, production, supply chain
management, and dealing with customers.
Which of the following terms refers to a philosophy of production that emphasizes minimizing the amount of
all the resources (including time) used in the various activities of the enterprise?
• Flow
• Six sigma
• Lean
A pull system involves the production of items only as demanded for use or to replace those taken for use.
Lean production uses kanban cards to generate a reorder point signal. This is an example of:
• a production support system.

• a push system.
• a pull system.
• a replenishment system.
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TPM is a system of maintaining and improving the integrity of production and quality systems through the
machines, equipment, processes, and employees that add business value to the organization.
Total productive maintenance (TPM) focuses on preventive maintenance plus:
• releasing orders to the machine shop for tool manufacture or equipment maintenance.
• driving down costs on service parts while focusing on manufacturing setups to be product-specific.
• increasing direct labor efficiencies along with continuous education on rapid changeovers and total quality.
• continuing efforts to adapt, modify, and refine equipment to increase flexibility, reduce material handling,
and promote continuous flows.
A kanban is a method of lean production that uses standard containers or lot sizes with a single card attached to
each. It is a pull system in which work centers signal with a card that they wish to withdraw parts from feeding
operations or suppliers.
Which of the following is a replenishment system where signals from a manufacturer to a supplier are used
to pull inventory replenishment through the system?
• Vendor-managed inventory
• Kanban
• Two-bin system
The first issue to be addressed is to ensure quality materials and components. Without total quality, lean cannot
happen.
Which of the following issues should be addressed first when helping a current supplier transition to a lean
environment?
• Quality assurance
• Continuous improvement
• Responsiveness
• Small and frequent lot shipments
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"Jidoka" is the Japanese term for the practice of stopping the production line when a defect occurs. The other terms
do not fit the definition of jidoka.
The term "jidoka" refers to the process of:
• combining loads from multiple suppliers.

• eliminating waste and continually improving processes.
• leveling production to match the rate of sales.
• halting the production process when a defect occurs.
The elimination of quality inspection by the buyer is an essential element in a supplier relationship. Even if the
supplier delivers the right items in the right quantities and on time, if the items lack perfect quality, the entire
delivery is faulty.
What is the most important selection criterion when a supplier is selected for a partnership?
• Supplier's quality practices

• Supplier's return policy
• Supplier's prices
• Supplier's location
Kanban is a method that uses standard containers or lot sizes with a single card attached to each. It is a pull system
in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers.
Which of the following is a pull system in which work centers signal that they wish to withdraw parts from
feeding operations or suppliers?
• Andon
• Dispatch
• Kanban
• Shop packet
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Jidoka means that when a problem occurs on a production line, a worker is able to stop the process and prevent
defective goods from being produced.
The practice of stopping a production line when a defect is found is known as:
• six sigma.
• jidoka.
• total quality management.
• kaizen.
Hoshin planning is a Japanese strategic planning process in which a company develops up to four vision statements
that indicate where the company should be in the next five years.
Which of the following is a strategic planning process in which a company develops up to four vision
statements that indicate where the company should be in the next five years?
• Vision planning
• Mission planning
• Sales and operations planning
• Hoshin planning
Hoshin planning is a Japanese strategic planning process in which a company develops up to four vision statements
that indicate where the company should be in the next five years.
A company is developing a strategy for where it is going within the next five years by developing multiple
vision statements. What is this planning process called?
• Hoshin planning
• Strategic manufacturing planning
• Business planning
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Lean production aims to eliminate all non-value-added activities (waste) from product design and production and
management of the supply chain and customers. Although the reduction of inventories, costs, and lead times may be
goals within a lean production program, none of these are, by themselves, the primary objective of lean production.
The primary objective of lean production is to reduce:
• labor costs.
• waste.
• inventories.
• lead times.
"Quality at the source" means that it is each person's responsibility to provide 100% acceptable quality material to
the consumer of the material.
"Quality at the source" is defined as:
• suppliers coming on site to deal with quality issues.

• a person taking responsibility for the quality of his or her own work.
• the quality department monitoring all operations.
• inspecting 100% of the raw materials.
"Hansei" is a Japanese word meaning reflection. In business, it refers to the concept of self-criticism and finding
areas for improvement.
What does the term "hansei" refer to?
• Voluntary study group

• Statement of objectives
• Reflecting upon areas for improvement
• Visual signaling system
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"Hansei" is a Japanese word meaning reflection. In this case it means that application of hoshin planning and the
PDCA requires a certain degree of mindfulness and introspection to ensure that one does not slip into unthinking
routines.
The question indicates that hoshin and hoshin planning are already being done, and the fact that they are using a
periodic audit implies that they are already using PDCA as well.
An organization is committed to using lean tools and techniques to continuously improve their
manufacturing process.
They begin with a statement of objectives and perform breakthrough planning that includes a set of vision
statements indicating where the company should be in the next five years.
During a periodic audit of the implementation of this plan, a key failure appears: Many people responsible
for helping in the plan's implementation have fallen back into their old routines.
What element needs to be added or strengthened as a reaction to this feedback?
• Plan-do-check-action (PDCA)
• Hoshin planning
• Hoshin
• Hansei
The five Ss are five core principles used to create a workplace suitable for lean production, named for the fact that
the original Japanese terms all begin with the letter S: seiri (tidiness), seiton (orderliness), seiso (cleanliness),
seiketsu (standardization), and shitsuke (discipline).
These terms can be translated into English as sort, set in order, shine, standardize, and sustain.
Implementing which of the following processes is mandatory for laying a foundation for a lean production
environment?
• Lean six sigma

• Kaizen
• Five Ss
• What-if analysis
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Section E Quiz
Extrinsic forecasting is a type of quantitative forecasting that works to find a link between information that is
externally available and demand. If there is a link, it is called correlation, and a greater level of correlation is
preferable to a lower level.
The best information that can be used is leading indicators because these economic or demographic indicators tend
to be among the first types of data that can show a change in a trend. Therefore, the correct answer is the leading
indicator that has the highest level of correlation. Note that extrinsic forecasts tend to be more useful for large
aggregations, such as total company sales, than for individual product sales.
For more information, refer to Module 1, Section E, Topic 3
An organization that sells industrial and consumer packaging to manufacturers wants to generate a
strategic-level long-term extrinsic forecast to help determine whether to expand, contract, or leave capacity
as it is.
Given information on the level of correlation and leading versus lagging, which indicator would be the best
choice for this organization to use in the extrinsic forecast if they want to restrict themselves to simple
regression analysis?
• Leading and 55% correlated: manufacturers' orders for non-defense capital goods
• Lagging and 60% correlated: change in labor cost per unit of output
• Leading and 72% correlated: manufacturers' new orders for consumer goods/materials
• Lagging and 79% correlated: ratio of manufacturing and trade inventories to sales
Forecasters and users of forecasts use information on forecast accuracy to understand the reliability and relevance of
the data as they are used to determine demand characteristics, variation, and stability.
Forecasters and users of forecasts use information on forecast accuracy to understand the reliability and
relevance of the data as they are used to determine demand characteristics, variation, and:
• sustainability.
• reliablity of the sales and operations planning process.
• stability.
• customer predictablity.
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Exceptional events might include a customer stockpiling product based on an anticipated strike, customer plant
shutdowns or equipment failures, or severe weather keeping customers at home. Events such as these need to be
recorded in the forecast notes to differentiate them from potential changes in a trend.
In the middle of April, an unusually large order comes in from a customer, at odds with forecast data. In
May, the customer's orders are more in line with forecasts. This could be the result of:
• a shift in customer buying habits.

• an exceptional event.
• seasonal variation.
• a new product roll-out.
Seasonality is a repetitive pattern of demand from year to year (or other repeating time interval) with some periods
considerably higher than others. Items such as lawn mowers and snow blowers are subject to seasonal demand.
A company producing lawn mowers, with peak selling periods during the year, would likely use which of the
following forecast methods?
• Extrinsic
• Moving average
• Trend
• Seasonality
Three critical functions within demand management include marketing management, customer relationship
management, and demand planning.
Three critical functions within demand management include customer relationship management, demand
planning, and:
• operations management.
• supplier relationship management.
• marketing management.
• engineering design.
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Qualitative forecasting is based on intuitive or judgmental evaluation. It is generally used when data are scarce, not
available, or no longer relevant.
Which of the following approaches to forecasting is based on intuitive or judgmental evaluation?
• Trend
• Qualitative
• Moving average
• Seasonality
Customer relationship management (CRM) is a marketing philosophy based on putting the customer first. It
involves the collection and analysis of information designed for sales and marketing decision support to understand
and support existing and potential customer needs.
Which of the following is the software-enabled process that collects and seeks to understand customer needs
based on collection and analysis of information?
• The house of quality

• Customer relationship management
• Root cause analysis
A moving average is an arithmetic average of a certain number (n) of the most recent observations. As each new
observation is added, the oldest observation is dropped.
The term for a forecasting technique that uses an average of a certain number of observations, with each new
observation added and the oldest observation dropped, is:
• trend.
• moving average.
• seasonality.
• exponential smoothing.
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Demand management requires that all sources of demand be included to effectively plan materials and capacity.
Which of the following is true if material and capacity resources are to be planned effectively?
• All sources of demand must be identified with the exception of promotions.

• Only interplant demand requires attention to detail.
• All sources of demand must be identified.
• Service parts do not need to be considered in the analysis.
Trend forecasting models are used for forecasting sales data when a definite upward or downward pattern exists.
Which forecasting model has definite upward or downward patterns?
• Trend
• Exponential
• Focus
• Moving average
Demand planning is the process of combining statistical forecasting techniques and judgment to construct demand
estimates for products or services across the supply chain from the supplier's raw materials to the consumer's needs.
Which of the following is the process of combining statistical forecasting techniques and judgment to
construct demand estimates for products/services across the supply chain from the supplier's raw materials
to the consumer's needs?
• Demand chain management

• Demand management
• Demand planning
• Demand forecasting
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Demand management is the function of recognizing all demands for goods and services to support the marketplace.
The function of recognizing all demands for goods and services to support the marketplace is called:
• demand management.
• demand forecasting.
• demand planning.
• demand chain management.
Trend forecasting models are used for forecasting sales data when a definite upward or downward pattern exists.
A new thermostat that learns the preferences of its owners is consistently growing in demand month after
month. Which of the following forecasting methods would the company most likely use?
• Qualitative
• Trend
• Exponential
• Seasonality
Demand management includes forecasting, order processing, making delivery promises, and interfacing with the
marketplace.
Demand management includes which of the following activities?
• Forecasting, determining safety stock, quoting new orders, and shipping product
• Forecasting, order processing, making delivery promises, and interfacing with the marketplace
• Order processing, making delivery promises, shipping product, and following up to ensure that delivery
takes place
• Taking orders, making delivery promises, shipping orders, and following up to ensure that delivery takes
place
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Exponential smoothing is a type of weighted moving average forecasting technique in which past observations are
geometrically discounted according to their age.
Which of the following is a type of weighted moving average forecasting technique in which past observations
are geometrically discounted according to their age?
• Exponential smoothing
• Delphi method
• Qualitative
• Seasonality
The planned order for an independent demand item becomes the gross requirements for its dependent components.
Dependent demand relates to which of the following elements?
• Gross component requirements

• Order quantities
• Throughput time
• Forecast error
Qualitative forecasting is based on intuitive or judgmental evaluation. It is used generally when data are scarce, not
available, or no longer relevant.
An electronic manufacturer is launching a new product line that is unlike anything else in the marketplace.
Which of the following forecasting methods would the company most likely use?
• Focus
• Qualitative
• Trend
• Seasonality
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Extrinsic forecasting correlates p indicators external to an organization that may influence demand.
Sales for a concrete block manufacturer correlate directly with new home starts. The company would likely
use which forecasting method?
• Trend
• Moving average
• Extrinsic
• Seasonality
Seasonality is a repetitive pattern of demand from year to year (or other repeating time interval) with some periods
considerably higher than others.
A repetitive pattern of demand from year to year with some periods considerably higher than others is
known as:
• seasonality.
• a trend.
• a qualitative forecast.
• exponential smoothing.
When both domestic and international demand are present, ignoring international demand will result in
understated requirements.
A supplier produces for countries around the globe. If only domestic customers are considered in demand
management, what will the resulting outcome likely be?
• Demand will be understated.

• Demand will be overstated.
• Demand will be unaffected.
• Not enough information exists to comment.
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Closer collaboration will mean that upstream partners get downstream customer information directly and
immediately.
A key benefit of communicating demand rather than only orders is that you can see the reason for certain orders
(e.g., to stockpile in advance of a plant shutdown versus a trend of higher sales), and this helps eliminate the
bullwhip effect where variability in orders (both high and low) is magnified at each upstream supply chain node.
A company operating in a volatile industry, in which demand and events can frequently throw off
predictions, has become frustrated with the unreliability of and its dependence on forecasts.
What step could it take to generate better and quicker information about customer demand?
• Collaborate more closely with downstream customers.

• Improve order winners.
• Increase inventory.
• Focus more closely on key competencies.
A make-to-stock environment relies on forecasting not only for supply and production but also for distribution,
ensuring that appropriate products are distributed to the right locations.
An assemble-to-order environment relies on forecasting for supply and component production, but from that point
it uses actual orders for assembly and distribution.
The point where push becomes pull is then wherever actual orders dictate activity rather than relying on forecasts.
A fashion house has forecasted the next season's colors and styles. Distribution plans have been drawn up
that will send the majority of heavier items (e.g., sweaters) to distributors in colder regions, while a larger
quantity of t-shirts and lighter fabric garments will be distributed in warmer regions.
This is an example of what kind of manufacturing environment?
• Make-to-order
• Make-to-stock
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Section F Quiz
If the required capacity or load exceeds the available capacity for any critical resource, the master planner can either
find ways to increase capacity or revise plans. If there is available capacity in other periods, the load might be
rebalanced.
Possible solutions include scheduling overtime, hiring part-time workers to pick up the slack, and subcontracting.
However, hiring part-time workers or subcontractors would not work for this time frame, since additional planning
and training would be required.
For more information, refer to Module 1, Section F, Topic 2
With a holiday season fast approaching, a factory's capacity is deemed insufficient to meet the orders placed
by a highly valued customer. The orders cannot be changed, nor can the load be rebalanced.
What step(s) can the company take in the current time frame that would allow them to meet the customer
demand as requested?
• Hiring part-time workers

• Hiring subcontractors
• Scheduling more overtime
• All of the above
The sales and operations planning process must reconcile all supply, demand, and new product plans at both the
detail and aggregate levels and tie to the business plan. S&OP improves inventory planning by reviewing and
adjusting aggregate inventory levels toward their targeted level at least monthly.
An organization does not engage in sales and operations planning (S&OP) at present. The organization has
clear policies regarding aggregate inventory levels, but inventory tends to be too high toward the end of each
budget year.
What can an inventory management professional say if management is discussing whether or not to start
using an S&OP process at the organization?
• The S&OP process would move inventory targets to an 18-month basis for better stability.
• The S&OP process reduces excess inventory levels relentlessly by identifying and removing waste in all of
its forms.
• The S&OP process would eliminate the need to have aggregate inventory policies because it matches supply
with demand.
• The S&OP process would promote monthly aggregate inventory corrections.
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The master production schedule is at the individual item level.
The level of detail for the master production schedule is:
• at the raw material level.

• at the product family level.
• identical to that used in the production plan.
• developed for individual items.
Rough-cut capacity planning is the process of converting the master production schedule into requirements for key
resources.
What is the term for the process of validating the master production schedule against available demonstrated
capacity?
• Resource requirements planning

• Capacity requirements planning
• Rough-cut capacity planning
Available-to-promise (ATP) is the uncommitted portion of a company's inventory and planned production
maintained in the master schedule to support customer order promising.
Which of the following is the term for the uncommitted portion of a company's inventory and planned
production maintained in the master schedule to support customer order promising?
• Capable-to-promise
• Work in process
• On-hand inventory
• Available-to-promise
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The planning horizon is the amount of time a plan extends into the future. It is normally set to cover a minimum of
cumulative lead time, time for lot sizing low-level components, and time for capacity changes of primary work
centers or key suppliers.
A scheduler at a factory is very cautious and is particularly concerned about the possibility of unanticipated
extra orders. Which of the following needs to be long enough to factor in potential increases in capacity?
• Cumulative lead time

• Planning horizon
• Final assembly schedule
• Liquid zone
Load leveling refers to spreading orders out in time or rescheduling operations so that the amount of work to be
done in sequential time periods tends to be distributed evenly and is achievable.
Which of the following terms applies to spreading orders out in time or rescheduling operations so that the
amount of work to be done in sequential time periods tends to be distributed evenly and is achievable?
• Load leveling
• Line balancing
• Capacity management
• Input/output control
Mixed-model production involves making several different parts or products in varying lot sizes so that a factory
produces close to the same mix of products that will be sold that day.
What is the term for making several different parts or products in varying lot sizes so that a factory produces
close to the same mix of products that will be sold that day?
• Mixed-model production
• Make-to-order
• Mixed-mode planning
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To calculate the answer (which cannot be 100 units in this scenario due to the lot size of 200 units), calculate the
projected available balance (PAB) and MPS for each week as follows:
Week 1 Week 2 Week 3 Week 4 Week 5

Demand 150 100 60 80 140
PAB (100 units) 150 50 190 110 170
MPS 200 200 200
To walk through the required calculations:
▪ Week 1: 100 units of opening inventory minus 150 units of demand in week 1 = –50 units, so an order is placed
for 200 units in week 1, leaving a PAB of 150 units.
▪ Week 2: 150 units PAB minus 100 units demand = 50 units.
▪ Week 3: 50 units PAB minus 60 units demand = –10 units, so another 200-unit order is placed, for a PAB of
190 units.
▪ Week 4: 190 units PAB minus 80 units demand = 110 units PAB.
▪ Week 5: 110 units PAB minus 140 units demand = –30 units, so another 200-unit order is placed. (This is the
answer.) This leaves a PAB of 170 units.
Given the following information, what is the master production schedule (MPS) for week 5?
Opening inventory = 100 units

Lot size = 200 units
Forecasted sales:
Week 1 = 150 units
Week 2 = 100 units
Week 3 = 60 units
Week 4 = 80 units
Week 5 = 140 units
Note: Assume that the master scheduler wants to keep inventory levels to a minimum while still meeting all
projected demand.
• 0
• 100
• 200
• 400
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Capable-to-promise is the process of committing orders against available capacity as well as inventory. This process
may involve multiple manufacturing or distribution sites.
The process of committing orders against available capacity as well as inventory is called:
• on-hand inventory.
• work in process.
• available-to-promise.
• capable-to-promise.
In the liquid zone, scheduling software may automatically make adjustments without input from the master
scheduler. Manual changes can also be made in this zone. The only constraint will be the limits set in the production
plan. This zone is usually the extra time added beyond the cumulative lead time of the product.
In relation to time fences, in which of the following zones can scheduling software make automatic
adjustments without the input of the master scheduler?
• Forecast zone
• Slushy zone
• Frozen zone
• Liquid zone
The production plan is the agreed-upon plan that comes from the sales and operations planning process, specifically
the overall level of manufacturing output planned to be produced, usually stated as a monthly rate for each product
family (group of products, items, options, features, and so on).
What is the key output of the sales and operations planning process?
• Production plan
• Rough-cut capacity plan
• Material requirements plan
• Master schedule
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The MPS takes the forecast and order information from sales and outputs a schedule for manufacturing.
The master production schedule (MPS) serves as the basis for communication between which two functions?
• Sales and manufacturing

• Manufacturing and purchasing
• Purchasing and sales
• Sales and marketing
Rough-cut capacity planning is compared to available or demonstrated capacity and is usually done for each key
resource.
Rough-cut capacity planning performs a:
• detailed capacity analysis.

• material requirements explosion.
• scheduling routine and then checks capacity availability.
• comparison to available or demonstrated capacity.
Order promising is the process of making a delivery commitment.
Order promising is the process of:
• routing the order for credit approval.

• staging order content.
• making a delivery commitment.
• entering an order.
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The sales and operations planning process must reconcile all supply, demand, and new product plans at aggregate
levels and tie to the business plan.
Plans for sales and operations planning are at the:
• customer level.
• aggregate product family level.
• detailed SKU level.
• manufacturing site level.
The master schedule includes time periods (dates), the forecast, customer orders, projected available balance,
available-to-promise, and the master production schedule.
Which of the following uses a format that includes time periods, the forecast, customer orders, projected
available balance, and available-to-promise?
• Master schedule
• Distribution requirements plan
• Resource requirements plan
Production planning is a long-term planning technique, and it is checked by means of resource requirements
planning for key work centers.
What is the term for the process of interpreting the production plan's impact on critical key materials and
capacity?
• Strategic business planning

• Infinite scheduling
• Resource requirements planning
• Master production scheduling
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The lead time for item E is four weeks. It is ordered at the start of week 7 and is then needed at the beginning of
week 11 in order to produce item C.
Using the planning horizon chart below, what is the lead time for item E?
• 2 weeks
• 4 weeks
• 7 weeks
• 13 weeks
Building up inventory in advance of an anticipated need would lower the need for overtime, subcontracting, and
additional capacity later. It would also raise inventory costs.
Which of the following situations is a result of anticipation inventory?
• Lower inventory carrying costs

• Lower overtime costs
• Higher subcontracting costs
• Higher required capacity
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The portion of production in which lean uses demand-pull signals will operate on orders rather than forecasts and so
will not use time fences. It will be purely reactive to demand. For elements with longer lead times than the required
customer lead time, lean will still use master schedules and capacity planning on this push side of operations. For
these push elements, lean can benefit from using time fences, because schedule stability in turn promotes production
stability.
When might it be appropriate for lean production systems to use time fences?
• When planning the parts of production with longer lead time than the required customer lead time
• When the master schedule is broken into daily time buckets
• When a heijunka box is used to break the time slots equal to takt time
• It is not appropriate to use time fences in lean because all orders are based on customer demand.
Hybrid strategies can combine chase, level, and subcontracting strategies in different ways to arrive at custom
solutions. Often a custom solution will be optimal in terms of minimizing costs and meeting other objectives such as
labor relations.
To minimize costs and meet predictable seasonal demand, a manufacturer may need to develop a customized
strategy drawing from multiple approaches. This is what type of strategy?
• Synthesized
• Chase
• Level
• Hybrid
Resource planning addresses capacity planning conducted at the business plan level.
Resource planning takes place at which of the following levels?
• Master production schedule

• Shop floor execution
• Business plan
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In a lean production environment, uniform plant loading balances the distribution of work between workstations so
that the time required for each station to complete all tasks is as close to equal as possible.
What method is used in a lean production environment to balance the distribution of work between
workstations so that the time required for each station to complete all tasks is as close to equal as possible?
• Drum-buffer-rope
• Value stream
• Uniform plant loading
• Process map
In order to validate the feasibility of the master production schedule, RCCP uses a bill of resources to check critical
resources.
Rough-cut capacity planning (RCCP) checks which of the following data?
• Critical resources
• Resources for a family of products
• Inventory
• Materials and labor
The sales and operations planning process must reconcile all supply, demand, and new product plans
at the aggregate level and tie to the business plan.
Sales and operations plans perform which of the following actions?
• Take into account the forecast, the production plan, and other important considerations such as the backlog,
the availability of material, the availability of capacity, and management policies and goals.
• Reconcile all supply, demand, and new product plans at the aggregate level and tie to the business plan.
• Describe how to marshal and determine actions to support the mission, goals, and objectives of an
organization.
• Determine in detail the amount of labor and machine resources required to accomplish the tasks of
production.
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The sales and operations planning process brings together all the plans for the business (sales, marketing,
development, manufacturing, sourcing, financial) into one integrated set of plans.
Sales and operations planning is focused on which of the following objectives?
• Making recommendations to release replenishment orders for material and rescheduling existing orders to
align with the master schedule
• Stating what the company plans to produce in terms of specific configurations, quantities, and dates
• Bringing together all the plans for the business into one integrated set of plans
• Converting the master production schedule into requirements for key resources
Capable-to-promise is the process of committing orders against available capacity as well as inventory. This process
may involve multiple manufacturing or distribution sites.
A customer contacts a manufacturer's salesperson and wants to purchase all production supply and capacity
for a given item. Which of the following values will the salesperson need to obtain from his company to
respond to his customer?
• Available-to-promise
• Master schedule
• Capable-to-promise
• Rough-cut capacity plan
The chase production method seeks to keep inventory levels stable while varying production levels based on
demand. This method typically has higher costs associated with varying staffing and overtime.
Which production planning method maintains a stable inventory level while varying production to meet
demand?
• Level loading method

• Critical chain method
• Chase production method
• Critical path method
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Section G Quiz
In this bill of material (BOM), item A is the parent of items B and C. Item B is the parent of items D and E. Items B
and C are components of item A, and items D and E are components of item B. An item can have only one parent.
However, a parent can have any number of children in a single BOM.
For more information, refer to Module 1, Section G, Topic 2
Which of the following statements is accurate?
• Items C and E are components of item A.

• Item A is the parent of items B and C.
• Item D and E are the parents of item B.
• Item A is the parent of items B and E.
A planning bill of material is intended to simplify planning. It is an artificial grouping of items and components
used to plan lead times for products that will need to be assembled- or made-to-order, the specifics of which will not
be known until an order is received.
A manufacturer of laptops knows roughly which components will be included in each laptop configuration
they offer. To facilitate master scheduling and material planning, the necessary components and
subassemblies can be grouped together in a particular type of document, even though specifics of an order
have not yet been received. What is this document called?
• Planning bill of material

• Planning schedule
• Business proposal
• Forecast
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Net Requirements = Gross Requirements – Scheduled Receipts – Available Inventory
Net requirements are equal to:
• gross requirements minus available inventory.

• gross requirements plus planned order releases minus available inventory.
• gross requirements plus scheduled receipts minus available inventory.
• gross requirements minus scheduled receipts minus available inventory.
Requirements explosion is the process of calculating the demand for the components of a parent item by multiplying
the parent item requirements by the component usage quantity specified in the bill of material.
The components for a product have been identified. The demand for each component must then be calculated
before the MRP record can be completed. This is known as:
• bill-of-material explosion.
• availability.
• net requirements.
• requirements explosion.
A where-used list includes every parent item that calls for a given component, and the respective quantity required,
from a bill-of-material file. It can assist in costing products or determining the impact of an engineering change for a
component.
A cellphone manufacturer uses the same speaker module on every phone model it produces. The
manufacturer keeps a report of every model for which it is used and in what quantity. What is this report
called?
• Inventory list
• Pegging
• Where-used list
• Bill of material
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Inventory data is an input to the MRP netting logic. The other responses are not used by MRP.
Which of the following is a required input of the material requirements plan (MRP)?
• Delivery orders
• Capacity constraints
• Backlog
• Inventory data
Lean may simplify and flatten bills of material. When a part is used directly in the next process rather than being
entered into inventory, two or more conventional bills might be combined so there will be fewer bills in total, or
some levels in bills of material may not be needed and the hierarchy can be flattened.
In a lean environment, it is possible for two or more conventional bills of material to be combined, therefore
reducing the number of overall bills needed. This will likely be because:
• a part was made as part of a simulation.

• a part is used directly in the next process.
• a part is now complete and can be put aside.
• a part has defects.
A where-used list is a listing of every parent item that calls for a given component, and the respective quantity
required, from a bill-of-material file.
A buyer needs to make a component change to every parent item that currently is made with it. In order to
prepare the engineering change request, which of the following reports will provide the identify of the parent
items?
• Material requirements planning exception report

• Routing list
• Where-used list
• Engineering change report
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A planned order includes a suggested order quantity, release date, and due date created by the planning system's
logic when it encounters net requirements in processing MRP.
Which of the following terms applies to a suggested order quantity, release date, and due date created by the
planning system's logic when it encounters net requirements in processing material requirements planning
(MRP)?
• Reschedule recommendation
• Planned order receipt
• Planned order release
• Planned order
When the manufacturing or purchasing planner has been authorized by the MRP output, the planner can release
planned purchasing and manufacturing orders.
What does it mean when a material requirements planning (MRP) planned order is released?
• Work has begun on the item referenced.

• Authorization has been given to manufacture or purchase the item.
• The item on the order has been completed and placed in stock.
• The item on the order must be scheduled.
Customer service and service parts departments will use bills of material, for example, to ensure that the right
replacement part is issued.
When a customer orders a laptop online and selects from a variety of different options, such as RAM, hard
disk space, color, etc., an order entry system will produce a modular:
• bill of material.
• design template.
• inventory list.
• manufacturing calendar.
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A planning bill of material is an artificial grouping of items or events used to facilitate production planning. Routing
describes the method for manufacturing an item. Item master refers to the database repository where information
about an item is kept. A pick list references finished goods, materials, and components to be withdrawn from stock
for shipment or production purposes.
An artificial grouping of items or events in a bill-of-material format used to facilitate production planning is
known as:
• a routing.
• an item master.
• a planning bill of material.
• a pick list.
The demand for items D and E are dependent on the number of item B, which is in turn dependent on how many
item As are to be produced.
In the multilevel bill of material below, item A is the parent of two children, one of which has two children of
its own. Which item(s) represent independent demand?
• Item A
• Item B
• Items B and C
• Items D and E
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Bills of material must reflect exactly what will take place in manufacturing. Any error will lead to errors in planning
material supply and result in excess inventory or shortages, as in this example.
A product is made from two widgets, but the bill of material shows only one. Which of the following results
can be expected?
• Material requirements will be understated in the material requirements plan.

• Material requirements will be overstated in the master production schedule.
• Production will not be impacted.
• The error is insignificant and can be covered by safety stock.
A lead-time offset is a technique used in MRP where a planned order receipt in one time period will require the
release of that order in an earlier time period based on the lead time for the item.
A lead-time offset is a technique used in material requirements planning (MRP) where a planned order
receipt in one time period will require the release of that order:
• in an earlier time period based on the lead time for the finished product.
• in an earlier time period based on the lead time for the item.
• in a later time period based on the lead time for the item.
• in a later time period based on dynamic load on the shop floor.
Pegging is the process of identifying the source of an item's gross requirements and/or allocations.
What tool could be used to find the customer affected by a delayed purchased component?
• Where-used
• Open order report
• MRP explosion
• Pegging
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The key input to material requirements planning (MRP) is the master production schedule (MPS), which provides
due dates and quantities for end items. MRP systems combine bills of material with planning data on lead times to
determine when to make or buy components.
A set of techniques that uses bill-of-material data, inventory data, and the master production schedule to
calculate requirements for materials is known as:
• a pull system.
• material requirements planning.
• the theory of constraints.
• kanban.
Gross requirements do not net available inventory receipts from the value.
How do gross requirements differ from net requirements?
• Gross requirements are a direct feed from the master production schedule.
• Gross requirements do not consider available inventory or scheduled receipts.
• Gross requirements consider available inventory but not scheduled receipts
• Gross requirements are frozen within the demand time fence.
Net Requirements = Gross Requirements – Scheduled Receipts – Available Inventory

Within a given period:
Opening balance = 350

Gross requirements = 50
Scheduled receipts = 75
Gross requirements in the next period = 500
What quantity should the planned order release be in this period?
• 25
• 125
• 175
• 275
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Bucketless MRP records show the exact date on which a specific action is required.
The table below is an example of what type of material requirements planning (MRP) record?
• Bucketed
• Kanban
• Bucketless
• Lead-time offset
When a planning bill's percentage is higher than 100, it is a form of hedge against volatility in demand. It serves
roughly the same purpose as safety stock.
Because this is a planning bill, no orders have yet been received, and therefore it does not refer to received orders.
In a planning bill for an updated configuration of a cellphone, the total percentages for the amounts required
for the three possible memory chips used equal 115. What does this indicate?
• There has been an error in the calculations.

• The manufacturer has received more orders for blue than other colors.
• The manufacturer is making a hedge against higher demand.
• The manufacturer is making up for missed orders.
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Many current systems use daily time buckets. This will be especially true for lean systems, since they focus on
reducing lead times in part by more precisely timing the flow of materials.
What would be the most likely time bucket duration for lean manufacturers, for whom the precise timing of
material flow is so important?
• Daily
• Weekly
• Biweekly
• Monthly
MRP is inherently a push system while lean is a pull system, so lean does not use MRP for its pull components.
However, lean systems may still have some push components for items with longer lead times than customer lead
times allow, and MRP could be used to plan these items. Lean may also use MRP to plan for proper levels of
capacity.
A lean manufacturer operates a pull system. However, they may produce items that require certain push
components. This will occur for items with:
• short customer lead times.

• shorter lead times than customer lead times allow.
• long customer lead times.
• longer lead times than customer lead times allow.
Material requirements planning provides the information on components needed, available quantities, and required
dates.
Which of the following provides information on component availability?
• Master production scheduling

• Material requirements planning
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Bucketless MRP systems are far more common than bucketed systems. Rather than showing buckets, these systems
list the actual date for actions or other events and omit periods in which there is no activity.
What type of material requirements planning (MRP) system lists the actual date for actions/events and omits
periods of inactivity?
• Perpetual flow
• Bucketless
• Bucketed
• Two-bin
As a result of on-hand inventory being overstated, 17 additional pieces are needed; 47 previously needed plus 17
additional pieces lost totals 64 pieces required.
A component has net requirements for 47 pieces for a future date. A cycle adjustment just reduced on-hand
inventory by 17 pieces. What will be the new net requirements for material requirements planning?
• 30
• 44
• 60
• 64
Planned orders should not be released early unless necessary. Releasing orders early will reduce system efficiency,
because materials will arrive early, have higher inventory holding costs, and may get in the way of operations. In
addition, material requirements sometimes change daily, and orders that are released before necessary are
commitments to buy something that may no longer be needed.
A planned order has been released earlier than expected. Materials have arrived at a workstation a week
before they were expected and are taking up space on the factory floor. What impact will this have on the
manufacturing system?
• Greater efficiency
• Reduced system efficiency
• Higher turnover
• Better products
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Planned order release is a row on an MRP table that is derived from planned order receipts by taking the planned
receipt quantity and offsetting to the left by the appropriate lead time.
What is the term for the row on a material requirements planning (MRP) grid that is derived by taking the
planned receipt quantity and offsetting to the left by the appropriate lead time?
• Net requirements
• Scheduled receipts
• Planned order receipt
When the amount of a component used or needed cannot be measured accurately using standard measurements, the
quantity is left blank on the bill of material. The cost of the part or component would have to be included in
overhead. For more information, refer to Module 1, Section G, Topic 2
In a single-level bill of material, a component amount has been left blank. What does this indicate?
• The component has not been selected yet.

• The component is not used in this process.
• The amount used is not important to the overall costing of production.
• It is not possible to measure the component in standard quantities accurately.
The multiple bill-of-material levels serve no purpose, as there are no intermediate steps or processes.
Converting to a single-level bill of material will reflect how the product is actually produced and eliminate
unnecessary receipts and issues. For more information, refer to Module 1, Section G, Topic 2
An assembly is manufactured in a single work center without any intermediate steps or processes. The bill of
material for the assembly has multiple levels. What, if any, action should be taken?
• The multiple bill-of-material levels should be consolidated into a single-level bill of material.
• It is not necessary to reflect how products are actually made. No changes are required.
• The bills of material should be changed to a single bill of material, but no changes to any routings are
required.
• Material requirements planning can handle the material explosion, and there are no other adverse effects.
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Exploding the bill of material is the process for determining and indicating the component identities, quantities
needed, and other parent-child relationships in a bill of material.
Multiplying the requirements for each material or component in a bill of material by its usage quantity and
recording the results in a product tree is known as:
• exploding the bill of material.

• production planning.
• resource planning.
• stock taking.
A scheduled receipt is an open order that has an assigned due date.
A scheduled receipt in material requirements planning is:
• an open order that is planned to be received.

• an order that was already received on a previous date.
• an open order that has an assigned due date.
• a planned release for an order to arrive on an assigned due date.
Bills of material are useful for finance because they help determine the direct materials used in the product. BOMs
can summarize cost information for all components and subcomponents.
The bill may also be helpful in calculating direct labor and provide a means of allocating overhead.
Because bills of material (BOMs) identify the exact materials used in production and can include component
and subcomponent cost information, they are also useful for which other department?
• Marketing
• Sales
• Finance
• Returns
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The bill of material (BOM) is a listing of all the subassemblies, intermediates, parts, and raw materials that go into a
parent assembly, showing the required quantity of each.
When the MRP BOM explosion occurs, the BOM enables the identification of all items and quantities that need to
be replenished.
The routing file includes the operations to be performed, their sequence, the various work centers involved, and the
standards for setup and run. The supplier master file contains the detail on suppliers used by the company and is
considered part of the MRP output for purchase replenishment. The work center file contains the detail on the
productive resources that are available for MRP production order output.
Which of the following types of files is a key input to material requirements planning (MRP)?
• Supplier master file

• Bill of material
• Work center master file
• Routing file
Replanning becomes necessary when expediting is not possible for one or more materials due to shortages. It
involves calculating a new net requirement and planned order release and receipt date.
This may or may not result in a new due date for the end unit(s).
Maintaining priorities is not possible at this time, a product redesign is an extreme and unworkable solution, and
canceling the order would result in waste.
A customer has doubled its order for ski boots, which means that the manufacturer will not be able to meet
the tight deadline.
In addition, some of the pre-made clasps have been rejected after suffering transit damage, which means
expediting the ski boot order is not an option.
What action remains to the planner to address these issues?
• Redesigning the product

• Replanning
• Maintaining priorities
• Canceling the order
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Section H Quiz
At the material requirements planning level, the preliminary material requirements plan is sent to capacity
requirements planning in the form of planned and open orders.
These are translated into load on specific work centers, which is compared to their available capacity.
For more information, refer to Module 1, Section H, Topic 1
Capacity requirements planning (CRP) receives the preliminary requirements plan in the form of which of
the following?
• Routing
• Design specifications
• Planned and open orders
• Bills of material
Capacity is the capability of a worker, plant, work center, machine, plant, or organization to produce output per time
period.
A workstation can produce 100 pencils per hour and possibly 20,000 per year. This is a measure of the
workstation's hourly and annual:
• capacity.
• production.
• utilization.
• load.
CRP uses planned and firm planned orders from the material requirements plan to calculate requirements.
Which of the following is an input to capacity requirements planning (CRP)?
• Master production schedule

• Sales and operations plan
• Resource requirements plan
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Resolving differences starts by working to increase capacity where possible. Scheduling overtime may assist in
resolving the difference, but a review aimed at finding the root cause of the underperformance should be made, as
four weeks running is a long time. Is this a temporary situation due to regular employees being on vacation? Due to
illness? A change in a process? Learning curves? Misstated standard times?
A work center is slightly under capacity for four weeks running, producing between 5% and 10% under its
rated capacity. Which of the following would be a feasible way of resolving this difference?
• Scheduling overtime
• Postponing delivery
• Redesigning the product
• Restructuring the work center
Manufacturing orders have already gone through the validation process in capacity requirements planning. The shop
order packet is made up of all the manufacturing orders that are waiting to start operations or are works in progress.
Before workers can begin operations, they are issued a shop order packet. What does this contain?
• Manufacturing calendar
• Planned orders
• Manufacturing orders
• Inventory location
Resource planning can add value to the strategic plan by, for example, validating the need and timing of capacity
requirements and by recommending whether to expand capacity in advance of need all at once, to expand capacity
incrementally in steps, or to lag behind the need.
By validating the need and timing of capacity requirements and by recommending adjustments to capacity,
resource planning can add what to the strategic plan?
• Longer planning horizon

• Value
• Lead time
• Efficiency
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A routing is information detailing the method of manufacture of a particular item. It includes the operations to be
performed, their sequence, the various work centers involved, and the standard for setup and run. In some
companies, it will also include information on tooling, operator skill levels, inspection operations, and testing
requirements.
Production is about to start manufacturing a new product. In order to begin, they will need to have specific
information and instructions. In which of the following will this information be contained?
• Open order
• Product's routing
• Shop file
Establishing standard times usually requires extensive observation of workers and activities. This type of
information can be time-consuming and expensive to gather.
Establishing which of the following requires extensive, time-consuming observation of workers and
activities?
• Work schedules
• Inventory
• Standard times
Rated capacity is calculated by the following formula:
Rated Capacity = Available Time x Utilization x Efficiency
A manager who knows the available hours of a workstation as well as its efficiency and utilization can
calculate the workstation's:
• efficiency.
• rated capacity.
• capacity.
• workload.
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The purpose of CRP is to show any imbalances between capacity and load by work center. Available capacity is
calculated outside of CRP but is used as an input.
What is capacity requirements planning (CRP) primarily used for?
• Calculating available capacity

• Balancing work center capacity and load
• Validating the master production schedule
• Prioritizing manufacturing orders
Backward scheduling starts with the due date for the order and works backward from the last operation to determine
the required start date and/or due dates for each operation.
Starting with the due date for the order is an example of:
• process scheduling.
• forward scheduling.
• backward scheduling.
• finite scheduling.
The queue time is one element of the total manufacturing lead time. Increases in queue time result in direct
increases in manufacturing lead time and work-in-process inventories.
Queue time is often the largest component of lead time in functional manufacturing process types.
A shipment of raw materials has arrived at a work center. The machine operators are finishing the work on
an order already in process at the work center and are about to start preparing their stations for processing.
The amount of time the materials wait to be processed is known as:
• the manufacturing calendar.

• the queue time.
• a planning horizon.
• a time bucket.
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Efficiency is a measurement of the actual output relative to the standard output expected. It measures how well
something is performing relative to existing standards. If the difference in this situation continues to be the case, the
standard times should be reviewed and adjusted.
A specific work center is outperforming expectations, completing a job that planners expected to take 15
hours in only 12 hours. What does this indicate?
• Good work ethic

• Low efficiency
• High efficiency
• Superior machine maintenance
Open orders appear as scheduled receipts, coming from material requirements planning.
In capacity requirements planning, scheduled receipts include:
• firm planned orders.

• open production orders.
• purchase orders.
• planned orders.
A manufacturing calendar consecutively numbers only the workdays so that the component and work order
scheduling may be done on the actual number of workdays available. Non-workdays are omitted from the sequential
count.
Where would a worker find details of the actual days to be worked on any given assignment?
• Queue time
• Time bucket
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The yield is the amount of good or acceptable material available after the completion of a process. The number of
units to produce is calculated by dividing the number of units ordered by the work center's yield; in this example,
80/0.4 = 200.
A customer has ordered 80 units of a new product that is particularly difficult to manufacture: a device
screen that has a 40% success rate of not breaking during construction. To meet the customer's acceptable
level of quality, the work center needs to produce how many units?
• 80
• 134
• 160
• 200
Utilization compares actual time used to available time. The information can be acquired through reviewing
historical records on the actual use of the equipment and/or work center. This allows planners to include downtimes,
breaks, delays, and maintenance in their calculations.
Which measurement, presented as a percentage, describes how intensively a resource is being used to
produce a good or service?
• Order winner
• Efficiency
• Output
• Utilization
A load profile, also known as a load projection or a load report, is a display of future capacity requirements based
on released and/or planned orders over a given span of time.
Which of the following is a display of future capacity requirements based on released and/or planned orders
over a given span of time?
• Yield
• Customer order
• Load profile
• Capacity
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Section I Quiz
The purchasing cycle consists of the following steps:
1. Receiving purchase requisition

2. Selecting suppliers
3. Determining the right price
4. Issuing purchase orders
5. Ensuring that delivery dates are met
6. Receiving goods and closing the order
7. Approving suppliers' invoice for payment
During the receiving goods step, the incoming order is compared to the purchase order and packing slip. This results
in a receiving report. During the approve payments step, the purchasing department performs a three-way match
between the purchase order, the receiving report, and the invoice to make sure that quantities and materials are
correct.
For more information, refer to Module 1, Section I, Topic 2
Which of the following should be done as part of the last step in the purchasing cycle for materials to be used
in a traditional manufacturing process to reduce the risk of paying for incorrect materials or quantities?
• Do a three-way match between the purchase order, the purchase requisition, and the MRP (materials
requirements planning) released order.
• Compare the name, part number, quantity, description, and price of goods ordered versus delivered.
• Do a three-way match between purchase order, receiving report, and invoice.
• Compare the incoming order with the status of the order to determine if there are discrepancies.
Supplier certification procedures verify that a supplier operates, maintains, improves, and documents effective
procedures that relate to the customer's requirements. Such requirements can include cost, quality, delivery,
flexibility, maintenance, safety, and ISO quality and environmental standards.
Which of the following terms refers to procedures that verify that a supplier operates, maintains, improves,
and documents effective procedures that relate to the customer's requirements?
• Six sigma
• Supplier certification
• ISO 14000
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The accounts payable department is responsible for processing the payment once an invoice is approved.
Which of the following functions is responsible for paying an invoice once it is approved?
• Accounts payable department

• Warehouse
• Cost accounting department
• Accounts receivable department
Production inventory shortages cause a "hole" in the constraints buffer and alert the buffer manager to release a
purchase order for the short materials.
Under the theory of constraints, what signals the start of the purchasing process?
• Change in buffer inventory

• Purchase requisition
• Kanban
The purchasing department is responsible for verifying the information on all documents and resolving any
discrepancies found.
A discrepancy has been identified between a supplier's shipping documents and the supplier's invoice with
regard to quantity. Which of the following functions should contact the supplier about the discrepancy?
• Purchasing department
• Warehouse
• Accounts payable department
• Cost accounting department
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A purchase order is the purchaser's authorization to formalize a purchase transaction with a supplier.
Which document serves as the purchaser's authorization to formalize a purchase transaction with a
supplier?
• Purchase order
• Supply agreement
• Invoice
• Quote
Consignment is the process of a supplier placing goods at a customer location without receiving payment until after
the goods are used or sold.
Placing inventory at a customer's location without receiving payment until after the goods are used or sold is
called:
• vendor-managed inventory.
• consignment.
• work-in-process inventory.
• consignee.
In supply chain management, the total cost of ownership is the sum of all the costs associated with every activity of
the supply stream.
Which of the following provides insight into why the acquisition cost is often a very small portion of the
supply chain's total cost?
• Total line-haul cost

• Total cost of ownership
• Total cost curve
• Total quality cost
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Quality has the dimensions of performance, features, conformance, warranty, service, aesthetics, perceived quality,
and price.
Aesthetics, features, and warranty are all dimensions of:
• conformance.
• service.
• utility.
• quality.
The terms and conditions specify all the provisions and agreements of a contract.
Which of the following documents or verbiage must accompany a purchase order to confirm how the
contract is to be executed?
• Quality agreement
• Terms and conditions
Purchasing is the function of and responsibility for procuring materials, supplies, and services.
What term is used in industry and management to denote the function of and responsibility for procuring
materials, supplies, and services?
• Sourcing
• Purchasing
• Buying
• Acquiring
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Order winners are special product and service attributes desired by the customer that enable companies to beat the
competition. For more information, refer to Module 1, Section I, Topic 1
The competitive characteristics that persuade a customer to choose one company's products over those of
another company are called:
• order winners.
• low price.
• specifications.

Which of the following steps completes the purchasing cycle?
• Receiving and accepting goods

• Filing the purchase order
• Approving supplier's invoice for payment
• Closing the purchase order
Sourcing is the process of identifying a company that provides a needed good or service.
Which of the following is the process of identifying a company that provides a needed good or service?
• Buying
• Purchasing
• Sourcing
• Surveying
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Contract buying is the authorization of material releases against a long-term contract. It is used for high-volume
and/or high-frequency purchases such as for MRP.
Rather than generating a purchase order, purchasing will release orders against the schedule or in lots as specified in
the blanket purchase order or other long-term contract.
If the purchasing cycle is instead used, many more purchase orders will need to be released, which will increase
ordering cost. The change would not necessarily result in lower prices for goods. Supplier scheduling depends on
contract buying being in place.
What would likely be the result if an organization wanted to reduce material prices for material
requirements planning (MRP) ordered materials that are commodities by requiring use of the standard
purchasing cycle rather than relying on contract buying?
• Much higher ordering cost

• Greater ability to implement supplier scheduling
• Lower total cost of ownership
• Need for fewer purchase orders
Approving a supplier's invoice for payment is preceded by the three-way match process of reconciling the purchase
order, the receiving report, and the invoice. For more information, refer to Module 1, Section I, Topic 2
What three pieces of information should agree before payment is made on a supplier's invoice?
• Purchase order, receiving report, and product specification

• Purchase requisition, purchase order, and invoice
• Purchase requisition, receiving report, and invoice
• Purchase order, receiving report, and invoice
Landed cost includes the product cost plus the costs of logistics, such as warehousing, transportation, and handling
fees. For more information, refer to Module 1, Section I, Topic 1
Which of the following includes the product cost plus the costs of logistics, such as warehousing,
transportation, and handling fees?
• Acquisition cost
• Standard cost
• Landed cost
• Cost roll-up
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In the purchasing cycle, what step follows the placement of a purchase order?
• Determining the right price

• Receiving the goods
• Following up to ensure that delivery dates are met
• Sending the purchase order to the supplier
Vendor-managed inventory (VMI) is a means of optimizing supply chain performance in which the supplier has
access to the customer's inventory data and is responsible for maintaining the inventory level required by the
customer. For more information, refer to Module 1, Section I, Topic 2
Which of the following is a means of replenishing inventory through a supplier's review and responsibility to
maintain targeted inventory levels?
• Two-bin system
• Kanban
The terms and conditions set out the provisions and agreements of a contract. For more information, refer to
Module 1, Section I, Topic 2
What sets out the provisions and agreements of a contract?
• Terms and conditions
• Quid pro quo
• Boilerplate
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The total cost of ownership in supply chain management speaks to the sum of all the costs associated with every
activity of the supply stream.
In this case, dock-to-stock is a program through which specific quality and packaging requirements are met before
the product is released. Prequalified product is shipped directly into the customer’s inventory.
Dock-to-stock eliminates the costly handling of components, specifically in receiving and inspection, and enables
product to move directly into production.
If the program is implemented correctly, the costs of poor quality should not increase.
Even from a total supply chain perspective, TCO will decrease because only one party is performing these quality
steps rather than both parties doing the same task.
An organization implements a dock-to-stock program with a key supplier. How will this impact the total cost
of ownership (TCO) if the program is implemented correctly?
• TCO will not be affected because passing costs on to the supplier cannot improve costs from a total supply
chain perspective.
• TCO will initially be higher but will eventually be lower as the cost of poor quality goes down.
• TCO will be lower due to no receiving and inspection without a higher average cost of poor quality.
• TCO will be higher because the costs of supplier relationship management will more than offset shorter lead
times from such a program.
A purchase requisition is an authorization to the purchasing department to purchase specified materials in specified
quantities within a specified time.
Which of the following is an authorization to the purchasing department to purchase specified quantities
within a specified time?
• Request for proposal

• Request for quote
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The cost of goods sold is a critical component of the income statement and consists of the elements needed to
produce finished goods (labor, material, and factory overhead).
Which of the following factors comprise the cost of goods sold?
• Direct labor and direct material

• Direct and indirect labor, direct material, and factory overhead
• Sales, general, and administrative costs
• Direct labor, direct material, and factory overhead
In a lean environment, all production occurs with the replenishment demand-pull signal originating with a kanban
trigger. The kanban trigger can be a simple card, an empty pallet, or an empty container.
Demand in a lean production system starts with a:
• kanban trigger.
• material requirements plan.
• shop order.
• requisition.
One of the prime criteria for selecting a supplier is the ability of the supplier to deliver the needed items in the right
quantities at the right time.
Which of the following is a critical factor in the supplier selection process?
• Supplier's lot-sizing techniques

• Supplier's use of material requirements planning
• Supplier's manufacturing capability
• Supplier's bottleneck location
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Supplier relationship management (SRM) is a comprehensive approach to managing an enterprise's interactions
with the organizations that supply the goods and services the enterprise uses.
The goal of SRM is to streamline the processes between an enterprise and its suppliers and make them more
effective.
Which of the following is a method for streamlining and increasing the effectiveness of processes between an
enterprise and its suppliers?
• Supplier relationship management

• ISO 9000
• Supplier partnerships

What is the first step in the purchasing cycle?
• Issuing purchase orders

• Receiving and analyzing purchase requisitions
• Selecting suppliers
• Determining the right price
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An organization that is using contract buying with a supplier can use supplier scheduling. For MRP (material
requirements planning) planned orders, often the supplier is given a copy or view of the material requirements plan
so they can produce the units that will be needed.
This is called supplier scheduling when the supplier uses the planned orders directly in its own MRP process.
In this arrangement, no purchase orders are issued. However, both the purchasing process itself and the
performance of individual suppliers still needs to be monitored and controlled in this situation.
Since purchasing involves large amounts of money, the organization needs checks and balances and audits to
safeguard against fraud.
Prices will be regulated by the blanket purchase order or other long-term contract, so price reviews should not need
to be more frequent in this scenario.
As part of a contract-buying improvement initiative, approved suppliers are integrated so they can use
supplier scheduling. Which of the following should be implemented with these suppliers?
• Frequent price reviews of supplier materials

• Issuing of purchase orders
• Audits of individual transactions with these suppliers
• Significant reduction of purchasing fraud–related checks and balances
The total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of
the supply stream.
As global supply chains open sourcing up around the globe, it becomes critical that buyers consider which of
the following before making a final sourcing decision?
• Total cost of ownership

• Inventory carrying cost
• Logistics costs
• Import duties and taxes
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Section J Quiz
Days of supply is an inventory-on-hand metric converted from units to how long the units will last.
For more information, refer to Module 1, Section J, Topic 3
Which metric measures the amount of inventory on hand?
• ABC classification
• Obsolescence list
• Inventory velocity
• Days of supply
Carrying cost is the cost of holding inventory. It depends mainly on the cost of capital invested as well as such costs
of maintaining the inventory as taxes and insurance, obsolescence, spoilage, and space occupied.
Elements of carrying cost include:
• stockout, capacity, and capital costs.

• item, ordering, and stockout costs.
• capital, storage, and risk costs.
• ordering, stockout, and capacity costs.
Ordering cost is used in calculating order quantities, the costs that increase as the number of orders placed increases.
It includes costs related to the clerical work of preparing, releasing, monitoring, and receiving orders, the physical
handling of goods, inspections, and setup, as applicable.
Which of the following types of costs is related to the clerical work of preparing, releasing, monitoring, and
receiving orders, the physical handling of goods, inspections, and setup?
• Ordering cost
• Total cost
• Purchase order cost
• Carrying cost
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Owners' equity is the working capital employed in a company, computed by deducting the book value of the
liabilities from the book value of the assets.
Owners' equity is defined as:
• the value at which an asset is carried on a balance sheet.

• the residual claim by the company's owners or shareholders to the company's assets less its liabilities.
• an amount of credit extended to a borrower.
• an entry recording a sum received, listed on the right-hand side or column of an account.
The new level of safety stock is equal to the old level of safety stock multiplied by the square root of the new lead
time divided by the old lead time—in this case, 85 times the square root of 7/6), or 85 times 1.08 = 92 (rounded).
A manufacturer is experiencing a delay in raw materials delivery; the materials will arrive a week later than
expected. As a result, the manufacturer must adjust its level of safety stock. The company needs 85 units of
safety stock to meet its customer service level. If the original lead time was six weeks, what is the new level of
safety stock required?
• 85
• 92
• 98
• 99
When demand variability is high, forecast error rates will be high, and higher amounts of safety stock will be
needed to provide a targeted customer service level.
A printing firm maintains a high level of paper safety stock. This is likely because of:
• variability of demand.
• product obsolescence.
• the cost of carrying inventory.
• the cost of placing an order.
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Hedge inventory is a form of inventory buildup to buffer against some event that may not happen. Hedge inventory
planning involves speculation related to potential labor strikes, price increases, unsettled governments, and events
that could severely impair a company's strategic initiatives. Risk and consequences are unusually high, and top
management approval is often required.
Which of the following is a form of inventory buildup to buffer against some event that may not happen?
• Buffer inventory
• Anticipation inventory
• Hedge inventory
• Safety stock
General and administrative expenses are the expenses required to administer a business. They are not related to the
construction or sale of goods or services.
Which category of expenses on an income statement includes the costs of general managers, computer
systems, research and development, and others?
• Accrued expenses
• Operating expenses
• General and administrative expenses
• Prepaid expenses
Maintenance, repair, and operating supplies (MRO) include items used in support of general operations and
maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and
supporting operations.
What is the term for items used in support of general operations and maintenance such as maintenance
supplies, spare parts, and consumables used in the manufacturing process and supporting operations?
• Expense items
• Overhead
• Indirect spend
• Maintenance, repair, and operating supplies
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Inventory can decouple supply from demand at the supply chain level by, for example, allowing raw materials to be
pulled from inventory rather than relying on order lead times or maintaining inventories of finished goods rather
than producing based on actual orders.
If the lead time for raw materials can be reduced by a full day, up to one day's worth of raw materials inventory
held for decoupling purposes can be eliminated with no impact on production.
Which is a positive benefit that can be realized by implementing a new raw material ordering system that
reduces the total lead time of in-transit inventory by a full day?
• Fewer raw material transportation vehicles will need to be used.

• Anticipation inventory levels at the plant can be reduced.
• The plant should experience lower overall setup costs and produce higher numbers of units overall.
• Raw material inventory levels held at the plant for decoupling purposes can be reduced.
Increasing revenue by $1,000,000 would increase the cost of goods sold to $1,700,000 (overhead does not increase),
resulting in gross profit of $1,300,000.
On the basis of the information below, increasing revenue by $1,000,000 would result in what amount for
gross profit?
• $1,000,000
• $1,050,000
• $1,300,000
• $1,700,000
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Inventory turnover is the number of times an inventory cycles, or "turns over," during the year. A frequently used
method to compute inventory turnover is to divide the annual cost of sales by the average inventory level.
Dividing the annual cost of sales by the average inventory level will produce which of the following values?
• Days of supply
• Cycle time
• Inventory turnover
• Inventory velocity
Distribution inventory typically includes spare parts and finished goods, located in the distribution system (e.g., in
warehouses or in transit between warehouses and the consumer).
Inventory located in warehouses or in transit between warehouses and the consumer is called:
• in-transit inventory.
• distribution inventory.
• finished goods inventory.
• work-in-process inventory.
In order to achieve a 99.99% customer service rate, a considerable amount of safety stock will need to be held to
fulfill a larger potential mean absolute deviation (MAD).
A company that wants to maintain a 99.99% customer service rate will require a considerable amount of
safety stock. This will incur a significant:
• carrying cost.
• shipping cost.
• overtime cost.
• overhead cost.
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Product costs are allocated by some method to the products being produced.
Which of the following is true of product costs?
• They are non-manufacturing costs.

• They vary with production.
• They are allocated to the product.
• They are period costs.
Carrying costs include the costs of obsolescence and storage. The other responses are ordering costs.
Inventory carrying costs include:
• the costs of obsolescence and storage.

• the costs of setup and storage.
• the costs of storage and order processing.
• the costs of obsolescence and setup.
Decoupling points are the locations in the product structure or distribution network where inventory is placed to
create independence between processes or entities.
What are decoupling points?
• Locations in a distribution network where demand is not passed up the supply chain
• Broken links with a supply chain where demand is lost
• Cross docks used to transfer goods from one trailer to another while in transit to their final destination
• Locations in the product structure or distribution network where inventory is placed to create independence
between processes or entities
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Inventory Turnover = Cost of Goods Sold/Average Inventory Investment
How is inventory turnover calculated?
• Cost of Goods Sold/Average Inventory Investment

• Sales/Average Inventory Investment
• Average Inventory/Standards Sales
• Sales/Inventory Investment
In-transit inventory is material moving between two or more locations, usually separated geographically.
Finished goods being shipped from one facility to another is considered which type of inventory?
• Anticipation
• In-transit
• Pipeline
• Hedge
Fluctuation inventory, also known as inventory buffer, is carried as a cushion to protect against forecast error.
What type of inventory is held due to the unpredictable nature of supply, demand, or lead time?
• Fluctuation inventory
• Anticipation inventory
• Demand inventory
• Hedge inventory
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Orders per Period = Period Demand/Order Quantity; 5,000/200 = 25
A typical order of cellphones contains 200 handsets. In a given year, demand for these handsets is 5,000. How
many orders would need to be fulfilled each year to meet demand?
• 25
• 50
• 100
• 200
The last in, first out (LIFO) method of inventory valuation assumes, for costing purposes, that the most recently
received (last in) is the first to be used or sold (first out). This does not necessarily affect the actual physical
movement of items.
In which accounting method for valuing inventory is the most recently received the first to be used or sold?
• First in, first out

• Last in, first out
• Average cost
• Standard cost
The APICS Dictionary, 15th edition, defines profit margin from a gross profit margin perspective: "Profit margin is
the difference between the sales and cost of goods sold for an organization, sometimes expressed as a percentage of
sales."
What is the term for the difference between sales and cost of goods sold for an organization?
• Revenue
• Gross profit margin
• Cash flow from operations
• Net profit
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Work in process (WIP) includes a good or goods in various stages of completion throughout the plant, including all
material from raw material that has been released for initial processing up to completely processed material awaiting
final inspection and acceptance as finished goods inventory.
What is included in work-in-process inventory?
• Finished and quarantined goods still in the plant

• Purchased materials in the plant
• Maintenance, repair, and operating supplies in the plant
• Goods in various stages of completion throughout the plant
The two key costs of inventory are carrying costs and order costs. A larger purchase order receipt will increase
carrying costs but decrease ordering costs and, therefore, decrease total cost.
What are the typical effects if a quantity discount is taken on a purchase order?
• Carrying cost increases and total cost decreases.

• Both carrying cost and total cost increase.
• Carrying cost decreases and total cost increases.
• Both carrying cost and total cost decrease.
Variable costs are those costs that vary depending on a company's production volume; they rise as production
increases and fall as production decreases.
Which of the following is true of variable costs?
• They are increases in the price of a standardized good/service over a specific period of time.
• They are expenses that do not vary with the production volume.
• They are persistently rising general price levels brought about by rising input costs.
• They are operating costs that vary directly with a change of one unit in the production volume.
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Item cost is the price paid for a purchased item, which consists of the cost of the item and any other direct costs
associated with getting the item into the plant. The other options are elements of item cost.
Which of the following types of costs includes transportation, customs duties, and insurance in addition to the
purchase price?
• Acquisition
• Delivery
• Setup
• Item
The balance sheet shows the resources owned, the debts owed, and the owners' share of a company at a given point
in time.
Which financial statement shows a company's debt?
• Balance sheet
• Cash flow statement
• Profit and loss statement
• Income statement
The cost of goods sold determines the amount of direct materials, direct labor, and allocated overhead associated
with the products sold.
What is the cost of goods sold?
• Computation used to calculate retail costs for the sale of a product

• Accounting classification used on an asset sheet to reflect inventory value
• Amount of direct materials, direct labor, and allocated overhead associated with products sold during a given
period of time
• Actual cost of the operation of a unit assigned the responsibility of developing and producing a specific
product
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On-time schedule performance is a measure of meeting the customer's originally negotiated delivery request date.
Which of the following is a key customer service performance indicator for most companies?
• Purchase price variance

• Manufacturing variance
• Overtime
• On-time schedule performance
Customer Service Level = (Orders per Period – Stockout Chances per Period)/Orders per Period; 77/80 = 0.96 =
96%
If a manufacturer typically produces 80 orders of a given product per year and calculates that three
stockouts are acceptable, what is its customer service level?
• 77%
• 83%
• 96%
• 97%
The first in, first out (FIFO) method of inventory valuation for accounting purposes assumes that the oldest
inventory (first in) is the first to be used (first out). However, this does not necessarily affect the actual physical
movement of items.
In which accounting method for valuing inventory is the oldest inventory the first to be used?

• Average cost
• Standard cost
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Safety lead time is extra time added to normal lead time to protect against unexpected fluctuations in lead time. This
would allow a product to be completed before its actual due date.
A manager has factored in an additional three days for an order to protect against fluctuations in lead time.
If all processes run smoothly, a work center might be able to complete orders ahead of time. What is this
additional time called?
• Efficiency
• Frozen bucket
• Safety lead time
Distribution inventory includes all finished goods inventory at any point in the distribution system. Distribution
inventories create time value by placing the product close to the customer.
Which of the following activities in the physical distribution system creates time value by placing the product
close to the customer?
• Order processing and communication

• Warehousing
• Distribution inventories
• Materials handling
Assets are property owned by a person or company. They are regarded as having value and are available to meet
debts.
Assets can be defined as:
• the costs related to problems found after the product reaches the customer.
• the resources owned by a company, whether tangible (cash, inventories) or intangible (patents, goodwill).
• those items of cost related to the activities associated with the movement and storage of finished products.
• the debts or obligations owed by a company to creditors.
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Service parts are modules, components, and elements that are planned to be used without modification to replace an
original part.
What are service parts?
• Modules, components, and elements that are planned to be used without modification to replace an original
part
• Expensed items that are used in manufacturing but are included in the structure of the product
• Items that are not planned for and are pulled from manufacturing stock when required
• Items stored in maintenance to repair manufacturing equipment on the shop floor
Anticipation inventories are accumulated above basic pipeline stock to cover projected increases in sales or plant
shutdowns and vacations.
Product inventory that is accumulated by the manufacturer in advance of the peak selling season is an
example of:
• anticipation inventory.
• hedge inventory.
• fluctuation inventory.
• transportation inventory.
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Standard costs are the target costs of an operation, process, or product including direct material, direct labor, and
overhead charges.
What is the term for the target costs of an operation, process, or product including direct material, direct
labor, and overhead charges?
• Standard costs
• Average costs
Average cost per unit is based on estimating total cost, including allocated overhead, to produce a batch of goods
divided by the total number of units produced.
Which accounting method for valuing inventory estimates total cost, including allocated overhead, to
produce a batch of goods divided by the total number of units produced?
• Average cost
• Standard cost
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Section K Quiz
One of the assumptions for using EOQ is that demand is independent and fairly uniform.
For more information, refer to Module 1, Section K, Topic 2
Which of the following scenarios warrants the use of economic order quantity (EOQ)?
• Finished goods with demand that is independent and fairly uniform

• Finished goods with a short shelf life
• Finished goods with a component that limits run length
• Finished goods that are made to order
Assuming that a lean manufacturer has managed to optimize its setup times and reduce its lot sizes to one (or as
close to one as possible), a reorder point system can be implemented. As the lean ideal is an order size of one, this
lowers the reorder point.
Upon receiving an order for two products, a lean manufacturer processes one item from one step to the next
before beginning the second item. What is this an example of?
• Perpetual inventory system

• Two-bin inventory system
• One-piece flow
• Periodic replenishment
A fixed reorder cycle inventory model is a form of independent demand management. An order is placed every n
time units (e.g., months, days). The quantity in each order is variable and reflects inventory used/sold. The aim is to
replenish inventory to the maximum inventory desired.
A manufacturer places a replenishment order to replace sold or used items every two months. This is an
example of what kind of inventory model?
• Fixed reorder cycle

• Perpetual inventory system
• Min-max system
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A perpetual inventory record tracks inventory levels at each stock keeping location. When a transaction occurs that
either adds or subtracts inventory, the inventory levels in the record are updated immediately.
In order to maintain real-time inventory records, every transaction can be recorded in what type of
document or electronic record?
• Inventory bin
• SKU
• Lot-for-lot
• Perpetual inventory record
Cycle counting breaks down counts by item and location and tracks accuracy by location. This reduces downtime
due to missing inventory. The other answers refer to disadvantages of periodic physical inventory.
Which of the following goals of cycle counting is a benefit for production?
• The material count is accurate within a tolerance.

• Material count overages are offset by shortages.
• Material value overages are offset by shortages.
• The material count is accurate by location.
A min-max system is a type of order point replenishment system where the minimum is the order point and the
maximum is the "order up to" inventory level. An order is recommended when the sum of the available and on-
order inventory is at or below the minimum.
At a technology manufacturer, a replenishment order is submitted at the end of the day when inventory of a
particular type of tablet drops below 50 units. The replenishment order is always calculated to ensure that
inventory is brought back up to 100 units. What is the name for this type of order replenishment system?
• Lot-for-lot
• Min-max system
• Period order quantity
• Fixed order quantity
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Two-bin inventory is a fixed-order system in which inventory is carried in two bins. A replenishment quantity is
ordered after the first is exhausted. During the replenishment time, material in the remaining bin is used.
At a toy manufacturer, one work center is assigned the task of attaching an action figure's head. Two lots of
the figure's head are provided. As soon as one lot is exhausted, a replenishment order is issued. The worker
continues to work on assembly using the second lot while the replenishment lot is processed. What is the
name for this inventory system?
• Hybrid system
• Min-max system
• Lot-for-lot system
Point-of-sale data is an integral part of meeting and replenishing demand in a retail supply chain.
The term that refers to the relief of inventory and computation of sales data at the time and place of retail
purchase, generally through the use of bar coding or magnetic media and equipment, is:
• electronic data interchange.

• point of sale.
• transaction processing.
• batch processing.
L4L is a lot-sizing technique that generates planned orders in quantities that equal the net requirements in each
period.
A guitar retailer sells four Gibson Les Pauls and a Fender Telecaster in one week. The manager places an
order to Gibson for four Les Pauls and another order to Fender for a single Telecaster. What is the name for
this lot ordering technique?
• Lot-for-lot (L4L)
• Batch ordering
• Stock keeping
• Min-max system
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Period order quantity is a lot-sizing technique under which the lot size is equal to the net requirements for a given
number of periods. This method orders enough items to satisfy demand for a particular number of time periods, such
as months, weeks, or days. For more information, refer to Module 1, Section K, Topic 2
An order has been placed and approved for delivery in two months' time. The factory produces the product
at a steady rate, meaning that days of supply are stable. What lot-sizing technique could be used to achieve
appropriate levels of supply in this situation?
• Period order quantity

• Min-max system
• Demand planning
• Time-phased order point
Category C items have the least complex controls and record keeping, for example, nuts and bolts. They will have a
low inventory carrying cost, so plentiful days of supply make sense. They are ordered far less frequently but in
much larger quantities. For more information, refer to Module 1, Section K, Topic 1
In ABC classification, an item with the least complex controls and record keeping and high levels of safety
stock would receive which classification?
• A
• B
• C
• D
Reducing annual ordering costs will lower the EOQ amount, because orders can be made more frequently and
average inventory levels are reduced.
In the pursuit of continuous improvement, reducing the annual ordering cost will have which of the following
effects on economic order quantity (EOQ)?
• It will lower the EOQ amount.

• It will raise the EOQ amount.
• The EOQ amount will be unaffected.
• Annual ordering costs have no relation to EOQ.
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In a visual review system, inventory reordering is based on actually looking at the amount of inventory on hand.
This is related to two-bin systems. When the first bin is seen to be depleted in a two-bin system, an order will be
placed.
An inventory manager needs to check how many screws and washers are in stock. What is a simple, low-tech
inventory control system that could be used in this instance?
• Fixed reorder cycle system

• Periodic replenishment system
• Perpetual replenishment system
• Visual review system
Record accuracy is a measure of the conformity of recorded values in a bookkeeping system to the actual values.
This measure is critically important to production planning and purchasing teams, as inaccurate records lead to
stockouts and lost production time. For more information, refer to Module 1, Section K, Topic 4
Which of the following is a key performance indicator critical to manufacturing execution and an accurate
reflection of the company's assets?
• Schedule attainment
• Order fill rates
• Shortages
• Record accuracy
T = D x (R + L) + SS; in this case, 25 x (7 + 2) + 50 = 275
A manufacturer has a seven-day workweek. Using a periodic review system, multiple orders are placed every
Tuesday, with a lead time of two days. For one item, the manufacturer maintains a safety stock level of 50
and has an average daily demand of 25. What would be the target (maximum) inventory level?
• 175
• 225
• 275
• 475
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If demand is higher than the rate shown, the slope will fall more quickly, while demand that is slower will result in a
slope falling more gradually. Safety stock is held in preparation for higher-than-average demand. If the inventory
falls more quickly than the average, a stockout will not occur until the safety stock is depleted.
In the order point system graph below, the downward slope will differ when demand is higher or lower than
expected. If demand were to suddenly increase, what would you expect to happen to the slope?
• It would plateau.
• There would be a shallower drop.
• There would be a steeper drop.
• It would remain the same.
The purpose of cycle counting is to find and correct the cause of errors.
The primary objective of cycle counting is to:
• eliminate the causes of errors.

• eliminate annual physical inventory.
• update inventory locations.
• update inventory quantities.
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The main purpose of periodic inventory is to satisfy financial auditors that the inventory records represent the value
of the inventory.
Which of the following primarily focuses on ensuring that inventory records accurately represent the value of
inventory?
• Audit
• Cycle counting
• Periodic inventory
• Perpetual inventory
Cycle counting is an inventory accuracy audit technique in which inventory is counted on a cyclic schedule rather
than once a year.
Which of the following is an inventory accuracy audit technique in which inventory is counted on a cyclic
schedule rather than once a year?
• Cycle counting
• Physical inventory
• Random counting
• Location counting
Inventory control includes the activities and techniques used to maintain the desired levels of items in inventory.
These items can be raw materials, work-in-progress, components, or finished products.
What is the term for the necessary activities and techniques used by a corporation to ensure that they always
have the desired levels of raw materials to meet demand?
• Wall-to-wall inventory
• Safety stock
• ABC classification
• Inventory control
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Section L Quiz
In every system, there is one weakest link—the constraint that limits the system from achieving higher levels of its
goal.
How does one find a constraint in a complex manufacturing plant?
This may be difficult in some situations, but often it is relatively straightforward. If work-in-process inventory is
accumulating before a process or work center and processes downstream are waiting for inputs, and if the process or
work center is working at full capacity, then it is the constraint.
For more information, refer to Module 1, Section L, Topic 1
Per the theory of constraints (TOC), in a plant producing a complex product with higher demand than can
be produced at present, which would be the best way listed to find "the weakest link" in the manufacturing
process?
• Look for a fully utilized work center with work-in-process inventory accumulating before it but low work
center utilization of direct downstream work centers.
• Find the earliest point in the process where the cycle time is the lowest and the queue time for direct
downstream work centers is the longest.
• Look for the work center with the lowest utilization rate in the process.
• Ensure that all work centers that can work at full capacity do so; then look for the work center with the
longest cycle time.
Finite forward scheduling is an equipment scheduling technique that builds a schedule by proceeding sequentially
from the initial period to the final period while observing capacity limits.
Which scheduling technique builds a schedule by proceeding sequentially from the initial period to the final
period while observing capacity limits?
• Capacity requirements scheduling

• Process sequencing
• Finite backward scheduling
• Finite forward scheduling
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The buffer ensures that the process will never be "starved" for needed inventory. This buffer of inventory represents
the amount of time that the inventory in the buffer protects the constraint from disruptions.
In the theory of constraints planning and control system, which of the following techniques facilitates the
capacity control function?
• Rope
• Buffer management
• Drum schedule
• Pace of throughput
Dispatching refers to the selecting and sequencing of available jobs to be run at individual workstations and the
assignment of those jobs to workers.
The process of selecting and sequencing available jobs to be run at individual workstations and the
assignment of those jobs to workers is called:
• order release.
• input/output control.
• priority sequencing.
• dispatching.
Advanced planning and scheduling uses advanced mathematical algorithms or logic to perform optimization or
simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand
management, and others.
Which of the following tools uses mathematical algorithms or logic to perform optimization or simulation on
finite capacity scheduling?

• Advanced planning and scheduling
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Input/output control is a technique in which the actual input and output of a work center is compared with the
planned input and output developed by capacity requirements planning.
Input/output control is a technique for monitoring the:
• capacity requirements plan.

• master production schedule.
• material requirements plan.
• production plan.
If more work is scheduled at a workstation than can be completed, the amount of work-in-process will increase.
Which of the following outcomes will occur if work is scheduled at a higher rate of production than is
actually produced?
• The output rate will increase.

• Lead times will decrease.
• Standard costs will decrease.
• Work-in-process will increase.
The fifth of the five focusing steps in the theory of constraints states that once the constraint no longer exists, the
new constraint must be found and the focusing steps must be repeated.
In applying the theory of constraints, what is the next logical step once a constraint is no longer a constraint?
• Elevate the constraint.

• Repeat the five focusing steps.
• Subordinate everything to the constraint.
• Exploit the constraint.
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DBR is the theory of constraints method for scheduling and managing operations that have an internal constraint or
a capacity-constrained resource.
Drum-buffer-rope (DBR) is the term for:
• scheduling and managing operations that have an internal constraint or a capacity-constrained resource.
• balancing the assignment of tasks to workstations to minimize the number of workstations and the amount of
idle time at all stations for a given output.
• periodically changing employee job responsibilities to provide a broader perspective and view of the
organization.
• spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential
time periods tends to be distributed evenly and is achievable.
The cost of poor quality is the cost associated with providing poor-quality products or services.
The cost associated with providing defective or substandard products or services is known as the
• cost of complaints.
• scrap rate.
• cost of poor quality.
• rework cost.
Overlapping occurs when the completed portion of an order at one work center is processed at one or more
succeeding work centers before the pieces left behind are finished at the preceding work centers.
A scheduling system sends part of a lot on to the next stage in processing before it has completed working on
all materials it has received. What is the name given to this useful expediting tool?
• Manufacturing order
• Split scheduling
• Infinite loading
• Overlapped scheduling
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Flow control is a specific production control system that is based primarily on setting production rates and feeding
work into production to meet these preplanned rates.
A manufacturer has set production rates of copper wire at 50 meters every hour. Materials are fed into the
system to meet that prearranged rate. What type of control system is this an example of?
• Flow control
• Line control
• Production plan
• Capacity rating
A space buffer is located immediately downstream of the constraint, and it protects against downtime downstream
from the constraint. The size allowed should be enough to protect against any reasonably foreseeable downtime.
Usually this buffer is empty.
The way to avoid a constraint downstream is by:
• lowering system throughput.

• lowering constraint throughput.
• establishing a space buffer.
• establishing a material buffer.
In the theory of constraints, buffers can be time or material, and they support throughput and/or due date
performance. Buffers can be maintained at the constraint, convergent points (with a constraint part), divergent
points, and shipping points.
What is the term for an element of time or material that can be maintained at the constraint, convergent
points, divergent points, and shipping points?
• Buffer
• Drum
• Rope
• Safety stock
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In the theory of constraints, the drum represents the pace of the constraint, which sets the production pace for the
entire system.
What does the drum in the drum-buffer-rope method represent?
• Pace needed to meet customer demand

• Pace specified in labor agreements
• Pace of the constraint in the process
• Pace of the slowest machine in the process
VATI analysis is a procedure for determining the general flow of parts and products from raw materials to finished
products (logical product structure). Once the general parts flow is determined, the system control points (gating
operations, convergent points, divergent points, constraints, and shipping points) can be identified and managed.
A consultant wants to understand the general flow of parts and products from raw materials to finished
products before implementing the theory of constraints. Which of the following analyses should be
performed to accomplish this task?
• Root cause
• VATI
• Break-even
• Critical chain
Floor stock items are already issued. The other responses would all need to be picked and issued to production.
Which of the following are pick lists most likely to exclude?
• Floor stock materials issued to the department

• Low-cost C-item vendor-managed inventory
• Consignment items that are stocked out
• Materials purchased specifically for an order
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The second of the five focusing steps in the theory of constraints, deciding how to exploit the constraint to the
system, is key. The other answers are not directly related to scheduling a constraint.
What does scheduling a constraint involve?
• Subordinating the constraint to the other processes

• Finding methods to maximize utilization of the constraint
• Getting rid of the bottleneck
• Allowing the process to stabilize after optimization
The drum of the system refers to the 'drumbeat' or pace of production. It represents the master schedule for the
operation, which is focused around the pace of throughout as defined by the constraint.
The drum in the drum-buffer-rope scheduling process serves which of the following functions?
• It provides protection for the shipping schedule.

• It is the communication device for releasing work to the manufacturing process.
• It provides protection to the constraint.
• It is used to create the master production schedule.
In every system, there is one weakest link—the constraint that limits the system from achieving higher levels of its
goal.
In the theory of constraints (TOC), what is the term "the weakest link" used to describe?
• Resource that provides the throughput in the system

• First resource in the system
• Resource with the least throughput in the system
• Buffer in the system
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Bottom of FormThe theory of constraints is a holistic management philosophy that is based on the principle that
complex systems exhibit inherent simplicity. Even a very complex system comprising thousands of people and
pieces of equipment can have, at any given time, only a small number of variables that actually limit the ability to
generate more of the system's goal.
Which concept is based on the following facts?
1. Every operation producing a product or service is a series of linked processes and has a specific
capacity.
2. One process limits the throughput of the entire operation.
• Lean
• Chase
• Just in time
The shop order packet will include what the shop floor needs to successfully produce the items.For more
information, refer to Module 1, Section L, Topic 4
A shop order packet contains the authorization for a particular item or number of items to be made. Which
of the following authorizations may also need to be issued as part of the order packet?
• Shop calendar
• Inventory list
• Pick lists
• Maintenance schedule
Once a process constraint has been identified, WIP is reduced by making all loads equal to the allowable capacity
found at the constrained process. Any load released to the manufacturing floor that is greater than the constrained
process capacity will simply end up as excess load.
Which of the following actions best reduces work-in-process (WIP) inventory on the shop floor?
• Subordinate all else to the constraint to the system.

• Identify the constraint to the system.
• Decide how to exploit the constraint to the system.
• Elevate the constraint to the system.
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The critical path method is a network planning technique for the analysis of a project's completion time used for
planning and controlling the activities in a project. By showing each of the activities and their associated times, the
critical path, which identifies those elements that actually constrain the total time for the project, can be determined.
Which of the following network planning techniques analyzes a project's completion time for planning and
controling the activities in the project?
• Milestone development
• Path convergence
• Critical point backflush
• Critical path method
The critical ratio is a dispatching rule that calculates a priority index number by dividing the time remaining to the
due date by the expected time to finish the job. The queue ratio is the ratio of the hours of slack within the job to the
queue originally scheduled.
What are the critical ratio and the queue ratio used for?
• Capacity planning
• Priority planning
• Master scheduling
• Cycle time calculation
A bottleneck must be fed at a rate equal to its capacity so that the time buffer remains constant.
Which of the following statements regarding scheduling bottlenecks is true?
• A gateway operation does not control the work feeding the bottleneck.
• Not everything that increases the capacity of the bottleneck increases the capacity of the system.
• The time buffer in front of the bottleneck should be longer than the time of any expected delay.
• A bottleneck must be fed at a rate equal to its capacity.
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A process buffer consists of raw materials, components, or subassemblies that are waiting to be used in production
when the demand pull occurs. There are no queues in a TOC system; production is initiated by the drum and not by
pre-released orders waiting to be started.
In the theory of constraints (TOC), which of the following terms refers to materials awaiting further
processing?
• Waiting
• Buffer
• Queuing
• Move
With first come, first served (FCFS), jobs are done in the order in which they are received, regardless of due dates
and processing times. This dispatching rule works well if schedules are well-designed and stable.
A shoe manufacturer receives two orders minutes apart. The first order, A, is for 100 trainers in ten colors to
be delivered in three weeks. The second order, B, is for 200 white trainers to be delivered in two weeks. The
manufacturer assigns order A to be completed first. What is this dispatching rule called?
• First come, first served

• Earliest operation due date
• Shortest process time
• Earliest job due date
The critical chain is, by definition, the longest sequence of dependent events through a project network required to
complete the project.
The critical chain method would typically be used to manage which of the following?
• Projects
• Production lines
• Critical capacity
• Work cells
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Section M Quiz
If B2B customers can order only in full pallet increments, this will reduce the amount of material handling for you
and for them.
For example, the customer will be able to unload the delivery using a forklift rather than manual labor, which would
be the case if they ordered, say, a pallet and a half of goods, which is what could occur if only the minimum order
size were specified. Since the customers generally sell between one and three pallets per order period, requiring
orders of full truckloads would necessitate that some of these pallets being moved into storage and then moved out
over time, so this would increase their material-handling costs.
Cross-docking may reduce the organization's material-handling costs, but it would not affect the customer's
material-handling costs.
For more information, refer to Module 1, Section M, Topic 3
Which is the best way listed to reduce material-handling costs for B2B customers who normally sell one to
three pallets of units in a given order cycle?
• Set the unit load size and order increment requirement to equal one full truckload of pallets.
• Use cross-docking to immediately build unit loads for all B2B customers upon receipt of finished goods.
• Change the unit load size and order increment requirement to equal the number of units that can fit on a
single pallet.
• Change the minimum order size to be the number of units to fill one pallet and allow any number of units to
be ordered above this amount.
The main advantage of water transport is cost. It is most useful for moving low-value bulky cargo over relatively
long distances.
What form of transportation is most useful for moving low-value, bulky cargo over long distances?
• Pipelines
• Water
• Air
• Truck
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A third-party logistics (3PL) provider works with buyers and suppliers to provide product delivery services and may
also have added supply chain expertise.
What is the term for a service provider that works with both buyers and suppliers to provide product
delivery services?
• Customs house
• Third-party logistics
• Freight broker
• Logistics manager
Expediting increases freight costs due to premium freight charges.
A distribution manager is asked to minimize freight expenses. Which of the following business activities
would likely conflict with these efforts?
• Expediting
• Packaging
• Training new employees
• Order entry
Since a floating-location storage system enables the storage of goods wherever there is appropriate space for them,
it maximizes warehouse space cube utilization.
The primary objective of a floating-location storage system is to improve:
• kitting.
• cross-docking.
• cube utilization.
• distribution.
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The distribution channel is the distribution route, from raw materials through consumption, along which products
travel. The transaction channel deals with the change of ownership of goods and services.
What is the distinction between the distribution channel and the transaction channel?
• The distribution channel is concerned with the route of goods; the transaction channel is concerned with the
costs.
• The distribution channel is concerned with the route of goods; the transaction channel is concerned with the
transfer of ownership.
• The distribution channel is concerned with warehouses; the transaction channel is concerned with
transportation nodes.
• There is no distinction.
For shipping lines, terminal-handling charges are the costs of paying container terminals for unloading and loading
during shipment. The use of bar codes or other automated identification methods (such as RFID) also reduces costs.
Which is most likely to reduce terminal-handling charges at an international shipping port that specializes in
container ship loading and unloading?
• Billing and collecting from the carriers on a more timely basis

• Shipping multiple containers on the same container ship rather than the same number of containers spread
across multiple ships
• Removing pallets and shipping units in containers that use the full floor-to-ceiling volume for the maximum
number of units
• Adding battery-powered radio frequency identification (RFID) units to all containers shipped there
A terminal is a location where carriers load and unload goods to and from vehicles. It is also used to make
connections.
Which of the following is a location where carriers load and unload goods to and from vehicles?
• Dock
• Depot
• Terminal
• Port
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Order picking is selecting, or "picking," the required quantity of specific products for movement to a packaging area
(usually in response to one or more shipping orders) and documenting that the material was moved from one
location to shipping.
Selecting the required quantity of specific products for movement to a packaging area and documenting that
the material was moved from one location to shipping is known as:
• order validation.
• order allocation.
• order extraction.
• order picking.
Decentralized inventory control places the inventory decision making at each stocking location for stock keeping
units at that location.
A distribution network that currently operates with a centralized replenishment planning team needs to
reduce inventory. What would be the most appropriate action to reduce inventories without jeopardizing
service?
• Perform an ABC classification.

• Reduce the number of stock keeping units stocked at the distribution centers.
• Implement decentralized inventory control.
• They should not make any changes.
The unit load concept refers to waiting for a container or pallet to be filled before the material is moved.
Waiting to fill a pallet before moving it through distribution is known as the:
• full truck concept.

• full pallet concept.
• palletization concept.
• unit load concept.
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In warehousing, unitization is the consolidation of several units into larger units for fewer handlings.
What term is used for consolidating several units in a warehouse into larger units?
• Palletization
• Unitization
• Containerization
• Unit loads
Intermodal transport refers to shipments moved by different types of equipment in order to benefit from the best
features of each mode.
The movement of shipments using different types of equipment and combining the best features of each mode
is called:
• combined transport.
• multimodal transport.
• intermodal transport.
• freight brokerage.
Line haul costs are variable, depending on the distance traveled,
Which of the following is an example of variable transportation costs?
• Pickup and delivery

• Terminal handling
• Billing
• Line haul
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Distribution is the action or process of supplying goods to stores and other businesses that sell to consumers.
What does the term "distribution" refer to?
• Art and science of obtaining, producing, and distributing material and product in the proper place and in
proper quantities
• Activities associated with the movement of material, usually finished goods or service parts, from the
manufacturer to the customer
• General flow of merchants shipping between two departure/terminal areas
• Action of transporting someone or something or the process of being transported
Green reverse logistics places the responsibility on the supplier to dispose of packaging materials or
environmentally sensitive materials such as heavy metals and other restricted materials.
What term is used for the responsibility of the supplier to dispose of packaging materials or environmentally
sensitive materials?
• Sustainability
• Green reverse logistics
• Recycling
• Environmental stewardship
Pallet positions involve the calculation of the space needed to store a certain number of pallets.
What is the term for the calculation of the space needed to store a certain number of pallets?
• Pallet capacity
• Palletized storage
• Pallet loading
• Pallet positions
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Random-location storage is a stocking technique in which parts are placed in any space that is empty when they
arrive at the storeroom.
In which stocking technique are parts placed in any space that is empty when they arrive at the storeroom?
• Dedicated-location storage
• Random-location storage
• Warehousing
• Automated storage and retrieval
Distribution requirements planning provides the supply warehouse with the information necessary to plan for the
goods to be at the regional warehouse when needed.
Which of the following planning techniques should a company use to improve customer service from its
regional warehouses?

• Material requirements planning
Flow-through also emphasizes throughput, but it involves using some or all of a shipment to immediately replenish
a picking area. In this case, cross-docking is not appropriate because of the online order fulfillment business model
being used.
In a warehouse that primarily does a lot of small order fulfillment of online orders, what is the best thing the
warehouse can implement if storage capacity is becoming an issue?
• Cross-docking
• Floating inventory
• Honeycombing
• Flow-through
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In marshalling, goods making up a single order are brought together and checked for omissions or errors. Order
records are updated. Picking is the process of selecting items from storage and bringing them to a marshalling area.
Dispatching goods to storage is the process of sorting goods upon receipt and placing them in a storage area.
Dispatching the shipment is the process of order packing, preparing shipping documents, and loading items on the
correct transport vehicles.
Which of the following warehouse activities involves bringing goods together and checking for omissions or
errors in the order?
• Dispatching goods to storage

• Marshalling the shipment
• Picking goods
• Dispatching the shipment
The transportation function takes into account the time needed to move goods from one location to another.
Which function exists because of the time needed to move goods from one location to another?
• Fluctuation
• Transportation
• Anticipation
• Hedge
Unitization is the consolidation of several units into larger units for fewer handlings.
Reducing the number of times a package is handled in distribution can be achieved through:
• palletization.
• unitization.
• aggregation.
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The transaction channel is concerned with the transfer of ownership including the activities of negotiation, selling,
and contracting.
Which channel of distribution is concerned with the transfer of ownership, specifically negotiation, selling,
and contracting?
• Logistics
• Transportation
• Transaction
• Distribution
Centralized inventory control places the inventory decision making in a central planning role, enabling the required
number of launch products to be produced and distributed according to launch plans.
A company is preparing to launch a number of new products, and demand is expected to exceed capacity.
What would be the most appropriate action to manage the build of launch quantities?
• Plan using centralized inventory control.

• Plan using decentralized inventory control.
• Allow distributors to pull as much inventory as they desire for launch.
• Do not make any changes.
of returns, repair, remanufacture, and/or recycling.
A supply chain handles used automobile computers, which are sent to a remanufacturer that repairs and
reprograms them. The computers are then returned to the market. This is an example of:
• rework.
• reprogramming.
• continued service.
135 | P a g e
When goods are moved between two entities, it is imperative that clarity exists as to who is responsible for what.
Incoterms, developed by the International Chamber of Commerce, are specifically designed to address this need.
Incoterms define which of the following in regard to shipping?
• When the sender needs to post an advance ship notice (ASN)

• Identity of the freight forwarder and/or broker
• Point at which ownership and risk for shipped goods transfers between parties
• Price of the goods
The objective of distribution management is to provide the required level of customer service at the least total cost
of ownership.
A finance manager states that the objective of physical distribution is to supply products at the lowest total
cost and that the cheapest mode and carrier should be selected to reduce the budget for this. Which is the
best response?
• The primary objective of physical distribution is to provide goods where they are needed, so the cheapest
mode and carrier should be the policy going forward.
• Modes and carriers that cannot provide the highest level of customer service should never be used.
• Modes and carriers that cannot provide the targeted level of customer service cannot be used even if they are
cheaper.
• The primary objective of physical distribution is actually to exceed the competition's level of service, and
sometimes this can require budget increases.
Distribution inventory is second only to transportation in terms of cost in a physical distribution system.
Which of the following typically contributes costs to a physical distribution system that are exceeded only by
costs for transportation?
• Distribution inventory
• Protective packaging
• Design
136 | P a g e
Least total cost means that the total of all distribution costs should be at a minimum while providing the required
level of customer service.
The objective of distribution management is to provide the required level of customer service:
• as conformance to requirements.
• at the least total cost.
• to delight the customer.
• for the lowest cost.
Terminal-handling costs are charges based on the number of times a package is loaded or unloaded.
Which of the following costs will be influenced by the number of times a shipment must be loaded, handled,
and unloaded?
• Terminal handling
• Pickup and handling
• Line haul
• Billing and collecting
Physical distribution is the movement and storage of finished goods from the end of production to the customer.
What is the term for the movement and storage of finished goods from the end of production to customers?
• Supply chain
• Physical distribution
• Logistics
• Physical supply
137 | P a g e
Line-haul costs are variable, depending on the distance traveled and the cost per mile or kilometer. For this scenario,
since the distance is predetermined, the primary consideration is the cost per mile or kilometer. Total line-haul costs
do not depend primarily on weight. Vehicle weight is usually the majority of the total weight, so an empty vehicle
will bear most of the same costs as a full one.
Which is the primary consideration listed for total line-haul costs when viable options for shipping include
rail and road modalities and the shipping and receiving locations will always be the same?
• Variable cost per mile or kilometer

• Distance shipped
• Total weight
• Pickup and delivery costs
Cross-docking involves packing products on incoming shipments so they can be easily sorted at intermediate
warehouses or for outgoing shipments based on final destination.
Packing products on incoming shipments so they can be easily sorted at intermediate warehouses or for
outgoing shipments based on final destination is known as:
• break-pointing.
• cross-docking.
• load-splitting.
• load-sorting.
Distribution inventory includes all finished goods inventory at any point in the distribution system. Distribution
inventories create time value by placing the product close to the customer.
In the physical distribution system, which of the following creates time value by placing the product close to
the customer?
• Order processing and communication

• Distribution inventories
• Warehousing
138 | P a g e
Increasing the number of warehouses to reduce transit times to customers increases distribution costs.
Creating an extensive distribution system in order to reduce shipment time to customers conflicts with which
of the following objectives?
• Best customer service

• Increased customer service
• Lowest distribution costs
• Lowest production costs
A key element in green reverse logistics is the reduction in the amount of packaging.
Using reusable packaging, such as bins or racks, rather than corrugated containers is an example of:
• kanban.
• green reverse logistics.
• design for service.
• recycling.
A distribution channel is the distribution route, from raw materials through consumption, along which products
travel.
What term is used for the distribution route, from raw materials through consumption, along which products
travel?
• Distribution channel
• Marketing channel
• Transaction channel
• Logistics channel
139 | P a g e
In a zoned inventory storage location system, goods are stored in a designated area of the warehouse based on their
physical characteristics or frequency of use.
Which of the following is a zoned inventory storage location system?
• A manufacturer stocks flammable goods in a designated area.

• A work cell team stores the tools that are routinely use in a work cell in or near the cell.
• A manufacturer stores component parts near the cell that will be using them.
• A manufacturer stocks finished goods in an automated storage and retrieval system (AS/RS).
To drop ship is to have a supplier ship directly to the buyer's customer.
Shipping purchased product directly from the supplier to the customer is known as:
• decoupling.
• consignment.
• drop shipping.
• cross-docking.
A customs broker is a person who manages the paperwork required for international shipping and who tracks and
moves the shipments through the proper channels.
An expert in helping companies move goods around the globe, particularly in dealing with matters of
paperwork and monitoring shipment progress, is called a:
• customs broker.
• clearance specialist.
• duty officer.
• customs agent.
140 | P a g e
A transaction channel is a distribution network that deals with change of ownership of goods and services including
the activities of negotiation, selling, and contracting.
What term is used for a distribution network that deals with change of ownership of goods and services
including the activities of negotiation, selling, and contracting?
• Marketing channel
• Sales channel
• Transaction channel
• Distribution channel
Reverse logistics is concerned with the management of the flow of products and materials from the customer back
through the supply chain to the originating source.
Which of the following activities represents reverse logistics?
• Reinspecting outdated inventories to determine whether they can still be used or sold
• Returning goods to the seller for repair, remanufacture, or recycling activity
• Rescheduling a future order to an earlier date
• Moving incomplete material back to an earlier work center
Consolidating into fewer shipments will lower overall transportation costs. The other responses increase the number
of shipments, thus increasing costs.
Which of the following actions can reduce overall transportation costs?
• Breaking up large shipments into smaller ones to the same location

• Using warehouses to consolidate shipments
• Shipping smaller amounts
• Making all shipments to local users bypassing warehouses
141 | P a g e
Cross-docking is packing products on incoming shipments so they can be easily sorted at intermediate warehouses
or for outgoing shipments.
What process of sorting and packing products eliminates the need for storage?
• Split delivery
• Honeycombing
• Cross-docking
• Floating inventory
of returns, repair, remanufacture, and/or recycling.
What is the term for a complete supply chain dedicated to the opposite flow of products and materials for the
purpose of returns, repair, remanufacture, and/or recycling?
• Sustainable supply chain

• Green supply chain
• Recycling
• Reverse logistics
While the distribution channel handles physical distribution, the transaction channel handles the related transactions,
which include both payment of funds up the channel and transfer of ownership down the channel. Transfer of
ownership is accomplished by transferring the title to the goods to the next party.
What flows downstream toward the customer in the transaction channel?
• Title to goods
• Goods
• Cash for sales
• Nothing other than cash for returns
142 | P a g e
Ways are the paths over which a carrier operates, including right-of-way, roadbed, tracks, and other physical
facilities. These may be owned by the government, privately held by the carrier, or provided by nature.
The paths over which a carrier operates, including right-of-way, roadbed, tracks and other physical facilities,
are:
• channels.
• toll paths.
• ways.
• routes.
Centralized systems cannot react to local demand, which lowers service; their advantage is the coordination between
the factory and distribution supply.
Which of the following is a disadvantage of a centralized distribution system?
• Inability to react to local demand

• Poor coordination between factory and distribution center
• Inability to respond to special sales promotions
• Does not accommodate seasonal requirements
143 | P a g e

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For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 1

• Supplier relationship management

What is the definition of the term "supply chain"?

For more information, refer to Module 1, Section A, Topic 2

• core competency evaluation.

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 1

Which of the following best defines reverse logistics?

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

• Omnibus Foreign Trade and Competitiveness Act

For more information, refer to Module 1, Section A, Topic 2

• Price and quality

For more information, refer to Module 1, Section A, Topic 2

Which of the following is an advantage of simultaneous engineering?

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 1

• Value chain analysis

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 1

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 1

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

How is a business plan different from a strategic plan?

• A business plan is a near-term projection of a company's financials.

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 1

In its narrowest sense, an organization that provides an intangible product is in the:

For more information, refer to Module 1, Section A, Topic 2

Which of the following statements describes the strategic plan?

For more information, refer to Module 1, Section A, Topic 2

How is a strategic plan different from a business plan?

• A strategic plan is tactical in nature.

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 1

For more information, refer to Module 1, Section A, Topic 2

Which of the following is true of a business plan?

• It is stated in terms of monetary units and grouped by product family.

For more information, refer to Module 1, Section A, Topic 2

• sales and operations plan.

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section A, Topic 2

For more information, refer to Module 1, Section B, Topic 1

Postponement enables specific identification of a product as close to the market as possible.

For more information, refer to Module 1, Section B, Topic 1

For more information, refer to Module 1, Section B, Topic 1

For more information, refer to Module 1, Section B, Topic 1

For more information, refer to Module 1, Section B, Topic 2

• ERP runs on different types of servers.

For more information, refer to Module 1, Section B, Topic 1

In an assemble-to-order strategy, when are orders for products received?

For more information, refer to Module 1, Section B, Topic 2

What is the definition of data governance?

For more information, refer to Module 1, Section B, Topic 1

In a make-to-stock strategy, when are orders for products typically received?