APICS CPIM Exam Questions

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21.

What is the major advantage of using water as the mode of transportation?

  • Low operating costs

  • Speed

  • Delivery services

  • Capacity

Correct answer: Low operating costs

The major advantage associated with using water as the mode of transportation is its low operating costs. Water transport is able to carry large capacities, which helps it absorb fixed costs.

Speed is incorrect because water transport is relatively slow. 

Delivery services is incorrect because door-to-door service is only available if customers live along the waterway. 

Capacity is an advantage of using water transport; however, it is not as much of an advantage as low operating costs.

22.

In the Manufacturing Planning and Control (MPC) hierarchy, resource planning is part of which category?

  • Capacity planning activities

  • Demand-side activities

  • Priority planning

  • Execution and control

Correct answer: Capacity planning activities

In the Manufacturing Planning and Control (MPC) hierarchy, resource planning is part of the capacity planning category. The ASCM Supply Chain Dictionary states that resource planning is "at the horizon of the production plan (e.g., the business plan). It addresses those resources that take long periods of time to acquire. Resource planning decisions always require top management approval."

Demand-side activities include forecasting, demand management, and Distribution Requirements Planning (DRP). 

Priority planning includes Sales And Operations Planning (S&OP), master scheduling, and Material Requirements Planning (MRP). 

Execution and control include purchasing and production activity control.

23.

What are the two types of performance improvement?

  • Continuous and breakthrough

  • Ongoing and exceptional

  • Small and big

  • Continuous and revolutionary

Correct answer: Continuous and breakthrough

Performance improvements can be either continuous or breakthrough. Continuous improvements focus on making small but ongoing (continuous changes). Continuous improvement can become part of a company's culture. Breakthrough improvements focus on making large, game-changing leaps in performance, involving new processes and/or new technologies. These activities are not mutually exclusive. Both can be part of company's strategy.

The other choices are incorrect.

24.

Contract carriers are subject to regulations. Carrier regulations include all EXCEPT which of the following?

  • Area served

  • Rates charged

  • Assumed liability

  • Services provided

Correct answer: Area served

Carriers can compete on dependability, specialized services, and/or areas served.

The ASCM Supply Chain Dictionary defines common carrier as "transportation available to the public that does not provide special treatment to any one party and is regulated as to the rates charged, the liability assumed, and the service provided." Interstate commerce carrier regulations oversee a rage of activities, including rates, liability assumption, and services provided.

25.

Processes can create unacceptable outputs due to variation. Narrow variations may be acceptable, while wider variations may be unacceptable. What is the level of variation called?

  • Tolerance

  • Specification

  • Process capability

  • Priority control

Correct answer: Tolerance

Variation can be viewed in a bell curve showing acceptable tolerances with an upper and lower specification limit. Variation within these limits is acceptable. Variation outside these limits (i.e., the tolerance thresholds) is unacceptable. 

A specification is a technical requirement of a material, item, or service. Specifications can be used to set tolerances. 

Process capability is the ability of a process to create output conforming to specifications, while priority control is the process of communicating key dates to manufacturing to execute a plan.

26.

A company pays for capacity in a subcontractor's manufacturing schedule based on anticipated requirements. This is an example of what activity?

  • Outsourcing

  • S&OP

  • MRP

  • Theory of Constraints (TOC)

Correct answer: Outsourcing

Contract manufacturing is a form of outsourcing, whereby a manufacturer may augment its production capabilities and/or capacity with an external supplier.

S&OP works at a volume level of business planning and may initiate a sourcing action to acquire a contract manufacturing partner. MRP might be the system whereby raw materials are ordered and supplied to the contract manufacturer. Theory Of Constraints (TOC) is a management philosophy based on managing bottlenecks.

27.

Which is NOT a consideration in finding the right place in the collaboration spectrum with a potential partner?

  • High capital investment requirements

  • Risk of business interruption

  • Number of potential partners

  • Criticality to products

Correct answer: High capital investment requirements

High capital investment requirements are usually associated with setting up a subsidiary, not a collaborative partnership. Collaborative partnerships are normally an avenue to avoid high capital investment due to risk and technology sharing across both entities. 

Risk of business interruption, number of potential partners, and criticality to products are all valid considerations and are common detractors to a productive partnership.

28.

Specification limits and control limits are key parts of control charts and measurements. What is a specification limit?

  • Parameters set by the customer to define if the product is in/out of customer tolerance

  • Parameters set by statistical observations to define if a process is in/out of tolerance

  • Constraints are defined by the company dictating to the customer what is possible

  • The maximum amount a company can change is the price of a product according to the contract

Correct answer: Parameters set by the customer to define if the product is in/out of customer tolerance

Specification limits are parameters set by the customer to define if the product is in/out of customer tolerance. This is also referred to as the voice of the customer. Specification limits are set by customer expectations, not what the supplier dictates. Product specifications are normally established as part of a supply agreement with a customer. Pricing for a specified quality is established through negotiation.

Control limits are parameters set by statistical observations to define if a process is in/out of tolerance, whatever the tolerance is. Control limits are also referred to as the voice of the process and determine if a process or machine can stay within compliance parameters.

The primary difference between specification limits and control limits is that specification limits are product-centric (does the product conform to customer expectations), while control limits are process-centric (can the defined processes deliver consistent and repeatable results).

29.

What is the relationship of customer service level to stockout percentage?

  • They are opposite measures of order fulfillment

  • Customer service level is a variable of the stockout percentage calculation

  • Stockout percentage is a variable of the customer service level calculation

  • These are leading indicator metrics for on-time delivery percentage

Correct answer: They are opposite measures of order fulfillment

The ASCM Supply Chain Dictionary defines customer service level, also known as customer service ratio, as "a measure of delivery performance of finished goods or other cargo, usually expressed as a percentage." Furthermore, it defines stockout percentage as "a comparison of total orders containing a stockout with total orders or of line items incurring stockouts with total line items ordered during a period." The two concepts are therefore opposite measures of each other: one delineating the amount supplied versus the other delineating the amount not supplied.

The on-time delivery percentage is an operations excellence metric and, while it has no direct relation to these metrics, could possibly be considered as a potential leading indicator metric versus the other way around.

30.

You are using the service area’s population numbers and disposable income to base your projections. Which forecasting technique are you using?

  • Extrinsic

  • Qualitative

  • Intrinsic

  • Dynamic

Correct answer: Extrinsic

The extrinsic forecasting technique uses external indicators such as a service area’s population numbers and disposable income to base its projections.

The qualitative forecasting technique uses informed opinions and intuition to base its projections. The intrinsic forecasting technique uses historical data to base its projections. Dynamic is incorrect because it is not one of the three forecasting techniques.

31.

A luxury car company is a good example of a company competing on:

  • Quality

  • Technology

  • Customer experience

  • Operational excellence

Correct answer: Quality

Luxury goods manufacturers can sell their products into the marketplace at premium prices because of superior workpersonship. Hence, these companies compete on the quality of their finished goods. 

Technology companies are usually first to market with new products. 

Customer experience companies tailor the buying experience and their products to specific customer needs. 

Operational excellence companies compete with least cost pricing on similar quality goods in the marketplace.

32.

An open order is an input needed for capacity requirements planning. Open orders help determine all EXCEPT which of the following?

  • Capacity

  • Quantity

  • Due dates

  • Operations

Correct answer: Capacity

The open order file is the document that lists the active shop orders. An open order does not drive capacity. Capacity is shown on the work center file.

An open order does determine quantities, due dates, and operations. 

33.

What is the fundamental principle underpinning ABC analysis?

  • Pareto's principle

  • Pythagorean theorem

  • Fibonacci sequence

  • Central tendency

Correct answer: Pareto's principle

Pareto’s principle establishes the rule of 80/20 in which 20% of the most important items are classified as A items and bring 80% of the impact. These are counted more frequently than B or C items. In other words, ABC analysis refers to classifying inventory based on usage/value, A items being the highest and C items being the least.

The Pythagorean theorem describes the fundamental relationship in Euclidean geometry between the three sides of a right triangle.

The Fibonacci sequence is a sequence in which each number is the sum of the two preceding ones.

Central tendencies include the statistics mean, median, and mode.

34.

Rated or calculated capacity is a product of all EXCEPT which of the following?

  • Historical data

  • Available time

  • Utilization

  • Efficiency

Correct answer: Historical data

Rated or calculated capacity is not a product of historical data. Historical data is used to figure demonstrated (measured) capacity.

Available time, utilization, and efficiency are what rated or calculated capacity is based on. The capacity available can either be measured or calculated.

35.

Which of the following is an example of a variable cost?

  • Sales force commissions

  • Taxes

  • Insurance

  • Administrative overhead

Correct answer: Sales force commissions

Sales force commissions are considered variable costs. Variable costs are directly linked to the amount of product made or sold. Direct labor and direct material are examples of variable costs.

Insurance, taxes, and administrative overhead are all examples of fixed costs.

36.

Identify the FALSE statement regarding production activity control.

  • PAC informs detailed capacity planning

  • PAC must meet manufacturing planning and control plans

  • PAC includes vendor scheduling and follow up

  • PAC utilizes SFC techniques

Correct answer: PAC informs detailed capacity planning

Production Activity Control's (PAC) main objective is to meet manufacturing planning and control plans by executing the materials requirements plan. PAC will efficiently manage material flows while ensuring compliance to customer service goals. 

In executing its mission, PAC interacts with vendors to perform scheduling and any required follow up to ensure smooth delivery of supplies. 

PAC also utlilizes Shop Floor Control (SFC) methods, such as Gantt charts, priority sequencing, and TOC scheduling as needed. 

PAC is informed by detailed capacity planning on when and where to run jobs, not the reverse.

37.

Demand management oversees the demands for products in the short, medium, and long term. Which planning process drives the need for demand management in the short term?

  • Master production scheduling

  • Detailed scheduling

  • Finite scheduling

  • Production activity control

Correct answer: Master production scheduling

Let's first describe what demand management is. According to the ASCM Supply Chain Dictionary demand management is: "the function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results." Demand management is needed in the short term for master production scheduling and the items needed. Master production scheduling is the most detailed level of scheduling to take advantage of demand management as an input. 

Demand management is not needed in the short term for detailed scheduling, finite scheduling (a form of detailed scheduling), or production activity control, as these rely on the master production schedule to be executed.

38.

The delivery lead time in a Make-to-Stock (MTS) environment includes time for which of the following?

  • Shipping

  • Designing, purchasing, manufacturing, assembling, and shipping

  • Manufacturing, assembling, and shipping

  • Assembling and shipping

Correct answer: Shipping

Make-to-Stock (MTS) is a conventional production and inventory strategy where businesses manufacture a product and fill their inventory to match forecasted customer demand. In this strategy, production occurs before demand has been explicitly stated. Instead of receiving customer orders and manufacturing directly for each order, production and inventory levels are predetermined and sold according to the amount produced. Essentially, this is a push manufacturing strategy. The delivery lead time in an MTS environment includes time for shipping. The ASCM Supply Chain Dictionary defines MTS as "a production environment where products can be and usually are finished before receipt of a customer order. Customer orders are typically filled from existing stocks, and production orders are used to replenish those stocks."

Engineer-to-Order (ETO) is a type of manufacturing where a product is engineered and produced after an order has been received. Using the ETO method, a manufacturer can meet the exact specifications of their customer. ETO focuses on producing one complex unit, such as a ship or a building. The delivery lead time in an ETO environment includes time for designing, purchasing, manufacturing, assembling, and shipping. 

ETO products are configured, engineered, and manufactured from scratch every time based on customer specifications. MTO products are manufactured once a customer places an order but according to pre-existing designs.

Assemble-to-Order (ATO) is a production and inventory system where components and subassemblies of a final product are manufactured but not yet assembled before the customer order is made. Only after the order is received does the company quickly assemble the product and send it out to the customer. It is a combination of MTO and MTS. The delivery lead time in an ATO environment includes time for assembling and shipping.

Make-to-Order (MTO) focuses on producing products after the customer order has been received. This enables products to be engineered to the customer’s exact specifications while allowing the manufacturer to build the right amount based on actual current demand. The delivery lead time in an MTO environment includes time for manufacturing, assembling, and shipping.

39.

Which of the following is TRUE when a quantitative forecasting technique is used?

  • The forecast is based on data

  • The forecast is based on judgments and intuition

  • The forecast is done using the Delphi Method

  • The forecast can be constrained by groupthink

Correct answer: The forecast is based on data

Quantitative forecasting techniques are based on data that can be extrinsic (e.g., from market indices) and/or intrinsic (demand data).

A qualitative forecasting technique is used when a forecast is based on judgments and intuition when data is limited, not available, or no longer relevant. The Delphi method is a qualitative forecasting method. Groupthink is a potential qualitative forecasting phenomenon, where individuals begin to agree with the influencers or dominant personalities.

40.

Which of the following is NOT an objective of inventory?

  • Efficient transportation

  • High customer service levels

  • Low cost plant operations

  • Minimum inventory investment

Correct answer: Efficient transportation

Efficient transportation is not an objective of inventory.

To maximize profits, a company must manage inventories, maximize customer service levels, and promote efficient operations. The company must also minimize the amount of capital investment used for inventory.