APICS CPIM-Part-2 - Certified in Planning and Inventory Management(Part 2)

Offering digital downloads only may result in an increased possibility of loss of intellectual property, as this exposes the online retailer to the risk of cyber theft and piracy. Digital downloads are easier to copy, distribute, and modify without authorization than hard copy books, and the online retailer may lose control over its IP rights and revenues. Cyber thieves may hack into the online retailer’s network and steal its IP assets, such as the content, design, and format of the books. Pirates may also offer illegal copies of the books to consumers at lower prices or for free, undermining the online retailer’s market share and profitability. According to Deloitte Insights, IP cyber theft has largely remained in the shadows compared with more familiar cybercrimes such as the theft of credit card, consumer health, and other personally identifiable information1. However, IP cyber theft can have serious consequences for a company’s future, as IP is the heart of the 21st-century company, an essential motor driving innovation, competitiveness, and the growth of businesses and the economy as a whole1. The WIPO Magazine also notes that digital technology has made IP theft easier, as Bad Actors use technology to flood the online market with pirated and counterfeit goods2. The impact of IP theft on the economy can be significant, as it can result in loss of legitimate sales, reduced tax revenues, lower employment opportunities, and diminished incentives for innovation3. Therefore, an online retailer that moves from delivering hard copy books to offering digital downloads only should take appropriate measures to protect its IP from cyber theft and piracy. This may include using encryption, digital rights management, watermarking, authentication, and monitoring technologies, as well as educating consumers about the value and benefits of legal downloads

ABC classification is an inventory categorization technique that divides items into three classes based on their usage value, which is the product of the number of units sold and the cost per unit. Class A items have the highest usage value and account for a large proportion of the total inventory value, but a small percentage of the number of items. Class B items have a moderate usage value and account for a moderate proportion of the total inventory value and the number of items. Class C items have the lowest usage value and account for a small proportion of the total inventory value, but a large percentage of the number of items1.

An advantage of applying ABC classification to a firm’s replenishment items is that it allows planners to focus on critical products. Replenishment items are items that are regularly ordered or produced to maintain a certain level of inventory. By using ABC classification, planners can prioritize the replenishment of class A items, which have the highest impact on the firm’s profitability and customer satisfaction. Planners can also apply different inventory management techniques and policies for each class of items, such as more frequent reviews, tighter controls, lower safety stocks, and higher service levels for class A items, and less frequent reviews, simpler controls, higher safetystocks, and lower service levels for class C items234. This way, ABC classification can help planners optimize the replenishment process and reduce costs, waste, and stockouts.

The other options are not advantages of applying ABC classification to a firm’s replenishment items, because they are either irrelevant or incorrect. ABC classification does not distinguish independent demand from dependent demand, which are two types of demand that depend on whether the item is sold to customers or used as a component in another item5. ABC classification does not provide better order quantities than the economic order quantity (EOQ), which is a formula that calculates the optimal order quantity that minimizes the total inventory costs6. ABC classification does not allow the firm to utilize time-phased order point (TPOP), which is a method that determines when to place an order based on the projected inventory position and the lead time7.

 A focused differentiation strategy is a type of focus strategy that targets a narrow buyer segment and pursues a unique competitive advantage. A focus strategy is a business-level strategy that involves concentrating on a specific market niche or segment and tailoring the products or services to the needs and preferences of that niche1. A differentiation strategy is a business-level strategy that involves creating a product or service that is perceived as unique, distinctive, or superior by the customers, and charging a premium price for it2. A focused differentiation strategy combines these two approaches by offering a differentiated product or service to a narrow market segment that has unique demands or characteristics. This strategy allows the firm to create value for its customers and charge higher prices than its competitors, while avoiding direct competition with firms that target a broader market or offer lower-cost products or services3.

An example of a focused differentiation strategy is Lululemon, a Canadian company that sells high-end yoga and athletic apparel. Lululemon targets a niche market of health-conscious, affluent, and fashion-oriented women who are willing to pay premium prices for its products. Lululemon differentiates itself from other sportswear brands by offering high-quality, stylish, and innovative products that are designed to enhance the performance and comfort of its customers. Lululemonalso fosters a strong brand identity and community among its customers by providing yoga classes, fitness events, online platforms, and social media engagement4.

References:

Focus Strategy - Definition, Types and Examples | Marketing Tutor

Differentiation Strategy - Definition & Examples | Marketing Tutor

Focused Differentiation Strategy: Definition & Examples - Video & Lesson Transcript | Study.com

Lululemon’s Focused Differentiation Strategy - Business Strategy Hub

 Apush system is a production system that operates based on planned or forecasted demand, rather than actual or current demand. In a push system, work orders or tasks are released to the work centers according to a predetermined schedule, regardless of the availability of capacity or resources at the work centers. This means that work centers may receive work even if they are already overloaded or have no idle time, which can result in long lead times, high inventory levels, and poor customer service1.

The other options are more likely to occur when using a pull system, which is a production system that operates based on actual or current demand, rather than planned or forecasted demand. In a pull system, work orders or tasks are released to the work centers only when there is a need or a request from the downstream work centers or customers. This means that work centers are scheduled using finite capacity planning, which is a method of allocating capacity and resources based on the actual availability and constraints of the work centers2. Work centers also operate using decentralized control, which means that each work center has the autonomy and authority to make decisions based on the local conditions and signals from the environment3. Work centers also signal previous work centers when they are ready for more work, which is a way of synchronizing the flow of materials and information along the production process4.

References: Push System vs. Pull System: Adopting A Hybrid Approach To MRP; Push Systems vs. Pull System: Definitions and Differences; JUST-IN-TIME MANUFACTURING | SpringerLink; 9 Just-In-Time and Lean Systems - Seneca College.

 Capable-to-promise (CTP) is a method of order promising that considers both material and capacity availability. CTP is more appropriate than available-to-promise (ATP), which only considers material availability, in environments where the production process is complex, customized, or resource-intensive, and where the demand is uncertain or variable. CTP can provide more accurate and realistic delivery dates, as well as optimize the use of resources and reduce inventory costs.

Among the options given, specialty chemicals packaged and shipped to order is the most suitable environment for CTP. This is because specialty chemicals are often produced in small batches or on demand, according to the specific requirements and preferences of each customer. Therefore, the production process requires high flexibility and customization, as well as careful coordination of materials and capacity. The demand for specialty chemicals may also vary depending on the market conditions and customer needs. CTP can help the company to promise delivery dates that take into account the availability of both materials and capacity, as well as the production lead time and transportation time.

The other options are less suitable for CTP, as they are more likely to use standard or mass production processes, where the products are made in large quantities or in advance, and where the demand is more stable or predictable. In these environments, ATP may be sufficient to promise delivery dates based on material availability alone, without considering capacity constraints.

References : What is a Capable-to-Promise System (CTP System … - Techopedia; Order promising - Supply Chain Management | Dynamics 365; Capable to Promise (CTP) (MRP and Supply Chain Planning Help) - Oracle; Calculate sales order delivery dates using CTP - Supply Chain ….

A purchase order is issued to the supplier for each delivery requirement is an activity that represents waste in a system. Waste is any activity or process that does not add value to the customer or the product, but consumes resources, time, or money. Waste can reduce the efficiency, productivity, and quality of the system, as well as increase the costs, defects, or delays. Waste can be classified into seven types: overproduction, inventory, transportation, motion, waiting, overprocessing, and defects1.

Issuing a purchase order to the supplier for each delivery requirement is an example of overprocessing waste. Overprocessing waste is any activity or process that is unnecessary or excessive for meeting the customer needs or specifications. Overprocessing waste can result from poor communication, unclear requirements, redundant tasks, or outdated procedures. Issuing a purchase order to the supplier for each delivery requirement is an overprocessing waste because it involves more paperwork, approvals, and transactions than needed. It can also create confusion, errors, or delays in the delivery process. A better way to eliminate this waste is to use a pull system, such as kanban2, that signals the supplier to deliver only when there is a demand from the customer.

The other options are not activities that represent waste in a system. More kanbans with smaller quantities are added to the supply chain is an activity that reduces waste in a system. Kanban is a pull system that uses visual signals, such as cards or containers, to indicate when and how much to produce or deliver. Kanban can help reduce waste by synchronizing the production and delivery processes with the customer demand, minimizing inventory levels, improving quality and efficiency, and preventing overproduction or underproduction3. Adding more kanbans with smaller quantities can help reduce inventory waste by lowering the holding costs, transportation costs, or obsolescence costs of inventory. It can also help reduce overproduction waste by producing or delivering only what is needed by the customer.

A kanban is eliminated from the system is an activity that reduces waste in a system. Eliminating a kanban from the system means reducing the number of signals or containers used in the production or delivery process. Eliminating a kanban from the system can help reduce waste by increasing the throughput and velocity of the process, reducing cycle times and lead times, improving responsiveness and flexibility, and enhancing customer satisfaction4.

A production forecast is issued to the supplier is not an activity that represents waste in a system. A production forecast is an estimate of the future demand or sales of a product or service. A production forecast can help plan and manage the production and delivery processes by determining how much and when to produce or deliver. A production forecast can help reduce waste by optimizing the use of resources and capacity, minimizing inventory levels and costs, improving service levels and quality, and avoiding stockouts or shortages5. Issuing a production forecast to thesupplier can help align the production and delivery processes with the customer demand and expectations.

References := The 7 Wastes With Examples: How to Identify Them | Lean Manufacturing, What Is Overprocessing Waste? Definition And Examples, Kanban - Wikipedia, How To Reduce Inventory With Kanban | Lean Manufacturing, Production Forecasting - an overview | ScienceDirect Topics

Multiple sourcing is an outsourcing approach in which products or services are contracted to various suppliers needed to conduct the business instead of using traditional single sourcing1. One of the potential advantages of multiple sourcing is that it can lower the price of the products or services, as it creates competition among the suppliers and gives the buyer more bargaining power2. Another potential advantage of multiple sourcing is that it can reduce the risk of supply disruptions, as it diversifies the supply chain and makes the buyer less dependent on any single supplier3. If one supplier fails to deliver due to unforeseen circumstances, such as natural disasters, political instability, or quality issues, the buyer can switch to another supplier or use a combination of suppliers to meet the demand4. Therefore, multiple sourcing can provide lower price and reduced risk as potential advantages in the supplier selection process.

References: 1: Multi-Sourcing: Everything You Need To Know - SupplierGATEWAY 3 2: Dual sourcing: Advantages and disadvantages - Hermes Supply Chain Blog 4 3: The Case for Making Multiple Suppliers Part of Your Supply Chain Strategy 5 4: Using Multi-Sourcing to Diversify the Supply Chain 6

A process capability study is a method of evaluating how well a process can produce outputs that meet the specifications or requirements. A process capability study involves collecting data from a sample of the process output, calculating the process mean and standard deviation, and comparing them with the specification limits1. A process capability study can help identify the sources and causes of variation, measure the performance and quality of the process, and determine the potential for improvement2.

A process capability study would be necessary in a laboratory when frequent failures are occurring. Frequent failures indicate that the process is not capable of producing reliable and consistent results, and that there may be some problems or defects in the process. A process capability study can help diagnose the issues and suggest corrective actions to reduce or eliminate the failures. For example, a laboratory that performs blood tests may conduct a process capability study to find out why some of the test results are inaccurate or invalid, and what factors affect the accuracy and validity of the test results.

The other options are not situations that would require a process capability study, because they are either unrelated or irrelevant to the process performance or quality. A test results are consistently late (A) is a problem of timeliness, not capability. A new technician is hired © is a change of personnel, not process. Hours of operation are to be extended (D) is a change of schedule, not process.

References:

Process Capability Analysis Cp, Cpk, Pp, Ppk - A Guide - 1factory

What is Process Capability? Capability Estimates & Studies | ASQ

Reducing distribution network inventory days of supply will have the impact of increasing turnovers and reducing cash-to-cash cycle time. Distribution network inventory days of supply is a measure of how long it takes for a company to sell its entire inventory in its distribution network, which includes the warehouses and transportation systems that deliver the products to the customers1. It is calculated by dividing the average inventory by the cost of sales per day1. A lower distribution network inventory days of supply indicates that the company is selling its inventory faster and more efficiently, while a higher distribution network inventory days of supply indicates that the company is holding too much inventory or having difficulty selling its products.

Turnovers, also known as inventory turnover or stock turnover, is a measure of how many times a company sells and replaces its inventory in a given period. It is calculated by dividing the cost of goods sold by the average inventory2. A higher turnover indicates that the company is selling its inventory quickly and efficiently, while a lower turnover indicates that the company is holding too much inventory or having difficulty selling its products.

Cash-to-cash cycle time, also known as cash conversion cycle or net operating cycle, is a measure of how long it takes for a company to convert its cash outflows into cash inflows. It is calculated by adding the days sales outstanding (DSO), which is the average time it takes for customers to pay for their purchases, and the distribution network inventory days of supply, and subtracting the days payable outstanding (DPO), which is the average time it takes for the company to pay its suppliers3. A shorter cash-to-cash cycle time indicates that the company is managing its cash flow more effectively, while a longer cash-to-cash cycle time indicates that the company is tying up more cash in its operations.

Therefore, reducing distribution network inventory days of supply will have the impact of increasing turnovers and reducing cash-to-cash cycle time, as it will decrease the average inventory level, increase the cost of sales per day, and decrease the distribution network inventory days of supply component in the cash-to-cash cycle time formula. This will improve the efficiency and profitability of the company’s operations and reduce its working capital needs.

References : Inventory Days Of Supply | Supply Chain KPI Library | Profit.co; Inventory Turnover Ratio | Formula | Calculator (Updated 2021); Cash Conversion Cycle - CCC.