When a certified supplier’s delivery performance declines, a company should respond initially by

communicating with the supplier to investigate the source of the problem. A certified supplier is a

supplier that has met certain quality, delivery, and service standards and has been approved by the

company to supply goods or services without inspection or testing. A certified supplier is expected to

maintain a high level of performance and reliability, as well as to report any issues or deviations that

may affect the delivery process. However, sometimes a certified supplier may experience a decline in

delivery performance, which can cause delays, disruptions, or dissatisfaction for the company and its

customers.

The best way to deal with a decline in delivery performance from a certified supplier is to

communicate with the supplier and find out the root cause of the problem. Communication is

essential for maintaining a good relationship with the supplier and for resolving any issues or

conflicts that may arise. Communication can help the company and the supplier to understand each

other’s expectations, needs, and challenges, as well as to identify and implement corrective actions

or preventive measures. Communication can also help to restore trust and confidence between the

parties and to prevent further deterioration of performance.

Tightening performance criteria for the supplier is not an appropriate initial response when a

certified supplier’s delivery performance declines. Tightening performance criteria means imposing

stricter standards or requirements on the supplier, such as reducing lead times, increasing penalties,

or demanding more frequent reports. Tightening performance criteria may seem like a way of

holding the supplier accountable and motivating them to improve their performance, but it can also

have negative consequences. Tightening performance criteria can create more pressure and stress

for the supplier, which can affect their quality, productivity, or morale. It can also damage the

relationship with the supplier, as it may signal a lack of trust, respect, or cooperation from the

company.

Establishing a temporary buffer of finished goods inventory at the supplier is not an effective initial

response when a certified supplier’s delivery performance declines. Establishing a temporary buffer

of finished goods inventory means storing extra units of products at the supplier’s location to

compensate for any delays or shortages in delivery. Establishing a temporary buffer of finished goods

inventory may seem like a way of ensuring availability and continuity of supply, but it can also have

drawbacks. Establishing a temporary buffer of finished goods inventory can increase inventory costs,

such as holding costs, transportation costs, or obsolescence costs. It can also reduce inventory

visibility and control, as it may be difficult to track or manage the inventory at the supplier’s location.

Moreover, establishing a temporary buffer of finished goods inventory does not address the root

cause of the decline in delivery performance, but rather masks or postpones it.

Increasing the standard lead time of the component to allow for supplier delays is not a suitable

initial response when a certified supplier’s delivery performance declines. Increasing the standard

lead time of the component means extending the time between placing an order and receiving it

from the supplier. Increasing the standard lead time of the component may seem like a way of

adjusting to the decline in delivery performance and avoiding late deliveries, but it can also have

disadvantages. Increasing the standard lead time of the component can reduce customer satisfaction

and loyalty, as it may result in longer waiting times or missed deadlines for the customers. It can also

reduce operational efficiency and flexibility, as it may limit the ability to respond to changes in

demand or supply. Furthermore, increasing the standard lead time of the component does not solve

the problem of the decline in delivery performance, but rather accepts or tolerates it.

Reference := Supplier Performance Metrics and Scorecard - IADC.org, Delivery Performance

Explained (Measures, KPIs, and How to Improve), How to manage supplier performance -

gatekeeperhq.com

The poka-yoke technique of process design is a method for preventing or detecting errors and

defects in the manufacturing process. Poka-yoke means “mistake-proofing” in Japanese, and it aims

to eliminate human errors by creating systems that either make it impossible for a mistake to occur

or make the mistake immediately obvious once it has occurred1. One way to implement poka-yoke is

to use part attributes, which are physical features of a part that ensure it can only be assembled or

used in the correct way2. For example, a part attribute can define the correct orientation of a part,

such as a notch, a hole, a shape, or a color, so that it can only fit into the matching component. This

prevents the operator from inserting the part incorrectly or using the wrong part.

The other options do not illustrate the poka-yoke technique of process design. Reducing the number

of types of fasteners is an example of standardization, which is a method for simplifying and

streamlining the production process by minimizing variation and complexity3. Customized containers

that hold mixed sets of parts are an example of kitting, which is a method for organizing and

delivering parts or materials to the point of use or consumption in the production process4. An

andon is a visual or audible signal that indicates the status of a machine or process, such as normal,

abnormal, or emergency5. An andon can be used to alert operators or supervisors of problems or

issues, but it does not prevent or detect errors by itself.

Reference: Lean Six Sigma Tools: What is Poka-Yoke? - Villanova University; What is Poka-Yoke?

Mistake & Error Proofing | ASQ; What is Poka-Yoke? [Examples, Principles, Methods]; Standardization

- an overview | ScienceDirect Topics; Kitting - an overview | ScienceDirect Topics.

The change in level of work-in-process (WIP) inventory is the most appropriate indicator to evaluate

the effectiveness of the detailed capacity planning processes for a firm that produces a moderate

variety of products to stock in a single plant. Detailed capacity planning is the process of determining

the quantity and timing of resources, such as labor, equipment, and materials, needed to execute the

master production schedule (MPS) at the work center level1. The MPS is a plan that specifies the

quantity and timing of end items to be produced in a given time period2. The change in level of WIP

inventory is a measure of the difference between the amount of WIP inventory at the beginning and

at the end of a period3. WIP inventory consists of partially completed products or components that

are waiting for further processing or assembly.

The change in level of WIP inventory can indicate how well the detailed capacity planning processes

are aligned with the MPS and the actual demand. A positive change in WIP inventory means that

more products or components are being produced than consumed, which implies that there is excess

capacity or insufficient demand. A negative change in WIP inventory means that more products or

components are being consumed than produced, which implies that there is insufficient capacity or

excess demand. A zero or minimal change in WIP inventory means that the production and

consumption rates are balanced, which implies that there is optimal capacity and demand.

Therefore, by monitoring the change in level of WIP inventory, the firm can evaluate whether its

detailed capacity planning processes are effective in meeting customer needs and expectations, as

well as minimizing inventory costs and maximizing resource utilization.

The other options are not as appropriate indicators to evaluate the effectiveness of the detailed

capacity planning processes for a firm that produces a moderate variety of products to stock in a

single plant. Units of output per direct labor hour is a measure of labor productivity, which indicates

how efficiently labor is used to produce output. However, labor productivity does not reflect the

effectiveness of detailed capacity planning processes, because it does not account for other factors

that affect production, such as equipment, materials, quality, or demand. Percentage of master

schedule attained is a measure of schedule performance, which indicates how well the actual

production matches the planned production. However, schedule performance does not reflect the

effectiveness of detailed capacity planning processes, because it does not account for other factors

that affect production, such as capacity constraints, resource availability, or customer satisfaction.

Level of finished goods inventory is a measure of inventory management, which indicates how much

inventory is available to meet customer orders. However, finished goods inventory does not reflect

the effectiveness of detailed capacity planning processes, because it does not account for other

factors that affect production, such as product variety, lead time, or quality.

Reference: Detail Capacity Planning - Capacity Planning - Gaebler.com Resources …; Master

Production Schedule (MPS) Definition | Operations & Supply Chain Dictionary; Work-in-Process

Inventory: Definition & Example - Video & Lesson Transcript | Study.com; [Work-in-Process (WIP)

Definition - Investopedia]; [Labor Productivity Definition - Investopedia]; [Labor Productivity:

Definition & Statistics - Video & Lesson Transcript | Study.com]; [Schedule Performance Index (SPI)

Definition - Investopedia]; [Schedule Performance Index (SPI) & Cost Performance Index (CPI) in

Project Cost Management]; [Finished Goods Inventory: Definition & Formula - Video & Lesson

Transcript | Study.com]; [Finished Goods Inventory: Definition & Example - Video & Lesson Transcript

| Study.com].

In a lean environment, one uses material requirements planning (MRP) processing primarily to

create plans to share with suppliers. MRP is a software-based system that calculates the quantity and

timing of materials needed for production, based on the master production schedule, the bill of

materials, and the inventory status. MRP helps to coordinate the flow of materials from suppliers to

the production process, reducing waste and inventory costs. MRP can also generate purchase orders,

work orders, and other documents to communicate the plans with suppliers and internal

departments. MRP does not calculate average daily demand, which is a measure of the average

amount of a product or service that is sold or consumed per day. MRP does not determine the

kanban circuit locations, which are the physical places where kanban cards or containers are

exchanged between processes in a pull system. MRP does not determine where to use

supermarkets, which are locations where a small amount of inventory is kept to buffer against

fluctuations in demand or supply. Reference: CPIM Exam Content Manual Version 7.0, Domain 4:

Plan and Manage Supply, Section 4.1: Supply Planning Concepts, p. 24; Lean MRP; Manufacturing

resource planning.

A reduction in purchased lot sizes will reduce inventory levels. Purchased lot sizes are the quantities

of inventory that a stage of the supply chain either produces or purchases at a given time1. Inventory

levels are the amount of stock available throughout the distribution network2. By reducing the

purchased lot sizes, a company can lower the amount of inventory it holds, which can reduce the

inventory costs, such as holding costs, shortage costs, and order costs3.

Holding costs are the costs associated with storing and maintaining inventory, such as rent, utilities,

insurance, taxes, depreciation, and obsolescence4. Shortage costs are the costs incurred when

demand exceeds supply, such as lost sales, customer dissatisfaction, and backorder costs4. Order

costs are the costs involved in placing and receiving orders, such as transportation, inspection, setup,

and administrative costs4.

Reducing the purchased lot sizes can lower the holding costs by decreasing the average inventory in

the supply chain due to either production or purchases in lot sizes that are larger than those

demanded by the customer1. This is also known as cycle inventory1. Reducing the purchased lot

sizes can also lower the shortage costs by increasing the frequency of orders and decreasing the lead

time between orders5. This can help avoid stockouts and meet customer demand more consistently.

Reducing the purchased lot sizes can also lower the order costs by optimizing the order quantity

based on the trade-off between holding costs and order costs. This is also known as economic order

quantity (EOQ).

Therefore, a reduction in purchased lot sizes will reduce inventory levels and inventory costs.

Reference: 1: Chapter 11 Flashcards by Amy Horton 3 2: Optimal Inventory Levels: Calculate &

Manage Your Stock Levels 2 3: Inventory Levels Explained: The Highs & Lows Of Optimal Stock 1 4:

Economic Order Quantity Model in Inventory Management 4 5: Dual sourcing: Advantages and

disadvantages : Economic Order Quantity: What Does It Mean and Who Is It For5

Product price is most effective in influencing demand in the introduction phase of the product life

cycle. The product life cycle is a concept that describes the stages that a product goes through from

its development to its decline. The introduction phase is the first stage, when the product is launched

into the market and consumers are made aware of its existence and benefits. In this phase, product

price can have a significant impact on the demand for the product, depending on the following

factors:

The degree of product innovation: If the product is highly innovative and offers a unique value

proposition to customers, it may have a high price elasticity of demand, meaning that customers are

willing to pay a high price for it regardless of the availability of substitutes or competitors1. This is

often the case for products that create a new market or category, such as the iPhone or the

Kindle2. On the other hand, if the product is not very innovative and offers a similar value

proposition to existing products, it may have a low price elasticity of demand, meaning that

customers are sensitive to price changes and will switch to cheaper alternatives or competitors if the

price is too high1. This is often the case for products that enter an existing market or category, such

as generic drugs or copycat products3.

The degree of market competition: If the product faces little or no competition in the market, it may

have more pricing power and flexibility, meaning that it can charge a high price and still generate

high demand4. This is often the case for products that have a strong brand image, a loyal customer

base, or a patent protection5. On the other hand, if the product faces high competition in the

market, it may have less pricing power and flexibility, meaning that it has to charge a low price or

offer discounts and promotions to attract and retain customers4. This is often the case for products

that have a weak brand image, a low customer loyalty, or a short product life cycle.

Therefore, product price can be an effective tool to influence demand in the introduction phase of

the product life cycle, depending on how innovative and competitive the product is. A high price can

signal quality, exclusivity, and differentiation, while a low price can signal affordability, accessibility,

and penetration.

Reference: Price Elasticity of Demand - Definition & Formula - Corporate Finance Institute; Product

Life Cycle Explained: Stage and Examples - Investopedia; Generic Drugs - Overview - Mayo

Clinic; Pricing Strategies For The Product Life Cycle (Made Simple) - Tyonote; Brand Image - Definition

& Examples - Marketing Tutor; [Customer Loyalty - Definition & Examples - Marketing Tutor].

The horizon for forecasts that are input to the sales and operations planning (S&OP) process should

be long enough that required resources can be properly planned. The S&OP process is a cross-

functional process that aligns the demand and supply plans of an organization. The S&OP process

consists of several steps, such as data gathering, demand planning, supply planning, pre-S&OP

meeting, executive S&OP meeting, and S&OP implementation. The output of the S&OP process is the

production plan, which is a statement of the resources needed to meet the aggregate demand plan

over a medium-term horizon. The production plan can be stated in different units of measure

depending on the type of manufacturing environment, such as hours, units, tons, or dollars. The

horizon for forecasts that are input to the S&OP process should be long enough that required

resources can be properly planned, meaning that the organization can anticipate and allocate the

necessary capacity, materials, labor, equipment, and facilities to meet the expected demand. The

horizon for forecasts should also match the lead time for acquiring or changing the resources, as well

as the planning cycle for updating the production plan.

Reference: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section 4.1:

Develop Supply Plans, Subsection 4.1.2: Describe how to develop a production plan (page 36).

Input/output control (I/O) is a type of tool that is used for monitoring a capacity plan. A capacity plan

is a statement of the resources needed to meet the production plan over a medium-term horizon. A

capacity plan can be stated in different units of measure depending on the type of manufacturing

environment, such as hours, units, tons, or dollars. Input/output control (I/O) is a method of

measuring and comparing the actual input and output of a work center or a production line against

the planned input and output. Input is the amount of work that is released to the work center or the

production line, and output is the amount of work that is completed by the work center or the

production line. Input/output control (I/O) helps to monitor the performance and efficiency of the

work center or the production line, and to identify any deviations or problems that may affect the

capacity plan. Input/output control (I/O) also helps to adjust the input or output levels as necessary

to maintain the balance between demand and supply, and to achieve the desired throughput.

Reference: CPIM Exam Content Manual Version 7.0, Domain 6: Plan, Manage, and Execute Detailed

Schedules, Section 6.3: Monitor Detailed Schedules, Subsection 6.3.2: Describe how to monitor

input/output control (I/O) (page 60).

The production plan is a statement of the resources needed to meet the aggregate demand plan over

a medium-term horizon. The production plan is the output of the supply planning step in the sales

and operations planning (S&OP) process. The production plan relates to a firm’s financial planning

because it is used to identify future cash needs. Cash needs are the amount of money that a firm

requires to operate and grow its business. Cash needs can be influenced by various factors, such as

sales revenue, cost of goods sold, operating expenses, capital expenditures, inventory levels,

accounts receivable, accounts payable, and taxes. The production plan can help to estimate the cash

inflows and outflows associated with these factors, and to determine the optimal balance between

them. The production plan can also help to identify the potential sources and uses of cash, such as

borrowing, investing, or paying dividends. By identifying future cash needs, the production plan can

help to improve the firm’s liquidity, profitability, and solvency.

Reference: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section 4.1:

Develop Supply Plans, Subsection 4.1.2: Describe how to develop a production plan (page 36).

A queue is the number of hours that a work order sits in front of a work center before it starts. It also

includes the move time required to physically move partially completed items from the previous

operation to the next work center1. A queue is used to provide a buffer between the time that a

component arrives at a machine or work center and when the operation actually starts2. A queue

can help to neutralize delays in previous operations and to reduce the waiting time and flow time of

the work orders3.

An order that moves into a work center on schedule following completion of a previous operation

will move into the queue in priority sequence. This means that the order will be placed in the queue

according to its priority level, which is determined by the priority control technique used for the

production system. A priority control technique is a method of determining the sequence and timing

of production orders in a manufacturing system4. Some examples of priority control techniques are

first-come, first-served (FCFS), shortest processing time (SPT), earliest due date (EDD), and critical

ratio (CR). Depending on the priority control technique, an order may move to the beginning, end, or

middle of the queue.

An order will not necessarily move to the end or the beginning of the queue, as these positions

depend on the priority level of the order and the other orders in the queue. An order will not move

into the queue when there is capacity available, as this implies that there is no queue at all. Capacity

is the amount of time or resources available for production at a work center5. Capacity can be

affected by factors such as machine availability, labor skills, setup time, and maintenance. Capacity

planning is a function of determining and adjusting the optimal level of resources needed to meet

the demand5.