2008 cpim exam content manual

8/17/2019 2008 CPIM Exam Content Manual

1/58

CPIM Exam Content Manual

This manual is in effect from January 1, 2008,through December 31, 2008.

The references in this manual have been selected solely on the basis of their educational value to the APICSCPIM certification program and on the content of the material. APICS does not endorse any services or othermaterials that may be offered or recommended by the authors or publishers of books and publications listed inthis manual.

©2008 APICS The Association for Operations Management

5301 Shawnee Road Alexandria, VA 22312-2317(703) 354-8851(800) 444-2742Fax: (703) 354-8106

No portion of this document may be reproduced under any circumstances. CPIM is a registered trademark of APICS.

Stock #09051


2/58


3/58

Contents

CONTENTS Page

Introduction

Letter to Candidates .......................................................................................................... i

Introduction ...................................................................................................................... iii

About the CPIM Examinations ......................................................................................... iii

Code of Ethics ................................................................................................................. vi

CPIM Certification Practice Questions ............................................................................ vii

Additional Resources for CPIM Candidates .................................................................... vii

CFPIM ........................................................................................................................... viii

Scope of the Subject Matter

Basics of Supply Chain Management .............................................................................. 1

Master Planning of Resources ........................................................................................ 10

Detailed Scheduling and Planning ................................................................................. 16

Execution and Control of Operations ............................................................................. 27

Strategic Management of Resources ............................................................................. 34

Answers to Sample Questions

Basics of Supply Chain Management Answers ............................................................. 41

Master Planning of Resources Answers ........................................................................ 42

Detailed Scheduling and Planning Answers .................................................................. 42

Execution and Control of Operations Answers .............................................................. 44

Strategic Management of Resources Answers .............................................................. 45


4/58

CPIM Exam Content Manual


5/58

Introduction

Dear Candidate:

For more than 30 years, the Certified in Production and Inventory Management (CPIM) program has beenrecognized as the international standard for individual assessment in the field of production and inventorymanagement. Initiated by APICS in 1973, it provides a common basis for individuals and organizations toevaluate their knowledge of this evolving field. APICS has administered more than 820,000 tests in 40 countries,and nearly 87,000 people have earned the CPIM designation—3,000 of these at the Fellow level.

The mission of the CPIM program is to be the premier professional certification for operations management thattests the candidate’s knowledge and understanding of the principles and practice of production and inventorymanagement. The CPIM program is designed to educate individuals in the concepts, tools, terminology, andintegration of topics within the operations management function and test candidates’ in-depth knowledge ofthese concepts. APICS has worked to ensure that CPIM exams are consistently reliable and that the highestprofessional standards are used to develop and administer the program.

Because organizations operate in a dynamically changing international world, the APICS body of knowledgecontinues to grow to include recognized concepts and tools to improve organizational competitiveness. TheCPIM Exam Content Manual is updated regularly to reflect these changes in the body of knowledge and toassist candidates in their understanding of the scope of material covered in the program.

Using a typical business process orientation, the CPIM program integrates individual modules in a progressionof increased understanding as follows:

1. Entry module—Basics of Supply Chain Management: Terminology and basic concepts related tomanaging the complete flow of materials from suppliers to customers.

2. Core competency modules—Master Planning of Resources, Detailed Scheduling and Planning,Execution and Control of Operations: Available methodologies and techniques to drive processes andthe application of these techniques.

3. Capstone module—Strategic Management of Resources: Choosing the appropriate structures andmethodologies to achieve organizational strategic objectives and an understanding of the integration ofoperations within the context of the organization.

The integration is presented here and represents a suggested sequence for the exams. Following is a summary

of each of the CPIM modules.

Basics of Supply ChainManagement

An introduction for production and inventorymanagement personnel and CPIM candidates, thismodule provides basic definitions and concepts forplanning and controlling the flow of products orservices into, through, and out of an organization. Itexplains fundamental relationships among theactivities that occur in the supply chain from

suppliers to customers. In addition, the modulecovers types of manufacturing and service systems,forecasting, master planning, material requirementsplanning, capacity management, production activitycontrol, purchasing, inventory management,distribution, quality management, and Just-in-Time/lean operations.

CPIM Program


6/58

ii CPIM Exam Content Manual

Master Planning of Resources

In this module, candidates explore processes used to develop sales and operations plans; identify and assessinternal and external demand and forecasting requirements; and gain an understanding of the importance ofproducing achievable master schedules that are consistent with business policies, objectives, and resourceconstraints. The module focuses on developing and validating a plan of supply, relating management of demandto environment, and developing and validating the master schedule.

In addition, the module encompasses concepts for transforming sales, marketing, and business requirementsinto a feasible and economic operations plan in various business environments. It also addresses concepts andmethodologies for managing projected and actual demands from distribution networks and external customers.Finally, the module presents methods for integrating sales and operations plans, demand forecasts, andcustomer demand into a specific master schedule.

Detailed Scheduling and Planning

In this module, candidates focus on the various techniques for material and capacity scheduling. The moduleincludes detailed descriptions of material requirements planning (MRP), capacity requirements planning (CRP),inventory management practices, and procurement and supplier planning. New techniques are discussed,including material and capacity constrained scheduling, which are applicable to multiple industries including theservice sector. Candidates will also become familiar with supplier partnerships, lean inventory principles, and

outsourcing strategies and techniques.

Execution and Control of Operations

This module focuses on three main areas: execution of operational plans and schedules, control of the releaseof work to the operational area assigned, and reporting the measurement of the performance. The moduleexplains techniques for scheduling and controlling operations. ECO deals with the execution of quality initiativesand continuous improvement plans. Finally, the module presents techniques for collecting data and measuringperformance for feedback.

Strategic Management of Resources

In this module, candidates explore the relationship of existing and emerging processes and technologies tooperations strategy and supply chain-related functions for both manufacturing and service organizations. Themodule addresses three main topics: aligning resources with the strategic plan, configuring and integratingoperating processes to support the strategic plan, and implementing change. For maximum comprehension ofcourse content, candidates should be familiar with the information and concepts presented in the other CPIMmodules before taking this course.

The CPIM program continues to evolve, incorporating relevant and current concepts and techniques into thebody of knowledge, such as supply chain management, lean, service industries, globalization, theory ofconstraints, project management, outsourcing, critical chain, and new approaches in quality management.

CPIM is an outstanding educational program and APICS relies on your comments and suggestions to maintainand improve the program for future candidates. We wish you success in your pursuit of your operationsmanagement knowledge.

Paul Pittman, Ph.D., CFPIMCPIM Program ChairIndiana University Southeast


7/58

Introduction i

IntroductionThis exam content manual provides assistance forthose studying in the production and inventorymanagement field, developing and conductingeducation courses and workshops, and preparingfor the certification examinations. The objective of

this manual is to outline the CPIM body ofknowledge, which the APICS Body of KnowledgeCouncil has organized into five modules:

• Basics of Supply Chain Management• Master Planning of Resources• Detailed Scheduling and Planning• Execution and Control of Operations• Strategic Management of Resources.

In this manual, each module begins with astatement of the scope of the subject matter,followed by a descriptive outline of the curriculum.Key terminology for the particular module is

provided, as well as a bibliography of primary andadditional references. Each module concludeswith sample questions typical of those that appearon the examinations. The correct answers for thesample questions, with brief explanations of whythey are correct, appear at the end the manual.

The recommended procedure for mastering thesubject matter is to review the curriculum outline,which defines the material, and then to study eachtopic, using the references. Candidates shouldunderstand the definitions of the key terms in thecurriculum outline, as well as the outlinedtechniques—why and how to apply them andwhich ones to select.

New developments in the state of the art may bedescribed in current literature. Sufficientreferences are given for each topical area toprovide different approaches to material coveredin each module and different styles of presentingit. Reading the available APICS periodicalmaterial, including APICS magazine, Productionand Inventory Management Journal, and theJournal of Operations Management, will help youto maintain an awareness of changes in the stateof the art.

About the CPIMExaminations

All CPIM exams are administered using a linear-testing approach. Linear testing is a proventesting methodology based on the same concept

as traditional paper-and-pencil exams. Candidatesanswer a predetermined number of questions toassess their knowledge in key areas.

Each of the CPIM exams (except Basics) consistsof 75 multiple-choice questions. The Basics examconsists of 105 multiple-choice questions. Thereis a three-hour time limit for each CPIM exam.

For more information about testing andregistration policies and procedures, call APICSCustomer Support at (800) 444-2742 or (703)354-8851 and request a current CPIM

Certification Bulletin. Candidates who plan to testin North America should request stock #09053,and candidates testing outside North Americashould order stock #09055.


8/58

iv CPIM Exam Content Manual

Question Format

Several types of questions are used in CPIMexaminations. (This manual includes examples ofmany of these types of questions in the samplequestions. A review of all of these types ofquestions is recommended to ensure maximumpreparedness.) For each question, one and only

one of the four choices represents the correctanswer. It is important that you make a choiceeven if you are not certain of the correct answer,because the omission of an answer will becounted the same as an incorrect answer.

Examples 1 and 2 are samples of an incompletestatement or a question, followed by foursuggested completions or answers. In Example 1,you are to choose the one option—A, B, C, or D— that completes the statement correctly. InExample 2, you are to choose the option that bestanswers the question.

Example 1: The key to a successfulproduction plan is(A) capacity requirements planning(B) material requirements planning(C) dynamic priority planning(D) adequate production capacity(The correct answer is D.)

Example 2: Which of the followingapproaches allows MRP techniques to beused for planning and controlling independentdemand items?(A) pegged orders(B) two-bin system(C) time-phased order point(D) reorder point(The correct answer is C.)

Example 3 is different. All the choices given arecorrect EXCEPT one. You are to choose theoption that does not correctly complete thestatement.

Example 3: Group technology identifies thesimilarities among all of the following EXCEPT (A) costs

(B) parts(C) shapes(D) processes(The correct answer is A.)

Example 4, another type of multiple-choicequestion, includes two or more statements orpossibilities. The question and the statements orpossibilities are always followed by four answerchoices labeled A, B, C, or D. When answeringmultiple-choice questions of this type, read the

question and the statements or possibilitiescarefully. Then determine whether each ofstatements I through IV is true or false.

Next, look at the four choices. In Example 4, youshould pick option A if you believe statements Iand III are true. You should pick option B if youbelieve statements I and IV are true. You should

pick option C if you believe statements II and IIIare true. You should pick option D if you believestatements II and IV are true.

Example 4: If a company changes frommake-to-stock to assemble-to-order, theeffects on inventory levels are which two ofthe following?I. Lower finished-goods inventoryII. Higher finished-goods inventoryIII. Lower work in processIV. Higher work in process

(A) I and III(B) I and IV(C) II and III(D) II and IV(The correct answer is B.)

Example 5 is similar to Example 4, but the numberof possible combinations is greater. The beststrategy for answering these questions is toconsider each statement, decide whether it is true,and then search for the correct combination. If thecombination you seek is not given, reconsidereach statement carefully.

Example 5: Management policies anddecisions about which of the following have adirect impact on investment?I. Customer service levelsII. Intracompany transportation modesIII. Placement of distribution centersIV. Types of production processes

(A) I and II only(B) III and IV only(C) I, II, and IV only(D) I, II, III, and IV(The correct answer is D.)

Examples 6 and 7 ask for a judgment orevaluation of the MOST or LEAST appropriatechoice. The judgment is not one person’s opinion,but is the accepted choice according to the APICSbody of knowledge. Example 6 asks for the MOST appropriate choice. Example 7 calls for theLEAST appropriate choice.


9/58

Introduction

Example 6: The MOST significantdisadvantage of aggregating demand databefore they are stored is that(A) information about demand is lost(B) there is risk of input error in the

aggregation process(C) data will usually be inconsistent with

financial information

(D) the processing time required to aggregateis extensive(The correct answer is A.)

Example 7: Which of the following lot-sizingcalculations would be LEAST sensitive tochanges in unit costs?(A) least total cost(B) period order quantity(C) part period balancing(D) lot-for-lot(The correct answer is D.)

Taking the TestYou should read each question carefully andthoroughly. Take care to avoid assuminginformation not given, assuming you know what isbeing asked without reading the questioncompletely, or “second guessing” the question.Every effort has been made to avoid misleadingwording and to provide sufficient information foreach question.

Each of the questions is based on the outline inthis exam content manual. The test is designed toevaluate a candidate’s knowledge of the subjectmatter. Therefore, the key to success is athorough understanding of the subject matter.

When you start your exam, read all the directionscarefully. Be sure you understand the directionsbefore you begin to answer any questions.

Read each question carefully. If a questionincludes stimulus material such as a table orgraph, be sure to study it before you answer thequestion. Choose the best answer from thechoices given. You may believe that a differentanswer is correct but was not provided. Care has

been taken to avoid misleading choices. Do notlook for hidden tricks or exceptions to the norm.

All questions are based on the current APICSbody of knowledge as defined in the exam contentmanual.

Once you begin the test, approach the questionsin order, but do not waste time on those that areunfamiliar or seem difficult to you. Go on to theother questions and return to the difficult oneslater if you have time. If you have some

knowledge about a particular question, you maybe able to eliminate one or more choices asincorrect. Your score on the test will be based onthe number of questions you answer correctly,with no penalty for incorrect answers; therefore, itis to your advantage to guess rather than notanswer a question. Avoid changing an answerunless you are absolutely certain that you marked

the wrong answer the first time.

Interpreting Test Scores

The CPIM scaled score range is 265–330:

265–299 Fail300–330 Pass

For each examination, you receive a score for thetotal test. All candidates will also receivediagnostic information on their performance. Atotal scaled score of 300 or higher is required to

pass an exam.

Suggested Study Materials

Bibliography Section. Each of the modules in thismanual contains a bibliography section that listsprimary and additional references. Although all ofthese references contain excellent material thatwill assist in test preparation, the primaryreferences usually contain the mostcomprehensive treatment of the subject matterincluded in the module. Those concepts andsubjects covered by the additional references,

limited to the scope of the curriculum outline, area part of the APICS body of knowledge and aresubject to examination questions.

A candidate may discover that the materialcovered in the chapters of one primary referenceduplicates material covered in another primaryreference. Both sources are included as primaryreferences to allow candidates some discretion inselecting test preparation materials that they findaccessible and understandable. For instance, acandidate who uses a specific reference inpreparing for a certification exam that he or she

passed may feel comfortable using that samereference to prepare for other certification exams.In deciding if a single primary reference issufficient, candidates should assess their ownlevel of knowledge against both the descriptiveexamination specifications and the detailed topiclist contained in the curriculum outline. If there areany areas of weakness, the candidate shouldconsult another primary reference or an additionalreference as part of the test preparation process.


10/58

vi CPIM Exam Content Manual

It is not practical to list all texts that containexcellent material. The serious student ofoperations management who wishes to staycurrent with the state of the art will take advantageof publications such as those listed in the APICSEducational Resources Catalog (stock #01041), acomprehensive catalog featuring APICS referencematerials. To receive the catalog, call APICS

Customer Support at (703) 354-8851 or (800)444-2742.

Curriculum outline. The curriculum outline foreach module provides a detailed overview of themajor topics included in that module. Each majortopic is denoted by a roman numeral and isfollowed by a list of the references that areparticularly relevant to that topic.

APICS Dictionary. The APICS Dictionary, 12th

edition, is an essential publication that applies tothe exam content manual and exams. Within theprofession, terminology varies among industries,companies, and the academic community. Eachexamination uses standard terminology as definedin the APICS Dictionary. Recognizing the termsand understanding their definitions are essential.

Reprints. The committee responsible for thedevelopment of the exam content manual and theexamination selects articles that are particularlyapplicable to the curricula and the candidates’preparation for the examination. These articlesare then reprinted in module-specific collections.These reprints are included in the primaryreferences for each module.

Other resources. In addition to the referencescited, it may be helpful for you to pursue chapter-sponsored courses, college courses, APICSseminars, or self-study courses as a means oflearning the body of knowledge that is tested inthe certification program. A wide variety ofcourses is available. As with any other investmentof time and money, you should research variouscourses before investing in one. Please visit theChapter Locator on the APICS Web site(www.apics.org) or call APICS Customer Supportat (703) 354-8851 or (800) 444-2742 to obtain

contact information for your local chapter.

Please refer to the most current APICSEducational Resources Catalog for furtherinformation.

Terminology

In studying for the CPIM certification, candidatesmay discover multiple terms used to denote thesame technique. Examples of this include sales

and operations planning versus productionplanning and master production schedule versusmaster schedule. APICS has attempted to provideconsistency across all modules with recognizedand preferred terminology. However, synonymsare often used by authors in the variousreferences used to compile the body ofknowledge. Candidates are encouraged to be

familiar with all terms and concepts listed withineach outline and key terminology section, usingthe APICS Dictionary as the primary guide fordefinitions. Supplemental glossaries are offered inthis manual wherever the committees feel thatadditional information is needed.

Code of EthicsWhen you start an examination, you will be askedto pledge to abide by the APICS Code of Ethics.Once certified, you pledge to continue youreducation to increase your contribution to theoperations management profession. Afterachieving the higher level of certification (CFPIM),you pledge also to share your CPIM knowledgewith others by participating in APICS research andeducational activities at local, regional, andnational levels.

The Code of Ethics:• To maintain and improve sound business

practices and foster high standards ofprofessional conduct.

• To hold in professional confidence anyinformation gained of the business of afellow member’s company, and to refrainfrom using such information in anunethical manner.

• To seek success without taking unfairadvantage or utilizing questionable actsthat would compromise one’s self-respect.

• To neither engage in nor sanction anyexploitation of one’s membership,company, or profession.

• To encourage and cooperate in theinterchange of knowledge and techniquesfor the mutual benefit of the profession.

• To be careful with one’s criticisms and

liberal with one’s praise; to build and notto destroy.

• Whenever a doubt arises as to the right orethics of one’s position or action, toresolve such doubt according to generallyaccepted standards of truth, fair dealing,and good taste.

• To maintain high personal standards ofmoral responsibility, character, andbusiness integrity.


11/58

Introduction v

• To uphold the high ideals of theassociation as outlined in the bylaws.

CPIM CertificationPractice Questions

The practice questions for each module include asampling of questions covering the APICS body ofknowledge and display the various test questionformats used in the exams. The questions wereselected or reviewed by the individual committeesof the Body of Knowledge Council.

Basics of Supply Chain ManagementPractice Questions Booklet Stock #09205Practice Questions CD-ROM Stock #09215

Master Planning o f ResourcesPractice Questions Booklet Stock #09209

Practice Questions CD-ROM Stock #09216

Detailed Scheduling and PlanningPractice Questions Booklet Stock #09211Practice Questions CD-ROM Stock #09217Execution and Control of OperationsPractice Questions Booklet Stock #09212Practice Questions CD-ROM Stock #09218

Strategic Management of ResourcesPractice Questions Booklet Stock #09213Practice Questions CD-ROM Stock #09219

Complete Set of Practice Questions BookletStock #09210

Complete Set of Practice Questions CD-ROMStock #09220

Note: A Practice Questions CD-ROM is includedin each participant workbook for each module.

Although these practice questions may be helpfulin preparing for exams, they should be used onlyto augment a comprehensive program of studyand preparation.

AdditionalResources for CPIMCandidates

APICS offers a number of resources to helpindividuals prepare for the CPIM examinations.

CPIM References

The APICS Certification Committees haveidentified a number of references for each CPIMmodule. These references include texts andreprints of pertinent articles and case studies. Fora complete list of CPIM references, visit our Website at www.apics.org, or call APICS Customer

Support at (800) 444-2742 or (703) 354-8851.

CPIM Review Courses

Available for each module of the CPIM process,the review courses are designed for classroomreview of the key principles and concepts for eachcontent area. The review course participantworkbook is not a stand-alone reference norcomprehensive single source and should be usedonly by a participant attending an instructor-ledreview course. For more information, visit ourWeb site at www.apics.org or call APICS

Customer Support at (800) 444-2742 or (703)354-8851 and request a complimentary APICSEducational Resources Catalog (stock #01041).

Independent Study Courses

APICS correspondence courses offerprofessionals a unique home-study alternative.Correspondence courses are designed andconducted for APICS by the MGI ManagementInstitute. For more information on courseavailability, call APICS Customer Support at (800)444-2742 or (703) 354-8851.

Educational Programs

APICS offers a variety of educational programs,including workshops in operations managementessentials and integrated resource managementand an international conference and exposition.For a complete list of APICS learningopportunities and information on courseavailability, call APICS Customer Support at (800)444-2742 or (703) 354-8851.

Chapter Certification ReviewClasses

Many chapters offer certification review classes.For more information, contact your local chapter.If you need a list of chapters in your area, visit ourWeb site at www.apics.org, or call APICSCustomer Support at (800) 444-2742 or (703)354-8851.


12/58

vii i CPIM Exam Content Manual

For a complete list of APICS resources, call APICS Customer Support and request a free copyof the APICS Educational Resources Catalog (stock #01041).

CFPIM

The distinguishing characteristic of a CertifiedFellow in Production and Inventory Management(CFPIM) is the willingness to share acquiredknowledge with others through presenting,teaching, publishing, and participating in APICSeducational activities. This knowledge sharingmust take place above and beyond a candidate'snormal job duties and be directly related to theCPIM body of knowledge.

To obtain the CFPIM designation, an applicationform must be filled out and submitted to APICSHeadquarters. Points are awarded based on thefollowing criteria: CPIM exams passed,presentations, high scores on CPIM exams,published works, classroom teaching, and variousvolunteer/practitioner activities.

To obtain copies and a more detailed explanationof the CFPIM guidelines and application, contact

APICS Customer Support at (800) 444-2742 or(703) 354-8851 and request stock #09052.

Certification MaintenanceContinuing Professional

DevelopmentTo promote professional growth and lifelonglearning, CPIM and CFPIM designees mustcomplete the Certification Maintenance programevery five years. Complete details on how tomaintain the CPIM and CFPIM designations willbe mailed to candidates upon successfulcompletion of the certification requirements. Tolearn more about the Certification Maintenanceprogram, call APICS Customer Support at (800)444-2742 or (703) 354-8851 and request a copyof the Certification Maintenance Bulletin (stock#09033) or visit the APICS Web site atwww.apics.org and download a copy of thebulletin.


13/58

Basics of Supply Chain Management

Basics of SupplyChain ManagementEffecti ve for January 1, 2008–December 31,2008, Exams.

EXAMINATION COMMITTEE Jim Caruso, CPIM, CSCP (Chair), CovidienCarol Bulfer, CPIM, Parker Hannifin Corp.Jim Cox, Ph.D., CFPIM, CIRM, Jonah’s Jonah,

TOCICO-certified, Professor Emeritus,University of Georgia

William Leedale, CFPIM, CIRM, IFSMike Roman, CPIM, Manufacturing Practices, Inc.

Angel A. Sosa, CFPIM, University of Puerto Ricoat Bayamon


This module covers basic concepts in managingthe complete flow of materials in a supply chainfrom suppliers to customers. It emphasizes basicterminology and covers relationships amongactivities in the supply chain. Knowledge of thematerial in this module is assumed as aprerequisite for the other CPIM modules, whichcover similar topics but in much greater depth.

The Basics module is divided into four majorsections:

1. Business Wide Concepts2. Demand Planning

3. Transformation of Demand into Supply4. Supply

The first section of the content outline coversbasic business wide concepts, including anunderstanding of the various productionenvironments used for the transformation process.Three common companywide managementapproaches—Enterprise resources planning(ERP), Just-in-Time (JIT/Lean), and total qualitymanagement (Quality Systems)—and theirinterrelationships are presented. Some financialfundamentals are also covered.

The second section of the outline covers demandplanning, including a basic understanding ofmarkets and customer expectations, the definitionof value, and a fundamental overview of demandforecasting. This information about demandserves as the primary input to the third section ofthe outline, which includes the design,management, and control of the transformationprocess itself.

The first part of the third section includes thedesign of products, processes, and informationsystems used for planning. The rest of the sectionincludes fundamentals of planning systems,execution controls, and performance measures.

The fourth and final section of the content outlineis devoted to supply issues. Specifically, this

section covers concepts in inventory, purchasing,and physical distribution.

Basics of Supply ChainManagement Curriculum

Four topics have been used to organize thedomain of Basics of Supply Chain Management.The relative importance of a topic is notnecessarily reflected by its level in the outline. Therelative importance of these topics will varyamong industries, but for study purposes thepercentage figures given below can be used as

guidelines.

DIAGNOSTICPART MAIN TOPIC

PERCENTAGEOF EXAM

I Business Wide Concepts 24%

II Demand Planning 17%

IIITransformation of Demandinto Supply

32%

IV Supply 27%

Curriculum Outline

I. Business Wide Concepts

This section of the outline covers basicbusiness wide concepts, including the variousproduction environments used for thetransformation process and financialfundamentals.

Also in this section, three of the morecommon companywide management

approaches (ERP, JIT/Lean, and QualitySystems) are individually presented, togetherwith their interrelationships.

A. Organization Fundamentals: The basicconcept of a supply chain includes allactivities and processes used to provide aproduct or service to the ultimatecustomer. It also includes internalorganization dynamics, such as thetraditional conflicts between functionalareas.


14/58

2 CPIM Exam Content Manual

1. Elements of the supply chaina. supplierb. producerc. distributord. retailere. customerf. service and support

2. Internal organizational dynamics

B. Operating Environments: Environmentsare the individual market andmanufacturing factors that combine todetermine the specific operatingconditions.1. Definition and impact of

a. customer expectationsb. cumulative lead timec. inventoryd. product life cyclee. product design

2. Process choicesa. projectb. lot/batch/intermittentc. line/repetitived. continuous

3. Production environmenta. design/engineer-to-orderb. make-to-orderc. assemble- or package-to-orderd. make-to-stocke. remanufacture

C. Financial Fundamentals: Basic financialstatements define the financial reportingcommon to most businesses. Underlyingcosts and analysis terms provide furtherunderstanding of statement information

and often serve as the basis formanagement decisions.1. Statements

a. balance sheetb. income statementc. cash flow statement

2. Costsa. cost of goods soldb. general and administrativec. fixed and variable costs

3. Analysisa. cash flowb. profit

c. margind. inventory turnsD. Enterprise Resources Planning (ERP):

ERP is a fully integrated planning andcontrol information system that serves asa master game plan for the business.(MRP II is a subset of ERP formanufacturers).1. Objectives2. Key principles and characteristics

a. top-management planning tool

b. integrated planning structurec. cross-functional integrationd. closed loop (feedback)e. what-if simulationsf. financial data

E. Just-in-Time (JIT/Lean): JIT and Lean canbe understood as philosophiesembodying certain objectives and as sets

of manufacturing techniques described byspecific characteristics.1. Objectives2. Key principles and characteristics

a. flow manufacturingb. process flexibilityc. quality at the sourced. continuous improvemente. supplier partnershipsf. employee involvementg. total productive maintenanceh. pull systemsi. work cells

j. elimination of waste3. Concepts of waste and value-added

activityF. Quality Systems: Quality systems focus

on customer needs including a specificset of tools to improve products, services,and production processes through the useof such techniques as employeeempowerment.1. Objectives2. Key principles and characteristics

a. problem-solving toolsb. costs of qualityc. customer focus

d. employee empowermente. process improvement

G. Impact of Environment on System Designand Deployment: The productionenvironment can be significantly improvedby JIT/Lean and Quality Systems. This inturn simplifies ERP system operation andimproves business performance.1. JIT/Lean using ERP2. Quality Systems impact

Reference: 1; 3 (chapters 1, 2, 14-16); 4

II. Demand Planning

This section covers demand planning,including a basic understanding of marketsand customer expectations, the definition ofvalue, and a fundamental overview of demandforecasting.

A. Marketplace-Driven: Customer needs andalternative competitive sources determinethe type of product demand experiencedby supplying firms.


15/58


1. Customer2. Competitors3. Economy and regulatory policy

B. Customer Expectations and Definition ofValue: A firm must determine the primarycharacteristics of products and servicesthat are attractive to customers. Thisunderstanding can then be exploited

through appropriate market plans andproduction processes.1. Order winners/qualifiers

a. qualityb. deliveryc. pre-sale and post-sale serviced. pricee. flexibility

2. Marketing strategyC. Customer Relationships Management: To

develop effective customer relationships,ongoing interaction and communicationwith customers is essential with bothproduct design and production deliveries.1. Expanding product/service offerings2. Design assistance3. Information/communications

D. Demand Management: Demandmanagement is the recognition ofdemand, either as forecast or actualcustomer orders. Forecasting is complex,but it involves a variety of standard terms.Once recognized, demand is met througha combination of inventories and themaster production schedule. Distributionrequirements planning (DRP) improvesdemand management by directly linking

distribution system demand to centraldemand.1. Sources of demand2. Forecast management

a. characteristics of demandb. principles of forecastingc. methodsd. forecast error measurement and

response

Reference: 3 (chapters 8, 9)

III. Transformation of Demand into

Supply

This section includes the design,management, and control of thetransformation process itself.

The first part of this section includes thedesign of products, processes, andinformation systems used for planning.

The rest of the section includes fundamentalsof planning systems, execution controls, andperformance measures.

A. Design: Design affects product andprocess, the resulting framework ofplanning system parameters, and therequirement for data appropriate insource, content, and accuracy.

1. Manufacturing feasibilitya. new product design andintroduction

b. process choicesc. process flexibility

2. Planning parametersa. manufacturing and purchasing

lead timeb. order quantity/lot size/batchc. safety stock and/or capacity

3. Data sources and data accuracya. bills of material/formulas/recipesb. planning bill of materialc. item master (material master)d. routing/processe. work center/flow line

4. Functional responsibilitiesB. Capacity Management: The fundamentals

of capacity management include therequired resources, the various methodsof measuring capacity, the levels andstages of planning capacity, and theimpact of bottlenecks and constraints.1. Resources2. Measuring capacity3. Capacity planning4. Bottlenecks/constraints

C. Planning (purposes, inputs, and outputs):The purpose and structure of the planningprocess are the basic inputs, datasources, and necessary outputs.Functional trade-offs are resolved ineffective higher-level planning. Otherplans at all levels must remain consistentwith one another and with the overallplan.1. Strategic planning and business

planning2. Sales and operations (S &OP)

planning/production planning

3. Master scheduling and rough-cutcapacity planning (RCCP)4. Material requirements planning (MRP)

and capacity requirements planning(CRP)

5. Final assembly scheduling (FAS)D. Execution and Control: Fundamental

definitions and structures of executionand control techniques are widely known.Understanding them requires a thoroughcomprehension of scheduling and work-


16/58


in-process techniques and how theyinterrelate to meet the master productionschedule. Customer service activities andquality assurance further affect executionand control.1. Customer service

a. order processingb. order promising

c. push/pull2. Linkages to the master schedule3. Scheduling techniques

a. forward/backwardb. finite/infinite

4. Work-in-processa. capacity controlb. priority controlc. production reporting

5. Quality assurancea. measuring qualityb. process variationc. process control

E. Performance Measurements: There areseveral types of key performanceindicators , each with specific reasons fortheir use. Some are strategic in nature,while others are operational or tactical innature. It is important to have anappropriate mixture of both types for aneffective evaluation of organizationalperformance.1. Strategic2. Tactical

Reference: 1; 3 (chapters 2-6)

IV. Supply

This section is devoted to supply issues.These include the concepts of inventory,purchasing, and physical distribution.

A. Inventory: Inventory can be described byits various categories and functions andwhether it meets dependent orindependent demand. There are severalapproaches to inventory management,order system interrelationships, andinventory cost analysis.1. Categories

a. raw materialsb. work-in-processc. finished goodsd. service partse. maintenance, repair, and

operating supplies (MRO)2. Functions

a. transit/pipelineb. cycle/lot sizec. anticipationd. safety stock

3. Dependent versus independentdemand systems

4. Managementa. ABC analysisb. tracking inventoryc. cycle countingd. record accuracye. physical inventory

5. Order systemsa. time-basedb. quantity-based

6. Cost analysisa. costsb. economic order quantity (EOQ)c. safety stock level versus

customer serviceB. Purchasing: There are several important

components of purchasing, especiallyregarding suppliers and ordermanagement, and ultimately includingreceiving and invoice payment.1. Receiving and analyzing notification

of needa. requisitionb. MRP output

2. Selecting suppliersa. source (single/multiple)b. supplier partneringc. vendor-managed inventory

3. Supplier agreementsa. priceb. termsc. deliveryd. qualitye. quantity

4. Order managementa. ordering/releasingb. monitoring and controlling open

ordersc. receiving and accepting ordersd. approving invoices for payment

5. Monitoring supplier performanceC. Physical Distribution System: The

components of a physical distributionsystem should be recognized, as well asthe interfaces with production, marketing,and finance.1. Transportation

2. Warehousing3. Distribution inventory4. Interfaces with production, marketing,

and finance

Reference: 1; 3 (chapters 7, 10-13); 4

Key Terminology

An understanding of the following list of terms isrecommended. The list is intended to be thorough,


17/58


but not exhaustive. The candidate is alsoexpected to be familiar with the definitions ofterms identified in the curriculum outline. A reviewof the list and study of the topics in the outlinemay reveal other important terms. Definitions ofthese terms can be found in the APICS Dictionary,12th edition, or in the references listed in thebibliography.

A ABC inventory control Actual costs Aggregate lead time Anticipation inventories Assemble-to-order Assembly line Asset Available inventory Available-to-promise (ATP) Average cost per unit

B

BackflushBacklogBackorderBackward schedulingBalance sheetBarcodeBatchBatch processingBias (to be consistent with MAD and random

variation)Bill of material (BOM)Blanket ordersBottleneckBufferBullwhip effectBusiness plan

CCapacityCapacity availableCapacity managementCapacity requiredCapacity requirements planning (CRP)Carrying costCash flowCellular manufacturing (work cells)ChangeoverChase (demand matching) methodClosed-loop MRPCompetitive analysisComponentConsignmentConstraintContinuous flow (production)Control chartCost of goods soldCost of (poor) qualityCumulative lead timeCustomer Relationship Management (CRM)

Customer serviceCustomer service ratioCycleCycle countingCycle stockCycle time

D

DecouplingDemandDemand managementDemand pullDemonstrated (measured) capacityDependent demandDirect laborDirect materialDiscrete manufacturingDispatchingDistribution inventoryDistribution requirements planning (DRP)Distribution resource planning (DRP II)DistributorDue date

EEconomic order quantity (EOQ)EfficiencyElectronic data interchange (EDI)Employee empowermentEmployee involvement (EI)Engineer-to-orderEnterprise Resources PlanningExpediteExplodeExtrinsic forecast

F FeedbackFill rateFinal assembly schedule (FAS)Finished goodsFinish-to-orderFinite forward schedulingFinite loadingFirm planned order (FPO)Five SsFixed order quantityFlexible manufacturing system (FMS)Flow manufacturingFlow shopFluctuation inventoryForecast errorForecastingFormulaForward scheduling

GGeneral and administrative expensesGross marginGross requirements


18/58


IIncome statementIndependent demandInfinite loadingInfinite schedulingInput/output controlInspectionIntermittent production

Interplant demandIn-transit inventoryIntrinsic forecastInventoryInventory adjustmentsInventory controlInventory issuesInventory managementInventory returnsInventory turnoverInventory turnsItem master record

J

Job costingJob orderJob shopJob shop layoutJob shop schedulingJust-in-Time (JIT)

KKaizenKanban

LLeading indicatorLead timeLead-time offset

LeanLevel of serviceLevel production plan (level schedule)LiabilityLine manufacturing (assembly line)LoadLoad levelingLotLot controlLot-for-lotLot sizeLot-size inventory

M

Maintenance, repair, and operating supplies(MRO)Make-to-orderMake-to-stockManufacturing lead timeManufacturing processManufacturing resource planning (MRP II)Market drivenMarketing researchMarket shareMaster planning

Master production schedule (MPS)Master scheduleMaterial requirements planning (MRP)Materials managementMean absolute deviation (MAD)Move timeMultilevel bill of materialMultisourcing

NNet requirementsO

On-hand balanceOpen orderOperationOrder entryOrdering costsOrder pointOrder promisingOrder qualifiersOrder quantityOrder winners

OverheadOwner’s equity

PPackage-to-orderPacking and markingParent itemPeggingPerformance measurement systemPerpetual inventory recordPhysical distributionPhysical inventoryPipeline inventoryPlanned order

Planned order receiptPlanned order releasePlanning horizonPoka-yokePriority controlProcessProcess layoutProduct differentiationProduct familyProduction activity control (PAC)Production lineProduction planProduction planningProductivityProduct layoutProduct life cycleProfitProfit marginProjected available inventory (balance)Pull (system)Purchase orderPurchase requisitionPurchasingPush (system)


19/58


QQualityQuality at the sourceQuality controlQueue

RRadio Frequency Identification (RFID)Random-location storage

Random variationRated capacityRaw materialReceiptRecord accuracyRemanufacturingReorder pointReorder quantityRepetitive manufacturingReplenishment lead timeRequest for quotationsRequired capacityRequirements explosion

RequisitionResource planningReverse LogisticsRough-cut capacity planning (RCCP)RoutingRun time

SSafety stockSales and operations planning (S & OP)Sales planScheduled receiptSchedulingSeasonality

Service industryService partsService parts demandSetupSetup lead timeShop calendarShop orderSimulationSingle-level bill of materialSingle-source supplierSix SigmaSplit lotStandard costsStandard hours (time)Start dateStatistical process control (SPC)Stockkeeping unit (SKU)Stockout costsStrategic planSubcontractingSupplierSupplier lead timeSupplier partnering (partnership)Supplier Relationship Management (SRM)Supply chain

TTakt timeThroughput timeTime bucketTime fenceTheory of Constraints (TOC)Total acquisition costsTotal productive maintenance (TPM)

Total quality management (TQM)Tracking signalTransit timeTransportation inventoryTrendTwo-bin system

UUnit of measureUtilization

VValue addedValue analysisValue stream mapping

VarianceVendorVendor-managed inventory (VMI)Visual review system

WWait timeWarehousingWasteWhere-used listWork cellWork centerWork-in-process (WIP)Work order

Supplemental Glossary

The following concepts not found in the APICSDictionary, will be helpful in preparing for theBasics of Supply Chain certification examination.

Value stream mapping: Maps created todocument current and future processes. Thecurrent state map identifying steps that add or donot add value. A future state map then details howto minimize or eliminate non-value addedprocesses.

Total acquisition cost: represents the total cost ofa purchased item that includes price per unit,charges, handling, transportation and deliverycost to get the product to production.

Bibliography

All test candidates should familiarize themselveswith the following primary references for thisexamination. The text Introduction to Materials


20/58


Management covers the majority of the materialfor this module. The additional references providefurther coverage of some of the topic areas andcan enhance candidates’ understanding of thebody of knowledge. Those concepts and subjectscovered by the additional references, limited tothe scope of the curriculum outline, are a part ofthe APICS body of knowledge and are subject to

examination questions. All of the references areavailable from the APICS Bookstore.

Primary References

1. APICS CPIM Basics of Supply ChainManagement Reprints, 2006.

2. APICS Dictionary, 12th ed., 2008.3. Arnold, J.R. Tony, S.N. Chapman and LM.

Clive, Introduction to Materials Management,6th ed., Prentice Hall, 2008.

Additional Reference

4. Feld, W.M., Lean Manufacturing: Tools,Techniques, and How to Use Them, St. LuciePress, 2001.

Sample Questions

Following are 10 questions that are similar informat and content to the questions on the exam.These questions are intended for practice—thatis, to enable you to become familiar with the waythe questions are asked. The degree of successthat you have in answering these questions is not

related to your potential for success on the actualexam and should not be interpreted as such.

Read each question, select an answer, and checkyour response with the explanation on page 41.

1. Which of the following situations reflects thebest supplier/customer partnership?(A) the supplier commits to the customer’s

requests.(B) the company buys a part from the supplier

even though the company could make thepart.

(C) the customer and supplier implementelectronic data interchange.(D) the customer and supplier share problem-

solving responsibilities.

2. Which of the following is the most appropriatedefinition of an “order winner”?(A) a product characteristic that causes

customers to choose the product over thatof a competitor

(B) a product characteristic that qualifies theproduct to compete in a market

(C) a product that has the highest profitmargin

(D) a product that generates the highestdollar sales volume

3. Which of the following is the primary purposeof forecasting?(A) projecting product demand

(B) estimating safety stock(C) determining resource requirements(D) loading the master production schedule

4. The production plan is used to establish whichof the following?(A) customer service level(B) gross sales volume(C) the business plan(D) product family rates of production

5. Order promising uses which of the followingelements of the master schedule?(A) projected available balance(B) available-to-promise(C) safety stock(D) forecast demand

6. Monitoring the statistical process control of anestablished, stable process should be done bywhich of the following?(A) process operators(B) supervisors(C) manufacturing engineers(D) quality engineers

7. Which of the following types of inventory is

used to protect against variations in supplyand/or demand?(A) cycle stock(B) common stock(C) safety stock(D) seasonal stock

8. Dependent demand items are most accuratelydescribed as which of the following?(A) finished goods awaiting final sale(B) service parts(C) products with a market-sensitive price(D) raw materials, component parts, and

subassemblies9. In backward scheduling, which of the followingis used as the first date to determine theschedule?(A) early start date(B) late start date(C) start date(D) due date


21/58


10. The bill of material in a material requirementsplanning (MRP) system serves which of thefollowing functions?(A) provides the basis for the gross-to-net

calculation(B) guides the explosion process(C) guides the assembly process(D) provides lot-sizing information

(Answers listed on page 41.)


22/58


Master Planning ofResourcesEffecti ve for January 1, 2008–December 31,2008, Exams.

EXAMINATION COMMITTEE Mark K. Williams, CFPIM, CSCP, (Chair), Williams

Supply Chain Group, Inc.Lynn Boyd, Ph.D., CPIM, University of LouisvilleMurray R. Olsen, CFPIM, CIRM, ATK Launch

SystemsJosie Vigil, CPIM, CSCP, B. Braun Medical, Inc.


Please read the introductory material in this manualfor essential information about the examination.

This module evaluates knowledge of both supplyand demand planning for mid- to long-termindependent demand. Major topics include demandmanagement, sales and operations planning, andmaster scheduling. It addresses both priority andcapacity planning.

Demand Management is the function of recognizingall demands for goods and services to support themarketplace. It includes forecasting, order servicingand customer relationship management, as well asdistribution planning.

Sales and Operations Planning is a process thatbrings together all the plans for the business (e.g.,operations, sales, sourcing, marketing, productdevelopment, and finance). The result is anintegrated set of plans for each product family.

Master Scheduling is the process of disaggregatingthe production plan into an executable schedulewhich links shipment of customer orders to materialmanagement.

In each of these areas collaboration within theorganization and with direct customers and

suppliers will be addressed.

Master Planning of ResourcesCurriculum

Three main subject topics have been used toorganize the domain of Master Planning ofResources. A topic’s relative importance is notnecessarily reflected by its level in the outline.Relative importance of these topics varies fromindustry to industry, but for study purposes the

percentage figures given below can be used asguidelines.


PERCENTAGEOF EXAM

I Demand Management 30%

IISales and Operations

Planning

25%

III Master Scheduling 45%

Curriculum Outline

I. Demand Management

This section addresses the interrelationship ofstrategic and business planning with themanagement of demand. The three primaryaspects of demand management (forecasting,order servicing/customer relationshipmanagement, and distribution planning) areaddressed. Exam questions covering this areawill include elements related to the following:

A. General Concepts and Purposes:Successful planning requires anunderstanding of how components,concepts, and linkages of the strategicplan, the business plan, and the masterplanning of resources interact. Knowledgein this area encompasses:1. The planning hierarchy2. Relating the planning process to the

environment

B. Forecasting Demand: Effective demandforecasting requires an understanding ofthe uses of a forecast, methods offorecasting, fitting a forecast to thesituation, and tracking its performance overtime. Knowledge in this area encompasses:1. Demand forecasting concepts2. The relationship between the timeliness

and accuracy of the data and therequirements of the forecast

3. Management considerations related toforecast selection

4. How to select a time horizon and

interval, and a level of aggregation5. The fit of basic qualitative techniques6. The fit of basic intrinsic quantitative

techniques. Specific techniques thatshould be understood include:a. Simple averagesb. Single level exponential smoothingc. Time Series Decomposition

7. The fit of basic extrinsic quantitativetechniques

8. Evaluating forecasting performance


23/58


C. Management of the Customer Interface:Effective management of the customerinterface requires an understanding of howto make realistic order delivery promisesand maintain positive customerrelationships. This area of the exam coverstopics related to ensuring effectivecustomer communication; handling actual

orders; and measuring the performance ofyour order management system.Knowledge in this area encompasses:1. Customer Relationship Management

(CRM) concepts2. How to set customer service policies

safety stock, and performance target3. Methods for calculating and using

Available-to-promise (ATP) andCapable-to-promise (CTP) quantities

4. How to maintain effective customercommunications

5. Techniques for measuring orderdelivery performance

D. Distribution Planning: Effective distributionplanning requires being aware of thevarious methods for disseminating productsor services to customers and the relativestrengths and weaknesses of thosealternatives. Knowledge in this areaencompasses:1. The various distribution strategies and

network configurations2. How to select between various

transportation methods3. Where to locate inventory within the

network

4. How to link the distribution network tocustomer demand and masterscheduling

5. How to measure the performance of thedistribution system

References: 1; 2; 3 (chapters 1, 3-9, 11, 12); 4(chapters 2, 8); 5 (chapters 1, 2, 5, 8); 6(chapter 4); 7; 8 (chapters 1, 16); 9 (chapters 5,11)

II. Sales and Operations Planning

This section addresses the processes,concepts, and techniques used to link strategicgoals to operations and coordinate the variousplanning efforts of the functional areas (i.e.,operations, sales, sourcing, productdevelopment, marketing, and finance) in avariety of business environments. Examquestions covering this area will includeelements related to the following:

A. General Concepts and Purpose: Sales andoperations planning (S&OP) coordinates

the various business functions to ensurethey support the overall organizationstrategy and enhance customer service. Atthe center of the process are twofundamental issues. First, what is the bestway to balance supply and demand?Second, what is the appropriate productionvolume and mix between product families?

The answers to these issues are heavilydependent on the type of businessenvironment in which the businessoperates. Knowledge in this areaencompasses:1. The key linkages to the S&OP process2. The different methods for balancing

supply and demand3. The trade offs related to different

volume/mix combinations4. How to carry out the S&OP process in

different business environmentsB. Management Considerations: S&OP is the

process top management uses to controland guide the business. It integrates themultiple plans developed within a businessand provides direction for more detailedshort-term to medium planning. Knowledgein this area encompasses:1. How to evaluate alternative plans2. How to assess the financial implications

of the plan3. How to identify:

a. The various stakeholders in theprocess

b. The planning horizonc. The S&OP Process owner

4. How to establish:a. Customer service levelsb. Inventory levelsc. Backlog levels

C. The Sales and Operations PlanningProcess: There are several steps involvedin the process of establishing a sales andoperations plan. Effective S&OP requiresproper execution of each of these steps.Knowledge in this area encompasses:1. The various levels of management

involved and their roles2. The five steps involved in S&OP

3. The various inputs and outputs of eachstepa. Month-end reportsb. Statistical forecastsc. Field sales worksheetsd. Management forecastse. Capacity constraints

D. Developing and Validating the ProductionPlan: A key output of S&OP is theproduction plan. Effective S&OP requiresan understanding of this key planning


24/58


document. Knowledge in this areaencompasses:1. How to develop and validate a

production plan in a variety ofproduction environments

2. How to carry out resource planning3. How to assess the desirability of

alternative production plans

References: 1; 2; 4 (chapters 3, 12); 5(chapters 1, 3, 4, 10, 13; Appendices A, D); 6(chapters 1-6, 8-11, 14-17); 7 (chapters 1-3, 6,

Appendices A, G); 8 (chapter 13); 9 (chapters1, 6)

III. Master Scheduling

This section addresses the processes oftranslating higher level aggregate plans intofeasible schedules that operations andsuppliers can execute. Exam questionscovering this area will include elements relatedto the following:

A. General Concepts and Purpose: Themaster scheduling process disaggregatesproduction plan into an executableschedule which links shipment of customerorders to material management. Knowledgein this area encompasses:1. The role of master scheduling in the

planning and control hierarchy2. The linkages with other planning

processes within the planning andcontrol hierarchy

3. The relationship between master

scheduling, capacity management, andmaterials management

B. Linking the Master Scheduling Process tothe Business Environment: The mechanicsof master scheduling vary according to thebusiness environment. Nevertheless, inevery environment it is necessary to link themaster scheduling process with theproduction plan and the S&OP process.Knowledge in this area encompasses:1. The relationship between the

manufacturing environment andproduct structure

2. How to determine the level in the bill ofmaterials where the master scheduleshould be developed.

C. Management Considerations: The masterscheduling process is the point wherehigher level plans are converted intoexecutable actions. As such, it is essentialthat the output of the process (i.e. themaster schedule) be consistent with theoverall goals of the organization.Knowledge in this area encompasses:

1. Senior executive responsibility relatedto managing the master schedule

2. The role of the master scheduler3. How to plan and coordinate changes in:

a. Inventory levelsb. Backlogc. Capacityd. Major customer orders

e. Time fencesf. Product or process designsg. Suppliers

4. How to maintain the integrity of themaster schedule

5. How to deal with the consequences ofan unrealistic master schedule:a. overloaded work centersb. poor customer servicec. meaningless priority system

D. The Master Scheduling Process: Theprocess of developing a master scheduleinvolves numerous decisions related to themechanics and the selection of techniquesand tools. Effective master schedulingrequires significant insights into each ofthese choices. Knowledge in this areaencompasses:1. How to identify and quantify sources of

demand to be considered in the masterscheduling process

2. The mechanics of the masterscheduling process, including:a. Disaggregating the production planb. Determining projected on-hand

balances and consuming theforecast

c. Identifying available-to-promisequantities using both thecumulative and discrete methods

d. Working with time-phased orderrecords

e. Working with time-fence, andrescheduling

f. Determining master scheduling lotsizes

3. How to structure, interpret, and use abill of materials

4. Reviewing capacity requirements andthe role of rough-cut capacity planning

(RCCP)5. Developing and using a final assemblyschedule (FAS)

E. Measuring Master Schedule Performance: As with demand management and salesand operations planning, measuring thesuccess of master scheduling is necessaryto using and improving the process.Knowledge in this area encompasses:1. How to validate the master schedule2. Relating the master schedule to:


25/58


a. S&OP performanceb. Customer service levelsc. Marketing/sales performanced. Purchasing performance

3. Maintaining data accuracy

References: 1; 2; 3 (chapters 1, 5, 6, 9, 11, 12);4 (chapter 6); 5; 6 (chapters 3-5, 7, 9, 11, 13,

16, Appendix D); 7 (chapters 6, 7, Appendices A, E, G); 8; 9 (chapters 6, 7)

Key Terminology

An understanding of the following list of terms isrecommended. The list is intended to be thoroughbut not exhaustive. The candidate is also expectedto be familiar with the definitions of terms identifiedin the curriculum outline and those definitions foundin the Key Terminology for Basics of Supply ChainManagement. A review of the list and study of thetopics in the outline may reveal other important

terms. Definitions of these terms can be found inthe APICS Dictionary, 12th edition, or in thereferences listed in the bibliography.

A Abnormal demand Actual demand Adaptive smoothing Aggregate forecast Aggregate plan Allocation Alpha factor

B

Base seriesBenchmarkingBill of distribution (BOD)Bill of resourcesBottom-up replanningBucket versus bucketless systemBy-product

CCapable-to-promise (CTP)Capacity planning using overall factors (CPOF)Chase production methodCollaborative planning, forecasting, and

replenishment (CPFR)

Common parts bill of materialConsuming the forecastContinuous productionCo-productCorrelationCurve fittingCustomer relationship management (CRM)Customer-supplier partnership

DDecompositionDelivery lead time

Delphi methodDemand filterDemand time fence (DTF)Design-to-orderDeviationDistribution centerDistribution channelDistribution network structure

Distribution of forecast errorsDouble order point system

EEconometric modelExponential smoothing forecastExtrapolation

FFeatureFinishing lead timeFirst-order smoothingFocus forecastingForecast consumptionForecast horizon

Forecast intervalForecast managementFrequency distribution

HHedgeHybrid production method

IInterplant demand

LLean productionLeast-squares methodLevel scheduleLife cycle analysis

MManufacturing environmentMass customizationMaster planning of resourcesMaster schedule itemMaster schedulerMeanMean absolute percent error (MAPE)Mean squared error (MSE)MedianMix forecastMixed-model schedulingMode

Modular bill of materialMoving averageMultilevel master schedule

NNoiseNormal distribution

OOptionOption overplanningOutlierOverstated master production schedule


26/58


PP:D ratioPlanning bill of materialPlanning horizonPlanning time fencePoint of sale (POS)PostponementPriority

ProbabilityProbability distributionProcess flow productionProcess manufacturingProduct configuration catalogProduct group forecastProduct lineProduct load profileProduct mixProduct positioningProduct/service hierarchyProduction forecastProduction levelProduction rateProduction scheduleProject manufacturingPyramid forecasting

QQualitative forecasting techniquesQuantitative forecasting techniques

RRandom sampleRegression analysisResource profileRunning sum of forecast errors

S

Safety capacitySales promotionSampleSampling distributionScatter chartSeasonal indexSecond-order smoothingService functionSingle smoothingSmoothing constantSmoothing factorStandard deviationStrategic planning

SubstitutionSuper bill of material

TTactical planningTime-phased order point (TPOP)Time series analysisTraceabilityTrend forecasting modelsTwo-level master schedule

WWarehouse demandWeighted moving average

Bibliography

All test candidates should familiarize themselveswith the following primary references. The

additional references provide further coverage ofsome of the topic areas and can enhance acandidate’s understanding of the body ofknowledge. The concepts and subjects covered inthe additional references, limited to the scope of thecurriculum outline, are part of the recognized

APICS body of knowledge and may be included inexamination questions. Also, candidates who havenot yet passed the suggested first module—Basicsof Supply Chain Management—should familiarizethemselves with the basic concepts of materialsmanagement presented in Introduction to MaterialsManagement. All of these references are available

from the APICS Bookstore.

Primary References

1. APICS CPIM Master Planning of ResourcesReprints, October 2007.

2. APICS Dictionary, 12th ed., 2008.3. Ross, D.F., Distribution Planning and Control,

2nd ed., Kluwer Academic Publishers, 2004.4. Vollmann, T.E., W.L. Berry, D.C. Whybark, and

F.R. Jacobs, Manufacturing Planning andControl Systems for Supply ControlManagement, 5th ed., McGraw-Hill, 2005.

5. Wallace, T.F., and R.A. Stahl, MasterScheduling in the 21st Century, T.F. Wallace &Co., 2003.

6. Wallace, T.F., Sales & Operations Planning:The How-to Handbook, 2nd ed., T.F. Wallace &Co., 2004.

7. Wallace, T.F., and R.A. Stahl, SalesForecasting: A New Approach, T.F. Wallace &Co., 2002.

Addi tional References

8. Proud, J.F., Master Scheduling, 3rd ed., John

Wiley & Sons, 1999.9. Williams, B.R. Manufacturing for Survival, Addison-Wesley, 1996.

Sample Questions

Following are 10 questions that are similar in formatand content to the questions on the MasterPlanning of Resources exam. These questions areintended for practice—that is, to enable you tobecome familiar with the way the questions areasked. The degree of success that you have in


27/58


answering these questions is not related to thepotential for success on the actual exam and shouldnot be interpreted as such.

Read each question, select an answer, and thencheck your response with the explanation on page42.

1. Which of the following demands is generallyNOT considered a part of demandmanagement?(A) dependent demands(B) interplant transfers(C) service parts requirements(D) branch warehouse requests

2. Normal uses of a master schedule includewhich of the following?I. To provide a means of planning future

productionII. To drive rough-cut capacity planningIII. To establish the production plan(A) I only(B) I and II only(C) II and III only(D) I, II, and III

3. Producing exactly to demand should result in(A) minimum change in inventory(B) least total cost(C) minimum capacity requirements(D) maximum machine utilization

Lead Time: 2 Lot Size: 30

Demand Time Fence: 3 On Hand: 15Planning Time Fence: 7 Safety Stock: 6

PERIOD 1 2 3 4 5

Forecast 10 22 20 24 28

Customer Orders 5 26 15 6 30

Projected Available Balance

Available-to-Promise

Master ProductionSchedule

4. For the master schedule above, what is theavailable-to-promise for period 4 if the discretemethod is used?(A) 22(B) 24(C) 35(D) 37

5. Using that same table, what is the projectedavailable balance for period 5?(A) 30(B) 35(C) 5(D) 7

6. The ability to notify a customer that his or her

order will be delayed because of a mechanicalbreakdown is dependent on(A) demand filters(B) pegging(C) safety stock(D) outliers

7. Which of the following is LEAST likely to beused as the value for alpha in an exponentialsmoothing forecast when the company believesrecent history to be most important?(A) .8(B) .6(C) .4(D) .3

8. The following are true of meaningfulperformance measurements EXCEPT (A) they relate to the organization’s strategic

goals(B) they relate principally to financial

performance(C) they are communicated and understood at

all organizational levels(D) they drive improvements in business

processes

9. The sales and operations planning processbrings together all of the following EXCEPT (A) sales plan(B) capacity requirements plan(C) marketing plan(D) new product development plan

10. The production plan is performed at whichlevel?(A) product family(B) work center(C) end-item level(D) product option level

(Answers listed on page 42.)


28/58


Detailed Schedulingand Planning Effecti ve for January 1, 2008–December 31,2008, Exams.

EXAMINATION COMMITTEE Ann K. Gatewood, CFPIM, CIRM (Chair),

Gatewood AssociatesSarah W. Klunk, CFPIM, CSCP, CIRM, C.P.M.,

Andrew CorporationDonna M. Schmoll, CPIM, Flow InternationalBlair Williams, CFPIM, CSCP, Jonah, Polytechnic

University, Tech. Ed., Inc.


Please read the introductory materials in thismanual for essential information pertaining to the

examination.

The subject matter of Detailed Scheduling andPlanning includes inventory management, materialrequirements planning, capacity requirementsplanning, and procurement and supplier planningfor both producing goods and providing services.Recognizing the importance of supply chainmanagement, this module also covers deploymentof supply chain strategies. The emphasis is onapplied- and higher-thinking questions.

Inventory planning concepts, policies,

methodologies, and techniques determine part-stocking levels, order quantities, safety stocks,forecasts, and handling and storage requirements.Material requirements planning (MRP) deals withthe thousands of dependent demand parts andinterrelationships that require planning at any giventime; it also includes independent demand planningfor service, matching supply with demand,managing demand at aggregate and disaggregatelevels, and other parts not encompassed by themaster production schedule (MPS). MRP combinesthe following three principles:

1. calculation, as opposed to forecast, of

dependent demand for component items2. netting of requirements for all items3. time phasing (that is, adding the dimension

of timing to material requirements andstatus data).

Capacity is defined as the ability to perform work toproduce goods or provide services. Capacityrequirements planning (CRP) provides a check thatthe material plan is achievable based on existingbacklog and available capacity. Capacitymanagement encompasses planning, establishing,measuring, monitoring, and adjusting levels of

capacity so that sufficient capacity is available toexecute the master schedule and related materialsplan. CRP closes the loop based on the quantityand scheduled output from MRP. For providingservices, uncertainty planning is also covered,including variability and capacity.

Procurement and supplier planning encompass

planning and evaluation activities that companiesemploy to qualify suppliers and establish effectivecommunication channels. Emphasis is on definingmutual business needs, as well as defining thematerials, information, product, process, and qualitymanagement and planning communicationsrequired of the ongoing business relationship.

Detailed Scheduling and Planning translatesproduct-level plans and schedules generated at themaster planning level into requirements that can beprocured or produced, in all types of environments,including process and service industries. Thisprocess supports the strategies and objectivesestablished by the company, as constrained by leadtime, cost, equipment, personnel, or otherconstraints. The subject matter thereforeencompasses anything required to bridge themaster planning area with the execution and controlarea of the CPIM body of knowledge. This isincludes understanding the commonalities anddifferences between producing goods and providingservices. Relevant strategy-level implications arealso considered.


CurriculumThis table identifies the three major DetailedScheduling and Planning subject areas. Thepercentages provide a guideline for study purposes.


PERCENTAGEOF EXAM

IPlanning MaterialRequirements to Support theMaster Schedule

50%

IIPlanning Operations toSupport the Priority Plan

30%

IIIPlanning Procurement and

External Sources of Supply20%

Curriculum Outline

I. Planning Material Requirements toSupport the Master Schedule

This section addresses the techniques andpractices for managing item-level inventories


29/58


within manufacturing and the distributionnetwork.

A. Recognizing Techniques and Practices ofInventory Management: This segmentcovers item-level techniques used withinthe detailed material planning process.These include the effect of inventoryaccounting decisions on material planning

calculations, as well as financialmanagement and accuracy. Cost objectivesthat apply to inventory are evaluated withrespect to balancing the desired customerservice level with inventory reductiontechniques. Measures of inventoryperformance are assessed.1. Types and classifications of inventory—

such as raw materials; work in process;finished goods; maintenance, repair,and operating supplies; excess;surplus; inactive; obsolete; scrap; andhard and perishable inventory inservice industries—are assessed fromtheir different requirements and impactson the planning processes. The scopeincludes the entire product life cycle, aswell as different types of businessenvironments, including leanmanufacturing and services industries.

2. Order review methodologies such asMRP, reorder point, visual review andkanban/pull system triggers to MRP areassessed with regard to different typesof inventory and inventory strategies.This applies to both manual andcomputerized processes.

3. Lot-sizing techniques, including theeffect of order quantity constraints, areassessed as they apply to differenttypes of production and serviceenvironments in support of inventoryinvestment strategies.

4. Safety stock techniques are assessedas they apply to different types ofinventory in support of customerservice objectives.

5. Inventory valuation such as first in, firstout (FIFO), last in, first out (LIFO),transfer, standard and actual cost, and

project and process cost, are assessedas they affect inventory investment andrelated replenishment and justificationdecisions in various types of businessenvironments.

6. Inventory accuracy methodologies suchas cycle counting, physical inventory,and use of dedicated containerizationare assessed as alternatives forimproving and sustaining part countand inventory investment accuracy.

7. Inventory policies related to stockinglevel, customer service and inventoryaccuracy targets, trade-offs, andemphasis in different types of businessenvironments are assessed.

8. Dependent and independent demandare assessed as they relate to types ofinventory and sources of demand. This

includes demand planning for servicesat aggregate and disaggregate levels.9. Inventory performance such as

inventory turns, customer service, leantechniques, inventory accuracy, andothers are assessed as they relate tohigher-level business metrics.

10. Inventory management in servicesindustries, including hard andperishable inventories.

B. Identifying Information Used in the MaterialPlanning Process: This section describesthe inputs used in calculating requirementsfor inventory items and their importance tothe detailed material planning process. Itemmaster data include information used forplanning time-phased requirements andproduct costing. Bills of material define theparent/component relationships and dataused by detailed material planningprocesses to determine requirements forreplenishing inventory. Effectivemanagement of engineering changes, openorder status, and master schedules arecritical to the effectiveness of the process.1. Inventory data describe parts, define

current usage rates and stock

balances, and track historical demandas required to support the policies,methodologies, and techniques of thematerial planning process.

2. Master schedule data describe types,quantities, sources, priorities, and time-phasing of product demand generatedas a result of the master planningprocess as required to initiate part-levelplanning.

3. Engineering data describe the productstructure and production routingsrelated to part interdependencies,

quantities, and lead times as requiredfor the aggregate planning, ordering,safety stock, and engineering changeprocesses.

4. Data accuracy, timeliness, andcompleteness are assessed as theyaffect material planning decisions indifferent types of environments.

C. Identifying the Desirable Characteristics ofthe Detailed Material Planning Process:This section addresses those


30/58


characteristics that enhance capabilities ofthe users to plan and control system output.Traceability of the sources of demand isuseful in evaluating the impact of systemaction messages. Safety policies are usedto recognize the impact of uncertainty onthe planning process.1. Design characteristics address the

required and desirable features andfunctions that facilitate materialplanning, establish requirementstraceability through peggingrelationships, and support otherdecision functions and productivitymeasures based on the type ofenvironment.

2. Performance characteristics addressthe speed with which changes to thematerial plan can be assessed andalternative courses of action generatedand evaluated for feasibility.

3. Operational characteristics address theease of use, types of operator actions,related system and process features,and requirements for education andtraining.

D. Mechanics of the Detailed MaterialPlanning Process: This section addressesthe use of planning data as the basis forperforming the gross-to-net calculations byexploding bills of material to calculate thetime-phasing of inventory requirements.The requirements are exploded level bylevel, accounting for order quantity, safetystock, and allocations at each level.

1. Initializing data accounts for inventoryalready allocated to requirements,establishing available stock balancesand scheduled receipts, andestablishing safety stock availability,kanban quantity, cycle times, or theneed for replenishment.

2. The explosion process addresses themechanics of the gross-to-netdependent demand aggregationprocess. This can be via MRP, orderconfigurators, or other means, inconjunction with various ordering and

safety stock techniques.3. Generating time-phased requirementscreates a material plan that supportsthe company’s and supplier’s needs forlonger-range planning and shorter-range tactical information. This is interms of firm-planned, planned, andreleased orders at each bill of materiallevel and part. In a lean enterprise pullsystems are then integrated withERP/MRP systems.

E. Maintaining the Validity of the MaterialPlan: This section describes how the outputfrom the process recommends theplacement of supply orders. It also includesmaking recommendations to replan opensupply orders to maintain the validity oforder priorities. The effects of planningparameters upon the process are identified.

1. Maintaining priorities accounts for theeffect of changing demand priorities oninventory allocation and replenishmentorder timing.

2. Replanning accounts fordemand/supply mismatches through aprocess of bottom-up replanning,expediting, and de-expediting. Thisincludes related actions thatresynchronize the material plan with thecurrent material requirements.

3. Revising planning parametersaddresses the options of revising thelead time, lot size, safety stock quantity,kanban quantity, cycle times andrelated parameters to reflect currentconditions and company strategy.

4. What-if analysis and modeling addressthe tools, methodologies, andtechniques planners use to evaluateviable alternatives within the constraintsof the material plan for producinggoods, and within the scheduling andqueuing constraints for providingservices

F. Interactions with Other Systems (i.e.,closing the loop): This section identifies the

interrelationships between this process andother planning and control subsystems. Themaster schedule or actual customer ordersdrive the detailed material planningprocess. Output from the process providesinput to purchasing and production controlto release supply orders and control openorders. Capacity planning is used to verifycapacity availability, which enables theplanner to balance projected loads withplanned available capacity for producinggoods and providing services1. Business planning interactions close

the demand/supply loop with themaster planning, final assembly, andconfiguration processes to ensure thatmaterial availability matches demandquantities, timing, and priorities. In aservices business, this includesmatching supply with demand.

2. Detailed scheduling and planninginternal interactions close thematerial/capacity loop with the capacityplanning process to ensure that self-


31/58


manufactured materials and parts willbe available in the required quantitiesand at the required time, and thatservices will be provided as and whenthey are required

3. Execution and control interactions closethe material/supply loop with thepurchasing processes to ensure that

purchased materials and pa

2008 cpim exam content manual

Documents