CPIM cheat sheet

Competitive priorities are cost, quality, delivery speed, delivery reliability, flexibility, and innovation; improving one usually trades off against another.

Order qualifiers are the minimum standards a firm must meet to be considered; order winners are the criteria that actually cause the customer to choose the firm.

SCOR level-1 processes are Plan, Source, Make, Deliver, Return, and Enable.

Porter's generic strategies are cost leadership, differentiation, and focus.

Strategy exists at three levels: corporate, business unit, and functional/operational.

Total cost of ownership covers acquisition, possession, and disposal costs, not just the purchase price.

Bullwhip effect causes: demand forecast updating, order batching, price fluctuation, and rationing/shortage gaming.

Little's Law: average inventory = throughput rate x average flow time.

The S&OP horizon is typically 12-18 months in monthly buckets, reviewed and rolled forward each month.

Five steps: data gathering, demand planning, supply planning, pre-S&OP reconciliation, and the executive S&OP meeting.

The output is a single authorized consensus plan that balances demand and supply at the aggregate product-family level.

Level strategy holds output and workforce constant, letting inventory and backlogs absorb demand variation.

Chase strategy matches output to demand each period through hiring, layoff, overtime, and subcontracting.

Mixed (hybrid) plans combine level and chase elements and generally beat pure strategies on total cost.

The aggregate plan is disaggregated into the master production schedule, whose capacity feasibility is then tested by rough-cut capacity planning.

Demand-shaping options in S&OP include pricing, promotion, backorder acceptance, and new-market development.

Forecast components are base level, trend, seasonality, cyclical movement, promotional lift, and random variation.

Exponential smoothing: F(t+1) = alpha x A(t) + (1 - alpha) x F(t); a higher alpha increases responsiveness and nervousness.

MAD = sum of absolute errors / n; MSE squares errors and penalizes large misses; MAPE states error as a percentage of actual.

Bias is the running sum of forecast errors (RSFE); a persistent sign signals systematic over- or under-forecasting.

Tracking signal = RSFE / MAD; values outside roughly +/-4 trigger a forecast model review.

Forecasts are more accurate for aggregate items and short horizons; family-level forecasts beat item-level forecasts.

Qualitative methods include Delphi, market research, panel consensus, sales force composite, and historical analogy.

Seasonal index = average demand in that period / overall average demand across all periods.

MRP inputs are the master production schedule, the bill of material, and inventory records; outputs are planned orders, order releases, and reschedule notices.

Net requirement = gross requirement + safety stock - scheduled receipts - projected available balance.

Planned order release = planned order receipt offset backwards by the item's lead time.

Time fences divide the MPS horizon into frozen (no changes), slushy (changes by exception), and liquid (any change) zones.

Low-level coding places each component at the deepest bill-of-material level where it appears and sets the MRP explosion sequence.

Lot-sizing rules include lot-for-lot, fixed order quantity, EOQ, periodic order quantity, and Wagner-Whitin.

Rough-cut capacity planning validates the MPS; capacity requirements planning validates MRP at the work-center level.

Backflushing deducts component inventory automatically at completion of the parent order rather than at issue.

Purchasing cycle: requisition, supplier identification, RFQ/RFP, negotiation, purchase order, expediting, receipt, and payment.

Supplier selection criteria include quality capability, cost, delivery reliability, technical capability, financial stability, and capacity.

Kraljic matrix categories: strategic (high profit impact / high supply risk), leverage, bottleneck, and noncritical.

Landed cost equals unit price plus freight, duty, insurance, brokerage, and handling charges.

Incoterms allocate cost, risk, and responsibility between buyer and seller; EXW places the most cost on the buyer and DDP the most on the seller.

Relationship spectrum: transactional, arm's-length, single-source, partnership, strategic alliance, joint venture.

Early supplier involvement brings supplier design expertise into product development to cut cost and time to market.

Transportation cost per unit weight ranks lowest for water and pipeline, then rail, then truck, highest for air; speed ranks roughly in reverse.

EOQ = square root of (2DS/H), where D is annual demand, S is order cost, and H is annual holding cost per unit.

Total inventory cost = purchase cost + ordering cost + holding cost (+ shortage cost).

Reorder point = expected demand during lead time + safety stock; safety stock = Z x sigma-d x square root of L.

Carrying cost typically runs 15-25% of unit value per year, covering capital, storage, insurance, taxes, and obsolescence.

Inventory turnover = cost of goods sold / average inventory value; days of supply = average inventory / average daily demand.

ABC classification follows Pareto logic: roughly 20% of items account for about 80% of annual usage value.

Periodic review orders at fixed intervals up to a target level; perpetual review orders when stock reaches the reorder point.

Raising service level from 95% to 99% moves Z from 1.645 to 2.326, requiring about 41% more safety stock.

Shortest processing time minimizes average flow time and average waiting time; earliest due date minimizes maximum lateness.

Critical ratio = (due date - now) / remaining processing time; a value below 1 means the job is behind schedule.

First-come-first-served is fair but generally poor on average flow time; slack per remaining operation prioritizes the least-slack job.

Forward scheduling starts at the release date; backward scheduling starts at the due date and works backwards.

Finite loading assigns work only up to capacity limits; infinite loading sets dates without regard to capacity.

Theory of constraints steps: identify the constraint, exploit it, subordinate everything else, elevate it, then repeat.

Drum-buffer-rope: the bottleneck sets the pace (drum), a time buffer protects it, and the rope ties material release to the drum.

Johnson's rule sequences two-machine jobs by repeatedly taking the shortest remaining time, front-loading machine-1 jobs and rear-loading machine-2 jobs.

DRP is time-phased and pulls replenishment from the plant based on warehouse demand, scheduled receipts, and lead times.

Cross-docking moves goods from inbound to outbound vehicles without put-away, cutting handling cost and lead time.

Square root law: total safety stock across n stocking locations grows roughly with the square root of n, so consolidation reduces inventory.

Warehouse activities are receiving, put-away, storage, order picking, packing, and shipping; picking is usually the largest cost driver.

Centralized distribution lowers inventory and facility cost but raises outbound transportation cost and lengthens customer lead time.

The perfect order index combines on-time, in-full, damage-free, and correct-documentation performance.

3PL providers supply warehousing and transportation services; 4PL providers additionally manage and integrate the whole network.

Cost of quality categories: prevention, appraisal, internal failure, and external failure; spending on prevention usually lowers failure costs.

Cp = (USL - LSL) / 6-sigma measures spread only; Cpk also accounts for how well the process is centered on the specification.

Six sigma quality equals 3.4 defects per million opportunities.

Control limits at +/-3 sigma are computed from process data; specification limits come from the customer and must never be plotted as control limits.

Common-cause variation is inherent to the process and needs management action; special-cause variation is assignable and must be investigated.

Acceptance sampling risks: producer's risk (alpha, rejecting a good lot) and consumer's risk (beta, accepting a bad lot), shown on the OC curve.

Seven basic quality tools: flowchart, check sheet, Pareto chart, cause-and-effect diagram, histogram, scatter diagram, and control chart.

DMAIC phases are Define, Measure, Analyze, Improve, Control; PDCA is Plan, Do, Check, Act.

Payback period = initial investment / annual net cash flow; it ignores the time value of money and all cash flows after payback.

NPV discounts all project cash flows at the cost of capital; accept a project when NPV is greater than zero.

IRR is the discount rate that makes NPV equal zero; accept when IRR exceeds the hurdle rate.

WACC is the most common hurdle rate used for capital investment screening.

Takt time = available production time / customer demand rate; it sets the pace the process must run at to meet demand.

Seven wastes: overproduction, waiting, transportation, overprocessing, inventory, motion, and defects.

Lean tools include value stream mapping, 5S, kaizen, kanban, poka-yoke, jidoka, SMED, and standard work.

Balanced scorecard perspectives: financial, customer, internal business process, and learning and growth.