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CPIM practice questions

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Question 1Supply Chains and Strategy

Which phrase best describes a supply chain?

  1. A method for calculating the economic order quantity for purchased parts
  2. A company's internal accounting process for tracking production costs
  3. A software tool used only for scheduling factory maintenance
  4. A network of firms that transforms inputs into goods for customers Correct answer.

Explanation

A supply chain spans multiple firms and activities that convert inputs into finished offerings and deliver them to customers. It is broader than a single company's internal process or a software tool.

Question 2Supply Chains and Strategy

In a supply chain, activities directed toward a company's suppliers are referred to as:

  1. reverse logistics
  2. demand management
  3. upstream activities Correct answer.
  4. downstream activities

Explanation

Upstream refers to the supplier side of the chain, including inbound materials and components. Downstream refers to distribution and delivery toward customers.

Question 3Supply Chains and Strategy

An organization's mission statement primarily communicates:

  1. the list of approved suppliers
  2. the organization's purpose and reason for existing Correct answer.
  3. the hourly production schedule
  4. the detailed annual operating budget

Explanation

A mission statement defines the organization's purpose and scope and guides strategy and decisions. Budgets, supplier lists, and schedules are operational details rather than mission statements.

Question 4Supply Chains and Strategy

A core competency is a capability that:

  1. can be easily copied by every competitor
  2. applies only to routine administrative tasks
  3. is purchased from a single external supplier under contract
  4. is hard for rivals to copy and adds value Correct answer.

Explanation

A core competency provides customer value and is difficult for competitors to imitate; it often enables access to multiple markets. It is not a routine task or a purchased input.

Question 5Supply Chains and Strategy

The bullwhip effect describes a situation in which:

  1. transportation costs decline as order sizes increase
  2. inventory levels remain constant across all supply chain stages
  3. customer demand becomes smoother at each upstream stage
  4. demand variability grows as orders move upstream toward suppliers Correct answer.

Explanation

The bullwhip effect is the amplification of demand variability as orders pass upstream. Small changes in customer demand can create larger swings in supplier orders and inventory.

Question 6Supply Chains and Strategy

The SCOR model organizes supply chain processes into which core categories?

  1. Design, Build, Test, Launch, Close
  2. Buy, Hold, Sell, Report, Audit
  3. Plan, Source, Make, Deliver, Return, Enable Correct answer.
  4. Forecast, Budget, Hire, Train, Evaluate

Explanation

The SCOR model uses Plan, Source, Make, Deliver, Return, and Enable as its core management processes. These provide a standard framework for describing supply chain activities.

Question 7Supply Chains and Strategy

A pull system triggers production based on:

  1. the availability of raw materials
  2. actual customer demand or consumption Correct answer.
  3. a fixed annual production target
  4. a forecast of future demand

Explanation

In a pull system, replenishment and production are triggered by actual demand or consumption rather than by forecasts. This reduces inventory and aligns output with customer usage.

Question 8Supply Chains and Strategy

Strategic fit is achieved when:

  1. the supply chain uses the lowest-cost transportation mode for every shipment
  2. supply chain capabilities match the competitive strategy and customer needs Correct answer.
  3. all products are managed with the same service level
  4. the marketing department sets its goals independently

Explanation

Strategic fit means the supply chain's capabilities and priorities support the competitive strategy and the needs of targeted customers. It is not about using one transport mode or identical service for all products.

Question 9Supply Chains and Strategy

A product characteristic that is necessary for a customer to consider a supplier but does not by itself win the order is called a(n):

  1. order qualifier Correct answer.
  2. order winner
  3. core competency
  4. value stream

Explanation

An order qualifier is a minimum requirement that allows a supplier to be considered; an order winner is the characteristic that actually causes the customer to choose. Qualifiers are necessary but not sufficient.

Question 10Supply Chains and Strategy

Delaying final assembly or customization until customer orders are received is known as:

  1. forward integration
  2. postponement Correct answer.
  3. order batching
  4. standardization

Explanation

Postponement delays differentiation or final assembly until demand is known, improving responsiveness while reducing finished-goods risk. It is not forward integration, standardization, or batching.

Question 11Supply Chains and Strategy

An agile supply chain strategy is most appropriate when:

  1. the product is a low-cost commodity with predictable demand
  2. demand is volatile and product life cycles are short Correct answer.
  3. capacity is inexpensive and forecast accuracy is high
  4. demand is stable and products have long life cycles

Explanation

Agile strategies suit unpredictable demand and short life cycles by emphasizing flexibility, responsiveness, and quick response. Stable demand and commodities are better served by lean or efficient strategies.

Question 12Supply Chains and Strategy

A lean supply chain strategy primarily emphasizes:

  1. maximizing flexibility through excess capacity
  2. eliminating waste and synchronizing flow to stable demand Correct answer.
  3. building large buffer inventories to cover variability
  4. customizing every order at the final assembly point

Explanation

Lean focuses on waste elimination, flow, and level scheduling under relatively stable demand. Large buffers and excess capacity are more characteristic of agile or buffered strategies.

Question 13Supply Chains and Strategy

Backward vertical integration occurs when a company:

  1. outsources all production to contract manufacturers
  2. sells products through independent retailers
  3. acquires or controls a supplier of inputs Correct answer.
  4. acquires a distributor closer to end customers

Explanation

Backward integration moves ownership toward suppliers, such as acquiring a component producer. Forward integration moves toward customers, such as owning distribution.

Question 14Supply Chains and Strategy

A firm is most likely to outsource an activity when:

  1. the activity requires proprietary knowledge the firm wants to protect
  2. the activity is a core competency that differentiates the firm
  3. the activity is noncore and a supplier performs it cheaper Correct answer.
  4. the activity is critical to product innovation

Explanation

Outsourcing makes sense for noncore activities where an external provider has superior capability or lower total cost. Core and proprietary activities are usually kept in-house.

Question 15Supply Chains and Strategy

Which practice tends to amplify the bullwhip effect?

  1. using everyday low pricing instead of promotions
  2. sharing point-of-sale demand data with suppliers
  3. shortening replenishment lead times
  4. ordering in large batches at infrequent intervals Correct answer.

Explanation

Order batching creates large, lumpy orders that magnify variability upstream. Sharing POS data, shortening lead times, and stable pricing tend to dampen the effect.

Question 16Supply Chains and Strategy

Which approach builds redundancy into a supply chain to reduce disruption risk?

  1. centralizing all production in one low-cost plant
  2. maintaining dual sources for critical components Correct answer.
  3. single-sourcing a critical component
  4. reducing safety stock to free working capital

Explanation

Dual sourcing creates redundancy so a disruption at one supplier does not stop the chain. Single sourcing, lean buffers, and concentrated plants increase exposure.

Question 17Supply Chains and Strategy

Segmenting customers by service needs helps a supply chain to:

  1. eliminate the need for demand forecasting
  2. replace financial metrics with production metrics
  3. apply identical service policies and resources to every account
  4. tailor service and resources to different customer groups Correct answer.

Explanation

Segmentation groups customers by service needs so resources and policies can be tailored. It does not mean identical service for all or eliminating forecasting.

Question 18Supply Chains and Strategy

Collaborative planning, forecasting, and replenishment (CPFR) is intended primarily to:

  1. measure employee productivity in warehouses
  2. share demand and inventory data to improve partner forecasts Correct answer.
  3. set purchase prices through a competitive reverse auction
  4. shift all inventory ownership and responsibility to suppliers

Explanation

CPFR is a collaborative process for sharing forecasts, demand, and inventory information among partners to improve replenishment. It does not transfer all inventory to suppliers or set prices by auction.

Question 19Supply Chains and Strategy

The triple bottom line approach to supply chain sustainability considers performance in which three areas?

  1. Economic, environmental, and social Correct answer.
  2. Cost, quality, delivery
  3. Plan, source, deliver
  4. Forecast, inventory, transportation

Explanation

The triple bottom line evaluates economic, environmental, and social performance. Cost/quality/delivery and SCOR processes are different frameworks.

Question 20Supply Chains and Strategy

In a leagile supply chain, the decoupling point is the stage where:

  1. inventory is eliminated completely from the chain
  2. all products are customized to individual customer orders
  3. suppliers take over all demand forecasting
  4. forecast-driven push flow meets demand-driven pull flow Correct answer.

Explanation

A leagile chain uses lean practices upstream where demand is more predictable and agile practices downstream near the customer. The decoupling point is where forecast-driven push flow meets demand-driven pull flow.

Question 21Supply Chains and Strategy

Perfect order fulfillment is calculated as the percentage of orders that are delivered:

  1. complete, on time, damage-free, and with correct documentation Correct answer.
  2. within the shortest possible lead time regardless of completeness
  3. at the lowest transportation cost
  4. using a single carrier and a single warehouse

Explanation

Perfect order fulfillment measures orders delivered complete, on time, damage-free, and with correct documentation. It is a customer-facing service metric, not a transport-cost or single-carrier measure.

Question 22Supply Chains and Strategy

In the Kraljic portfolio matrix, a purchased item that is high in supply risk and high in profit impact is classified as:

  1. noncritical
  2. leverage
  3. bottleneck
  4. strategic Correct answer.

Explanation

In the Kraljic matrix, high supply risk and high profit impact define strategic items, which require close supplier partnerships and careful risk management. Leverage items are high impact but low risk; bottleneck items are low impact but high risk.

Question 23Supply Chains and Strategy

A total landed cost analysis for sourcing decisions should include:

  1. unit price, freight, duties, carrying cost, and quality costs Correct answer.
  2. only freight and insurance charges
  3. only import duties and tariffs
  4. only the quoted unit price from each candidate supplier

Explanation

Total landed cost includes all costs of acquiring and delivering an item, such as price, freight, duties, carrying cost, and quality costs. Looking only at unit price or one cost element can mislead sourcing decisions.

Question 24Supply Chains and Strategy

Cash-to-cash cycle time is calculated as:

  1. receivable days minus inventory days plus payable days
  2. inventory days plus receivable days plus payable days
  3. payable days minus inventory days minus receivable days
  4. inventory days plus receivable days minus payable days Correct answer.

Explanation

Cash-to-cash cycle time equals inventory days plus receivable days minus payable days. It measures how long cash is tied up in operations before being recovered from customers.

Question 25Sales and Operations Planning (S&OP)

What is the primary purpose of the sales and operations planning process?

  1. To calculate material requirements per order
  2. To schedule shop-floor work centers each day
  3. To set individual customer delivery dates
  4. To balance aggregate demand and supply Correct answer.

Explanation

S&OP is an aggregate planning process that matches demand and supply at the product family level over a rolling horizon. Detailed scheduling and material planning occur downstream in master scheduling and MRP.

Question 26Sales and Operations Planning (S&OP)

Which planning horizon is typical for an S&OP process?

  1. 3 to 6 months forward
  2. 18 to 36 months forward Correct answer.
  3. 5 to 10 years forward
  4. 1 to 2 weeks forward

Explanation

S&OP uses a rolling horizon long enough to cover capacity additions, hiring, and product launches, commonly 18 to 36 months in monthly time buckets.

Question 27Sales and Operations Planning (S&OP)

How often is the standard S&OP cycle repeated?

  1. Monthly Correct answer.
  2. Quarterly
  3. Annually
  4. Weekly

Explanation

S&OP is normally a monthly cycle with a fixed sequence of reviews culminating in an executive meeting. This cadence refreshes the plan while keeping it stable within the month.

Question 28Sales and Operations Planning (S&OP)

Who typically leads the executive S&OP meeting?

  1. The senior business executive Correct answer.
  2. The purchasing manager
  3. The sales manager
  4. The master scheduler

Explanation

The executive S&OP meeting is chaired by the senior business leader, such as the president or general manager, who has authority over both demand and supply functions.

Question 29Sales and Operations Planning (S&OP)

Which input does marketing and sales provide to the S&OP process?

  1. The bill of materials
  2. The dispatch list
  3. The master production schedule
  4. The demand plan Correct answer.

Explanation

Sales and marketing own the demand plan, which includes forecasts, customer orders, and market intelligence. The other items are outputs of production and engineering planning.

Question 30Sales and Operations Planning (S&OP)

The authorized S&OP plan is disaggregated into which plan for execution?

  1. The sales compensation plan
  2. The master production schedule Correct answer.
  3. The distribution requirements plan
  4. The strategic business plan

Explanation

The S&OP plan sets aggregate rates that are broken down by product and time period in the master production schedule, which then drives MRP.

Question 31Sales and Operations Planning (S&OP)

In S&OP, the demand plan is normally expressed in which form?

  1. Machine hours by work center
  2. Units by product family Correct answer.
  3. Individual part numbers
  4. Dollar value of open orders

Explanation

S&OP works at the aggregate product family level in units, which allows comparison with capacity and conversion into financial terms.

Question 32Sales and Operations Planning (S&OP)

What is the main purpose of the pre-S&OP meeting?

  1. To set the firm's five-year strategy
  2. To commit delivery dates for individual orders
  3. To reconcile demand and supply before the executive review Correct answer.
  4. To approve the annual operating budget

Explanation

In pre-S&OP, demand, supply, and finance representatives reconcile plans, resolve issues within their authority, and document remaining gaps and alternatives for executives.

Question 33Sales and Operations Planning (S&OP)

Which action is a demand-shaping tactic used in S&OP?

  1. Subcontracting production to a partner
  2. A price promotion that shifts demand timing Correct answer.
  3. Adding a second shift at a plant
  4. Building inventory ahead of a peak season

Explanation

Demand shaping uses pricing, promotion, lead-time, and product mix levers to influence the level or timing of customer demand. The other choices add or reposition supply.

Question 34Sales and Operations Planning (S&OP)

Aggregate demand matches the plan in total, but several product families are far from their planned volumes. This situation is best described as a:

  1. yield problem
  2. volume problem
  3. mix problem Correct answer.
  4. lead-time problem

Explanation

When the total is on plan but its composition differs, capacity and material needs may be mismatched even though the aggregate is met; this is a mix issue.

Question 35Sales and Operations Planning (S&OP)

Why should new product introductions be included in the S&OP process?

  1. To satisfy accounting rules for capitalized development
  2. To replace the stage-gate review process
  3. To set the standard cost of the new item
  4. To reserve capacity for expected launch volumes Correct answer.

Explanation

Launch volumes consume capacity and materials, so they must appear in both the demand plan and the supply plan before they occur to avoid shortages or idle capacity.

Question 36Sales and Operations Planning (S&OP)

An S&OP plan is considered financially integrated when it reconciles to the:

  1. supplier scorecard
  2. shop-floor dispatch list
  3. annual operating plan Correct answer.
  4. payroll register

Explanation

Financial integration means the volume-based S&OP plan is translated into revenue, cost, and margin and reconciled with the annual operating plan and budget.

Question 37Sales and Operations Planning (S&OP)

Which technique is used for rough-cut capacity planning in S&OP?

  1. Operator attendance records
  2. Machine-level maintenance schedules
  3. Product-family resource requirements Correct answer.
  4. Time-phased net requirements at part level

Explanation

Rough-cut capacity planning at the S&OP level uses resource profiles or capacity bills that estimate capacity needs by product family rather than by individual part.

Question 38Sales and Operations Planning (S&OP)

What is the purpose of scenario planning in S&OP?

  1. To remove the need for a demand forecast
  2. To test alternative assumptions before committing Correct answer.
  3. To replace the annual budgeting process
  4. To calculate standard costs for each product

Explanation

Scenarios let the team compare outcomes under different demand, capacity, or pricing assumptions so decisions are made with known risks.

Question 39Sales and Operations Planning (S&OP)

How does S&OP differ from master scheduling?

  1. S&OP covers individual orders while master scheduling covers families
  2. S&OP is done daily while master scheduling is monthly
  3. S&OP plans families monthly; master scheduling plans end items weekly Correct answer.
  4. S&OP ignores capacity while master scheduling considers only capacity

Explanation

S&OP is aggregate and monthly over a long horizon, while the master production schedule disaggregates it into end items in weekly or daily time buckets.

Question 40Sales and Operations Planning (S&OP)

When demand exceeds supply in an S&OP cycle, which is a demand-side gap-closing option?

  1. Raising price to moderate demand Correct answer.
  2. Authorizing overtime on the line
  3. Adding a supplier for a component
  4. Deferring maintenance to free capacity

Explanation

Demand-side options change the level or timing of demand through pricing, promotion, lead-time extension, or order management. The others increase or free up supply.

Question 41Sales and Operations Planning (S&OP)

The executive S&OP meeting should focus primarily on:

  1. Decisions on gaps and plan approval Correct answer.
  2. Detailed promising of customer orders
  3. Reviewing daily production output
  4. Preparing purchase orders for suppliers

Explanation

The executive session resolves issues escalated from pre-S&OP, makes trade-off decisions, and authorizes the plan; operational detail belongs elsewhere.

Question 42Sales and Operations Planning (S&OP)

Which measure best evaluates demand plan quality in S&OP?

  1. Machine utilization in the final assembly area
  2. Forecast accuracy at the product family level Correct answer.
  3. Inventory turns at the part-number level
  4. Number of purchase orders released

Explanation

Because S&OP plans at the product family level, forecast accuracy should be measured at that same level and lag to judge the quality of the demand plan.

Question 43Sales and Operations Planning (S&OP)

A demand plan cannot be met within the agreed supply constraints and the gap remains material. In a mature S&OP process, what should happen?

  1. The demand plan is adjusted by the sales team without documentation
  2. The gap and alternatives go to the executive meeting Correct answer.
  3. The issue is deferred to the next annual planning cycle
  4. The supply plan is increased beyond capacity without approval

Explanation

Pre-S&OP resolves what it can; unresolved material gaps, with options and recommendations, go to executives who have authority to choose among demand, supply, and financial trade-offs.

Question 44Sales and Operations Planning (S&OP)

How should the demand plan be developed relative to supply capability in S&OP?

  1. It is set equal to the supply plan each month
  2. It is limited to confirmed customer orders
  3. It ignores supply constraints so gaps show Correct answer.
  4. It is capped at current demonstrated capacity

Explanation

The unconstrained demand plan shows what the market requires; comparing it with the constrained supply plan exposes gaps that executives can decide how to close.

Question 45Sales and Operations Planning (S&OP)

A company has limited capacity across several regions and must decide how to allocate supply. In S&OP, this allocation should be:

  1. Determined by the sales team with the largest forecast
  2. Based on the sequence in which orders arrive
  3. Left to each plant scheduler to decide independently
  4. Agreed at the aggregate level using stated priorities Correct answer.

Explanation

S&OP sets allocation rules and priorities at the aggregate level with executive agreement, and the detailed plans then apply those rules consistently across regions.

Question 46Sales and Operations Planning (S&OP)

Why does S&OP in service businesses place heavy emphasis on demand shifting?

  1. Service capacity is perishable and cannot be inventoried Correct answer.
  2. Service demand cannot be forecast at all
  3. Service capacity is always unconstrained
  4. Services can be stored as finished inventory when demand is low

Explanation

Because a service hour not used cannot be saved, S&OP in services relies on pricing, scheduling, and reservation levers to move demand toward available capacity.

Question 47Demand

Which statement best describes dependent demand?

  1. It must be forecast from historical shipment data.
  2. It occurs only for finished goods sold to end customers.
  3. It is unaffected by changes in the production schedule.
  4. It is derived from the demand for another item. Correct answer.

Explanation

Dependent demand exists for components, materials, and subassemblies because a parent item requires them. It is calculated from the plan for the parent rather than forecast independently. A change in the build schedule therefore changes dependent demand directly.

Question 48Demand

Which statement about demand forecasts is generally true?

  1. Forecasts should rely only on the item's own past sales history.
  2. Longer forecast horizons generally produce more accurate results.
  3. A published forecast becomes a firm commitment to customers.
  4. Family forecasts are more accurate than item forecasts. Correct answer.

Explanation

Forecast error tends to shrink as items are grouped, because individual item variations offset one another. Forecasts therefore become more reliable at the family or aggregate level than at the detailed item level. A forecast is an estimate, not a promise to the customer.

Question 49Demand

The Delphi method produces a forecast by:

  1. Averaging the last three periods of historical demand
  2. Applying exponential smoothing to a weighted average of expert opinions
  3. Simulating future demand with a Monte Carlo model
  4. Anonymous multi-round polling of experts Correct answer.

Explanation

Delphi is a qualitative technique in which experts submit estimates separately and anonymously, see the group summary, and revise over several rounds until opinions converge. Anonymity reduces the influence of dominant personalities. No quantitative time series model is involved.

Question 50Demand

CPFR is best described as:

  1. Joint forecasting and replenishment planning by trading partners Correct answer.
  2. A scheduling rule used to sequence work on a production line
  3. A statistical method for calculating safety stock at each distribution center
  4. A technique for measuring forecast error over time

Explanation

Collaborative planning, forecasting, and replenishment links customers and suppliers so they share demand information and agree on a common forecast and replenishment plan. The goal is to reduce inventory and improve service across the chain. It is a process, not a formula or a scheduling rule.