CSCP Exam Mod 2

Question 1

alliance development

Answer 1

Strengthening the capabilities of a key supplier.

Question 2

anticipation inventories

Answer 2

Additional inventory above basic pipeline stock to cover projected trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant shutdowns, and vacations.

Question 3

assemble-to-order (ATO)

Answer 3

A production environment where a good or service can be assembled after receipt of a customer’s order. The key components (bulk, semi-finished, intermediate, subassembly, fabricated, purchased, packing, and so on) used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product. This strategy is useful where a large number of end products (based on the selection of options and accessories) can be assembled from common components.

Question 4

blanket purchase order

Answer 4

A long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements. Often [these] cover only one item with predetermined delivery dates.

Question 5

buffer

Answer 5

1) A quantity of materials awaiting further processing. It can refer to raw materials, semifinished stores or hold points, or a work backlog that is purposely maintained behind a work center. 2) In the theory of constraints, [these] can be time or material and support throughput and/or due date performance. [These] can be maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points.

Question 6

business intelligence

Answer 6

Information collected by an organization on customers, competitors, products or services, and processes. [It] provides organizational data in such a way that the organizational knowledge filters can easily associate with this data and turn it into information for the organization. Persons involved in [these kind of] processes may use application software and other technologies to gather, store, analyze, and provide access to data, and to present that data in a simple, useful manner. The software aids in business performance management and aims to help consumers make better business decisions by offering them accurate, current, and relevant information. Some businesses use data warehouses because they are a logical collection of information gathered from various operational databases for the purpose of creating [this].

Question 7

collaborative planning, forecasting, and replenishment (CPFR)

Answer 7

1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods. 2) A process philosophy for facilitating collaborative communications. [It] is considered a standard, and is endorsed by the Voluntary Interindustry Commerce Standards.

Question 8

consortia trade exchanges (CTX)

Answer 8

An online marketplace, usually owned by a third party, that allows members to trade with each other. Such sites lower members’ search costs and enable lower prices for the buyer.

Question 9

continuous replenishment

Answer 9

A process by which a supplier is notified daily of actual sales or warehouse shipments and commits to replenishing these sales (for example, by size or color) without stockouts and without receiving replenishment orders. The result is a lowering of associated costs and an improvement in inventory turnover.

Question 10

cross-docking

Answer 10

The concept of packing products on incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination. The items are carried from the incoming vehicle docking point to the outgoing vehicle docking point without being stored in inventory at the warehouse. [It] reduces inventory investment and storage space requirements.

Question 11

cross-selling

Answer 11

Occurs when customers buy additional products or services after the initial purchase.

Question 12

customer relationship management (CRM)

Answer 12

A marketing philosophy based on putting the customer first. Involves the collection and analysis of information designed for sales and marketing decision support (in contrast to enterprise resources planning information) to understand and support existing and potential customer needs. Includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions.

Question 13

data warehouse

Answer 13

A repository of data that has been specially prepared to support decision-making applications.

Question 14

demand forecasting

Answer 14

Forecasting the demand for a particular good, component, or service.

Question 15

demand management

Answer 15

1) The function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. [This] facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs.

Question 16

demand planning

Answer 16

The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services (both high and low volume; lumpy and continuous) across the supply chain from the suppliers’ raw materials to the consumer’s needs. Items can be aggregated by product family, geographical location, product life cycle, and so forth, to determine an estimate of consumer demand for finished products, service parts, and services. Numerous forecasting models are tested and combined with judgment from marketing, sales, distributors, warehousing, service parts, and other functions. Actual sales are compared to forecasts provided by various models and judgments to determine the best integration of techniques and judgment to minimize forecast error.

Question 17

demand pull

Answer 17

The triggering of material movement to a work center only when that work center is ready to begin the next job. In effect, it shortens or eliminates the queue from in front of a work center, but it can cause a queue at the end of a preceding work center. [This] also can occur within a supply chain, in which case it often is called a demand chain.

Question 18

distribution inventory

Answer 18

Inventory, usually spare parts and finished goods, located in the distribution system (e.g., in warehouses or in transit between warehouses and the consumer).

Question 19

distribution requirements planning (DRP)

Answer 19

1) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are “exploded” via MRP logic to become gross requirements of the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard MRP logic applies. 2) More generally, replenishment inventory calculations, which may be based on other planning approaches such as period order quantities or “replace exactly what was used,” rather than being limited to the time-phased order point approach.

Question 20

foreign/free trade zone (FTZ)

Answer 20

Designated areas within a country that are considered to be outside the country. Material in the zone is not subject to duties and taxes until the material is moved outside the zone for consumption. There is no limit on the time material may remain in the zone. […].

Question 21

fourth-party logistics (4PL)

Answer 21

[This concept] differs from third-party logistics in the following ways: (1) [this type of] organization is often a separate entity formed by a joint venture or other long-term contract between a client and one or more partners; (2) [this type of] organization is an interface between the client and multiple logistics services providers; (3) ideally, all aspects of the client’s supply chain are managed by the [this type of] organization; and (4) it is possible for a major 3PL organization to form [this type of] organization within its existing structure.

Question 22

harmonized system classification codes

Answer 22

An internationally standardized description of goods that uses a system of numbers to provide increasingly detailed classification and descriptions.

Question 23

horizontal marketplace

Answer 23

An online marketplace used by buyers and sellers from multiple industries. This marketplace lowers prices by lowering transaction costs.

Question 24

incoterms

Answer 24

A series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law. These terms do not cover property rights.

Question 25

independent demand

Answer 25

The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand.

Question 26

interplant demand

Answer 26

One plant’s need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner.

Question 27

inventory accuracy

Answer 27

When the on-hand quantity is within an allowed tolerance of the recorded balance. This important metric usually is measured as the percent of items with inventory levels that fall within tolerance. Target values usually are 95 percent to 99 percent, depending on the value of the item. For logistical operations (location management) purposes, it is sometimes measured as the number of storage locations with errors divided by the total number of storage locations.

Question 28

inventory visibility

Answer 28

The extent to which inventory information is shared within a firm and with supply chain partners.

Question 29

joint replenishment

Answer 29

Coordinating the lot sizing and order release decision for related items and treating them as a family of items. The objective is to achieve lower costs because of ordering, setup, shipping, and quantity discount economies. This term applies equally to joint ordering (family contracts) and to composite part (group technology) fabrication scheduling.

Question 30

joint venture

Answer 30

An agreement between two or more firms to risk equity capital to attempt a specific business objective.

Question 31

kanban

Answer 31

A method of just-in-time production that uses standard containers or lot sizes with a single card attached to each. It is a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers. [This] Japanese word, loosely translated, means card, billboard, or sign, but other signaling devices such as colored golf balls have also been used. The term is often used synonymously for the specific scheduling system developed and used by the Toyota Corporation in Japan.

Question 32

landed cost

Answer 32

This cost includes the product cost plus the costs of logistics, such as warehousing, transportation, and handling fees.

Question 33

level production method

Answer 33

A production planning method that maintains a stable production rate while varying inventory levels to meet demand.

Question 34

line haul costs

Answer 34

Basic costs of carrier operation to move a container of freight, including drivers’ wages and usage depreciation. These vary with the cost per mile, the distance shipped, and the weight moved.

Question 35

make-to-order

Answer 35

A production environment where a good or service can be made after receipt of a customer’s order. The final product is usually a combination of standard items and items custom-designed to meet the special needs of the customer. Where options or accessories are stocked before customer orders arrive, the term assemble-to-order is frequently used.

Question 36

make-to-stock

Answer 36

A production environment where products can be and usually are finished before receipt of a customer order. Customer orders are typically filled from existing stocks, and production orders are used to replenish those stocks.

Question 37

market demand

Answer 37

In marketing, the total demand that would exist within a defined customer group in a given geographical area during a particular time period given a known marketing program.

Question 38

master production schedule (MPS)

Answer 38

A line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material requirements planning. It represents what the company plans to produce, expressed in specific configurations, quantities, and dates. [This] is not a sales item forecast that represents a statement of demand. It must take into account the forecast, the production plan, and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals.

Question 39

material requirements planning (MRP)

Answer 39

A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. [When] time-phased, [this concept] begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. [Also when] time-phased, [this] is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.

Question 40

mix forecast

Answer 40

Forecast of the proportion of products that will be sold within a given product family, or the proportion of options offered within a product line. Product and option mix as well as aggregate product families must be forecasted. Even though the appropriate level of units is forecasted for a given product line, […] material shortages and inventory problems [can be created if this is inaccurate].

Question 41

multisourcing

Answer 41

Procurement of a good or service from more than one independent supplier.

Question 42

ordering cost

Answer 42

The costs that increase as the number of orders placed increases. Used in calculating order quantities. Includes costs related to the clerical work of preparing, releasing, monitoring, and receiving orders; the physical handling of goods; inspections; and setup costs, as applicable.

Question 43

outsourcing

Answer 43

The process of having suppliers provide goods and services that were previously provided internally. [This] involves substitution—the replacement of internal capacity and production by that of the supplier.

Question 44

pipeline stock

Answer 44

Inventory in the transportation network and the distribution system, including the flow through intermediate stocking points. The flow time through the pipeline has a major effect on the amount of inventory required in the pipeline. Time factors involve order transmission, order processing, scheduling, shipping, transportation, receiving, stocking, review time, and so forth.

Question 45

plan-do-check-action (PDCA)

Answer 45

A four-step process for quality improvement. In the first step[…], a plan to effect improvement is developed. In the second step[…], the plan is carried out, preferably on a small scale. In the third step[…], the effects of the plan are observed. In the last step[…], the results are studied to determine what was learned and what can be predicted. [This] cycle is sometimes referred to as the Shewhart cycle (because Walter A. Shewhart discussed the concept in his book, Statistical Method from the Viewpoint of Quality Control) or as the Deming circle (because W. Edwards Deming introduced the concept in Japan and the Japanese subsequently called it the Deming circle).

Question 46

planning horizon

Answer 46

The amount of time a plan extends into the future. For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and time for capacity changes of primary work centers or of key suppliers. For longer-term plans, [this] must be long enough to permit any needed additions to capacity.

Question 47

portal

Answer 47

A multiservice website that provides access to data that may be secured by each user’s role. Users can aggregate data and perform basic analysis. Ownership [of this] can be independent, private, or consortium-based. Business [types of this] are often connected with a customer relationship management or supplier relationship management system. [This] can include structured data such as ERP information, pictures, and documents. Unlike exchanges or marketplaces, [it] generally can display and aggregate data without integration between application software.

Question 48

private trading exchange (PTX)

Answer 48

A trade exchange hosted by a single company to facilitate collaborative e-commerce with its trading partners. As opposed to public e-marketplaces, a private exchange provides the host company with control over many factors, including who may participate (and in what manner), how participants may be connected, and what contents should be presented (and to whom). The ultimate goal might be to improve supply chain efficiencies and responsiveness through improved process visibility and collaboration, advanced integration platforms, and customization capabilities.

Question 49

product family

Answer 49

A group of products or services that pass through similar processing steps, have similar characteristics, and share common equipment prior to shipment or delivery to the customer. Can be from different overlapping product lines that are produced in one factory and often used in production planning (or sales and operations planning).

Question 50

quick-response program (QRP)

Answer 50

A system of linking final retail sales with production and shipping schedules back through the chain of supply; employs point-of-sale scanning and electronic data interchange, and may use direct shipment from a factory to a retailer.

Question 51

rapid replenishment

Answer 51

A replenishment strategy in which the supplier prepares shipments at predetermined intervals and varies the quantity based on recent sales data. Sales data may be supplied via a point-of-sale system.

Question 52

reverse auction

Answer 52

An internet auction in which suppliers attempt to underbid their competitors. Company identities are known only by the buyer.

Question 53

reverse logistics

Answer 53

A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.

Question 54

reverse supply chain

Answer 54

The planning and controlling of the processes of moving goods from the point of consumption back to the point of origin for repair, reclamation, recycling, or disposal.

Question 55

risk pooling

Answer 55

A method often associated with the management of inventory risk. Manufacturers and retailers that experience high variability in demand for their products can pool together common inventory components associated with a broad family of products to buffer the overall burden of having to deploy inventory for each discrete product.

Question 56

safety lead time

Answer 56

An element of time added to normal lead time to protect against fluctuations in lead time so that an order can be completed before its real need date. When used, the MRP system, in offsetting for lead time, will plan both order release and order completion for earlier dates than it would otherwise.

Question 57

safety stock

Answer 57

1) In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. 2) In the context of master production scheduling, the additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog. Overplanning can be used to create [this].

Question 58

sales and operations planning (S&OP)

Answer 58

A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. [This] is performed at least once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all supply, demand, and new product plans at both the detail and aggregate levels and tie to the business plan. It is the definitive statement of the company’s plans for the near to intermediate term, covering a horizon sufficient to plan for resources and to support the annual business planning process. Executed properly, [this] process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement.

Question 59

seasonality

Answer 59

A predictable repetitive pattern of demand measured within a year where demand grows and declines. These are calendar-related patterns that can appear annually, quarterly, monthly, weekly, daily and/or hourly.

Question 60

single-source supplier

Answer 60

A company that is selected to have 100 percent of the business for a part although alternate suppliers are available.

Question 61

sole-source supplier

Answer 61

The only supplier capable of meeting (usually technical) requirements for an item.

Question 62

stock keeping unit (SKU)

Answer 62

1) An inventory item. For example, a shirt in six colors and five sizes represents 30 [of these]. 2) In a distribution system, an item at a particular geographic location. For example, one product stocked at the plant and at six different distribution centers would represent seven [of these].

Question 63

strategic alliance

Answer 63

A relationship formed by two or more organizations that share information (proprietary), participate in joint investments, and develop linked and common processes to increase the performance of both companies. Many organizations form [these] to increase the performance of their common supply chain.

Question 64

strategic sourcing

Answer 64

A comprehensive approach for locating and sourcing key material suppliers, which often includes the business process of analyzing total-spend-for-material spend categories. Includes a focus on the development of long-term relationships with trading partners who can help the purchaser meet profitability and customer satisfaction goals. From an information technology applications perspective, includes automation of requests for quote (RFQ), requests for proposal (RFP), electronic auctioning (e-auction or reverse auction), and contract management processes.

Question 65

subcontracting

Answer 65

Sending production work outside to another manufacturer.

Question 66

supplier certification

Answer 66

Certification procedures verifying that a supplier operates, maintains, improves, and documents effective procedures that relate to the customer’s requirements. Such requirements can include cost, quality, delivery, flexibility, maintenance, safety, and ISO quality and environmental standards.

Question 67

supplier relationship management (SRM)

Answer 67

A comprehensive approach to managing an enterprise’s interactions with the organizations that supply the goods and services the enterprise uses. The goal of [this] is to streamline and make more effective the processes between an enterprise and its suppliers. [It] is often associated with automating procure-to-pay business processes, evaluating supplier performance, and exchanging information with suppliers. An e-procurement system is often an example of [this type of] family of applications.

Question 68

tactical buying

Answer 68

The purchasing process focused on transactions and nonstrategic material buying. Closely aligned with the “ordering” portion of executing the purchasing transaction process. Its characteristics include stable, limited fluctuations; defined standard specifications noncritical to production; no delivery issues; and high reliability concerning quality-standard material with very little concern for rejects.

Question 69

tariff

Answer 69

An official schedule of taxes and fees imposed by a country on imports or exports.

Question 70

third-party logistics (3PL)

Answer 70

A buyer and supplier team with a third party that provides product delivery services. This third party may provide added supply chain expertise.

Question 71

time fence

Answer 71

A policy or guideline established to note where various restrictions or changes in operating procedures take place. For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point where changes should be resisted. [It] can be used to define these points.

Question 72

total cost of ownership (TCO)

Answer 72

In supply chain management, [this] is the sum of all the costs associated with every activity of the supply stream. The main insight that [this] offers to the supply chain manager is the understanding that the acquisition cost is often a very small portion of [this concept].

Question 73

trade bloc

Answer 73

An agreement between countries intended to reduce or remove barriers to trade within member countries. Frequently, but not always, those countries are geographically close. Examples […] are the European Economic Community and the North American Free Trade Agreement (NAFTA).

Question 74

vendor-managed inventory (VMI)

Answer 74

A means of optimizing supply chain performance in which the supplier has access to the customer’s inventory data and is responsible for maintaining the inventory level required by the customer. Accomplished by a process in which resupply is performed by the vendor through regularly scheduled reviews of the on-site inventory. The on-site inventory is counted, damaged or outdated goods are removed, and the inventory is restocked to predefined levels. The vendor obtains a receipt for the restocked inventory and accordingly invoices the customer.

Question 75

virtual trading exchange

Answer 75

An online trading exchange that enables both information integration and collaboration between multiple trading partners.

Question 76

waste

Answer 76

1) Any activity that does not add value to the good or service in the eyes of the consumer. 2) A by-product of a process or task with unique characteristics requiring special management control. [The] production [of this] can usually be planned and somewhat controlled. Scrap is typically not planned and may result from the same production run as [this term].