Index
CPIM Exam – Basics of Supply Chain Management
Practice Study Sheet
This study guide contains my notes on topics from “Introduction To Materials Management” as
preparation for the first CPIM Exam. It is ordered by chapter. You need to purchase this book in order
to make sense of the notes – they are highlights for quick review
Index.......................................................................................................................................................1
Chapter One – Introduction to Materials Management..........................................................................1
Chapter Two – Production Planning System .........................................................................................2
Chapter Three – Master Scheduling.......................................................................................................3
Chapter Four – Master Requirements Planning.....................................................................................4
Chapter Five – Capacity Management...................................................................................................6
Chapter Six – Production Activity Control............................................................................................8
Chapter Seven – Purchasing ................................................................................................................11
Chapter Eight – Forecasting.................................................................................................................12
Chapter Nine – Inventory Fundamentals .............................................................................................14
Chapter Ten – Order Quantities ...........................................................................................................16
Chapter Eleven – Independent Demand Ordering Systems.................................................................17
Chapter Twelve – Physical Inventory and Warehouse Management ..................................................18
Chapter Thirteen – Physical Distribution.............................................................................................20
Chapter Fourteen – Products and Processes ........................................................................................23
Chapter Fifteen – Just-in-Time Manufacturing....................................................................................25
Chapter Sixteen – Total Quality Management.....................................................................................27
Chapter One – Introduction to Materials Management
(1). Three critical elements of the supply chain are 1) flow of materials
2) flow of information
3) fund Transfers (supplier -> manufacture -> customer)
(2). Manufacturing Planning and Control consist of 1) Production Planning
2) Implementation and Control
3) Inventory Management (它是MRPII和ERP的
TEMPLATE )
(2.1). Production Planning includes 1) forecasting
2) master planning
3) material requirements planning
4) capacity planning
(2.2). Implementation and Control includes 1) Production Activity Control and
2) Purchasing
(3). Five basic inputs to the Manufacturing Input and Control system are
1) product description / bill of material
2) process specifications/routing
3) time needed to perform operations, in standard time
4) available facilities and
5) quantities required
(4).Physical supply and distribution includes 1) transportation
2) distribution inventory
3) warehousing
4) packaging
5) materials handling
6) order entry
(5).To get the most profit, a company should: 1) provide best customer service
2)Provide lowest production costs
3)Provide lowest inventory investment
4)Provide lowest distribution costs
(6). Factors affects operation environment: 1). government regulation
2).economy
3).competition
4).customer expectations
5).quality
Chapter Two – Production Planning System
(1) Priority – what is needed, how many and when; Capacity is the capability to produce goods and
services. In the long run, they must be in balance
(2) Manufacturing Planning and Control System has five levels (sorted by level of detail):
1. Strategic Business Plan
2. Production Plan
3. Master Production Schedule
4. Material Requirements Plan
5. Production Activity Control and Purchasing
(2.1) Strategic Business Plan 1) marketing determines product & pricing
2) Finance finds funds
3)Production meets needs through machinery & labor
4) Engineering is responsible for design.
Reviewed every 6 months to a year
(每个部门将各自的
汇总成Strategic business plan)
(2.2) Production Plan 1) quantities by product group
2) desired inventory levels
3) equipment, labor and material needed
4) availability of resources needed.
Planning horizon 6-18 months and reviewed monthly or quarterly
(2.3) Master Production Schedule (MPS) is for production of individual items. The planning horizon is
3-18 months out. Master scheduling is the process of making an MPS. The plans are changed
weekly or monthly
(2.4) Material Requirements Plan (MRP) is a plan for production and purchase of components used in making
items in the master production schedule. Purchase and Production Activity control use the MRP for
controlling raw materials. The planning horizon is 3-18 months as with MPS
(2.5) Production Activity Control and Purchasing
Purchasing is responsible for establishing and controlling the flow of raw materials into the factory.
PAC is responsible for planning and controlling the flow of work through the factory.
• Sales and Operations Planning
Sales and operation planning is a process for continually revising the strategic business plan and
coordinating plans of the various department.
Annual
Monthly
Weekly daily
Strategic business plan
Sales and operation plan
Marketing plan production plan
Master production schedule Detailed sales plan
(3) Manufacturing Resource Planning (MRP II) is the fully integrated planning and control system. It
coordinates between marketing and production. It includes the sales and operations plan, the sales
plan, master schedule, material requirements plan, purchasing, production activity control and
performance measures.( loop closed 是指下层信息的反馈能使上层为之改变计划)
(4) Enterprise Resource Planning (ERP) is an accounting oriented information system for identifying
and planning the enterprise. ERP encompasses the entire company and MRP II is manufacturing
(整合所有分公司,工厂,销售中心,甚至供应商,分销商)
(5) In the short term the product plan is limited by capacity(产能无法满足生产计划就要改变,改变方法如下)
Changes can be made through overtime
build up of inventory
subcontracting and leasing extra equipment
The production plan usually has a12 month time horizon, a few product groups, demand is
fluctuating, plant and equipment are fixed
(6) Three basic strategies for making the production plan include
1) chase (只在有需求时才生产)
2) production leveling (每个PERIOD生产平均值,不管需求)
(divide total production units by # of days for target)
3) subcontracting (make minimum demand and subcontract the rest) (只生产最小的需求量,其他的由
subcontract来处理,或是加价和拒绝订单)
(7) Level production = (total forecast + back orders + ending inventory – opening inventory) / # of
Periods
(8) Chase production: end inventory 不变,只求每个PERIOD 的数量的变动,再将该数量乘以每次变动
的成本。
(9) Backlog = open order 用与make to order ,因为make to order 没有inventory
CPIM Exam – Basics of Supply Chain Management
Practice Study Sheet
•
Chapter Three – Master Scheduling
• Master production schedule (MPS) 1) links production planning to what will be built 2) calculates
capacity and resources needed 3) drives the materials requirements plan 4) drives priorities for
manufacturing
• To build the master production schedule (MPS) you need the following information
1. the production plan
2. forecasts for individual end items
3. actual orders received from customers and for stock replenishment
4. inventory levels for individual end items
5. capacity constraints
• Objectives of MPS are to 1) maintain finished good inventory levels 2) make the best use of labor,
materials & equipment 3) maintain inventory investment (WIP) at the required levels
• Develop a preliminary MPS, check MPS against capacity, resolve differences (this is called rough
cut capacity planning)
• Rough cut capacity planning checks whether resources are available to support the preliminary
master production schedule. Plan on a single product, not a group, and use the resource bill
• For make to stock, the MPS is a schedule of finished goods items, for make to order the MPS is a
schedule of actual customer orders, for assemble to order, go to the base order
• Final Assembly Schedule (FAS) – schedule of what will be produced
• MPS is a plan for what production can and will do – it is not a sales forecast
• Available to Promise (ATP) is based on the MPS – portion of inventory that is not already
committed and available to a customer. ATP = scheduled receipts + beginning inventory = actual
orders scheduled
• Projected available balance (PAB) includes a calculation for customer orders. PAB = prior period
PAB + MPS – greater of (customer orders or forecast demand)
• Frozen Zone – capacity and materials are committed to specific orders, senior mgmt approval
required for changes.
• Slushy Zone – capacity and material are committed to less extent. Tradeoffs must be met between
marketing and manufacturing
• Liquid Zone – any changes can be made to the MPS
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CPIM Exam – Basics of Supply Chain Management
Practice Study Sheet
Chapter Four – Master Requirements Planning
• Materials Requirements Planning has 2 major objectives1) determine requirements 2) keep
priorities current
• Independent demand must be forecast; dependent demand is related to the demand for other items
(higher level assemblies or products)
• Material Requirements Planning (MRP) drives Production Activity Control (PAC) and
purchasing. MRP plans the release and receipt dates for orders. PAC and purchasing must plan
and control the performance of orders to meet the due dates
• The Material Requirements Planning System has three inputs 1) master production schedule 2)
inventory records 3) bills of materials
• Inventory records have 1) planning factors (header records) and 2) status of each item that changes
with every transaction
• Bill of Material is “a listing of all the subassemblies, intermediaries, parts and raw materials that
go into making the parent assembly showing the quantities of each required to make an assembly”.
Three points
1. BOM shows all the parts required to make one item
2. Each part or item has only one part number
3. A part is defined by its form, fit or function. If any of these change, they become new, unique
parts (i.e. if you paint something)
• Multilevel bills are formed as logical groupings of parts into subassemblies, based on the way the
product is assembled (i.e. an auto has a frame, chassis, doors, windows and engine as
subassemblies)
• Summarized parts list contains all the parts needed to make one assembly; produced by the
product design engineer
• Planning bills are artificial groupings of components for planning purposes. They do not represent
buildable products but an average product
• Where-used reports give the same information as a bill of material, but gives the parents for a
component. Wheels might be used on several models of cars
• Pegging report is like a where used report but only shows parents for which there is an existing
requirement (rather than all parents, even those with no current production)
• Bills of material are used for the following purposes
1. product definition – components to make a product
2. engineering change control – recording changes to design of a product
3. service parts – replacement parts needed to fix a broken component are determined from the
bill of material
4. planning- define what materials are needed to create an end product
5. order entry – the order entry system usually automatically configures the order with parts and
calculates the total extended price
6. manufacturing – provide a list of parts needed to make a product
7. costing – method of determining direct material and a structure for recording direct labor and
distributing overhead
• Lead time is the amount of time needed to perform an operation – it includes order preparation,
queuing, processing, moving receiving and inspecting
• Exploding is the process of multiplying the requirements by the usage quantity and recording the
appropriate requirements throughout the product tree
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CPIM Exam – Basics of Supply Chain Management
Practice Study Sheet
• Offsetting is the process of placing the exploded requirements in their proper periods based on
lead time
• The planned order release of the parent becomes the gross requirement of the component
• Releasing an order means that authorization is given to purchasing to buy the necessary material
or to manufacturing to make the component (check component availability first)
• Scheduled receipts are orders place on manufacturing or on a vendor and represent a commitment
to make or buy. Scheduled receipts on the MRP record are open orders on the factory . When the
goods are received into inventory and available for use, the order is closed out, and the scheduled
receipt moves into on-hand inventory
• Net Requirements = gross requirements – scheduled receipts – available inventory
• Low level code is the lowest level on which a part resides in all bills of material. Determined by
starting at the lowest level of a bill of material and working up to the part
• Responsibility of planner is to 1) launch (release) orders to purchasing or manufacturing 2)
reschedule due dates of open (existing) orders as required 3) reconcile errors and try to find their
cause 4) solve critical material schedules by expediting or re-planning 5) coordinate with others
• Planned orders are automatically scheduled by the computer. Released orders are responsibility of
the planner. Firm planned orders can be held against changes
• Exception messages advise the planner when something needs attention
• Transaction messages mean that the planner must tell the MRP software of all actions such as 1)
release an order 2) schedule a receipt 3) change to the data
• Feedback to the plan comes from 1) suppliers actions through purchasing 2) early or late
completion at the factory 3) management actions such as changing the master production schedule
• Reducing systems nervousness of constant changes through firm planned orders
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CPIM Exam – Basics of Supply Chain Management
Practice Study Sheet
Chapter Five – Capacity Management
• Capacity is the amount of work that can be done in a specific time span. “The capability of a
worker, machine, work center, plan or organization to product output per period of time”.
• Capacity is the rate of doing work, not the quantity of work done
• Capacity required is the capacity of a system or resource needed to produce a desired output in a
given time period
• Load is the amount of released and planned work assigned to a facility for a particular time period
• Capacity management is responsible for determining the capacity needed to achieve the priority
plans. “The function of establishing, measuring, monitoring, and adjusting limits or levels of
capacity in order to execute all manufacturing schedules
• Capacity Planning is the process of determining the resources required to meet the priority plan
and the methods needed to make that capacity available
• Capacity control is the process of monitoring production output, comparing it with capacity plans,
and taking corrective actions when needed
• Capacity planning process is as follows
1. determine the capacity available at each work center in each time period
2. determine the load at each work center in each time period
3. resolve differences between available capacity and required capacity
• Resource Planning involves long-range capacity resource requirements and is directly linked to
production planning. If the resource plan cannot be devised to meet the production plan, then the
production plan has to be changed
• Rough cut capacity planning is medium range and the capacity requirements plan is short range.
• Inputs for the Capacity planning include 1) open shop orders 2) planned order releases 3) routings
4) time standards 5) lead times 6) work center capacities
• An open order file is a record of all the active shop orders
• Planned order releases are determined by the computer’s MRP logic based upon the gross
requirements for a particular part
• Routing is the path that work follows from work center to work center as it is completed. A
routing file should exist for every component manufactured and contain 1) operations to be
performed 2) sequence of operations 3) work centers to be used 4) possible alternative work
centers 5) tooling needed at each operation 6) standard times for setup and run for each piece
• A work center is composed of a number of machines or workers capable of doing the same work.
A work center file contains information on the capacity and move, wait and queue ties associated
with the center
• The move time is the time taken to move material from one workstation to another. The wait time
is the time a job is at a work center after completion and before being moved. The queue time is
the time a job waits at a work center before being handled. Lead time is the sum of queue, setup,
run, wait and move times.
• Capacity available is the capacity to produce a quantity of output in a given time period. It is
effected by 1) product specifications 2) product mix 3) plant and equipment 4) work effort
• Unit of output is appropriate if there is not a wide variety of products produced such as paper mills
measuring in tons of paper; if not, the common element is time
• Standard time is the time required to make the product using a given method of manufacture
(through time study techniques)
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CPIM Exam – Basics of Supply Chain Management
Practice Study Sheet
• Demonstrated capacity is figured from historical data (and is the average, not maximum output).
Calculated or rated capacity is based on available time, utilization, and efficiency
• Utilization = hours actually worked / available hours * 100%
• Efficiency = actual rate of production / standard rate of production * 100%
• Rated capacity = available time * utilization * efficiency
• The time needed for each order is the setup time and the run time
• Load is the sum of the required times for all the planned and actual orders to be run on the work
center in a specified period. Calculate load by 1) determine standard hours of operation time for
each planned and released order for each work center by time period 2) add all the standard hours
together
• Work center load report shows 1) over capacity 2) under capacity work centers
•