Explanation: Process improvement is a method of analyzing and enhancing the production methods and techniques to increase productivity and performance. Process improvement aims to reduce costs, waste, defects, and errors, as well as to improve quality, efficiency, and customer satisfaction. When considering process improvement, the first approach that should be considered is making better use of existing resources. This means that the production system should optimize the utilization andallocation of the available resources, such as materials, labor, machines, and space. This can be achieved by implementing various techniques, such as lean manufacturing, six sigma, kaizen, or 5S.

Making better use of existing resources can help to improve the process without requiring additional investment or expenditure.

The other options are not the first approaches that should be considered as part of process improvement. Hiring more skilled people to perform the job is not the first approach, as it may increase the labor cost and require more training and supervision. Hiring more skilled people may not necessarily improve the process if the existing methods and techniques are inefficient or ineffective. Buying better and faster equipment is not the first approach, as it may involve a large capital outlay and a long payback period. Buying better and faster equipment may not necessarily improve the process if the existing resources are underutilized or misallocated. Applying stricter quality control is not the first approach, as it may increase the inspection and testing cost and time. Applying stricter quality control may not necessarily improve the process if the existing methods and techniques are prone to errors or defects.

References: CPIM Exam Content Manual Version 7.0, Domain 8: Manage Quality, Continuous Improvement, and Technology, Section 8.2: Continuous Improvement Concepts, p. 46; Process Improvement; Process Improvement Definition.

Explanation: A bill of distribution is a document that specifies the planned channels of inventory disbursement from one or more sources to field warehouses. A bill of distribution is similar to a bill of materials, but it applies to the distribution stage rather than the production stage. A bill of distribution helps to optimize the inventory level, reduce transportation costs, and improve customer service. A bill of distribution considers the factors such as demand patterns, lead times, costs, and capacities of the sources and warehouses.
The other options are not documents that specify the planned channels of inventory disbursement from one or more sources to field warehouses. A supply chain community is a network of organizations that collaborate and coordinate their activities to deliver products or services to customers. A supply chain community includes suppliers, manufacturers, distributors, retailers, and customers. A supply chain community helps to improve the visibility, efficiency, and responsiveness of the supply chain. Interplant demand is the demand for a product or component that is generated by another plant within the same organization. Interplant demand is usually transferred through internal orders or shipments. Interplant demand helps to balance the capacity and resources among different plants. Logistics data interchange (LDI) is a system that enables the exchange of information and documents among different parties involved in the logistics process. LDI uses electronic data interchange (EDI) or other technologies to transmit data such as orders, invoices, shipment notices, and tracking information. LDI helps to improve the accuracy, speed, and security of the logistics transactions.

References: CPIM Exam Content Manual Version 7.0, Domain 7: Plan and Manage Distribution, Section 7.1: Distribution Planning Concepts, p. 40; Bill of Distribution; Supply Chain Community.

Explanation: A balanced scorecard is a performance measurement approach that involves linking financial and non-financial performance measures to organizational goals. According to the web search results, a balanced scorecard is a strategic planning and management system that organizations use to communicate what they are trying to accomplish, align the day-to-day work with strategy, prioritize projects, products, and services, and measure and monitor progress towards strategic targets1. A balanced scorecard focuses on four key perspectives: financial, customer, internal business process, and learning and growth2. Each perspective includes objectives, measures, targets, and initiatives that are aligned with the organization’s vision, mission, and strategy3. By using a balanced scorecard, organizations can balance the short-term and long-term objectives, the financial and non-financial outcomes, and the internal and external stakeholders.

Explanation: Sales and operations planning (S&OP) in a make-to-stock (MTS) environment is concerned with projecting inventory. S&OP is an integrated planning process that aligns demand, supply, and financial planning and is managed as part of a company’s master planning1. MTS is a traditional production strategy that is used by businesses to match inventory with anticipated consumer demand2. Inventory is the quantity and value of materials and products that are available in stock or in transit3.

S&OP in an MTS environment is concerned with projecting inventory because inventory is the key link between demand and supply. Inventory can be classified into three types: raw materials, work-in-process, and finished goods3. S&OP aims to balance the inventory levels of these types with the expected demand and supply plans, as well as the financial objectives of the company. S&OP can help optimize inventory management by:

Reducing inventory costs, such as holding, ordering, and shortage costs3.
Improving inventory turnover, which is the ratio of sales to average inventory3.
Increasing inventory availability, which is the percentage of orders that can be fulfilled from stock3.
Enhancing inventory quality, which is the degree of conformance to specifications and standards3.

The other options are not as relevant for S&OP in an MTS environment as inventory. Item forecasts are estimates of future demand for specific products or services based on historical data, market trends, or customer inputs4. Item forecasts are an input to S&OP, not an output. S&OP uses item forecasts to generate aggregate demand plans for product families or categories, which are then matched with aggregate supply plans for production capacity or resources1. Backlog is the quantity of customer orders that have been received but not yet fulfilled3. Backlog is not applicable for S&OP in an MTS environment, because MTS products are produced before customer orders are received. MTS products are delivered from stock, not from backlog. Bookings are the quantity of customer orders that have been received and confirmed3. Bookings are also not applicable for S&OP in an MTS environment, because MTS products are not dependent on customer orders. MTS products are based on forecasted demand, not actual demand.

References: Make To Stock (MTS): Definition, Example, and How It Works - Investopedia; Forecasting - Definition & Examples - ASQ; What is Sales and Operations Planning (S&OP) | Oracle; Inventory Management - Definition, Types, Objectives and Examples.

Explanation: Finished goods inventory is a type of inventory that consists of the final products that are ready for sale to the customers. Finished goods inventory investment is the value of the finished goods inventory held by the company. Service level is a measure of customer satisfaction that indicates the percentage of customer orders that can be fulfilled from the available inventory. Service level typically will increase when finished goods inventory investment is increased, because more inventory means more ability to meet the customer demand. However, the relationship between service level and finished goods inventory investment is not linear, but rather asymptotic. This means that service level will increase at a decreasing rate as finished goods inventory investment increases. In other words, the marginal benefit of increasing finished goods inventory investment will diminish as the service level approaches 100%. This is because there is a limit to how much inventory can improve the service level, and beyond a certain point, the additional inventory will not have a significant impact on customer satisfaction.

References: CPIM Exam Content Manual Version 7.0, Domain 5: Plan and Manage Inventory, Section 5.1: Develop Inventory Plans, Subsection 5.1.2: Describe how to develop an inventory policy (page 44).

Explanation: Load variability is the fluctuation in electricity demand over time. It is influenced by factors such as weather conditions, time of day, day of the week, and various external events. The higher the load variability, the more challenging it becomes to accurately predict demand and plan capacity1.

A technique to manage load variability would be to plan additional safety capacity as a part of total available capacity to meet unplanned demand. Safety capacity is the act of consistently planning your production below capacity. The reason for this is so the company can become more flexible and responsive to the changing needs of the customer2. For example, if your company was operating at full capacity and your best customer needed extra product, you would be unable to meet their request. By allowing for safety capacity, your company can become more flexible and more responsive.

The other options are not techniques to manage load variability, because they are either irrelevant or ineffective. Applying capacity planning using overall factors (CPOF) to identify priority items at the work center is a simple approach to capacity planning that applies historical ratios. These ratios are based on the master production schedule along with established production standards3. However, this method does not account for load variability or unexpected changes in demand or supply. Designing the shop floor with machines that sit idle until additional demand requires their use is a wasteful and costly way of managing load variability. It does not optimize the utilization of resources or minimize the inventory costs4. Using capacity bills to provide a rough-cut method of planning total-time-per-unit value is a procedure based on the manufacturing production schedule (MPS). It indicates the total standard time required to produce one end product in each work center required in its manufacture5. However, this method does not address the fluctuations in demand or supply that may occur due to load variability.

Explanation: Third-party logistics (3PL) services are services that involve outsourcing some or all of the logistics functions of a firm, such as transportation, warehousing, distribution, or order fulfillment, to an external provider1. By using 3PL services, a firm can reduce its need to own and operate its own logistics assets, such as trucks, trailers, warehouses, or inventory management systems. These assets are classified as fixed assets on the balance sheet, because they are long-term and tangible assets that are used in the normal course of business2. Therefore, increased use of 3PL services is likely to have the effect of decreasing the fixed assets on a firm’s balance sheet.
The other options are not likely effects of increased use of 3PL services on a firm’s balance sheet. Retained earnings are the accumulated net income of a firm that is not distributed to shareholders as dividends3. Retained earnings are not directly affected by the use of 3PL services, unless the firm’s net income changes as a result of cost savings or revenue growth from outsourcing logistics functions. Accounts receivable are the amounts owed to a firm by its customers for goods or services delivered on credit4. Accounts receivable are not directly affected by the use of 3PL services, unless the firm’s sales volume or credit terms change as a result of improved customer service or delivery performance from outsourcing logistics functions. Intangible assets are non-physical assets that have value based on their intellectual or legal rights, such as patents, trademarks, goodwill, or brand names5. Intangible assets are not directly affected by the use of 3PL services, unless the firm’s reputation or market position changes as a result of enhanced quality or innovation from outsourcing logistics functions.

References:
What Is Third Party Logistics (3PL) ? | Definition, Types, Benefits
Fixed Asset - Definition & Examples (Assets = Liabilities + Equity)
Retained Earnings - Definition & Formula
Accounts Receivable - Overview, Examples & Importance
Intangible Asset - Definition & Examples

Explanation: A work cell layout is a type of process layout that arranges equipment and workers according to the sequence of operations performed on a product or service. A work cell layout can improve space utilization by reducing the amount of floor space needed for production, eliminating unnecessary material handling and storage, and increasing the flexibility of the layout. A work cell layout can also reduce cycle time, improve quality, and enhance worker motivation.

References: CPIM Exam Content Manual
Version 7.0, Domain 6: Plan, Manage, and Execute Detailed Schedules, Section 6.2:
Implement Detailed Schedules, Subsection 6.2.3: Describe the principles of work center design and layout (page 58).

Explanation: When deciding what to report externally regarding sustainability performance, a company should disclose its past results and future strategies. This will help the company to demonstrate its progress, achievements, challenges, and commitments in relation to its environmental, social, and governance (ESG) goals. Disclosing past results and future strategies will also enhance the company’s transparency, accountability, and credibility with its stakeholders, such as investors, customers, employees, regulators, and the public.

Disclosing results of poor performance or acceptable performance alone is not sufficient, as it does not provide a complete picture of the company’s sustainability performance. Moreover, disclosing only poor performance may damage the company’s reputation and trust, while disclosing onlyacceptable performance may raise doubts about the company’s honesty and reliability. Disclosing why current regulations are too costly is irrelevant and inappropriate, as it does not reflect the company’s sustainability performance or efforts. It may also imply that the company is not willing or able to comply with the regulations or improve its sustainability practices.

References : A Comprehensive Guide on How to Write a Sustainability Report; Designing Your Company’s Sustainability Report; What to Include in a Sustainability Report.

Explanation: Long lead-time items are items that take a long time to procure, produce, or deliver. Stable demand means that the demand for these items is predictable and does not fluctuate much over time. A supply chain that supports long lead-time items with stable demand would best be designed to position inventory close to the consumer, because this would reduce the delivery time and improve the customer service level. Positioning inventory close to the consumer also reduces the transportation costs and risks associated with long-distance shipments. A supply chain that uses a pull system, which is based on actual customer orders rather than forecasts, may not be suitable for long lead-time items, because it may not be able to meet the customer demand in a timely manner. A supply chain that is linked through an enterprise resources planning (ERP) system, which is a software system that integrates various business functions and processes, may improve the visibility and coordination of the supply chain, but it does not necessarily reduce the lead time or position inventory close to the consumer. A supply chain that is designed to be responsive, which means that it can quickly adapt to changes in demand or other variables, may not be necessary for long lead-time items with stable demand, because these items have low demand uncertainty and variability.

References:
Inventory Positioning | Supply Chain Resource Cooperative
Push System vs. Pull System: Adopting A Hybrid Approach To MRP
What Is Inventory Positioning in Supply Chain Management?

Explanation: A3 method is a tool that can be used in a root cause corrective action process to determine the problem of a machine that is suddenly having excessive downtime. A3 method is a structured problem-solving approach that follows the Plan-Do- Check-Act (PDCA) cycle and uses a single sheet of paper (A3 size) to document the problem, analysis, countermeasures, and results1. A3 method can help identify the root cause of a problem by using tools such as the 5 Whys or the fishbone diagram, and then develop and implement effective corrective actions to prevent recurrence2. A3 method can also help communicate the problem and the solution to stakeholders, as well as monitor and evaluate the outcomes3.

The steps of the A3 method are4:
Step 1: Define the problem and its impact. Describe the current situation, the gap between the actual and the desired state, and the scope and magnitude of the problem.
Step 2: Identify the root cause of the problem. Use tools such as the 5 Whys or the fishbone diagram to analyze the factors that contribute to the problem and drill down to its root cause.
Step 3: Propose countermeasures to address the root cause. Generate possible solutions that can eliminate or reduce the root cause, and evaluate their feasibility, effectiveness, and costs.
Step 4: Implement countermeasures. Select the best solution and plan how to execute it. Define the roles, responsibilities, resources, timeline, and expected outcomes of the implementation.
Step 5: Check results and process. Measure and compare the results before and after the implementation, and verify if the problem has been solved or improved.
Also check if the process has been followed correctly and document any deviations or issues.
Step 6: Standardize successful processes or identify unresolved issues. If the results are satisfactory, standardize the new process and ensure that it is sustained. If not, identify the remaining or new issues and repeat the A3 method.
Therefore, A3 method is a tool that can be used in a root cause corrective action process to determine the problem of a machine that is suddenly having excessive downtime.

References: 1: What is an A31 2: How to Use an A3 Report for Problem Solving 2 3: The A3 Problem Solving Method 4 4: The A3 Report – A Simple Tool for Complex Problems 5