DSP Test Yourself

Planned orders are generated in periods where the total requirement is greater than the total availability.
Total requirement = Gross requirement + safety stock; total availability = projected available balance from the previous period + scheduled receipts in this period.
The answer is 4

This is an example of period order quantity. The answer is 4

High levels of accuracy will result in fewer surprise shortages, and the level of safety stock will be cut, thus reducing the overall levels of inventory, the risk of obsolescence. While cycle counting may be easier as the problems have been resolved, we cannot afford to reduce the vigilance that achieved this high level of accuracy, so the LEVEL of cycle counting will not be reduced. The answer is 1

In the same way as a cycle count is an audit of the inventory records to dive inventory accuracy, auditing BOMs is the best way to achieve BOM accuracy. 1 and 2 are practices that should be in place, and the audit verifies their completeness and accuracy.  4 will help to maintain inventory accuracy, but the best answer is 3

Safety lead time offsets the planned order receipt date from the net requirement date by the duration of the safety lead time. The answer is 3

The provision of this data enables the supplier to plan his business better, therefore it will facilitate options 1, 3 and 4. It will not enable him to better control his production activity, which is done through PAC. The answer therefore is 2

In a process based, or job shop type industry, the most effective way to reduce lead times is through reducing queues. The answer is 3

I is the responsibility of quality and engineering; III is the responsibility of the materials planner. II and IV are the responsibility of purchasing. The answer is 2

Full pegging will identify the products that create the demand for this item and that will be affected by this surprise shortage. We will still need to look at the MRP records to identify the material affect of the short in relation to each of those parts, and the routing to identify if enough interoperation time exists to enable a late start of the order for the part without delaying completion (by expediting to reduce queue time etc). The best answer therefore is 4

The inputs to MRP are the MPS, Inventory data (which includes open purchase and works orders) and bills of material. The only options opposite that fall into those categories are II and III. The forecasts will be used as an input to the MPS, and material constraints will be an input to RCCP. The answer is 2

Stock status should be updated when the parts have been made available for use. Only 3 of the above four options satisfies that criteria

Actual manufacturing lead time will be affected by the urgency of the order – the priority – and the availability or otherwise of capacity to maintain queues at the planned level. The answer therefore is 3

The inputs to capacity requirements planning are the capacity available, the open orders (scheduled receipts) and planned orders. The production plan is an input to Resource Planning. The correct answer therefore is 4

All of the above except money may be used as a measure of capacity. The answer therefore is 3

All of the above are included in the outputs of an MRP system. The answer is 4

The only one of these four options that directly affects capacity planning is the generation of planned orders. Each of the other three is how it does that. The answer is 3

MRP is said to be a priority planning system – it plans the availability of material at the date of need. CRP assists in this by planning the availability of capacity – but will sometimes plan material availability prior to date of need to enable a balanced workload to be created. Input/output control is a capacity control technique, and dispatching is a priority control technique. The answer is 1

Blanket orders are used to reduce lot size by reducing ordering cost. Therefore 1 is true statement – the cost is not the paper, but the time involved in managing all of the information and the actions involved with the paper.

Options 2, 3 and 4 all refer to specific quantities, and so are not as good an answer as 1.

The best answer is 1

The only way to reduce the actual carrying cost is to reduce the level of inventory. Average inventory = lot size/2 + safety stock, and of the above four options the only one that directly addresses this is option 2.

Eliminating incoming inspection reduces the ordering cost, which in turn CAN lead to a reduction in lot size. Establishing storage points merely redistributes inventory, not reduces it, and reducing the carrying cost factor will enable BIGGER lot sizes which will increase inventory

ABC analysis utilizes Pareto’s Law; applied to inventory it states that 80% of the money spent will be spent on 20% of the parts. ABC analysis classifies parts according to their level of importance based on annual spend on each part. Typically every A class part is counted once per month; every B class part once per quarter and every C class part at most twice per year.  Inventory planning is carried out by MRP; stockroom management will include cycle counting – but the classifications are set on more than the value of goods in stock. Trend analysis is used to develop forecasts. The best answer is 2

Inventory is included in the balance sheet as an asset – that is an asset in the financial sense. Therefore 1 is true and 2 is false. Operationally, inventory can be either an asset or a liability: an asset insofar as by operating as a buffer between the different stages in the supply chain it will enable each stage to progress at the pace most suited to it; a liability insofar as we are obliged to make use of the inventory that we have, which may or may not be most suited to the needs of the moment.  Therefore both 3 and 4 are true. The best answer is 2

Planned order receipts are generated by MRP in period where there is a net requirement. A net requirement is generated when DEMAND (the sum of the gross requirements and the safety stock) exceeds AVAILABILITY (the sum of the projected available balance in the previous period and any scheduled receipts in the period being planned). This means that 1, 2 and 3 are all false, and while 4 is not a COMPLETE answer (based on the above statement on when a net requirement exists) it is the BEST answer of the four options given. The answer is 4

Excess stock exist when we have more of an item on hand or on order than there is demand for; Obsolete stock is inventory for which no demand exists and for which no demand is foreseen; slow-moving stock is similar to excess stock. Lot size stock is the excess stock arising from purchasing in quantities greater than the current demand. The answer is 4

The greater the degree of inventory accuracy, the less need there is for safety stock to guard against surprise shortages. As the average inventory is Lot Size / 2 + Safety Stock, this will result in a reduction in inventory levels, and a reduction in inventory carrying costs. Therefore 1 is false and 2 is true. Cycle counting helps maintain high levels of accuracy buy identifying the causes of inaccuracy, so 3 is false. 4 is false as shortages can occur from unexpected demand, and accuracy cannot prevent that. The answer is 2

Before an order is released it is either planned order or a firm planned order. In the case of planned orders, the two dates will NOT differ, but they may do for FPOs.

Statement 1 is false, because either date may change after the order is released.

Statement 2 is true, as we must ensure that goods are available at the time they are needed.

Statement 3 is true, but is not a good answer as there an inference of relying on “chance” to manage our business – not a good idea.

Statement 4 is false, because either date may change after the order is released

A product based layout is best represented by a production line. To speed up a production line, it is best to equalize the time needed at each work station, and to reduce the time between completion of a product and the commencement of work on the next product. This is best achieved by 4 opposite – set-up times are practically irrelevant; there are no queues, and equalizing task times may mean that some task times may need to be increased

Strategic sourcing is required where there is any risk in terms of availability, technology or price. Only 4 opposite encompasses any of these

Statement I is generally false – the lower a component is down the product structure tree (the lower the level on bills of material) the more likely it is that it will be used in multiple products.

Statement II is true, (see above)

Statement III is true as the primary purpose of the low level code technique is to identify to the software that ALL of the possible sources of requirements for the part have been processed. However, a net change system will only replan a part if any unplanned event occurs for that part, so the low-level code is not necessarily needed in that case.

The best answer is 3

MRP outputs include a schedule of planned purchase and production orders; and reschedule messages where appropriate for open production and purchase orders. These are used for production scheduling, prioritizing and monitoring orders on the shop floor and for detailed capacity planning. These are options I, III and II respectively. Option IV, resource planning, is carried out at the Sales and Operations Planning process.

The correct answer is 1

Physical inventories are necessary only if an accurate, well-controlled, perpetual inventory system cannot be maintained.

Many studies have shown that physical inventories introduce more errors than they correct.