Certified in Production and Inventory Management (CPIM)

The Certified in Production and Inventory Management (CPIM) credential is something to seriously consider when on a career path to production and inventory management, operations, supply chain management, procurement, materials management, or purchasing. The knowledge acquired while preparing for the CPIM examination will be used every day by a professional in all of these fields. A CPIM credential will offer a better position for advancement to higher positions, as well as the potential for a higher salary, in both short-term and long-term scenarios.

The following five examinations must be passed in order to earn the CPIM designation:

1. Basics of supply chain management
2. Master planning of resources
3. Detailed scheduling and planning
4. Execution and control of operations
5. Strategic management of resources

All candidates must take and pass the basics of supply chain management examination, before attempting the other examinations. This is because knowledge of the material covered in this examination is assumed in the other examinations. The remaining four examinations cover similar topics, but they do so in considerably greater depth.

1. The basics of supply chain management examination covers manufacturing, distribution, service, and retail industries:

  • The concepts of various supply chain elements.
  • Manage demand, including markets and customer expectations.
  • Design products, processes, and information systems.
  • Understand common supply issues, such as inventory, cost, function, and metrics.

2. The master planning of resources examination evaluates a candidate’s knowledge of long-term planning for supply and demand:

  • Recognize the demand for goods and services that support the marketplace.
  • Execute a schedule for a production plan that brings together the plans and goals for a business.
  • Plan a distribution network; include how to replenish when needed.

3. The detailed scheduling and planning examination requires an understanding of the various tools and techniques that are available for the planning of inventory, as well as the effect that each technique has on a business:

  • Manage inventory, planning material and capacity requirements, and procurement and supplier planning.
  • Recognize the importance of supply chain management and how it relates to scheduling, planning, and sourcing.
  • Translate plans and schedules into a product or service that is tangible to the customer.
  • Make sure that the master plan is executed and controlled in a proper manner.
  • Allocate resources to manage an even supply distribution of products and services.

4. The execution and control of operations examination tests a candidate’s knowledge on translating plans into activities that can be executed by a business:

  • Compare projected output to actual output and take appropriate corrective action as needed.
  • Communicate ideas to a group and instruct others on how to implement those ideas.
  • Determine how to best allocate competing resources.
  • Explain performance data to a group.
  • Understand how to execute quality initiatives and continuous improvement plans.
  • Evaluate and participate in design decisions.

5. The strategic management and resources examination requires candidates to have a grasp of how market requirements drive the resources and processes of a business:

  • Understand concepts that require knowledge of a combination of concepts in production and inventory management.
  • Know the relationship between processes, technologies, operations, and supply chain functions.
  • Understand how business strategies are developed and how operations strategies are implemented in various business environments.

Certified in Production and Inventory Management (CPIM) Practice Questions

1. The advantages of putting a customer in possession of consignment stock are counterbalanced by the negative impact of:

A. Having to pay for consignment stock at the end of each period
B. Carrying costs
C. Streamlined delivery
D. Having to keep a customer in continuous supply

2. Which of the following four elements of materials supply is NOT attributed to inventory cost?

A. Stockout
B. Ordering cost
C. Carrying cost
D. Production rate

3. The production component most closely related to and impacted by the amount of WIP is:

A. Product lead time
B. Work in progress
C. Carrying costs
D. Transportation costs

4. An accounting department should determine the value of WIP as:

A. The amount paid to the company providing the inventory materials
B. All carrying, production, and setup costs accrued before the product’s or material’s use in the next phase of production
C. The amount accrued in carrying costs only
D. Ordering and setup costs

5. An inventory costing system may show a sudden, sharp increase because:

A. Labor costs suddenly increase
B. Deregulation incurs higher utility costs
C. Stockouts have a major impact on profitability
D. A business must find another supplier

Answers

1. B: Answer choice “b” is the correct answer, and closer examination of the other answer choices should help you conclude those elements to be advantageous. Consignment stock is usually warehoused with a middleman in close proximity to the customer or directly within the customer’s business. Carrying costs include cost of storage, pilferage, spoilage, insurance, and other handling charges. However, consignment stock helps to streamline the delivery process, maintains the relationship with the customer, and ensures that finished products or materials are ready for customer uses. The only “negative” is that the business providing the consignment stock must account for inventory carrying costs and ancillary charges.

2. D: The correct answer is “d,” the production rate established to meet demand. The production rate set up by the management planning will impact the materials held in inventory and the ordering of resupply, as well as related activities, but the set rate of production is not a typical inventory function or cost. When managing inventory, however, the costs that may be categorized as inventory costs include the impact of stockouts, the cost of ordering and setup, “chasing costs,” and the direct costs of inventory—insurance, spoilage, handling, insurance, etc.

3. A: The best answer is “a.” Inventory is maintained in a condition ranging from single component parts to nearly finished product. Some companies may be in the business of adding the next step to the phase of processes that leads to a finished product. The amount of time it takes for that business to complete this process is called “lead time.” The amount of lead time can vary, but it determines the amount of raw materials or unfinished product to be maintained in inventory. Carrying and transportation costs are relevant factors but should not be the primary factors in determining inventory.

4. B: The best answer is “b,” though some of the other answer choices may have some relevance to the amount the accounting department will charge to inventory. The value of work in progress (WIP) consists of all carrying, production, and setup costs accrued before the product’s or material’s use in the next phase of production. Carrying and order setup costs are only part of the WIP value equation. The amount paid to the company providing the inventory is also a factor but does not include the costs of storage, handling, transporting, and maintaining the inventory.

5. C: The best answer is “c.” The inventory management system must ensure against stockouts because they represent an expensive interruption of manufacturing and have a major impact on profitability. Aside from the idling of machinery and labor, stockouts may incur higher costs resulting from shipping back-ordered materials or products. Finding other suppliers is dependent upon whether the stockout is caused by the weakness of inventory management (ordering) or supplier inefficiencies. The fault most often lies with inventory management and ordering. Labor costs should never surprise because they are fixed, established costs, not likely to suddenly spike.

 

Last Updated: June 27, 2019