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CIPS Supply Network Design Sample Questions (Q50-Q55):
NEW QUESTION # 50
Ajewelry manufacturerhas recently acquired themining companythat supplies the precious metals used in its jewelry production.
What is this an example of?
- A. Backward vertical integration
- B. Forward vertical integration
- C. Backward horizontal integration
- D. Forward horizontal integration
Answer: A
Explanation:
Backward vertical integrationoccurs when a companyacquires a supplier or producerthat is further upstreamin the supply chain. In contrast,forward vertical integrationhappens when a companybuys a retailer or distributorfurtherdownstream.
#Note:Forward horizontalandbackward horizontal integrationdo not exist-these are trick options. (See LO 1.2, p.42)
NEW QUESTION # 51
The operations department of ABC Ltd has recently launched a new product. The product is manufactured within a large factory and then sent to retailers for sale. The department has a system in place which details the components required for the product and the quantities required to fulfil customer demand. The system works online and links to other areas of the business including HR and finance.
So far, several large orders have been placed for the product from different retailers. The Chief Operations Officer (COO) has decided to programme the completion of the orders based on when the orders were placed.
The benefit of this strategy is that it will give each customer a similar lead time. Thus far no buffer stock has been created as products are only created when orders are received.
Three teams are required to make the product and the product flows from team one to team two to team three, each team adding a component to the product. Unfortunately, team two are short staffed and are completing their work at a slower rate than the other two teams. This is a huge consideration for the COO as it will impact upon the capacity of the organisation.
The retailers have all signed contracts with ABC Ltd and the COO is extremely happy that they are long term contracts. Contract 1 is with retailer X and the price is set for three years. Contract 2 is with retailer Y and is a five year contract where the price will be reviewed annually in line with CPI. Contract 3 has a variable pricing mechanism based on the volume of products ordered.
What pricing mechanism is being used with supplier Y?
- A. Fixed price
- B. Variable price
- C. Indexation
- D. Gain share
Answer: C
Explanation:
Indexationis the correct pricing mechanism because the price is adjusted based onCPI (Consumer Price Index), which is a form of indexed pricing. This ensures that prices fluctuate in response to inflation or other economic indicators. (See LO 3.3)
NEW QUESTION # 52
Greg is the manager at a car wash and is trying to work out the break-even point of his business. Which of the following pieces of information will he need to consider to understand his break-even point?Select ALL that apply.
- A. Number of customers
- B. Number of employees
- C. Fixed costs
- D. Variable costs
- E. Price per car wash
Answer: C,D,E
Explanation:
Greg needs to know hisfixed costs, variable costs, and price per car washto determine his break-even point.
For example, if:
* Fixed costs(rent, bills) = £100/day
* Variable cost per car wash(soap, sponges) = £5
* Price per car wash= £10
Thebreak-even pointis when revenue = costs, which means washing20 cars per day(£10 × 20 = £200 revenue, covering fixed and variable costs).
* Number of customers (C) is incorrect, as this iscalculated from the break-even formula, not an input.
* Number of employees (E) is incorrect, as it isnot a direct factorin the break-even calculation (only their wages as part of fixed costs).
(LO 1.3)
NEW QUESTION # 53
Which of the followingcapacity planning strategiesis theleast conservative?
- A. Incremental strategy
- B. Demand smoothing
- C. Lead strategy
- D. Lag strategy
Answer: C
Explanation:
* Lead strategyis theleast conservativeas itincreases capacity before demand is proven, making it risky but proactive.
* Lag strategy (B)waits for demand toexceed capacitybefore expanding.
* Incremental strategy (C)expandsgradually over time.
* Demand smoothing (D)focuses onmanaging demand fluctuations, not increasing capacity.
(LO 1.3, See p.54-55)
NEW QUESTION # 54
What does a forcefield diagram show?
- A. The sequencing of events within an operational strategy
- B. People in favour of change and against it
- C. The potential causes of an issue that has occurred
- D. The flow of information through a supply network
Answer: B
Explanation:
Aforcefield diagramidentifies forces (e.g., people or factors) that support or oppose change. This model, developed byKurt Lewin, helps organisations assess and manage resistance to change. (See p.196)
NEW QUESTION # 55
......
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