CIPS Supply Network Design L6M9 Exam Questions

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Total 84 questions
Question 1

Which of the following can be used to pre-assess the consequences of a network member not meeting the control requirements set by the organisation?



Answer : A

The key term in this question is 'pre-assess.' An escalation strategy identifies risks in the supply network and outlines how to manage disruptions before they escalate. It ensures control issues are handled efficiently by escalating them to senior management when necessary. (See p.194)


Question 2

Maxi Ltd is a medium-sized manufacturing organisation in the automotive industry that creates engines for cars. It has traditionally worked well with its suppliers, with strong relationships and regular meetings. There are currently around 15 suppliers who provide parts to Maxi Ltd.

Due to changing customer demands, Maxi Ltd will, from next month, modify the manufacturing of some of its products. Product X is being made more environmentally friendly, with output of CO2 being reduced by 32%. The product will take longer to produce, but there will be no additional cost to customers for this.

Maxi ltd are considering outsourcing the manufacturing of Product Y as it is not a product which is routinely ordered by customers. This will allow Maxi Ltd to focus on other products which generate higher revenues for the company. The concern within the Board of Directors is that if demand increases for this product, an outsourced company may not be able to cope with higher numbers of orders.

Product Z is an extremely popular item and oftentimes Maxi Ltd does not have the capacity to fulfil all orders. Consideration has been given to increasing the size of the factory, but this has been discarded as risky as demand is not guaranteed. The product has been available on the marketplace for a short amount of time and sales are continuing to increase, but the company believes this will soon plateau. To deal with current demand, the marketing team is working on campaigns to invite customers to make orders for this product at certain times of the year when product X is not being created in the factory. This means resources can be reallocated to the creation of product Z.

What capacity strategy is being used for product Z?



Answer : D

The marketing team is encouraging customers to make orders at specific times of the year, when product X is not being produced, to better allocate resources. This is a classic example of demand smoothing, where businesses adjust demand patterns to match available capacity. (LO 1.3)


Question 3

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 is the nature of the COO's consideration?



Answer : A

This is an issue related to the Theory of Constraints, as Team 2 is the bottleneck affecting overall production efficiency. The Theory of Constraints focuses on identifying and managing the most critical limitation in a system. (See LO 3.3)


Question 4

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.



Answer : A, B, D

Greg needs to know his fixed costs, variable costs, and price per car wash to 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

The break-even point is when revenue = costs, which means washing 20 cars per day (10 20 = 200 revenue, covering fixed and variable costs).

Number of customers (C) is incorrect, as this is calculated from the break-even formula, not an input.

Number of employees (E) is incorrect, as it is not a direct factor in the break-even calculation (only their wages as part of fixed costs).

(LO 1.3)


Question 5

What does a forcefield diagram show?



Answer : D

A forcefield diagram identifies forces (e.g., people or factors) that support or oppose change. This model, developed by Kurt Lewin, helps organisations assess and manage resistance to change. (See p.196)


Question 6

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 system is used by ABC Ltd?



Answer : C

The system used is ERP (Enterprise Resource Planning) since it links multiple business functions such as HR and finance. MRP and MRPII are primarily used for manufacturing/operations, and KPI refers to performance measurement rather than a system. (See LO 3.3)


Question 7

Which of the following are benefits of optimising the supply chain? Select ALL that apply.



Answer : A, B, C, E

Optimising the supply chain brings benefits such as increased flexibility, higher profit margins, better demand forecasting, and waste reduction.

Use of AI and technology (D) is incorrect because it is a method to achieve supply chain optimisation, not a benefit itself.

(LO 1.1, See p.3)


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