CIPS L6M9 Supply Network Design Exam Practice Test

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Total 84 questions
Question 1

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)


Question 2

Which of the following is a difference between a supply chain and a supply network? Select ALL that apply.



Answer : B, C, D

A supply chain is a simple, linear system where products move from A B C.

A supply network is multi-layered, with horizontal and vertical connections, making it more complex.

Dimension difference (B): Supply networks have larger dimensions, with multiple supply channels and flows.

Complexity (C): A supply network is more intricate than a single supply chain.

Number of players (D): Supply networks involve more entities than a simple supply chain.

Profit made (A) is incorrect, as both supply chains and supply networks can be profitable.

Location of players (E) is incorrect, as both supply chains and networks can be local or global.

(LO 1.1, See p.8)


Question 3

XYZ Ltd is a manufacturing organisation that buys raw materials from ABC Ltd, including rare materials such as rubies and gold. XYZ Ltd accepts all orders from ABC Ltd as the materials are rare, making the relationship one-sided. Which type of network best describes this relationship?



Answer : C

This is an asymmetric relationship, meaning it is one-sided---one company has more power in the supply relationship.

Asymmetric supply networks occur when one party is dependent on the other (e.g., XYZ Ltd relies on ABC Ltd for rare materials).

Symmetric networks involve mutual negotiation and equal dependence.

Since XYZ Ltd must accept whatever ABC Ltd supplies, the relationship is asymmetric. (LO 1.1, See p.4)


Question 4

When designing a supply network, which of the following stages should be completed first?



Answer : B

The correct sequence for designing a supply network is:

Determine strategic objectives

Confirm the network scope

Analyse potential risks

Determine the approach for managing material and information flow

Track material and information flow

Since network scope defines the boundaries, scale, and overall structure of the network, it must be confirmed first. (LO 1.1, See p.3)


Question 5

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 6

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 area of the product lifecycle is product Z in?



Answer : B

Product Z has been available for a short amount of time, and sales are still increasing. Since the demand is growing but has not yet stabilized, it is in the growth stage of the product lifecycle. (LO 2.2)


Question 7

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)


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Total 84 questions