CPIM Practice Exam

How is the order point for dependent demand items primarily determined?

1. Order point system

2. Material requirements planning

3. Periodic review system

4. Economic order quantity

The correct answer is: Material requirements planning

The order point for dependent demand items is primarily determined through material requirements planning (MRP). In the context of MRP, dependent demand refers to the demand for components or materials that are directly tied to the production of finished goods. MRP uses information from the master production schedule, the bill of materials (BOM), and inventory status to calculate the exact quantity of materials required and when they are needed. By utilizing a system that takes into account lead times, inventory levels, and the scheduling of production runs, MRP ensures that materials are ordered in a timely manner to support production needs. The determination of the order point in this case is not arbitrary; it is based on the calculated requirements derived from the overall production plan. This allows for efficient inventory management and helps to minimize excess stock while ensuring that production processes are not disrupted due to material shortages. Other choices, such as the order point system or periodic review system, may be applicable for independent demand items or more general inventory control approaches, and the economic order quantity focuses on optimizing order sizes rather than specifically determining inventory levels for dependent demand items. Therefore, MRP stands out as the most suitable and accurate method for establishing order points for materials that are used to produce finished goods.