CPIM Practice Exam

What approach is used in distribution requirements planning to manage inventory needs?

1. Just-In-Time

2. Time-phased order point approach

3. Batch processing

4. Continuous review system

The correct answer is: Time-phased order point approach

The time-phased order point approach is a method employed in distribution requirements planning (DRP) to manage inventory needs effectively. This approach involves analyzing inventory levels and demand forecasts over specific time intervals to determine when and how much inventory should be ordered. By scheduling replenishment orders based on projected demand, businesses can ensure that inventory is available when required, thereby minimizing stockouts and excess inventory. The strength of this approach lies in its structured timeline, allowing organizations to align their inventory levels with anticipated consumer demand over various periods. It facilitates better planning by giving insights into when to place orders and how to optimize inventory levels to meet distribution requirements while balancing cost efficiencies. In contrast, Just-In-Time focuses on reducing inventory holding costs by receiving goods only as they are needed in the production process, which could be less applicable in the context of distribution planning. Batch processing refers to a method of executing tasks in groups or batches rather than continuously, which may not provide the ongoing responsiveness required for managing inventory needs. The continuous review system involves monitoring inventory levels consistently and placing orders whenever stock drops below a predetermined threshold, which can be less effective in the dynamic environment of distribution planning that often requires per-period forecasting. Overall, the time-phased order point approach is ideally suited for DR