CPIM Practice Exam

Which two organizational objectives are often in conflict?

1. Targeted level of customer service and low-cost plant operation

2. Low-cost plant operation and strong cash flows

3. High inventory investment and targeted level of customer service

4. Cash flow and profitability

The correct answer is: Targeted level of customer service and low-cost plant operation

The relationship between the targeted level of customer service and low-cost plant operation often leads to conflict within an organization. Achieving a high level of customer service typically requires greater flexibility in production, inventory management, and potentially higher operational costs to meet customer demands promptly. This might involve maintaining higher inventory levels to ensure product availability, employing more labor to handle varied requests, or expediting shipments. Conversely, a low-cost plant operation emphasizes efficiency, minimizing waste, and reducing expenses. This focus often means standardizing products and processes, which can limit responsiveness to unique customer requests and potentially lead to longer lead times. The drive to keep costs down may result in constraints that can hinder the ability to provide a level of service that meets or exceeds customer expectations. Thus, the dual goals of maintaining a targeted level of customer service while simultaneously keeping a low-cost operational framework create inherent conflicts in prioritization and resource allocation within organizations. Managing and balancing these objectives is a quintessential challenge in supply chain management.