CPIM Practice Exam

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What does the time-phased order point technique primarily forecast for?

Dependent demand items
Independent demand items
Total inventory levels
Supplier lead times

The correct answer is: Independent demand items

The time-phased order point technique is primarily used for forecasting independent demand items. Independent demand refers to items whose demand is not influenced by the demand for other products, such as finished goods sold to customers. This technique helps in managing inventory by determining when to reorder based on projected demand and lead times. Time-phased order points analyze historical data and use it to establish reorder points over time, adjusting for varying demand trends. It is beneficial in environments where demand is directly related to market conditions and customer buying behavior, making it crucial for businesses focusing on finished products. While dependent demand items are driven by the production requirements of independent demand items, this technique specifically targets how to manage the inventory of those finished goods. Total inventory levels and supplier lead times are also important considerations in inventory management but are not the primary focus of the time-phased order point technique.