CPIM-Part-2 Exam Dumps : Certified in Planning and Inventory Management(Part 2)

 A focused differentiation strategy is a type of focus strategy that targets a narrow buyer segment and pursues a unique competitive advantage. A focus strategy is a business-level strategy that involves concentrating on a specific market niche or segment and tailoring the products or services to the needs and preferences of that niche1. A differentiation strategy is a business-level strategy that involves creating a product or service that is perceived as unique, distinctive, or superior by the customers, and charging a premium price for it2. A focused differentiation strategy combines these two approaches by offering a differentiated product or service to a narrow market segment that has unique demands or characteristics. This strategy allows the firm to create value for its customers and charge higher prices than its competitors, while avoiding direct competition with firms that target a broader market or offer lower-cost products or services3.

An example of a focused differentiation strategy is Lululemon, a Canadian company that sells high-end yoga and athletic apparel. Lululemon targets a niche market of health-conscious, affluent, and fashion-oriented women who are willing to pay premium prices for its products. Lululemon differentiates itself from other sportswear brands by offering high-quality, stylish, and innovative products that are designed to enhance the performance and comfort of its customers. Lululemonalso fosters a strong brand identity and community among its customers by providing yoga classes, fitness events, online platforms, and social media engagement4.

References:

• Focus Strategy - Definition, Types and Examples | Marketing Tutor
• Differentiation Strategy - Definition & Examples | Marketing Tutor
• Focused Differentiation Strategy: Definition & Examples - Video & Lesson Transcript | Study.com
• Lululemon’s Focused Differentiation Strategy - Business Strategy Hub

 In a make-to-stock (MTS) environment, improving estimates of customer demand would improve the trade-off between the cost of inventory and the level of customer service. MTS is a production strategy that manufactures products in anticipation of customer demand, based on forecasts. The main challenge of MTS is to balance the inventory costs and the customer service levels. Inventory costs include holding costs, ordering costs, and obsolescence costs. Customer service levels measure the ability to meet customer demand without delay or stockout. A trade-off exists between these two objectives, as higher inventory levels can increase customer service levels but also increase inventory costs, and vice versa.

Improving estimates of customer demand can help reduce the trade-off between inventory costs and customer service levels, as it can lead to more accurate production planning and inventory management. By forecasting demand more accurately, a company can avoid overproduction or underproduction, which can result in excess inventory or stockouts, respectively. By producing the right amount of products at the right time, a company can lower its inventory costs and increase its customer service levels.

Eliminating raw material stockouts would not improve the trade-off between inventory costs and customer service levels in a MTS environment, as it would not affect the finished goods inventory or the customer demand. Raw material stockouts are a supply issue that can disrupt the production process and cause delays or shortages in the finished goods. However, they do not directly impact the inventory costs or the customer service levels of the finished goods, which are determined by the demand forecasts and the production plans.

Decreasing the frozen time zone would not improve the trade-off between inventory costs and customer service levels in a MTS environment, as it would increase the variability and uncertainty in the production process. The frozen time zone is the period of time in which no changes can be made to the production schedule, as it is considered fixed and final. Decreasing the frozen time zone would allow more flexibility and responsiveness to changes in demand or supply, but it would also increase the risk of errors, disruptions, or inefficiencies in the production process. This could resultin higher production costs, lower quality, or longer lead times, which could negatively affect the inventory costs and the customer service levels.

Reducing manufacturing overtime would not improve the trade-off between inventory costs and customer service levels in a MTS environment, as it would reduce the production capacity and output. Manufacturing overtime is a way of increasing the production capacity and output by extending the working hours of the production resources, such as labor or equipment. Reducing manufacturing overtime would lower the production costs, but it would also lower the production output. This could result in insufficient inventory to meet customer demand, which could lower the customer service levels. References := Make-to-Stock (MTS) Definition, Make-to-Stock (MTS) vs Make-to-Order (MTO) | TradeGecko, Value Creation: Assessing the Cost-Service Trade-off

A reduction in purchased lot sizes will reduce inventory levels. Purchased lot sizes are the quantities of inventory that a stage of the supply chain either produces or purchases at a given time1. Inventory levels are the amount of stock available throughout the distribution network2. By reducing the purchased lot sizes, a company can lower the amount of inventory it holds, which can reduce the inventory costs, such as holding costs, shortage costs, and order costs3.

Holding costs are the costs associated with storing and maintaining inventory, such as rent, utilities, insurance, taxes, depreciation, and obsolescence4. Shortage costs are the costs incurred when demand exceeds supply, such as lost sales, customer dissatisfaction, and backorder costs4. Order costs are the costs involved in placing and receiving orders, such as transportation, inspection, setup, and administrative costs4.

Reducing the purchased lot sizes can lower the holding costs by decreasing the average inventory in the supply chain due to either production or purchases in lot sizes that are larger than those demanded by the customer1. This is also known as cycle inventory1. Reducing the purchased lot sizes can also lower the shortage costs by increasing the frequency of orders and decreasing the lead time between orders5. This can help avoid stockouts and meet customer demand more consistently. Reducing the purchased lot sizes can also lower the order costs by optimizing the order quantity based on the trade-off between holding costs and order costs. This is also known as economic order quantity (EOQ).

Therefore, a reduction in purchased lot sizes will reduce inventory levels and inventory costs.

References: 1: Chapter 11 Flashcards by Amy Horton 3 2: Optimal Inventory Levels: Calculate & Manage Your Stock Levels 2 3: Inventory Levels Explained: The Highs & Lows Of Optimal Stock 1 4: Economic Order Quantity Model in Inventory Management 4 5: Dual sourcing: Advantages and disadvantages : Economic Order Quantity: What Does It Mean and Who Is It For5