Chapter 3 Flashcards
What is a Fixed Asset?
Accounting terms used to describe item which are in possession but not intended for regular sale. i.e. equipment, machinery land etc
What is a Current Asset?
Accounting terms given to an item which is regularly bought and sold. This include cash and debtors i.e receivables
What is the difference between Lease vs Hire
legal commitment with T&Cs allowing the owner to charge the renter with fees. The rental period is usually fixed. Hire is usually just a short term lease.
As lease is a longer term hire, lease can also distinguish itself by the T&Cs discussing taking possession, but crucially not ownership, deposit, responsibility of the lessee to maintain, insure the asset. The lessor may also discuss terms for if the lessee want to purchase the asset after leasing
What is capital expenditure?
Money spent of acquiring or maintain fixed assets.
What are consumables?
Items required to complete a process but do not form part of the finished product. Cleaning product, PPE, machinery lubrication etc
What techniques are available to reduce acquisition costs?
Buyer discretion - buyer of varying levels inc management can approve up to an amount without needing to seek further approval
User buying - end users are allowed to make purchases themselves subject to training, spend caps and category of items
Vendor managed inventory (VMI) - supplier visit site and maintain stock on site which involves stock counting, replenishment, reverse logistic - return and defective goods
Two bin Kanban
Procurement catalogue - a list of items following as much standardization as possible advertised via internal documents or could simply be an internal document to buy X from supplier Y using their online platform and sharing log in details
e-Procurement techniques - an extension of catalogues but with MRP/ ERP functions
Procurement card - specific corp cards for buying supplies of low value and often type C products. Avoid costly long processes of raising POs
What is corrective maintenance?
Also known as reactive maintenance, is the term used to describe maintenance when part have ALREADY failed
What is corrective maintenance and Schedule Maintenance?
Also known as reactive maintenance, is the term used to describe maintenance when part have ALREADY failed
Also known as preventative maintenance, this is schedule interval maintenance pre empting any failures. It is usually based on supplier recommendations based on statistical data showing when parts are likely to fail
What’s the difference between Guarantee & Warranty?
Guarantee - a commitment from seller that should the item not meet a stated quality level over a set period, the seller will be obligated to to repair, replaced or refund the item
Warranty - A commitment that the product will perform as stated for the specified period.
Remember, CIPS suggest that most failures occurs at the start of a product life they drop off as the equipment is used more, followed by a low stable pattern of failures, ending with a dramatic increase of failure as item reaches the end of its economic life cycle
What is Total Productive Maintenance Concept
Concept of proactively taking action to avoid equipment failures. Techniques include:
Training of operator to ensure correct use
Health and safety awareness
Day to day maintenance of equipment is with the operator - daily checks should be carried out, perhaps per shift and then reported
Planned/ schedule maintenance is a must
Quality maintenance - quality check and assurance of items produce can be a quick flag as to broken or about to break equipment
Remember, Cost Benefit Analysis is vital to assess TCO. A table detailing all costs and savings should be produced to document and vet opportunities.
Note, it is vitally important to apply Net Present Value (NPV) to any numbers used over the life cycle - an accounting term for an amount in the future, adjusted to todays value. This allows for a value in say 5 years to be compared to todays value which is likely a reduction due to inflation over the period. discount is applied to each year cash flow. It is possible to have positive cumulative cashflows but a negative NPV
NPV will most likely to show a lower cumulative cashflow, thus show that the project is not as attractive as first thought if NPV hadn’t been used. In short, it aims to use a TRUE cost
What is Ex works?
An Incoterm used to designate that cost of item is for collection, not delivery to a designated site.
Remember, ISO 15686 assess service life of buildings
Remember TCO should be supported with Fixed Asset Registers. These track item ID, date of acquisition, age, original cost etc. This register can suggest when new equipment is required as to support planning of life cycles. This makes the process methodical.
