Qs 7 Flashcards

Question

MRP software is applied to schedule which of the following? A. Tax accounting B. Production processes C. Human resource management D. Executive meetings

Answer 1

Answer(s): B Explanation: Material Requirements Planning (MRP) software manages material requirements for manufacturing processes. LO 2, AC 2.3

Answer 2

Answer(s): B Explanation: Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier's invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order. The total ordering cost will be equal to ordering cost per order multiply with number of orders. Reference: CIPS study guide page 99-100 LO 2, AC 2.2

Answer 3

Answer(s): D Explanation: Safety stock is also known as buffer stock. As this name suggests, this type of stock provides some kind of 'buffer', which means safety stock will help the business to reduce the shocks induced by volatile demand or disruption on the supply chain. In other words, safety stock will reduces the probability of stockouts. The following graph would explain the reason why an organisation should have safety stock: Figure 1: Safety stock graph As it is only the buffer against uncertainty, safety stock level should be equal to the deviation of demand or replenishment time. Safety stock should be able to accommodate variance of demand and variance of lead time. Reference: - Safety stock explained - CIPS study guide page 84-86 LO 2, AC 2.1

Answer 4

Answer(s): C Explanation: The triple bottom line is a sustainability framework that examines a company's social, environment, and economic impact (or People, Planet, Profit). ASI Ltd practice would reduce the waste into the environment as well as keep the business more profitable. So the correct answer should be Planet and Profit. Reference: - 25 Years Ago I Coined the Phrase "Triple Bottom Line." Here's Why It's Time to Rethink It. - CIPS study guide page 202 LO 3, AC 3.3

Answer 5

Answer(s): B Explanation: Costs of holding inventory include the following: - Acquisition cost - Inventory holding cost - Costs of stock-outs Acquisition costs follow the typical procure-to-pay model. Benefits of procure-to-Pay (P2P) software include: - Vendor Management, which includes researching, selecting, engaging with, and evaluating the performance of suppliers who make up your supply chain. - Purchase Requisition Workflows, or the formal process of creating and submitting a purchase requisition (PR) for approval to meet a specific business need. - Purchase Order (PO) Workflows, covering the creation of a formal, detailed PO from the purchase requisition, including information on the quantity and quality of goods and services, as well as specific terms and conditions. - Receiving, which includes the acceptance of physical goods (or review of quality and completion for services) and entering the accepted order into inventory, tracking, and accounting systems. - Invoice Management, during which the invoice is compared to the original PO to verify pricing, quality, quantity, and terms have been met. - Accounts Payable Workflows, wherein the accounts payable department processes the invoice for payment, submits the payment to the vendor, and reconciles any related financial entries in the accounting system. The software is intended to help reduce the acquisition costs. LO 2, AC 2.2

Answer 6

Answer(s): A Explanation: There are two main processes of recycling open loop recycling and closed loop recycling. Open Loop Recycling Open loop recycling is a method that delays disposal by converting manufactured goods and spent materials into both new raw materials, which can be used for a manufacturing purpose, as a fuel source for a different manufacturing process and waste products. Typically, materials recycled through open-loop recycling will be used for purposes different from their original purpose. This means that the input into the recycling process is converted to a new raw material, which can be used as an input into another manufacturing process. Materials in an open loop recycling process are treated using various forms of treatment including heat, chemical reactions, or physical crushing. Closed Loop Recycling Closed loop recycling is a process where waste is collected, recycled and then used again to make the same product it came from. This process is restorative and regenerative by design and aims to keep materials at their highest utility and value always. Closed loop recycling is focused on resource sustainability, which means that recycling of a material can be done indefinitely without degradation of properties. In this case, conversion of the used product back to raw material allows repeated making of the same product, which helps hazardous waste generators reduce carbon footprint and achieve corporate sustainability initiatives. Closed-loop recycling is common in specialized industries, such as the computer and battery industries, which use expensive or complex goods that cannot easily be broken down post- consumption into constituent materials. A prime example of a closed-loop recycling process is the recycling of aluminum cans. Aluminum can be recycled to form new cans with little material degradation or waste creation. Reference: - Open Loop Vs Closed Loop Recycling - CIPS study guide page 203 LO 3, AC 3.3

Answer 7

Answer(s): A Explanation: Void filling is the general term giving to the challenge of filling the space left in a box after the products have been packed. This means that if there is no void filling material, the product inside can move around and could be damaged. Materials to fill voids to secure contents - Polystyrene (PS) is a synthetic aromatic hydrocarbon polymer made from the monomer known as styrene.[5] Polystyrene can be solid or foamed. General-purpose polystyrene is clear, hard, and rather brittle. It is an inexpensive resin per unit weight. It is a rather poor barrier to oxygen and water vapour and has a relatively low melting point.[6] Polystyrene is one of the most widely used plastics, the scale of its production being several million tonnes per year.[7] Polystyrene can be naturally transparent, but can be coloured with colourants. Uses include protective packaging (such as packing peanuts and CD and DVD cases), containers, lids, bottles, trays, tum-blers, disposable cutlery[6] and in the making of models. Polystyrene is generally considered to be non-biodegradable. However, certain organisms are able to degrade it, albeit very slowly. - Chips made of bio-degradable materials - Absorbent and fire-resistant material - Shredded paper, cardboard or wood-Based material - Paper or cardboard rolls - Bubble wrap - Air-filled cushions - Self expanding foam Straps are used to group items into unit load. Polypropylene or polyester are the materials most often used. The wider the strap, the stronger it will be. Using more than one strap and straps for length and width will create a strong place for stock. Reference: - Polystyrene (Wikipedia) - CIPS study guide page 65 LO 1, AC 1.3

Answer 8

Answer(s): D Explanation: In the scenario, one of the requirements for the new software is that the new one will interface with current system. Compatibility testing would be the most appropriate test here. There are also other acceptance tests that are mentioned in L4M7 study guide: - Health and safety test aims at establishing new health and safety routines, providing guidance notices and documentation and ensuring designed-in safety in operation. - Stress testing (sometimes called torture testing) is a form of deliberately intense or thorough testing used to determine the stability of a given system, critical infrastructure or entity. It involves testing beyond normal operational capacity, often to a breaking point, in order to observe the results. - A dry run (or a practice run) is a testing process where the effects of a possible failure are inten- tionally mitigated. For example, an aerospace company may conduct a "dry run" test of a jet's new pilot ejection seat while the jet is parked on the ground, rather than while it is in flight. The usage of "dry run" in acceptance procedures (for example in the so-called FAT = factory ac- ceptance testing) is meant as following: the factory which is a subcontractor must perform a complete test of the system it has to deliver before the actual acceptance by customer. Reference: CIPS study guide page 150-151 LO 3, AC 3.1

Answer 9

Answer(s): C Explanation: Direct and indirect costs of holding inventory include the following: - Acquisition costs: preparing the requisition, supplier selection and approvals, time and costs of the procurement process, etc. - Holding costs - Costs of stockouts LO 2, AC 2.2

Answer 10

Answer(s): B Explanation: Fixed-Time Period System (or Periodic Review system) is the inventory management system in which inventory is checked in fixed time periods, T, and the quantity ordered varies. The system also contains a target inventory level, R, which is restored when order received. The order quantity is calculated as: Q = R IP where: Q = order quantity R = target inventory level IP = inventory position Inventory position (IP) is equal to inventory on-hand plus quantity on order minus backorder (if any) The order quantity varies because the inventory position at each review point differs from each other. LO 2, AC 2.3

Answer 11

Answer(s): B,D Explanation: Temporary warehousing (or 'Very short-term warehousing') is offered in the market where organ- isation makes their requirements for space open online to offers or bids for available space. This appears to be an emerging market and service providers in the UK and USA typically quote a price per pallet per week with some also requiring a 'transaction fee' for movements of each pallet in and out. Consignment stocking is a facility offered by a supplier to a buyer to allow a delivery of stock to the buyer with payment only after it is used or sold to a customer. Double-deep pallet racking and carousel-style storage are two tools that leverage space within a warehouse: Reference: CIPS study guide page 31 LO 1, AC 1.1

Answer 12

Answer(s): A Explanation: Assets in their end of life need to be removed or disposed. Though an organisation can incur some costs in decommissioning or removal of the assets, it may recover costs by reselling the assets. Therefore, sometimes the organisation can gain positive cash flow from removal and disposal of assets. The answer should be "No, the organisation may recover the value of the assets by reselling it". LO 3, AC 3.3

Answer 13

Answer(s): C Explanation: ABC analysis is applied to stock and its management. It is based loosely on the Pareto principles, better known as 80/20 rule. Pareto principle is the theory that 80% of outcome results from 20% of inputs. For example, 80% of sales are to the top 20% of customers; 80% of spend on inventory is accounted for by the top 20% of stock items. The ABC concept is based on Pareto's law. The following steps are carried out for the ABC analy-sis. - Step 1: Compute the annual usage value for every item in the sample by multiplying the annual requirements by the cost per unit. - Step 2: Arrange the items in descending order of the usage value calculated above. - Step 3: Make a cumulative total of the number of items and the usage value. - Step 4: Convert the cumulative total of the number of items and usage values into a percentage of their grand totals. - Step 5: Draw a graph connecting cumulative % items and cumulative % usage value. The graph is divided approximately into three segments, where the curve sharply changes its shape. This indicates the three segments A, B and C. LO 2, AC 2.1

Answer 14

Answer(s): B Explanation: Materials that will not easily deteriorate, are generally stored in open or fairly covered areas (stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc. Stockyards are open or semi-covered areas that are used for the following: - Bulk loose or packaged materials - Bulky or oversized items that may be difficult to move inside - Materials that may require specialised handling, loading or unloading Below image shows the example of a stockyard that stores loose coal and its handling system. LO 1, AC 1.1

Answer 15

Answer(s): B Explanation: In inventory management, service level is the expected probability of not hitting a stock-out during the next replenishment cycle or the probability of not losing sales. Key performance indicators (KPIs) can be used to analyse data based on performance objectives and set actionable goals for improvement. KPIs can be developed in conjunction with suppliers as well as others, and can be used to measure the essential elements of the process. Safety stock is the amount of inventory a business needs to have to achieve a certain level of risk mitigation when it comes to stockouts. Reorder level (or reorder point) is the inventory level at which a company would place a new order or start a new manufacturing run. Reference: CIPS study guide page 131 LO 2, AC 2.3

Answer 16

Answer(s): B Explanation: Last in, first out (LIFO) is a method used to account for inventory that records the most recently produced items as sold first. Under LIFO, the cost of the most recent products purchased (or pro- duced) are the first to be expensed as cost of goods sold (COGS)--which means the lower cost of older products will be reported as inventory. Moving average: a calculation to analyse data by creating series of averages of different subset of full data set. It is commonly used with time series data to smooth out short-term fluctuation and highlight long-term trends or cycle ABC analysis is a method of analysis that divides the subject up into three categories: A, B and C. There is no technique called time-weighted series. LO 2, AC 2.3

Answer 17

Answer(s): A Explanation: The main improvements from ERP to ERP II are the following: - ERP II is web enabled as compared to Conventional ERP Which is not. - ERP is restricted to provide selected exhaustive or rigorous or wide-spread coverage in its mod-ules. But as compared to ERP, ERP II provides the true and accurate blend of the macro and the micro and affords customers with curative actions/measures after identifying the slip-up/error or fault; - ERP was embattled more headed for manufacturing or industrialization and the dilemma or difficulty is conquer in ERP II by endowing clarification for all kind of industries and sectors. - ERP is not in the position or could not possibly integrate/incorporate diverse functions from di- verse departments/divisions but ERP II could possibly do so as well as from different industries as compared to conventional ERP. - For WEB and WAP connectivity ERP II grip CRM and SCM Functionalities. - ERP II be obliged the function and purpose to an external/outdoor one and smooth the progress of better networks than remaining as internal/interior application. Reference: - Next Generation Enterprise Resource Planning: ERP II - CIPS study guide page 119-122 LO 2, AC 2.3

Answer 18

Answer(s): D Explanation: One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spac-ings of parallel lines. These include some of the most traditional and well-recognized barcode types, such as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes. Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters. There are two different scan engine types (laser scanner versus imager) for interpreting the infor- mation provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term "scanning" regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you. Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited. LO 1, AC 1.2

Answer 19

Answer(s): B Explanation: Total productive maintenance (TPM) is an innovative concept in the manufacturing industry that evolved from the idea of preventive maintenance to adopt practices of productive maintenance, maintenance prevention, and reliability Engineering. What we now refer to as TPM, has become an ingenious approach to achieve overall equipment effectiveness by involving the workforce behind the machines (i.e. the operators). 8 pillars of TPM 1) 5S - Sort, straighten, shine, standardize, and sustain Just like a physical structure starts with a grounded framework, building a strong TPM process requires a strong foundation in the form of the principles of 5S. This is a workplace organization method that is simplified into 5 basic steps: Sort tools, equipment, and materials to identify which of these can be discarded Straighten and set things in proper order to reduce unnecessary motion and efficiently travel be- tween working groups and locations Shine refers to performing necessary housekeeping to clean up the work area Standardize and schedule activities to systematically form the habits to keep the workplace orga- nized Sustain the process and principles for long-term applications The 5S approach provides a systematic approach to cleaning the workplace, thereby uncovering underlying problems and challenges. 2) Autonomous maintenance Maintenance tasks and caring for equipment should start with the people using the equipment. The empowerment of operators to work on small maintenance tasks effectively allows the maintenance teams to focus on more specialized assignments. 3) Continuous improvement Also known as the Japanese term Kaizen, Continuous Improvement promotes the attitude of pro- gressing towards zero losses and zero defects. Through small but continual tweaks to processes, the overall effectiveness and efficiency of the organization is developed. 4) Planned maintenance Planned maintenance activities are essential to the prevention of equipment breakdown. Planned maintenance is performed by periodically evaluating the condition of equipment to proactively prevent deterioration and mechanical failures. 5) Quality maintenance To ensure the satisfaction of the customer, manufacturing processes aim for zero-defect production. Standards for superior quality, and checks on whether the standards are being met, should be in place. The goal of quality maintenance is to identify any possible causes of deviations from zero- defect production. 6) Training The idea of TPM is that everyone does their part to contribute to the overall productivity of the production process. In order to achieve optimum performance, and to build each member's competence, proper training is required to equip each one with the theoretical and practical know- how of working with machines and equipment. 7) Office TPM A key role that is often overlooked is the administrative department that works behind the scenes. Like the rest of the production teams and processes, the management and administrative functions are also subject to productivity improvement. Tins includes identifying and eliminating losses, and contributing to the overall performance of the plant. 8) Safety, health, and environment The last of the eight pillars focuses on creating a safe workplace. The essence of this pillar is real-ized when actively applied to each of the other pillars. The successful implementation of this pillar will contribute to a secure and hazard-free workplace. Reference: Total Productive Maintenance (TPM) - Upkeep CIPS study guide page 163 LO 3, AC 3.1

Answer 20

Answer(s): D Explanation: (signboard or billboard in Japanese) is a scheduling system for lean manufacturing and Kanban (just-in-time manufacturing (JIT). , [poka yoke]) is a Japanese term that means "mistake-proofing" or "inadvertent Poka-yoke ( error prevention". A poka-yoke is any mechanism in any process that helps an equipment operator avoid (yokeru) mistakes (poka). Its purpose is to eliminate product defects by preventing, correcting, or drawing attention to human errors as they occur. Kaizen is a concept referring to business activities that continuously improve all functions and involve ) is the Sino-Japanese word all employees from the CEO to the assembly line workers. Kaizen ( for "improvement". Kaizen also applies to processes, such as purchasing and logis-tics, that cross organizational boundaries into the supply chain. , on'yomi reading) is a Japanese word meaning "futility; uselessness; wastefulness", and Muda ( is a key concept in lean process thinking, like the Toyota Production System (TPS) as one of the three types of deviation from optimal allocation of resources (the others being mura and muri). Waste reduction is an effective way to increase profitability. Reference: CIPS study guide page 124 LO 2, AC 2.3

Answer 21

Answer(s): A Explanation: VACUUM LIFTER uses the vacuum pad which attaches itself to a product. The suction force al-lows the product to be lifted (and rotated and placed). Vacuum lifters are used for moving and positioning glass sheets, but are also seen lifting boxes, plastic sacks, sheets of building materials and pipework. Some models feature hydraulic arms which allow easy movement of the lifted load. The lifting system will have a number of sucker pads and vacuum capability which determines the maximum weights and largest items that can be lifted. DOLLY consists of stack and sets of wheels (either casters or rollers) under the stack that allow the dolly and the heavy object on top of it to move easily and smoothly. For moving in a straight line, rollers is ideal. If you want to move manoeuvrability, dolly with sets of casters will let you swivel and turn. SACK TRUCK (hand truck) is an L-shaped box-moving handcart. It comprises a small base plat-form with two wheels at the base and a larger vertical structure. A small ledge to set objects on flat against the floor when the sack truck is upright. When moving, the truck and object are then tilted backward based on the vertical structure until the weight is balanced over the large wheels, making otherwise bulky and heavy objects easier to move. PALLET STACKER is designed to lift and stack pallets. This one is fully mobile so can move easily around the warehouse. An operator would typically sit or stand while driving like a counter-balanced, reach or straddle lift truck. LO 1, AC 1.3

Answer 22

Answer(s): A Explanation: Holding extra stocks will always improve customer service levels, or at least reduce the risk of them falling. This implies that if an organisation aims at higher service levels, they should have larger safety stock. However, increasing safety stock is not the only solution to improve service level. The widespread adoption of just-in-time (JIT) techniques particularly in the automotive industry has greatly reduced costs with increased service levels as well as the additional benefit of increased problem visibility. The correct answer should be 'A safety stock is not always required to achieve a required service level'. Reference: CIPS study guide page 104-105 LO 2, AC 2.2

Answer 23

Answer(s): D Explanation: There are several methods to reduce the acquisition costs in procurement. L4M7 study guide lists the following methods: - Buyer discretionary spend - 'User buying' - Vendor managed inventory (VMI) - Two-bin Kanban - Product catalogue - e-Procurement techniques, including some systems such as ERP, procure-to-pay (P2P), e-requisition, e-tendering, etc. - Procurement cards Reference: CIPS study guide page 155-156 LO 3, AC 3.1

Answer 24

Answer(s): D Explanation: An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight and significance on the most recent data points. The exponential moving average is also referred to as the exponentially weighted moving average. An exponentially weighted moving average reacts more significantly to recent price changes than a simple moving average (SMA), which applies an equal weight to all observations in the period. Reference: CIPS study guide page 111-112 LO 2, AC 2.3

Answer 25

Answer(s): C Explanation: Direct and indirect costs of holding inventory include the following: - Acquisition costs - Holding costs: There are 2 different types of holding costs: costs related to the value of the goods (including opportunity costs, costs of insurance, losses due to product deterioration, etc) and costs related to the physical characteristics of this inventory. - Costs of stockouts Reference: CIPS study guide page 100-101 LO 2, AC 2.2

Answer 26

Answer(s): B,E Explanation: Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. This has many different types (i.e. Data matrix, QR codes, Aztec code,...) and several different standards in use (i.e. GS1 standards, ISO/IEC 18004:2015). It can be substituted for 1D barcode, but it has the capability to hold a larger amount of data. For examples, GS1 Data Matrix can contain 3116 Numeric characters or 2335 Alphanumeric characters while GS1-128 barcode has maximum capacity of 48 characters. Like 1D barcodes, 2D barcodes are also machine-readable with dots/squares and spaces. They have symbology like this: Since the code is two dimensional, conventional laser scanner can't read it. 2D barcodes require imaging scanner to read. 2D barcodes can be also used for different purposes throughout the supply chain: identifying prod- ucts/SKU (single unit, packaged or pallet), identifying content of a purchase order or delivery, identifying the batch number from which the item originates, identifying the manufacturer, country of origin etc, tracking status of an order, shipment or delivery Reference: CIPS study guide page 44-46 LO 1, AC 1.2

Answer 27

The following costs are categorized as operation costs in the total cost of ownership (TCO) model: B. Costs of any person who operates the equipment: This includes salaries, wages, benefits, and training costs for employees who operate the equipment. E. Costs of consumables: These are the ongoing expenses for materials used in the operation of the equipment, such as ink for printers, paper, cleaning supplies, or fuel. Explanation: Operation Costs: These are the ongoing expenses associated with using the asset. They represent the recurring costs incurred throughout the asset's lifecycle. Why the other options are not operation costs: A. Decommissioning costs: These are the costs associated with disposing of or retiring the asset at the end of its useful life. They are considered disposal costs, not operation costs. C. Installation and configuration costs: These are one-time expenses incurred when initially setting up the equipment. They are typically categorized as acquisition costs or implementation costs. D. Delivery costs: These are the costs of transporting the equipment to the location where it will be used. They are generally considered acquisition costs. In summary, operation costs are the ongoing expenses directly related to the use and maintenance of an asset over its lifecycle. Reference: CIPS study guide page 163-164 LO 3, AC 3.1

Answer 28

Answer(s): C Explanation: The ISO 14000 family of standards are developed by ISO Technical Committee ISO/TC 207 and its various subcommittees. For a full list of published standards in the series see their standards catalogue. ISO 14001 provides requirements with guidance for use that relate to environmental systems. Other standards in the family focus on specific approaches such as audits, communications, labelling and life cycle analysis, as well as environmental challenges such as climate change. ISO 27000 family of standards concerns information technology, with the goal of improving security and protecting company assets. Started in 2005, the two most popular standards are ISO 27001:2013 and 27002:2013. 27001 is management-based system, whereas 27002 is a technical document, focused on the individual and putting a code of conduct in place. Organizations can choose either standard; ISO 27001 has over 22,000 certifications worldwide. It is a broad standard, and for this reason the certification can be customized to fit the needs of the organization, and is not mandatory. ISO 22000 sets out the requirements for a food safety management system and can be certified to it. It maps out what an organization needs to do to demonstrate its ability to control food safety hazards in order to ensure that food is safe. It can be used by any organization regardless of its size or position in the food chain. ISO 9001 is a family of quality management standards, there are fourteen in total. Of these, ISO 9001:2015 is the only one that can be certified to. It was first published in 1987, and has since been updated about every 7 years. The standard details how to put a Quality Management System (QMS) in place to better prepare your organization to produce quality products and services. It is customer focused, and places an emphasis on continuous improvement and top management processes that extended throughout the organization. Reference: - ISO website - Top 10 Most Popular ISO Standards - CIPS study guide page 193 LO 3, AC 3.3

Answer 29

Answer(s): D Explanation: Price setting mechanisms fall into two main categories: fixed and variable. A fixed price mecha-nism is a straightforward concept which typically results in a relatively stable budget that can be forecast. Variable mechanisms have an element of variable pricing per unit bought. Setting a fixed price mechanism is in theory a relatively simple and straightforward concept, where the collector and the buyer agree on a fixed price for a specific material or mix of materials, for a certain length of time. All other pricing mechanisms that are not fixed have an element of variable pricing per unit bought. The most common variable pricing mechanisms can be divided into two groups: 1. Where the benefit accruing to the buyer from acquiring the material is used to calculate what the payment to the seller should be; or Approaches to Materials Sales: A guide for local authorities 2. Where the price paid is indexed to a published source of market price information. The above scenario demonstrates variable pricing mechanism using published sources on inflation rate and exchange rate. CIPS also refers this mechanism as adjustable prices. Reference: - CIPS study guide page 138-139 - 10.0 Price setting mechanisms LO 3, AC 3.1

Answer 30

Answer(s): C,D Explanation: It is important to ensure safe working in storage facilities, and access to higher shelves or racking presents a challenge. Lifting at full reach becomes a problem at relative low weight. There can also be danger for other workers who are around someone working at height, from the movement of equipment or dropping stock from a height. Scissor platforms are used in high-roof warehouses to gain access to lighting, high-racking units and sections of wall and roof. ORDER PICKER is manual or powered device - some with ride-on capability and some without. This allow for low-level, medium-level and high-level picking of various items. Many are equipped with forks to allow transfer capability of larger picked boxes. Higher-level and narrow or very narrow - aisle versions have the ability to elevate operators on the front platform to higher racking to pick items. Grabs are designed to hold stock either width-wise or from above. These are either specific devices designed for grabbing materials or are available as an accessory to forklift trucks. Carousels are space-efficient, rotating devices which allow access to a large range of product from a single location. Designs are variable, with carousels rotating horizontally or vertically until the required items can be retrieved. Stacker-cranes are designed for the automated storage and retrieval of unit loads, in high-bay warehouses. They travel in aisles equipped with guide rails, electrical supply, data transmission and control systems. To ensure the storage and retrieval functions, the stacker-crane carries out three types of movement : long-travel, lifting and picking. Reference: CIPS study guide page 52-55 LO 1, AC 1.3

Answer 31

Answer(s): C Explanation: Holding costs (carrying costs) are the costs associated with the storage and handling of physical stock. There are two different types of holding costs: - Costs related to the value of the goods: financial costs (i.e. the interest on the working capital tied up in inventory, which may be the bank borrowing rate or the company's target for return on capital); cost of insurance; losses due to product deterioration; losses due to obsolescence and redundancy of inventory; losses due to theft, accidental damage etc. - Costs related to the physical characteristics of the inventory include the following: storage space; power, heat and lighting of the store; movement equipment; labour costs; administration costs. Reference: CIPS study guide page 100-101 LO 2, AC 2.2

Answer 32

Answer(s): C Explanation: ABC classifications are applied to stock and its management is based loosely on the Pareto princi-ple, better known as the 80/20 rule. The likely outcome of analysis of inventory (value importance): - Category A - about 20% of the stock items account for about 80% of the total inventory value. Items in category A have the highest value. - Category B - about 30% of items account for about 15% of total inventory value - Category C - the remaining 50% of items account for 5% of the total inventory value Reference: CIPS study guide page 91-95 LO 2, AC 2.1

Answer 33

Answer(s): C Explanation: Tote box is the reusable storage box. These can be open or have lids or flaps to close them and come in a large variety of sizes and weight loadings. A tote is ideal for holding and hauling items such as: tools, fasteners, bark dust, dry cement, cords, wires, smaller boxes,... Pallets are the platform structures designed to support a load and be lifted using the forks (typically seen on forklift trucks and other equipment). These are in a variety of standard sizes and can be made of many materials including plastics, resin, board or timber. Pallets are not containers, but support platforms. Bar racks are designed to store bars and pipes Stock cages are available in many sizes and can hold single items or groups of items Reference: CIPS study guide page 18 LO 1, AC 1.1

Answer 34

Answer(s): D Explanation: The purposes of a warehouse are to keep the inventories in good condition and to ensure that the operations is smooth. In the scenario, the warehouse has 2 stories, with goods-in and goods-out areas located on the ground floor and a lift connecting the stories. The lift could become a bottleneck if the goods inside the warehouse are not well-arranged. Since the lift is often small with limited load capacity, putting heavy bulk items on the first floor will cause bottleneck and increase the chance of accidents. Therefore, palletised items (even they have low-usage) should be placed on the ground floor. Smaller and lighter items should be stored on the first floor. Reference: CIPS study guide page 11-13 LO 1, AC 1.1

Answer 35

Answer(s): D Explanation: RFID tags are made of three different components: an RFID chip, which is an integrated circuit (IC), an antenna, and a substrate. RFID Antennas are necessary elements in an RFID system be-cause they convert the RFID reader's signal into RF waves that can be picked up by RFID tags. Without some type of RFID antenna, whether integrated or stand-alone, the RFID reader cannot properly send and receive signals to RFID tags. Reference: CIPS study guide page 49-50 LO 1, AC 1.2

Answer 36

Answer(s): A Explanation: An inventory write-off is a process of removing from the general ledger any inventory that has no value. Using the direct write-off method, a business will record a credit to the inventory asset account and a debit to the expense account. For example, say a company with $100,000 worth of inventory decides to write off $10,000 in inventory at the end of the year. First, the firm will credit the inventory account with the value of the write-off to reduce the balance. The value of the gross inventory will be reduced as such: $100,000 - $10,000 = $90,000. Next, the inventory write-off expense account will be increased with a debit to reflect the loss. The expense account is reflected in the income statement, reducing the firm's net income and thus its retained earnings. A decrease in retained earnings translates into a corresponding decrease in the shareholders' equity section of the balance sheet. If the inventory write-off is immaterial, a business will often charge the inventory write-off to the cost of goods sold (COGS) account. The problem with charging the amount to the COGS account is that it distorts the gross margin of the business, as there is no corresponding revenue entered for the sale of the product. Most inventory write-offs are small, annual expenses. A large inventory write-off (such as one caused by a warehouse fire) may be categorized as a non-recurring loss. Reference: - CIPS study guide page 86-90 - Inventory Write-Off LO 2, AC 2.1

Answer 37

Answer(s): A,B Explanation: The costs of stockouts - the costs of being out of inventory - include: - Loss of production output - Costs of idle time and of fixed overheads spread over a reduced level of output - Costs of any action taken to deal with the stockout, such as buying from another stockist at an enhanced price, switching production, obtaining substitute materials - Loss of customer goodwill due to the inability to supply or late delivery. (Procurement and Supply Chain management - 9th Edition, K. Lysons and B. Farrington, 2016) LO 2, AC 2.2

Answer 38

Answer(s): A Explanation: Material requirement planning (MRP) is a production planning and material (inventory) control system used in manufacturing. Objectives of MRP are to ensure materials are available for production while minimising inventory and to plan production and procurement activities. Bill of materials (BOM) is an important component of MRP. BOM is also known as product struc-turer. This lists all the items that comprise each assembly and sub-assembly that make up the final product or end item. Therefore, MRP is commonly used to manage dependent demand stock. Reference: CIPS study guide page 116-119 LO 2, AC 2.3

Answer 39

Answer(s): A,B Explanation: Implementing a full ERP system is not an easy option. They are complex systems and the disad- vantages include the following: - The installation of the ERP system is costly. ERP consultants are very expensive take approxi-mately 60% of the budget. - The success depends on the skills and experience of the workforce, including education and how to make the system work properly. - Resistance in sharing internal information between departments can reduce the efficiency of the software. - The systems can be difficult to use. - Change of staff, companies can employ administrators who are not trained to manage the ERP system of the employing company, proposing changes in business practices that are not synchro- nized with the system. - Having an ERP system has many advantages, but does not guarantee the total success of the company. Organizational culture, know how to involve staff and anticipate changes that will suffer the organization using this system of administration, are important elements for the completion of the implementation. - The effectiveness of the ERP system may decrease if there is resistance to share information be- tween business units or departments. Due to strong changes that implementation of the ERP system brings in the culture of work, there may be poorly trained or disinterested in making use of the same staff... - The benefits of having an ERP system are not presented immediately with the implementation of the software, they will be evident long after the system is running. - The culmination of the implementation depends on the ability and skill of the workforce, also involves education and training, to make the system is correctly applied. Reference: - What are the Advantages and Disadvantages of ERP System - CIPS study guide page 119-122 LO 2, AC 2.3

Answer 40

Answer(s): A,C Explanation: The purposes of stores and warehouses are: 1. Maximum use of space. 2. Ready access to all items. 3. Efficient movement of goods. 4. Effective utilization of labour & equipment's 5. Maximum protection of items 6. Good-house-keeping. Reference: - Warehousing: Meaning, Objectives and Functions - CIPS study guide page 3 LO 1, AC 1.1

Answer 41

Answer(s): B Explanation: The core idea of lean manufacturing is actually quite simple...relentlessly work on eliminating waste from the manufacturing process. Waste is defined as any activity that does not add value from the customer's perspective. According to research conducted by the Lean Enterprise Research Centre (LERC), fully 60% of production activities in a typical manufacturing operation are waste they add no value at all for the customer. On the other hand, agile manufacturing places an extremely strong focus on rapid response to the customer turning speed and agility into a key competitive advantage. Reference: CIPS study guide page 127-129 LO 2, AC 2.3

Answer 42

Answer(s): A Explanation: Organisations often create their own stock keeping unit (SKU) numbering system, which may or may not have a meaningful structure. Stock keeping unit is a number that is assigned to a product for the purpose of inventory management and is of tracking. In other words, a stock keeping unit is a unique identifier assigned to each product for easier and more efficient record keeping. An FDA (US Food and Drug Administration) product code describes a specific product and contains a combination of five to seven numbers and letters. The product code submitted with each FDA line item should match the actual product name and/or invoice description of the product. The International Standard Book Number is a numeric commercial book identifier which is in-tended to be unique. Publishers purchase ISBNs from an affiliate of the International ISBN Agency. The Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature is an internationally standardized system of names and numbers to classify traded products. Reference: CIPS study guide page 33 LO 1, AC 1.2

Answer 43

Answer(s): B Explanation: Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery. Reference: CIPS study guide page 83 LO 2, AC 2.1

Answer 44

Answer(s): A,B,F Explanation: A powerful benefit of MRP system is the capacity to produce exception reports, which show deviations from normal planning and performance. These enable anomalies to be investigated with a view to improve future forecasting. Material requirement planning is an electronic system for combining the following: - Known demand - Forecast demand. Known demand and forecasted demand are shown in master production schedule. - Bill of materials for the final product - Inventory records Reference: CIPS study guide page 116-119 LO 2, AC 2.3

Answer 45

Answer(s): A Explanation: In principle, use of any materials involves an environmental cost. Some packaging materials use a lot of natural resources and energy to produce. The journey taken by packaging from raw material to manufacturing and then to the initial user also incurs a 'carbon footprint'. The weight of packag-ing contributes to the fuel usage of vehicles while the volume used can add up to additional jour-neys or the use of larger vehicles. Finally, the reuse, return, disposal or recycling will also involve additional to the environmental cost. In this question: - 'Purchase the packaging materials in bulk' may incur additional fuel and carbon footprint in delivering these materials - 'Try to reduce the costs of packaging' may prompt the organisation to use less eco-friendly and cheap materials like polystyrene chips - 'Not use the packaging materials at all' can increase the environmental performance of packag-ing activities, but it also harms the products to be delivered and may cause other environmental problems (i.e. spillage of toxic chemicals into the environment) So the correct answer should be: 'Adopt international environmental packaging standards'. The International Standards Organisation (ISO) has published several standards regarding packaging and environment, namely ISO 18601, ISO 18602, ISO 18603, ISO 18604, ISO 18605, ISO 18606. Reference: CIPS study guide page 67-70 LO 1, AC 1.3

Answer 46

Answer(s): C Explanation: The amount of closing stock (properly valued) is used to arrive at the cost of goods sold in a periodic inventory system with the following calculation: Opening stock + Purchases - Closing stock = Cost of goods sold Reference: - CIPS study guide page 130-131 - Closing stock definition LO 2, AC 2.3

Answer 47

Answer(s): B Explanation: Decisions regarding stores and warehouse locations involve a complex range of issues that are unique to each business. Most storage facilities and location decisions are based on a combination of qualitative and quantitative analysis. Qualitative analysis uses subjective judgment to analyze a situation based on non-quantifiable in- formation, such as potential markets for new products, forecast on possible risks that may happen, etc. Quantitative analysis (QA) is a technique that uses mathematical and statistical modeling, meas- urement, and research to understand behavior. Quantitative analysts represent a given reality in terms of a numerical value. This may include the following: - Cost analysis for the current premises and future predictions based on current premises - Cost analysis for routine operations - Current inventory performance measures: lead times, service levels, rate of stock turn, stock-outs in a given period and stock cover To get a big picture of current situation and future demands, organisation should combine both qualitative and quantitative methods so that useful information is achieved and well-informed decisions are made. Reference: CIPS study guide page 6 LO 1, AC 1.1

Answer 48

Correct Answer: D Fixed assets may be sold anytime during their useful life. This gives rise to the need to derecognize the asset from balance sheet and recognize any resulting gain or loss in the income statement. The accounting for disposal of fixed assets can be summarized as follows: - Record cash receive or the receivable created from the sale: Debit Cash/Receivable - Remove the asset from the balance sheet Credit Fixed Asset (Net Book Value) - Recognize the resulting gain or loss Debit/Credit Gain or Loss (Income Statement) Example ABC LTD purchased a machine for $2000 on 1st January 2001 which had a useful life of 5 years and an estimated residual value of $500. The machine was being depreciated on straight line basis. However, ABC LTD decided to sell the asset on1 January 2003 for $1500 in order to raise cash for the purchase of a new machine. The disposal of the fixed asset will be recorded as follows: Record cash received or the receivable arising from the sale: Debit Cash $1,500 Remove the asset from the balance sheet As a fixed asset is recognized in the balance sheet at the Net Book Value (i.e. Cost less Accumulated Depreciation), the machine will be removed from the accounts of ABC LTD in two parts: First, the Machine Cost must be removed by crediting the ledger: Credit Machine Cost $2,500 Second, the Accumulated Depreciation in respect of the machine must be removed by debiting the ledger: Debit Accumalated Depreciation $600* *Accumulated Depreciation: (2000 - 500)/5 x 2 Years The combined effect of the above two transactions would be to remove the machine's net book value of $1400 (2000 - 600) from the balance sheet. Recognize the resulting gain or loss on the sale of machine ABC LTD received $1500 for an asset with a balance sheet worth of $1400. It therefore earned a gain of $100. The gain will be recorded as follows: Credit Gain on Disposal $100 - Accounting for Disposals - CIPS study guide page 197-198 LO 3, AC 3.3

Answer 49

Answer : C Outsourcing involves contracting a third party to manage storage or logistics functions, which allows the company to concentrate on core business activities. In this case, outsourcing the warehousing needs aligns with whole-life asset management, as it optimizes resources and mitigates the challenges of limited storage capacity.

Answer 50

Correct Answer: B Drum is the container for stock, which is usually cylindrical and can be made from a variety of materials. Contents are usually loose material or liquids Tote box is the reusable storage box. These can be open or have lids or flaps to close them and come in a large variety of sizes and weight loadings. A tote is ideal for holding and hauling items such as: tools, fasteners, bark dust, dry cement, cords, wires, smaller boxes,... For larger and bulkier items, industrial containers make it easy to keep things stored and in one spot for transportation. Due to the metal interior, an industrial container is more appropriate for items that --- unlike tools and small pieces of machinery --- lack any surface sensitivity. Solid containers like bins and totes are far from the only storage devices for the various materials that are needed in abundance at factories and warehouses. Another option is the storage bag, which can be used to hold bulk supplies of items until they're needed for the department shelves or assembly lines. LO 1, AC 1.1

Answer 51

Answer B B. Narrow aisle forklift truck Here's why: Narrow aisle forklifts are specifically designed for operation in narrow aisles, typically between 1.8 and 2.4 meters wide. Counterbalance forklifts require wider aisles for safe operation and maneuvering, making them unsuitable for this scenario. Hand pallet trucks are manual devices and not designed for high-level storage or efficient movement within narrow aisles. Reach trucks are designed for very narrow aisles, often less than 1.8 meters wide, and may not be necessary or suitable for a 2.4-meter aisle. In summary, a narrow aisle forklift would be the most efficient and safe choice for a gangway width of 2.4 meters.

Answer 52

Answer: B B. Decontamination and cleaning costs for site areas: If the older machinery used any hazardous materials (like oils, solvents, etc.), there would be costs associated with cleaning up those areas to ensure safety and environmental compliance. Why the other options are less likely to be decommissioning costs: A. Costs to upgrade electric vehicle charging facilities: These are costs associated with new infrastructure for the electric vehicle, not the decommissioning of the old. C. Sales and marketing costs of the new electric vehicle: These are costs related to launching the new product, not the removal of old equipment. D. Engineering drawing fees for the new electric vehicle designs: These are costs associated with the design of the new vehicle, not the removal of old equipment. In essence, decommissioning costs primarily involve the removal, disposal, and cleanup associated with the old equipment and its related infrastructure.

Answer 53

The most likely technology HTP is using given its description is: A. Radio Frequency Identification (RFID) Why RFID fits: Wireless Technology: RFID systems use radio waves to transmit data, making them wireless. Continuous Monitoring: RFID tags can be read continuously without line-of-sight, allowing for real-time tracking of stock movement and location. Quick Identification: RFID readers can quickly identify and track multiple items simultaneously, improving efficiency. State-of-the-art: RFID is considered a cutting-edge technology for inventory management. Why the other options are less likely: B. ABC classification management: This is a method for prioritizing inventory based on value and usage, not a technology itself. C. Handheld scanning devices: While these devices can be used with barcodes or RFID, they are not the technology itself. D. Barcodes: While still used, barcodes require line-of-sight scanning and individual item scanning, which is less efficient than RFID in this scenario. In summary: RFID's wireless nature, real-time tracking, and ability to handle multiple items simultaneously align perfectly with HTP's investment in advanced technology for its distribution center.

Answer 54

Answer: A Explanation: Explanation Mounting or embedding RFID tags on metal can be tricky. Metal surfaces reflect energy emitted from RFID readers and create interference for RFID tag antennas, which means the tag isn't able to receive power and transmit information; however, specific RFID tags will work around metal sur-faces. RFID companies have patented technology that allows RFID to work when attached to metal surfaces and even embedded within metal products. As long as you choose the correct RFID equipment for your environment and application, you won't need to worry about interference from metal. [Reference: CIPS study guide page 49-50, LO 1, AC 1.2, , , ]

Answer 55

The term that describes a method used to account for inventory, where the oldest produced items are recorded as sold first, is: B. First in, first out (FIFO) FIFO (First In, First Out) assumes that the oldest items in inventory are sold first. This means that the cost of the oldest items purchased is used to calculate the cost of goods sold (COGS). Key Points: LIFO (Last In, First Out) assumes that the most recently produced items are sold first. FIFO is generally considered more reflective of the actual physical flow of goods in most businesses. The choice of inventory valuation method can significantly impact a company's financial statements.

Answer 56

Answer: B Explanation: Explanation Many codes have integrated check digits. These are additional numbers or characters added to codes that a computer uses to verify the number is valid. The intention is to reduce the likelihood of miskeying an item and hitting an alternative live item. More often, a system is devised which a computer can calculate using combination of numbers. Barcode is a graphic symbol used to convey data. Typically the characters in a barcode symbol consist of bars/space pattern. Barcode is the method of representing data in a visual, machine-readable form. Initially barcodes represented data by varying the width and spacing of parallel lines. Radio-frequency identification (RFID) uses electromagnetic fields to automatically identify and track tags attached to objects. A prefix is an affix which is placed before the stem of a word or a string. A product code may have prefix which indicates its group, country, origins, etc. [Reference: CIPS study guide page 35-36, LO 1, AC 1.2]

Answer 57

Answer: C Explanation: Explanation Dependent demand is the requirement for stock item which is directly related to and therefore de-pendent upon the rate of production (examples are: raw materials, components, energy). The com-ponents in the scenario are dependent demand items. Independent demand is the requirement for stock item which is not directly related to, and is therefore independent of rate of production. [Reference: CIPS study guide page 95-98, LO 2, AC 2.1]

Answer 58

The correct answer is: A. It is the age beyond which it is not worth keeping an asset from a cost point of view. Here's why: Economic life refers to the estimated period during which an asset will remain useful and generate income for its owner. It considers factors like: Maintenance costs: As assets age, maintenance costs tend to increase. Obsolescence: Technological advancements can make older assets less efficient or outdated. Repair costs: The cost of repairs may exceed the value of the asset. Once the costs of maintaining and operating an asset outweigh the benefits it provides, it has reached the end of its economic life. Why the other options are incorrect: B. It is the point beyond which it is not possible to find anyone who has the skills to operate the asset: While skill availability can be a factor, it's not the primary definition of economic life. C. It is when the asset's effective performance is below the standard required by the organisation: Performance standards are important, but they don't solely determine economic life. D. It is the point beyond which it is not possible to obtain any spare parts for the asset: While spare part availability is a concern, it's not the core definition of economic life.

Answer 59

Answer: C Explanation: Along with Jidoka, Just-in-time (JIT) production is one of the pillars of the two Toyota Production System. It is a production method that fundamentally changed the way large-scale production oc-curred in the 20th century, and is the basis for Lean Manufacturing (Lean for short), which is the school of thought many modern companies have modeled themselves after. JIT production is often called a pull system because instead of using traditional push production where scheduling is done based on historical data and demand forecasting, production is scheduled based on actual customer orders. Rather than predicting demands from customers, the JIT method requires that actual customer demand exists. Production doesn't begin before an order triggers it. This system not only reduces the amount of extra inventory, but also reduces the amount of work in progress at one time. [Reference:, - Just-in-Time Production, - CIPS study guide page 122-127, LO 2, AC 2.3]

Answer 60

Answer: A Explanation: Net present value (NPV) is the 'today' net value that deprives from 'future' cash flow of an invest-ment or a capital purchase. Net Present Value is a helpful tool for assessing the total lifetime value of an investment. Procurement professionals or investors can base on this value to make decision to achieve value for money. Generally, an organisation should select the offer which has the highest NPV among their options. Preferably, the NPV of an capital investment should be positive, which means the investment eventually adds value to the business. [Reference: CIPS study guide page 177, LO 3, AC 3.2]

Answer 61

Answer: D Explanation: Explanation A 'U' flow occurs when the goods receipt and dispatch functions are located at the same end of a warehouse building. Products flow in at receiving, move in to storage in the back of the warehouse, and then to shipping, which is located at the adjacent to receiving on the same side of the building. Items with higher throughput level are located closer to the loading bays. Advantages of 'U' Flow - Excellent utilization of dock resources because the receiving and shipping processes can share dock doors - Facilitating cross-docking because the receiving and shipping docks are adjacent to one another and may be co-mingled - Excellent lift truck utilization because put away and retrieval trips are easily combined and be-cause the storage locations closest to the receiving and shipping docks are natural locations to house fast moving items - Yields excellent security because there is a single side of the building used for entry and exit [Reference: CIPS study guide page 28, LO 1, AC 1.1, , , , ]

Answer 62

Answer: D Explanation: RFID tags have very limited range. The following table was extracted from Wikipedia: 24A picture containing text Description automatically generated RFID tags can be used to do the following: - Track individual items - Track boxes of products, cages of products and pallet - Track containers with multiple loads - Locate equipment within a building - Trigger alarms should equipment or stock be removed without authorisation. RFID tags are made of three different components: an RFID chip, which is an integrated circuit (IC), an antenna, and a substrate. RFID chips are very small integrated circuit incorporating a small memory capability - many are smaller than 2mm square and 2mm thick. Despite its size, many can hold 2000 characters of data. Many retailers simply use the tag as a thick label and print both sides with product information and perhaps a barcode. It is important to note that there are multiple standards in use for RFID - some of these are standardised for industries but there are also national standards in operations. These standards need to be investigated before investment as not all readers work with all cards. GS1 is a non-for-profit organisation which make the standards for barcodes and RFID. [Reference: CIPS study guide page 49-50, LO 1, AC 1.2]

Answer 63

The correct answer is: D. Increased speed, decreasing cost, improved efficiency, and maximised space Here's why: Increased Speed: Automation significantly speeds up processes like order picking, packing, and shipping. Decreasing Cost: While there's an initial investment, automation can reduce labor costs, minimize errors (reducing costly returns), and improve overall efficiency, leading to lower operational expenses. Improved Efficiency: Automation eliminates manual tasks, reduces human error, and streamlines workflows, leading to greater overall efficiency. Maximised Space: Automated systems like automated guided vehicles (AGVs) and robotic arms can utilize vertical space more effectively and optimize storage density. Why the other options are incorrect: A: Maintenance costs, downtime, and investment costs are potential challenges, not benefits. Reduced flexibility can also be a concern in some cases. B: Decreased speed and increasing cost are the opposite of what automation aims to achieve. C: Reduced customer service, reduced picking errors, and reduced accidents are benefits, but "minimized space utilization" is incorrect. Automation typically helps maximize space utilization. In summary: Warehouse automation offers numerous advantages, including increased speed, reduced costs, improved efficiency, and maximized space utilization, leading to a more competitive and profitable operation.

Answer 64

Answer: B Explanation: Explanation Stockout is a situation where an inventory item is not available when required. The costs associated with a stockout include the following: - Lost of production output - there will be no production until the stockout is resolved (new stock is acquired). For factory operating 24/7 with no spare capacity, this lost output will not be able to be recovered. - Costs of machine downtime and of overhead spread over a reduced level of output - Costs of any action required to deal with the stockout... - Loss of customer goodwill through inability to supply or late delivery - Loss of sales or new orders - Loss of market creditability [Reference: CIPS study guide page 101-102, LO 2, AC 2.2]

Answer 65

Answer: A Explanation: Explanation Below is a formula from Toyota you can use to make an informed decision. 1. Start with the basic right-angle stacking width 2. Add the load length 3. Add 12 inches for clearance The basic right-angle stacking width is the smallest amount of space a forklift needs turn in order to insert its forks into a pallet. You can find basic right-angle stack measurements in the equipment manual or by contacting TMHNC if your business is located in Northern California. This measurement does not include the length of the load or room need for clearance. Load lengths vary depending on your application, products, etc. As a starting point, a standard pallet has a 48-inch load length. Always check your forklift’s data plate for the rated capacity (which is affected by attachments and other factors). Adding 12 inches for clearance ensures you have enough room for your forklift’s turn radius and helps protect against damage from operator error and/or product that may hang over the edge of the pallet. [Reference:, - CIPS study guide page 29-30, - How to Calculate Forklift Aisle Width Minimums, LO 1, AC 1.1]

Answer 66

Answer: A Explanation: Explanation There are different types of maintenance that organizations use to increase the uptime of their assets and utility of their facilities. Based on an organization’s budget, amount of resources, level of combined experience, and maintenance goals, one or more maintenance types are used. Proactive types of maintenance Preventive maintenance Preventive maintenance is the most popular type of proactive maintenance. To start conducting preventive maintenance tasks (PMs), an organization does not need to purchase new technology if it already has a CMMS. This is not the case with predictive maintenance which requires condition monitoring sensors and new software integrations. However, with preventive maintenance, the or-ganization runs the risk of over-scheduling maintenance tasks because tasks are scheduled based on time rather than actual conditions. That said, preventive maintenance achieves 12% to 18% cost savings over reactive maintenance. Predictive maintenance Predictive maintenance (PdM) is what savvy maintenance teams aspire to have or are already im-plementing. The major barrier to PdM is the time it takes to implement rather than the cost of the technology itself. For instance, a vibration sensor that can identify imbalance, misalignment, and resonance issues only costs around $200. But the time it takes to install, integrate with other maintenance software, and adopt a culture around is not time that all organizations are willing to allocate. For those that do allocate the time, PdM provides an 8% to 12% cost savings over preventive maintenance. Condition-based maintenance Condition-based maintenance (CBM) is at the core of predictive maintenance but, on its own, does not rely on technology to determine the condition of an asset like PdM does. For instance, a manager may instruct an operator to monitor the condition of an asset and submit a work request when a specific condition is met. This approach may, or may not be, as reliable as predictive maintenance. An organization that has highly-trained operators may spot hazardous conditions better than an organization using PdM technology that doesn’t know what to look for. Scheduled maintenance Scheduled maintenance includes work that is scheduled on a calendar for completion. The most common type of scheduled maintenance is calendar-based preventive maintenance tasks. These are scheduled well in advance of completion. For instance, an asset with a monthly PM has twelve instances of scheduled maintenance in a given year. However, just because maintenance is scheduled does not mean it’s planned. Planned maintenance implies that a maintenance planner or other type of maintenance worker has fully planned for parts, materials, skills, and other resources to be available during the scheduled time window. Planned maintenance Planned maintenance is work that’s prepared for in advance of it taking place. According to an UpKeep survey, it’s also the most popular key performance indicator (KPI) to track. A high planned maintenance percentage indicates that a maintenance team will have resources available to complete work for the time/day the work is scheduled for. Having a high planned maintenance percentage also helps boost other maintenance KPIs like schedule compliance. More planned maintenance means more successful completion of scheduled maintenance. Routine maintenance Routine maintenance is a form of time-based maintenance and preventive maintenance, though some organizations differentiate between routine maintenance and preventive maintenance. They use the latter for smaller tasks (i.e. cleaning) performed at higher frequencies (hourly, daily) and the former for larger tasks (i.e. inspections) performed at lower frequencies (weekly, monthly, annually). Additionally, routine maintenance is performed by operators, janitors, and other staff member while preventive maintenance is performed by technicians. Non-routine maintenance includes maintenance that is performed reactively or only when needed based on an asset’s conditions. Reactive types of maintenance Emergency maintenance Emergency maintenance occurs when an asset requires immediate attention in order to keep a facility operational or safe. This is the most reactive and intrusive type of maintenance as it pulls technicians away from other jobs and lowers schedule compliance. In extreme circumstances, emergency maintenance can set an organization back days depending on the scope of the repair, available parts, and the asset’s level of importance. To reduce the amount of emergency maintenance that is both unplanned and unscheduled, organizations adopt various forms of proactive maintenance. Corrective maintenance Corrective maintenance is inherently part of emergency maintenance because, when there is an emergency, something needs corrected or fixed. In this way, corrective maintenance is mostly reactive. However, it can also be proactive. If an asset with a condition monitoring sensor detects an issue, a workorder is created and a technician is sent to correct it. Similarly, preventive maintenance is considered corrective maintenance if there is an issue to fix. This is rare though as PMs are often conducted when an asset is in good working order. Other types of maintenance Deferred maintenance Deferred maintenance includes repairs and inspections that are put into a backlog due to limited budget and resources. While deferring maintenance saves money up front, the costs of not performing important maintenance compounds at 7% annually. Rising costs come from fines resulting from missed inspections and unscheduled downtime that brings production to a standstill. By far, deferred maintenance and emergency maintenance are the least desired types of maintenance. Total productive maintenance Total productive maintenance (TPM) is the broadest type of maintenance that targets more than the assets that need maintained. It also aims to improve employee satisfaction and overall morale in the workplace, specifically in manufacturing plants. TPM does this by increasing overall equipment effectiveness (OEE) and the amount of planned maintenance. More planned work means more workers have the resources they need to do their job, which means higher levels of satisfaction. TPM also leverages machine operators to participate in maintenance and take ownership of their equipment. [Reference:, Types of Maintenance - Upkeep, CIPS study guide page 158-159, LO 3, AC 3.1]

Answer 67

The removal or disposal of assets should depend on an assessment of: C. Location of the equipment and accessibility: The location and accessibility of the equipment will significantly impact the cost and feasibility of removal and disposal. If the equipment is in a remote location or difficult to access, it will increase the costs associated with its removal. E. Type of equipment and incorporated components: The type of equipment and its components will determine the appropriate disposal methods. Some equipment may require specialized handling and disposal procedures due to environmental or safety concerns (e.g., hazardous materials). Why the other options are less relevant: A. Consumer demand for the product: Consumer demand for the product is more relevant to production decisions and inventory levels, not directly to asset disposal decisions. B. The current rate of interest for new equipment: Interest rates might influence the decision to replace old equipment, but they are not the primary factors in determining whether to remove or dispose of an existing asset. D. The total cost of the equipment: The original cost of the equipment is generally not a primary factor in disposal decisions. The focus is on the current value, maintenance costs, and disposal costs.

Answer 68

he correct answer is: B. Yes, as it has no value it must be written off Here's why: Obsolete stock has no value because it cannot be sold at any price. It is no longer useful or in demand. Accounting principles require that assets be recorded at their net realizable value (the estimated selling price minus the costs of selling). If the net realizable value of the stock is zero, it must be written off. Writing off the stock removes it from the inventory balance sheet and reflects the true value of the remaining inventory. Why the other options are incorrect: A. No, the best approach would be to leave the stock where it is: Leaving obsolete stock in the storeroom ties up capital and space that could be used for valuable inventory. It also increases the risk of damage or loss. C. Yes, this will increase the sales for the period: Writing off obsolete stock does not directly increase sales. It simply removes the value of the unsalable inventory from the financial records. D. No, it should be included with the closing stock: Including obsolete stock in closing stock would misrepresent the true value of the inventory and provide a misleading picture of the company's financial position. In summary: Writing off obsolete stock is the correct accounting treatment because it accurately reflects the value of the inventory and ensures that the financial statements provide a true and fair view of the company's financial position. Sources and related content

Answer 69

Answer: A Explanation: Explanation Material requirement planning (MRP) is a production planning and material (inventory) control system used in manufacturing. Objectives of MRP are to ensure materials are available for production while minimising inventory and to plan production and procurement activities. Bill of materials (BOM) is an important component of MRP. BOM is also known as product struc-turer. This lists all the items that comprise each assembly and sub-assembly that make up the final product or end item. Therefore, MRP is commonly used to manage dependent demand stock. [Reference: CIPS study guide page 116-119, LO 2, AC 2.3]

Answer 70

The correct answer is: B. Is the minimum stock level below which actual stock should not fall Here's why: Buffer stock is a safety net of inventory kept in reserve to minimize the risk of stockouts due to unexpected demand surges, delays in orders, or production issues. It acts as a cushion to ensure that there is always enough stock on hand to meet customer needs, even in uncertain situations. Why the other options are incorrect: A. Is half of the actual stock that needs to be in the warehouse: Buffer stock is not a fixed percentage of the total stock. It's a separate quantity determined based on factors like demand variability and lead times. C. Is the maximum stock in inventory: Maximum stock levels are different from buffer stock. They represent the upper limit of inventory to avoid excessive holding costs. D. Is when the physical ordering process should start to replenish used items: This describes the reorder point, which is the level at which a new order needs to be placed to replenish stock, but it's not the same as buffer stock. In summary: Buffer stock is a crucial element of inventory management, helping businesses avoid stockouts and maintain customer satisfaction by ensuring a minimum level of stock is always available.

Answer 71

The best description of a distribution center is: D. A building that offers value-added services like product mixing, order fulfilment, cross-docking, and packaging Here's why: Distribution centers are more than just warehouses. They are strategically located facilities that: Store goods: Yes, they hold inventory, but they also... Facilitate the movement of goods: They act as hubs for receiving, sorting, and distributing products to various destinations (retail stores, customers, etc.). Provide value-added services: These services enhance the flow of goods and improve efficiency, such as: Product mixing: Combining different products from various sources into a single shipment. Order fulfillment: Picking, packing, and shipping orders. Cross-docking: Quickly transferring goods from incoming vehicles to outgoing vehicles without storing them. Packaging: Repackaging goods for specific transportation or customer requirements. Why the other options are incorrect: A. A building which is rented to tenants, usually on a short-term month-by-month basis: This describes a warehouse, which is a more general term. B. A large building for storing things before they are sold, used, or sent out to shops: This is a basic definition of a warehouse, not a comprehensive description of a distribution center. C. A large metal box of a standard design and size used for the transport of goods by road, rail, sea, or air: This describes a shipping container. In summary: Distribution centers are sophisticated facilities that play a vital role in the modern supply chain by efficiently moving and managing goods.

Answer 72

Answer: C Explanation: Explanation Economic order quantity (EOQ) model is the method that provides the company with an order quantity. This order quantity figure is where the record holding costs and ordering costs are mini-mized. By using this model, the companies can minimize the costs associated with the ordering and inventory holding. In 1913, Ford W. Harris developed this formula whereas R. H. Wilson is given credit for the application and in-depth analysis on this model. If the economic order quantity model is applied, the following assumptions should be met: - The rate of demand is constant, and total demand is known in advance. - The ordering cost is constant. - The unit price of inventory is constant, i.e., no discount is applied depending on order quantity. - Delivery time is constant. - Replacement of defective units is instantaneous. - There is no safety stock level, i.e., the minimum stock level is zero. - Restocking is made by the whole batch. Because the demand and lead time are constant, no stockout events can occur. [Reference: CIPS study guide page 113-114, LO 2, AC 2.3]

Answer 73

D. Where the stock is not used as part of manufacturing of the finished product Explanation: Indirect stock refers to items essential for the manufacturing process but not directly incorporated into the final product. Examples include: Maintenance supplies: Lubricants, spare parts for machinery Consumables: Cleaning supplies, office stationery Indirect materials: Fuel for factory vehicles, packaging materials Why other options are incorrect: A. Where the stock has been acquired from a distributor rather than another manufacturer: The source of acquisition doesn't determine whether stock is direct or indirect. B. Where the stock does not have to be paid for until it has been used by the manufacturer: Payment terms are unrelated to the classification of stock as direct or indirect. C. Where the stock is currently held in a warehouse owned by another organisation: The location of the stock does not define its classification. Let me know if you have any other questions!

Answer 74

Answer: B Explanation: Explanation Direct and indirect costs of holding inventory include the following: 1. Acquisition costs 2. Holding costs (carrying costs) are the costs associated with the storage and handling of physical stock. There are two different types of holding costs: a. Costs related to the value of the goods: financial costs (i.e. the interest on the working capital tied up in inventory, which may be the bank borrowing rate or the company's target for return on capital); cost of insurance; losses due to product deterioration; losses due to obsolescence and redundancy of inventory; losses due to theft, accidental damage etc. b. Costs related to the physical characteristics of the inventory include the following: storage space; power, heat and lighting of the store; movement equipment; labour costs; administration costs. 3. Costs of stockouts [Reference: CIPS study guide page 100-101, LO 2, AC 2.2]

Answer 75

Answer: A Explanation: Explanation Decommissioning or disposal should start with the original specifications of the assets so that the organisation and supplier can make an appropriate plan. Some specifications also mention the is-sues regarding to end-of-life environmental factors. [Reference: CIPS study guide page 200, LO 3, AC 3.3]

Answer 76

Answer: C, E Stockyards are best suited for materials with the following characteristics: C. Items that are bulky and individually packed: Stockyards are large, open-air storage areas, ideal for handling and storing bulky items like construction materials, timber, or large equipment. E. Equipment that requires larger specialized handling: Stockyards can accommodate heavy equipment and materials that require specialized handling, such as cranes or forklifts, due to their open space and lack of structural limitations. Why the other options are less suitable: A. Equipment only suited for inside storage: Stockyards are outdoor storage areas, unsuitable for items that require protection from the elements. B. Equipment with a long delivery lead time: While stockyards can store items for extended periods, the suitability of a stockyard is primarily based on the physical characteristics of the material, not its delivery lead time. D. Small equipment that is of relatively low value: Stockyards are generally not the most efficient or cost-effective way to store small, low-value items, as they are more susceptible to theft and damage in an open-air environment. In summary: Stockyards are ideal for storing and handling bulky, individually packed items, and equipment that requires specialized handling due to their size and weight.

Answer 77

Answer: A Explanation: Explanation All risk management processes follow the same basic steps, although sometimes different jargon is used to describe these steps. Together these 5 risk management process steps combine to deliver a simple and effective risk management process. Step 1: Identify the Risk. You and your team uncover, recognize and describe risks that might affect your project or its outcomes. There are a number of techniques you can use to find project risks. During this step you start to prepare your Project Risk Register. Step 2: Analyze the risk. Once risks are identified you determine the likelihood and consequence of each risk. You develop an understanding of the nature of the risk and its potential to affect pro-ject goals and objectives. This information is also input to your Project Risk Register. Step 3: Evaluate or Rank the Risk. You evaluate or rank the risk by determining the risk magni-tude, which is the combination of likelihood and consequence. You make decisions about whether the risk is acceptable or whether it is serious enough to warrant treatment. These risk rankings are also added to your Project Risk Register. Step 4: Treat the Risk. This is also referred to as Risk Response Planning. During this step you assess your highest ranked risks and set out a plan to treat or modify these risks to achieve acceptable risk levels. How can you minimize the probability of the negative risks as well as enhancing the opportunities? You create risk mitigation strategies, preventive plans and contingency plans in this step. And you add the risk treatment measures for the highest ranking or most serious risks to your Project Risk Register. Step 5: Monitor and Review the risk. This is the step where you take your Project Risk Register and use it to monitor, track and review risks. [Reference:, - What are the 5 Risk Management Steps in a Sound Risk Management Process?, - CIPS study guide page 192-193, LO 3, AC 3.3]

Answer 78

Answer: D Explanation: Explanation Maintenance can represent a significant portion of the cost in asset intensive organisations (such as Sidel - a food processor), as breakdowns have an impact on the capacity, quality and cost of operation. However, the formulation of a maintenance strategy depends on a number of factors, including the cost of down time, reliability characteristics and redundancy of assets. Consequently, the balance between preventive maintenance (PM) and corrective maintenance (CM) for minimising costs varies between organisations and assets. Nevertheless, there are some rules of thumb on the balance between PM and CM, such as the 80/20 rule. Preventive maintenance is a type of proactive maintenance, while corrective maintenance is an example of reactive maintenance. Therefore, the answer should be "Balance between proactive maintenance and reactive maintenance". [Reference:, - Preventive and corrective maintenance – cost comparison and cost–benefit analysis, - CIPS study guide page 158-163, LO 3, AC 3.1]