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The CIPS Whole Life Asset Management certification has become increasingly popular with professionals in the procurement and supply chain management space, as it provides a clear pathway for career progression and enhances employability in the industry. In addition to developing skills and knowledge in asset management, the certification also provides a pathway for professionals to gain recognition for their expertise and demonstrate their commitment to professional development.
CIPS L4M7 certification exam covers a range of topics, including the principles of whole-life asset management, asset management strategies, the role of technology in asset management, and the importance of sustainability in asset management. L4M7 exam is designed to test a candidate's understanding and application of these topics in real-world situations. Successful completion of the CIPS L4M7 certification exam demonstrates that a candidate has the knowledge and skills necessary to manage assets effectively, efficiently, and sustainably throughout their entire life cycle.
NEW QUESTION # 90
Practice of unloading goods from inbound delivery vehicles and loading them directly onto out-bound vehicles is known as ...?
- A. Automation
- B. Decommissioning
- C. Cross-docking
- D. Tracing and tracking
Answer: C
Explanation:
Cross-docking is the practice of unloading goods from inbound delivery vehicles and loading them directly onto outbound vehicles. By eliminating or minimizing warehouse storage costs, space requirements and inventory handling, cross-docking can streamline supply chains and help them move goods to market faster and more efficiently.
Cross-docking usually takes place in a dedicated docking terminal in a warehouse, where inbound goods are first received at a dock and sorted according to their final destinations. They are then moved to the other side of the dock via forklift, conveyor belt or other equipment and loaded on outbound vehicles.
Cross-docking works best with products that need to be transported quickly, such as food, that have already been sorted and labeled for customers, do not need quality inspections or have steady demand.
Reference:
- CIPS study guide page 16
- Cross-docking
LO 1, AC 1.1
NEW QUESTION # 91
The purchase-order lead time is the...?
- A. Time needed to correct errors in the defective products
- B. Period between receiving a customer order and delivering the items
- C. Period between receiving a customer order and producing the products
- D. Period between placing an order and its delivery
Answer: D
Explanation:
Purchase order lead time (POLT) refers to the number of days from when a company places an order for production inputs it needs, to when those items arrive at the manufacturing plant.
LO 2, AC 2.3
NEW QUESTION # 92
A company does not have enough space to hold inventory to satisfy an external foreign market. Therefore, the board of directors has decided that the company would buy stock in bulk and pay a fee for storage to a third- party warehouse provider local to the foreign market. This would allow the company to focus on other aspects of the business. The stock will be called off as and when required. Which of the following strategies is being pursued by this company?
- A. Outsourcing
- B. Partnering
- C. Insourcing
- D. Cross-docking
Answer: A
Explanation:
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.
NEW QUESTION # 93
A supermarket calculates that the average holding cost for an item is $1.50 per cubic meter per day. A beer pallet which has volume of 0.5 cubic meter will be stored for 5 days. What is the holding cost of this beer pallet?
- A. $4.50
- B. $3.75
- C. $4.25
- D. $4.00
Answer: B
Explanation:
The holding cost per day of the beer pallet is equal to 1.50/2=0.75
The beer pallet is stored for 5 days, the total holding cost is: 0.75*5=3.75.
LO 2, AC 2.2
NEW QUESTION # 94
Which of the following is the core idea of Lean manufacturing?
- A. Improving response to erratic demand
- B. New product development
- C. Business Continuity Planning
- D. Waste elimination
Answer: D
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.
NEW QUESTION # 95
Which of the following is a description of a distribution centre?
- A. A large building for storing things before they are sold, used, or sent out to shops
- B. A building that offers value-added services like product mixing, order fulfilment, cross-docking, and packaging
- C. A large metal box of a standard design and size used for the transport of goods by road, rail, sea, or air
- D. A building which is rented to tenants, usually on a short-term month-by-month basis
Answer: B
NEW QUESTION # 96
Which of the following is the minimum aisle width for using standard counterbalanced forklifts?
- A. 10.5 ft - 13.1 ft
- B. 4.9 ft - 5.2 ft
- C. 5.6 ft - 5.9 ft
- D. 6.9 ft - 7.2 ft
Answer: A
Explanation:
Minimum open aisle width for standard counterbalance forklift is 10.5-13.1 ft. You can look at the minimum aisle width for different equipment here, or calculate yourself with an instruction here.
LO 1, AC 1.3
NEW QUESTION # 97
Using consignment stocking with suppliers can assist with flexible warehousing when space is at a premium in the warehouse. Another advantage of using the consignment stocking approach is that ...
- A. it increases the amount of stock that needs to be held by the customer
- B. the goods do not have to be paid for until the customer uses them
- C. inventory management is easier as the stock belongs to the supplier
- D. the goods are not produced until the customer places a purchase order
Answer: B
Explanation:
With consignment stocking, the supplier retains ownership until the item is used by the customer. This approach minimizes the customer's holding costs and improves cash flow, as payment is deferred until the item is consumed. It's particularly beneficial in whole-life asset management for inventory flexibility and reduced capital commitment.
NEW QUESTION # 98
Manufacturing resources planning (MRP II) was developed from material requirement planning (MRP).
Which of the following is the additional input that is available in MRP II but does not ap-pear in MRP?
- A. Master production schedule
- B. Bill of materials
- C. Inventory records
- D. Finance
Answer: D
Explanation:
MRP I was some of the first business software to be widely adopted during the 1970s. Manufacturers sought these systems in order to improve efficiency and accuracy when it came to basic processes such as production scheduling and inventory management.
By the 1980s, manufacturers realized they needed software that could also tie into their accounting systems and forecast inventory requirements. Enter MRP II, which included these integrations in addition to all the capabilities offered by MRP I. Enterprise resource planning (ERP) software features-which we'll cover later on-are included in the following table for comparison.
Graphical user interface Description automatically generated
NEW QUESTION # 99
Which of the following costs does the EOQ minimise?
- A. Total cost of annual inventory cost
- B. Total cost of ordering inventory
- C. Total cost of safety stock
- D. Total cost of carrying stock
Answer: A
Explanation:
Economic order quantity (EOQ) was developed in 1913 by Ford W.
Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant. The EOQ minimizes the total annual inventory cost.
EOQ formula is as follow:
LO 2, AC 2.3
NEW QUESTION # 100
What term describes a method used to account for inventory, where the oldest produced items are recorded as sold first?
- A. Last in, last out
- B. First in, first out
- C. Last in, first out
- D. First in, last out
Answer: B
NEW QUESTION # 101
Which of the following best describes the relationship between a service level and safety stock?
- A. When safety stock is zero the service level always equals zero.
- B. A service level decreases in proportion to a decrease in safety stock
- C. A safety stock is not always required to achieve a required service level
- D. A service level increases in proportion to an increase in safety stock
Answer: C
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'.
NEW QUESTION # 102
With D is the annual demand (units), S is cost per order, H is annual carrying cost per unit; the formula for Economic Order Quantity is....?
- A. √(2D*S/H)
- B. √(D*S/3H)
- C. √(D*S/2H)
- D. √(D*S*H)
Answer: A
Explanation:
LO 2, AC 2.3
NEW QUESTION # 103
Which of the following costs does the EOQ minimise?
- A. Total cost of annual inventory cost
- B. Total cost of ordering inventory
- C. Total cost of safety stock
- D. Total cost of carrying stock
Answer: A
Explanation:
Economic order quantity (EOQ) was developed in 1913 by Ford W. Harris and has been refined over time.
The formula assumes that demand, ordering, and holding costs all remain constant. The EOQ minimizes the total annual inventory cost.
EOQ formula is as follow:
LO 2, AC 2.3
NEW QUESTION # 104
U-shape flow layout can utilise handling equipment if the high demands items locate adjacent to shipping docks. Is this statement true?
- A. Yes, because this layout places receiving docks and despatch docks close to one another
- B. Yes, because U-shape layout allows S-line routing more efficient
- C. No, because aisles between racks in U-shape flow are too small for any handling equipment
- D. No, because cross-docking is impossible in U-shape flow warehouse
Answer: A
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. An example of a 'U' flow design can be seen in the diagram below.
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:
LO 1, AC 1.1
NEW QUESTION # 105
The ABC approach involves classifying inventory items by unit cost, with expensive items classi-fied as 'A' items and low cost items classified as 'C' items. Is this statement true?
- A. No, ABC analysis considers the supply risks associated with an inventory item
- B. No, ABC analysis considers the usage of each inventory item
- C. Yes, 'C' items with the lowest unit prices are the tail spends
- D. Yes, 'A' items represent approximately 20% of total unit prices
Answer: B
Explanation:
ABC analysis is an approach for classifying inventory items based on the items' consumption val-ues.
Consumption value is the total value of an item consumed over a specified time period, for example a year.
The approach is based on the Pareto principle to help manage what matters and is applied in this context:
- A items are goods where annual consumption value is the highest. Applying the Pareto principle (also referred to as the 80/20 rule where 80 percent of the output is determined by 20 percent of the input), they comprise a relatively small number of items but have a relatively high consumption value. So it'slogical that analysis and control of this class is relatively intense, since there is the greatest potential to reduce costs or losses.
- B items are interclass items. Their consumption values are lower than A items but higher than C items. A key point of having this interclass group is to watch items close to A item and C item classes that would alter their stock management policies if they drift closer to class A or class C. Stock management is itself a cost. So there needs to be a balance between controls to protect the asset class and the value at risk of loss, or the cost of analysis and the potential value returned by reducing class costs. So, the scope of this class and the inventory management policies are determined by the estimated cost-benefit of class cost reduction, and loss control systems and processes.
- C items have the lowest consumption value. This class has a relatively high proportion of the total number of lines but with relatively low consumption values. Logically, it's not usually cost-effective to deploy tight inventory controls, as the value at risk of significant loss is relatively low and the cost of analysis would typically yield relatively low returns.
LO 2, AC 2.1
NEW QUESTION # 106
ASI Ltd is known for its commitment to sustainability. ASI builds railroad ties and pilings using recycled plastic bottles and industrial waste instead of standard materials such as wood, steel, and cement. This practice helps the company save 15% in compare with traditional material purchases. Which pillar of sustainability would include the practice of ASI Ltd?
- A. Profit and Expense
- B. Planet and Profit
- C. People and Planet
- D. Profit and People
Answer: B
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
NEW QUESTION # 107
In a manufacturing organisation, which of the following explains an 'indirect' stock classification of items?
- A. Where the stock is not used as part of manufacturing of the finished product
- B. Where the stock does not have to be paid for until it has been used by the manufacturer
- C. Where the stock is currently held in a warehouse owned by another organisation
- D. Where the stock has been acquired from a distributor rather than another manufacturer
Answer: A
NEW QUESTION # 108
Which of the following is the formula for calculating the re-order level?
- A. Average usage in a lead-time / Required level of safety stock
- B. Required level of safety stock - Average usage in a lead-time
- C. Required level of safety stock x Average usage in a lead-time.
- D. Average usage in a lead-time + Required level of safety stock
Answer: D
Explanation:
In management accounting, reorder level (or reorder point) is the inventory level at which a com-pany would place a new order or start a new manufacturing run.
Reorder level depends on a company's work-order lead time and its demand during that time and whether the company maintain a safety stock.
If a company maintains a safety stock, reorder level calculation changes are follows:
Reorder Level = Average Demand × Lead Time + Safety Stock
Reference:
LO 2, AC 2.3
NEW QUESTION # 109
ATT is a small retailer that specializes in selling 'seasonal goods' which change throughout the year. Some products need regular reordering and some only require a start-of-season single order. Sales volumes are unpredictable and variable. Ordering is from multiple suppliers with variable lead times (between two weeks and two months). ATT has no computerized stock management system but can monitor product sales through the barcode-equipped point-of-sale (POS) system.
Which of the following would be appropriate to support ATT for its stock monitoring and reorder requirements?
- A. Undertake variable periodic reviews of products by classifying each product by lead times and sales volume
- B. Introduce a just-in-time system using sales information with visual checks of stock to create orders
- C. Introduce a continuous stocktaking process to check all stock once per month against sales records for each product
- D. Undertake an MRP system with a dependent demand database to allow for variances in delivery and availability
Answer: A
Explanation:
Variable periodic reviews enable ATT to manage seasonal goods effectively by adjusting ordering based on:
* Lead times and sales volume: Classifying products by these factors helps in planning, aligning with varying supplier delivery times and unpredictable sales demand.
Implementing a JIT or MRP system would require more sophisticated management tools, making option C the most feasible. This method aligns with whole-life asset management by supporting efficient inventory planning while minimizing stockouts or overstock situations.
NEW QUESTION # 110
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