L4M7 Exam Dumps - CIPS Level 4 Diploma in Procurement and Supply Questions and Answers

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

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.

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.

Explanation

Calculating Inventory Turnover (Stock Turn)

As with a typical turnover ratio, inventory turnover details how much inventory is sold over a period. To calculate the inventory turnover ratio, cost of goods (COGS) is divided by the average inventory for the same period.1

Cost of Goods Sold ÷ Average Inventory or Sales ÷ Inventory

In this exercise, the stock turn equal to sales divided by inventory, or 1,000,000:250,000 = 4.

Explanation

Consignment stock is stock legally owned by one party, but held by another, meaning that the risk and rewards regarding to the said stock remains with the first party while the second party is re-sponsible for distribution or retail operations. Ownership of consignment stock is passed only when the stock is used (issued or sold in the case of a shop). Unused stock in a warehouse may be returned to the supplier when it concerns standard manufactured products. With customer specific items, agreements concerning returning products, should be negotiated.

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.

Explanation

Raw materials are basic input materials - they are only processed limitedly or have not been pro-cessed at all. Their values are equal to acquisition cost and are the lowest value of stock held.

Secondary components are the products that are combined with others to produce the finished goods. They are acquired in the processed state. Their value is higher than raw materials, but still at acquisition cost.

Work in progress is the stock part-way through manufacture that has not been finished. It is typically not completed yet, so it doesn't have full value. But the costs of processing already carried out makes it more valuable than materials and components.

Finished goods are completed and ready to be used or sold. Finished goods are the most expensive and need to be stored in good conditions.