CIPS L4M7 - Whole Life Asset Management

Explanation

The bullwhip effect (or Forrester effect) is a distribution channel phenomenon in which forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in customer demand as one moves further up the supply chain.

Seasonal demand: consumer interest in purchasing particular products only during a specific peri-od within the calendar year.

OPITZ is a coding system used to form Groups in Group Technology philosophy of Manufactur-ing.

The Pareto Curve is the shape created when the bars of a Pareto Chart are progressively summed and the points joined together. The final curve ends at 100% of items in the chart, which means that you can then draw a line across at 80% and 'bounce' it down to find the bar which, when combined with all bars to its left, will give 80% of all items.

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.

Explanation

Available inventory (or Inventory position - IP) is equal to inventory on-hand plus quantity on order minus backorder (if any)

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

Safety stock is the stock held as a contingency or insurance against disruption or unexpected de-mand. Holding safety stock reduces the risks of stockouts, when an organisation is unable to meet an order or continue production due to lack of finished goods or input materials.

For single items, an extra investment in inventory (higher levels of safety stock) will always in-crease customer service levels. Conversely, higher service levels imply larger quantities of safety stocks and an increased investment in inventory. (Procurement and Supply Chain Management - 9th Edition)

However, high levels of safety stocks also increase the inventory cost. There must be a balance between inventory costs and customer service. Thus, calculating the should-be safety stock based on a determined service level has long been recommended by many professionals.

Key considerations in choosing a warehouse location include:

Local regulations: Compliance with bylaws and other local authority requirements.

Nature of items stored: Warehouses for perishable or hazardous items may have specific location requirements.

These factors ensure the warehouse is compliant and suitable for the type of inventory stored, optimizing safety and operational efficiency, both crucial in whole-life asset management.

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

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.