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CIPS L4M7 Certification Exam is recognized by employers around the world as a mark of excellence in asset management. Professionals who hold this certification are highly sought after by employers in a range of industries, including manufacturing, construction, healthcare, and transportation. CIPS Whole Life Asset Management certification is also recognized by professional bodies such as the International Organization for Standardization (ISO) and the Institute of Asset Management (IAM), further enhancing its value in the global job market.
NEW QUESTION # 10
What is meant by the term 'obsolete stock'?
- A. Stock which has been stolen
- B. Stock which has become outdated
- C. Damaged stock
- D. Low value/low risk stock
Answer: B
Explanation:
Obsolescent stock is stock, usually finished goods, which is in good condition and satisfactory working but for which demand is irreversibly falling towards zero. Once this demand reaches zero the stock can be considered 'obsolete'. It cannot be used or sold in its current state. Food ingredients (like candy canes) which are out of date are another example.
Reference:
LO 2, AC 2.1
NEW QUESTION # 11
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 # 12
Which of the following correctly describes the triple bottom line?
- A. People, Product, Profit
- B. Professional, Planet, Profit
- C. People, Planet, Project
- D. People, Planet, Profit
Answer: D
Explanation:
The triple bottom line is a sustainability framework that examines a company's social, environment, and economic impact (or People, Planet, 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 # 13
Which costs in the following list are categorised as operation costs in the total cost of ownership model? Select TWO that apply.
- A. Decommissioning costs
- B. Installation and configuration costs
- C. Delivery costs
- D. Costs of any person who operates the equipment
- E. Costs of consumables
Answer: D,E
Explanation:
Costs of operating an asset can widely vary. The following table is an example from Guide to Total Cost of Ownership, New Zealand Government:
Reference:
LO 3, AC 3.1
NEW QUESTION # 14
"A measure of the ability of an organisation to supply customers without delay" is the best defini-tion of which of the following:
- A. Safety stock
- B. Re-order level
- C. Key performance indicator
- D. Service level
Answer: D
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:
LO 2, AC 2.3
NEW QUESTION # 15
Which of the following statements is true of just-in-time (JIT) purchasing?
- A. JIT purchasing is guided solely by the EOQ model because that model emphasizes the tradeoff between relevant carrying and ordering costs
- B. In JIT purchasing, the optimal safety-stock level is the quantity of safety stock that minimizes the sum of annual relevant stockout and carrying costs
- C. In JIT purchasing, raw materials (or goods) are purchased so that products are delivered just as needed for production or sales
- D. Only disadvantage of JIT purchasing is the higher level carrying and inspection costs
Answer: C
Explanation:
Just-in-time (JIT) purchasing is a systems approach for developing and operating the purchasing function. JIT purchasing along with the total quality management in many industries has been suc-cessful in reducing inventory and increasing the overall effectiveness of purchasing function and hence the productivity of manufacturing.
The just-in-time objectives of eliminating waste can be summarised in the 'five zeros: zero defects, zero set-up times, zero inventories, zero handling and zero lead times.
The correct answer should be 'In JIT purchasing, raw materials (or goods) are purchased so that products are delivered just as needed for production or sales' because it expresses that upstream activity (purchasing) only occurs as the downstream activity (production or sales) triggers.
Reference:
LO 2, AC 2.3
NEW QUESTION # 16
A retailer wants to improve its service level in inventory management from 95% to 97%. Which of the following is the best course of action?
- A. Holding more cycle stock
- B. Expanding replenishment lead time
- C. Increasing safety stock
- D. Decreasing safety stock
Answer: D
Explanation:
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) Reference:
LO 2, AC 2.2
NEW QUESTION # 17
ANTA Logistics is looking for a place to build a new, integrated cold chain facility, "Chill Hub", to its customers. Which of the following need to be considered when selecting the location of the new facility? Select TWO that apply.
- A. Accessibility to roads and highways
- B. Availability of the building
- C. Ease of objective forecasting on inventory level
- D. Volume of obsolescent stock
- E. Availability of product coding system
Answer: A,B
Explanation:
There are many different factors that must be considered when assessing warehouse and stock locations:
* Operating cost of the location or area
* Availability and suitability of warehouses
* Availability of manpower or labour
* Proximity to suppliers and customers
* Access to transport infrastructure (domestic and international)
* The political and security environment of the location
LO 1, AC 1.1
NEW QUESTION # 18
Do all types of warehouses require access to daylight to reduce the cost of electricity?
- A. Yes, because sunlight sterilises inventories in damp conditions
- B. No, because only ventilation can help to reduce the humidity in the warehouse
- C. No, because some types of stock are sensitive to sunlight
- D. Yes, because organisation's need for artificial lighting and heating will reduce
Answer: C
Explanation:
The design of a building should consider the advantages of natural light as this can reduce the cost of artificial lighting and improve the environmental performance of the building. Daylight entering the building can also help reduce heating costs. Unfortunately some stocks react badly to direct sunlight, and some stock reacts badly to extreme of temperature or may require a specific temperature for storage. Some stock may require a warmer temperature than the ambient temperature and other stocks may require cooler temperature. For example, fabric and garment are sensitive to direct sunlight as ultraviolet light catalyses a reaction between the water present in all fabrics and atmospheric oxygen to create hydrogen peroxide. This is a bleaching agent and breaks down the chemical bonds that give dyes their colour.
Reference:
LO 1, AC 1.1
NEW QUESTION # 19
Which of the following code systems is commonly used by governments as a basis for their Cus-toms tariffs and for the collection of international trade statistics?
- A. The Harmonized Commodity Description and Coding System
- B. Global Location Number
- C. Global Trade Item Number
- D. The International Mobile Equipment Identity
Answer: A
Explanation:
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. It came into effect in 1988 and has since been developed and maintained by the World Customs Organization (WCO) (formerly the Customs Co-operation Council), an independent intergovernmental organization based in Brussels, Belgium, with over 200 member countries.
The Global Trade Item Number (GTIN) is an identifier for trade items, developed by GS1. Such identifiers are used to look up product information in a database (often by entering the number through a barcode scanner pointed at an actual product) which may belong to a retailer, manufacturer, collector, researcher, or other entity.
The Global Location Number can be used by companies to identify their locations, giving them complete flexibility to identify any type or level of location required.
The International Mobile Equipment Identity (IMEI) is a number, usually unique, to identify 3GPP and iDEN mobile phones, as well as some satellite phones.
Reference:
LO 1, AC 1.2
NEW QUESTION # 20
Decommissioning, removal and disposal of assets may have impact on the environment. An organisation should have policies and procedures in place to enhance its environmental performance. Which standard family provides the guidance on environmental policies and procedures?
- A. ISO 27000 family
- B. ISO 22000 family
- C. ISO 14000 family
- D. ISO 9000 family
Answer: 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
NEW QUESTION # 21
A restaurant needs to buy a new freezer. The owner applies total cost of ownership model to calcu-late the life-time cost of the freezer. This equipment has a price tag of $1,000, the supplier can offer free delivery if the restaurant pays off immediately. Estimated electricity consumption of the freezer is $200 in 5 years. The supplier ascertains that the freezer is very durable, buyer doesn't need to care about maintenance costs. However, if the restaurant needs better protection from breakdowns, the warranty is free for the first 12 months after the purchase. This warranty package can be extended once for another 24-month period with the cost of $75. After 5 years, the buyer will be able to resell this freezer for $250. What would be the estimated total cost of ownership of this freezer if the restaurant owner buys the extended warranty package?
- A. $1,200
- B. $1,275
- C. $1,525
- D. $1,025
Answer: D
Explanation:
The total cost of ownership would be the sum of all estimated costs.
The costs are as the following:
- Purchase price: $1,000
- Electricity consumption: $200
- Extended warranty: $75
Total expense = $1,000 + $200 +$75 = $1,275. Then subtract the resale price from this sum, the total cost of ownership is $1,025.
Reference:
LO 3, AC 3.1
NEW QUESTION # 22
XYZ Ltd is a major distributor of electrical equipment protection products in the United States. XYZ found that there was a lack of communication between the company and its key supplier, leading to the supplier trying to predict distributor needs and distributor attempting to estimate lead times. Essentially, both the supplier and the distributor have different sets of information, spending time and money trying to predict what the other will do. To deal with this problem, XYZ Ltd decides to implement new inventory management method in which the supplier manage the replenishment of items for sale. Both parties are obliged to share information on variations in demand and stock levels for goods used for or sale. Which inventory management method is XYZ Ltd implementing?
- A. Reverse logistics
- B. Vendor managed inventory
- C. Economic order quantity
- D. Floor-ready merchandise
Answer: B
Explanation:
Floor-Ready Merchandise can be defined as the merchandise that is pre-tagged, pre ticketed and pre-occupied with all the necessary details and information such as marked to their specifications for style, size, type, color and price, this information is required in the retail store and is done before it reaches the retail store.
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model 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 full definition of reverse logistics, as according to The Council of Logistics Management, is the process of implementing, controlling, and planning the cost-effective flow of finished goods, raw materials, and in-process inventory. The flow is from the point of consumption (i.e. the customer) to the point of origin (i.e. the manufacturer), to properly dispose of these or to recapture value.
In the scenario, XYZ solves the current situation by letting the supplier to management the inventory and sharing stock level information with the supplier. Vendor managed inventory is the most suitable answer.
Reference:
LO 3, AC 3.1
NEW QUESTION # 23
Assuming that all other factors are constant except one, the net present value of a capital expendi-ture increases when...?
- A. Net cash flow during a time period increases
- B. Cash outflow during a time period increases
- C. The initial cost of a project increases
- D. The discounted rate increases
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.
The following formula is used to calculate NPV
Where:
Rt is the net cash flow (cash inflow - cash outflow) during the period t i is the discount rate t is the number of time periods As you can conclude from the above formula, the net present value increases when the numerators (net cash flows) increase and/or denominators (1+i) decrease. So the correct answer should be "Net cash flow during a time period increases" The purpose of this exercise is to help you identify the factors that influence the net present value and how to increase/decrease NPV in real-world scenario.
Reference:
- Net present value in capital expenditure
- CIPS study guide page 177
LO 3, AC 3.2
NEW QUESTION # 24
The minimal total cost is always achieved when there is only one warehouse. Is this statement true?
- A. No, fewer warehouse may lead to increasing transport costs
- B. No, more warehouses will reduce the cost of storage
- C. Yes, because the operation cost for warehouse reaches minimal level
- D. Yes, because warehouse overheads are fully utilised
Answer: A
Explanation:
The total cost of storage consists of two different costs:
- The cost of warehouses: each one has a different cost, and each has the cost of stock-holding and stock management included
- The transport costs: the total transport cost reduces as further warehouses mean shorter final delivery to the customers.
Depending on each situation, the optimal number of warehouses varies. Generally, more facilities will increase the cost of warehouses while reduce the transport costs and vice versa.
Reference:
LO 1, AC 1.1
NEW QUESTION # 25
To make loading/unloading more effective and efficient, which feature should be included in vehi-cle dock design?
- A. 'Dual-use' docks are always the most efficient
- B. Steeper slope will reduce the chance of errors and accidents
- C. Vehicle docks only require a small area to ensure faster goods flow
- D. The dock platform is almost at the same level as the height of the trailer's rear platform
Answer: D
Explanation:
Warehouse dock is a feature of warehouse design - used for unloading and loading vehicles. It is crucial to carefully design where they are externally located in a facility and choose the best type of dock depending on the available space.
In many cases efficient and effective loading and unloading is achieved by a dock design that places the loading and unloading vehicle' rear platform at the same height as the warehouse floor.
Slopes in docking areas must always be as small as possible: the gentler the slope, the less chance of errors and accidents. If a warehouse is going to be used by large volume vehicles, such as high cubes, it may be necessary to install special devices, such as hydraulically adjustable docks or ground level lift platforms.
Current trends indicate that vehicles that are longer and wider and have a greater volume will be increasingly common. Therefore, when planning the location of the docks, it would be useful to ensure that there is a large area for the approach, manoeuvring and build-up of large vehicles.
One option to increase the efficiency of the docks is to combine reception and dispatch into a single area (dual use). This solution drastically reduces costs and, above all, increases the use of handling equipment and personnel. However, if this is justified by the volume of material flows, there can also be separate access points for each function (some for reception and others for dispatch - 'sole use').
Reference:
- Warehouse docking areas - Interlake
- CIPS study guide page 13
LO 1, AC 1.1
NEW QUESTION # 26
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