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CIPS L4M7 Certification Exam is ideal for professionals who are responsible for managing assets, such as plant managers, maintenance managers, facility managers, and operations managers. CIPS Whole Life Asset Management certification is also beneficial for individuals who are looking to transition into asset management roles or who want to enhance their knowledge and skills in this field. The CIPS L4M7 Certification is recognized by organizations around the world and provides professionals with a competitive advantage in the job market.
NEW QUESTION # 33
Which of the following is the correct statement about total ordering cost?
- A. Rise as the average stock level rises
- B. Fall with the per period usage rate
- C. Rise as the order quantity rises
- D. Equal the number of orders placed times the cost of placing an order
Answer: D
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
NEW QUESTION # 34
Which of the following best describes category 'A' in ABC analysis in inventory management?
- A. Items with high values
- B. Items that represent approximately 15% of total value
- C. Items with high uncertainty
- D. Items with low uncertainty
Answer: A
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
NEW QUESTION # 35
The time period between placing an order and its receipt in stock is known as what?
- A. Lead time
- B. Shortage time
- C. Over time
- D. Carrying time
Answer: A
Explanation:
Lead time is the duration from ordering to receipt and is a critical metric in inventory management. Reducing lead time enhances supply chain responsiveness and allows for more accurate planning. Whole-life asset management prioritizes reducing lead times to optimize inventory levels and meet demand effectively.
NEW QUESTION # 36
Warehouse automation involves the use of technology to perform as many warehousing tasks as possible.
There are several benefits that can be gained by using automation in a warehouse. They are...
- A. Reduced customer service, reduced picking errors, reduced accidents, and minimised space utilisation
- B. Maintenance costs, downtime due to malfunction, investment costs, and reduced flexibility
- C. Decreased speed, increasing cost, improved efficiency, and maximising space
- D. Increased speed, decreasing cost, improved efficiency, and maximised space
Answer: D
NEW QUESTION # 37
One of the classifications of inventory is referred to as 'indirect supplies.' Which of the following items are examples of indirect supplies in a water bottling plant?
* Lubricants for maintenance of production machines
* Computer cartridges for the procurement office
* Reams of printed labels to stick on water bottles
* Blue-colored plastic caps to seal the water bottles
- A. 2 and 3 only
- B. 1 and 2 only
- C. 3 and 4 only
- D. 1 and 3 only
Answer: B
Explanation:
Indirect supplies support operations but are not part of the finished product. For a bottling plant, items like lubricants for machine maintenance and office supplies are indirect supplies, as they aid in operation but do not enter the final product. Managing these supplies in whole-life asset management is critical for cost efficiency and operational support.
NEW QUESTION # 38
In a manufacturing organization, which of the following explains an 'indirect' stock classification of items?
- A. Where the stock does not have to be paid for until it has been used by the manufacturer
- B. Where the stock is not used as part of manufacturing of the finished product
- C. Where the stock has been acquired from a distributor rather than another manufacturer
- D. Where the stock is currently held in a warehouse owned by another organization
Answer: B
Explanation:
Indirect stock refers to items that are necessary for the operation of the manufacturing process but are not incorporated into the finished product. Examples include maintenance supplies, office consumables, and tools.
In whole-life asset management, indirect stock management ensures that essential operational items are available without tying up excessive capital in inventory that doesn't contribute directly to production output.
NEW QUESTION # 39
SpeedyCar GmbH is a vehicle manufacturer that is launching a new electric vehicle onto the market, replacing a previous diesel vehicle. There is a lot of equipment in the manufacturing site to be changed, some new machinery to replace older machinery, and some production equipment to decommission. The costs of decommissioning would include which of the following?
- A. Costs to upgrade electric vehicle charging facilities
- B. Sales and marketing costs of the new electric vehicle
- C. Decontamination and cleaning costs for site areas
- D. Engineering drawing fees for the new electric vehicle designs
Answer: C
NEW QUESTION # 40
Ranger Mobile Ltd is a emerging smartphone manufacturer. The manufacturer adopts the just-in-time method: First, the customers make orders, then it will decide which components to be pur-chased according to the bill of materials. These components are known as which of the following?
- A. Independent forecast items
- B. Dependent demand items
- C. Capital goods
- D. Indirect items
Answer: B
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:
LO 2, AC 2.1
NEW QUESTION # 41
Which of the following is the most suitable container of fasteners (screws, nails, nuts and bolts,...)?
- A. Pallet
- B. Bar rack
- C. Stock cage
- D. Tote box
Answer: D
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:
LO 1, AC 1.1
NEW QUESTION # 42
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 # 43
The size of the order that minimizes the total cost of acquiring and holding stock is known as ...
- A. Order quantity
- B. Average stock
- C. Correct quantity
- D. Economic order quantity
Answer: D
Explanation:
The Economic Order Quantity (EOQ) is the ideal order size that minimizes total inventory costs, balancing the ordering cost (costs related to placing and receiving orders) and the holding cost (costs related to storing inventory). The EOQ model is a fundamental concept in inventory management and is derived from the following formula:
EOQ=2DSHEOQ = \sqrt{\frac{2DS}{H}}EOQ=H2DS
where:
* DDD = demand rate (units per period),
* SSS = cost per order,
* HHH = holding cost per unit per period.
The EOQ model assumes constant demand and lead time, and it does not consider discounts for bulk purchases. By minimizing both ordering and holding costs, EOQ contributes to overall cost efficiency in inventory management, which is essential for whole-life asset management in balancing long-term expenses.
NEW QUESTION # 44
Which of the following factors influence stock-holding policy for slow-moving items?
* Item cost
* Surplus cost
* Shortage cost
* Lead time
- A. 2, 3 and 4 only
- B. 1, 2 and 4 only
- C. 1, 2 and 3 only
- D. 1, 3 and 4 only
Answer: C
NEW QUESTION # 45
XYZ Inc opens a tender to purchase new forklift trucks for their new established warehouse. In the final round, there are two suppliers remain who offer two different bids. Supplier A's bid has high initial investment. After calculating the net present value, the NPV in year five is positive. On the other hand, supplier B's bid has low purchase price, with the NPV in year five is negative. If the NPV is the sole selection criterion, XYZ Inc should select the bid which has...?
- A. Negative NPV
- B. The lowest NPV
- C. Positive NPV
- D. Zero NPV
Answer: C
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:
LO 3, AC 3.2
NEW QUESTION # 46
Which of the following allow the operators to access higher levels in warehouse facility? Select TWO that apply:
- A. Order picker
- B. Grab
- C. Carousel
- D. Scissor platform
- E. Stacker crane
Answer: A,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:
LO 1, AC 1.3
NEW QUESTION # 47
Your employers have expanded rapidly over the past five years and have acquired a number of smaller companies in the same industry. Unfortunately, all of the companies purchased have manual inventory systems. Your employer is setting up a computerised inventory control system and wishes to ensure that all stock is classified under the appropriate headings. Under what classification would semi-finished goods be classified?
- A. Acquisition costs
- B. Indirect inventories
- C. Direct inventories
- D. Material costs
Answer: C
NEW QUESTION # 48
The optimum balance in the standard ISO 18602:2013 (Packaging and the environment - Optimi-zation of the packaging system) considers which of the following factors?
1. Environmental impact of losses due to lack of packaging
2. The process for packaging design, including material selection
3. Procedures and requirements for packaging that are suitable for organic recycling
4. Environmental impact of excess packaging
- A. 2 and 3 only
- B. 2 and 4 only
- C. 1 and 3 only
- D. 1 and 4 only
Answer: D
Explanation:
ISO 18602:2013 is about Packaging and the environment - Optimization of the packaging system. ISO 18602:2013 specifies requirements and a procedure for assessment of packaging to ensure that the weight or volume of its material content is optimized consistent with the functions of packaging. This is one of several options for reducing the impact of packaging on the environment.
It also provides methodologies and procedures for
- determining the amount and minimization of substances or mixtures hazardous to the environ-ment, and
- determining the amount of four heavy metals (lead, cadmium, mercury, hexavalent chromium) in packaging.
The optimum balance in this standard weighs the environmental impact of losses that may happen with no packaging or inadequate packaging against the environmental impact from excess packag-ing.
The process for packaging design, including material selection, is not part of ISO 18602:2013.
The procedure for applying ISO 18602:2013 is contained in ISO 18601.
Reference:
LO 1, AC 1.3
NEW QUESTION # 49
A brewery sells its beer in aluminum cans. It recycles the cans by using contractors to collect and mold the used cans. This is an example of...?
- A. Carbon recycling
- B. Reuse
- C. Open-loop recycling
- D. Closed-loop recycling
Answer: D
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
NEW QUESTION # 50
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/2H)
- C. #(D*S/3H)
- D. #(D*S*H)
Answer: A
Explanation:
LO 2, AC 2.3
NEW QUESTION # 51
What is meant by the term 'obsolete stock'?
- A. Stock which has been stolen
- B. Low value/low risk stock
- C. Stock which has become outdated
- D. Damaged stock
Answer: C
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 canbe 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.
NEW QUESTION # 52
Which of the following is another name for scheduled (routine) maintenance?
- A. Corrective maintenance
- B. Predictive maintenance
- C. Preventative maintenance
- D. Run to breakdown
Answer: C
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.
NEW QUESTION # 53
International Standard Book Number (ISBN) is a unique international identification system for each product form or edition of a monographic publication published or produced by a specific publisher. ISBN is an example of...?
- A. Own product code system
- B. Harmonized system
- C. Check digit
- D. Industry standard code
Answer: D
Explanation:
The International Standard Book Number (ISBN) is a numeric commercial book identifier which is intended to be unique. Publishers purchase ISBNs from an affiliate of the International ISBN Agency. ISBN is standardised by ISO 2108:2017. ISBN is an example of industry standard code as it applies to commercial books around the world.
Check digits 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.
Own product code system: an organisation will use its own product code system. This has the ad-vantage that the organisation can construct a code that is effective and fits with its software and variety of items covered.
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.
NEW QUESTION # 54
In addition to the cost of interest on capital tied up in inventory, and losses through deterioration and obsolescence, there are other holding costs. Which of the following are holding costs? Select TWO that apply.
- A. Selling costs
- B. Administrative costs
- C. Cost of idle time
- D. Production costs
- E. Storage costs
Answer: B,E
NEW QUESTION # 55
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