L4M7 Whole Life Asset Management Questions and Answers

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.

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

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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.

Explanation

A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial or business equipment is also leased. Since the lessee does not own the asset, it is not responsible for disposing the assets, and therefore, disposal costs are not attributable to the lessee. The lessee usually incurs rentals and operating costs. Finally, a company should treat the lease the same as other contracts, which they must qualify the supplier.

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

Vendor Managed Inventory (VMI) is a business model where the buyer of a product provides in-formation to a vendor of that product and the vendor takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location.

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.

Explanation

It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons. Here are some of the most prominent ones:

1. Safety: Packaging is used to keep your product safe from external factors. It also prevents human tampering. If you want to sell fruit juice, you just can’t hand it over to customers. It should be packaged in something, like a stand up pouch.

2. Brand visibility: You provide the best product in your category and you want your customers to remember that. How else will you do that without using the right kind of creative food packaging?

3. Bundling it together: If you want to sell an ounce of something, you need to create a packet so that the right amount is bundled together.

4. Theft prevention: If you sell your product loose, there are chances that the retailer doesn’t give the right amount to the customer and saves some part for himself. There are other cases too where theft can be done in the absence of packaging.

Apart from these four, there are many other reasons why you should package your products.

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.

Explanation

An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight and significance on the most recent data points. The exponential moving average is also referred to as the exponentially weighted moving average. An exponentially weighted moving average reacts more significantly to recent price changes than a simple moving average (SMA), which applies an equal weight to all observations in the period.

Explanation

Reorder point is the point either in time or in a process when the next order should be placed.

Explanation

The normal breakdown in a manufacturing organisation would be raw materials, components, work in progress and finished goods.

Following are the different types of inventory:

Raw materials are the basic materials that a manufacturing company buys from its suppliers, and that is used by the former to convert them into the final products by applying a set of manufacturing processes. For example, aluminum scrap is the raw material for a company that produces aluminum ingots. Flour is the raw material for a company that produces bread or pizza. Similarly, metal parts and ingots are the raw materials bought by a company that manufactures cars, and crude oil is the raw material for an oil refinery.

Work in progress inventory can also be called semi-finished goods. They are the raw materials that have been taken out of the raw materials store and are now undergoing the process of their conversion into the final products. These are the partly processed raw materials lying on the production floor. And they have also not reached the stage where they have been converted into the final product.

Finished goods are indeed the final products obtained after the application of the manufacturing processes on the raw materials and the semi-finished goods discussed above in the article. They are saleable, and their sale contributes fully to the revenue from the core operations of the company.

Explanation

An inventory write-off is a process of removing from the general ledger any inventory that has no value.

Using the direct write-off method, a business will record a credit to the inventory asset account and a debit to the expense account. For example, say a company with $100,000 worth of inventory decides to write off $10,000 in inventory at the end of the year. First, the firm will credit the inventory account with the value of the write-off to reduce the balance. The value of the gross inventory will be reduced as such: $100,000 - $10,000 = $90,000. Next, the inventory write-off expense account will be increased with a debit to reflect the loss.

The expense account is reflected in the income statement, reducing the firm’s net income and thus its retained earnings. A decrease in retained earnings translates into a corresponding decrease in the shareholders’ equity section of the balance sheet.

If the inventory write-off is immaterial, a business will often charge the inventory write-off to the cost of goods sold (COGS) account. The problem with charging the amount to the COGS account is that it distorts the gross margin of the business, as there is no corresponding revenue entered for the sale of the product. Most inventory write-offs are small, annual expenses. A large inventory write-off (such as one caused by a warehouse fire) may be categorized as a non-recurring loss.

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.

Explanation

ABC analysis is applied to stock and its management. It is based loosely on the Pareto principles, better known as 80/20 rule. Pareto principle is the theory that 80% of outcome results from 20% of inputs. For example, 80% of sales are to the top 20% of customers; 80% of spend on inventory is accounted for by the top 20% of stock items.

The ABC concept is based on Pareto's law. The following steps are carried out for the ABC analy-sis.

- Step 1: Compute the annual usage value for every item in the sample by multiplying the annual requirements by the cost per unit.

- Step 2: Arrange the items in descending order of the usage value calculated above.

- Step 3: Make a cumulative total of the number of items and the usage value.

- Step 4: Convert the cumulative total of the number of items and usage values into a percentage of their grand totals.

- Step 5: Draw a graph connecting cumulative % items and cumulative % usage value. The graph is divided approximately into three segments, where the curve sharply changes its shape. This indicates the three segments A, B and C.

LO 2, AC 2.1

Explanation

Lean thinking aims to remove wastes from work processes. Before diving into the 8 wastes, it is important to understand what waste is. Waste is any action or step in a process that does not add value to the customer. In other words, waste is any process that the customer does not want to pay for.

The original seven wastes (Muda) was developed by Taiichi Ohno, the Chief Engineer at Toyota, as part of the Toyota Production System (TPS). The seven wastes are Transportation, Inventory, Motion, Waiting, Overproduction, Overprocessing and Defects. They are often referred to by the acronym ‘TIMWOOD’. The 8th waste of non-utilized talent or ‘Skills’ of workers was later introduced in the 1990s when the Toyota Production System was adopted in the Western world. As a result, the 8 wastes are commonly referred to as ‘TIMWOODS’.

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Source: The lean way

Multiple approval levels for a small purchase request is an example of over-processing since this adds more unnecessary work to users and procurement professionals.

Explanation

Material Requirements Planning (MRP) software manages material requirements for manufacturing processes.

LO 2, AC 2.3

Explanation

RFID tags have very limited range. The following table was extracted from Wikipedia:

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RFID tags can be used to do the following:

- Track individual items

- Track boxes of products, cages of products and pallet

- Track containers with multiple loads

- Locate equipment within a building

- Trigger alarms should equipment or stock be removed without authorisation.

RFID tags are made of three different components: an RFID chip, which is an integrated circuit (IC), an antenna, and a substrate. RFID chips are very small integrated circuit incorporating a small memory capability - many are smaller than 2mm square and 2mm thick. Despite its size, many can hold 2000 characters of data. Many retailers simply use the tag as a thick label and print both sides with product information and perhaps a barcode.

It is important to note that there are multiple standards in use for RFID - some of these are standardised for industries but there are also national standards in operations. These standards need to be investigated before investment as not all readers work with all cards. GS1 is a non-for-profit organisation which make the standards for barcodes and RFID.

Explanation

RFID tags are made of three different components: an RFID chip, which is an integrated circuit (IC), an antenna, and a substrate. RFID Antennas are necessary elements in an RFID system be-cause they convert the RFID reader’s signal into RF waves that can be picked up by RFID tags. Without some type of RFID antenna, whether integrated or stand-alone, the RFID reader cannot properly send and receive signals to RFID tags.