Pass the CIPS Level 4 Diploma in Procurement and Supply L4M7 Questions and answers with ValidTests

Explanation

Subjective forecasting uses qualitative methods (surveys, opinions) which relay on perception and opinion. Objective forecasting uses quantitative methods (facts and figures). Both methods have to make assumption about how closely (or not) the future will resemble the present and the past. Forecasting is never exact.

Indirect supplies support operations without becoming part of the final product. They impact operating costs (e.g., maintenance supplies), supporting the production environment but not the end product. Managing indirect supplies is crucial in whole-life asset management to control overhead costs and ensure uninterrupted operations.

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.

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

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.

A bar coding system enables operators to scan items as they are picked, updating inventory levels in real-time. This system minimizes errors and ensures efficient inventory tracking. In whole-life asset management, barcoding helps maintain accurate records, reduces picking errors, and improves warehouse productivity.