CIPS L4M7 Whole Life Asset Management Exam Practice Test

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Question 1

Which of the following would be an impact of low stock in the supply chain?

Warehouse space would all be full with excess stock

There may be delays and higher costs to fulfill supply

Stock may not be available at times of high demand

Lead times would reduce and purchase costs would fall

A. 2 and 3 only B. 1 and 3 only C. 2 and 4 only D. 1 and 4 only

Answer :

Low stock levels can lead to:

Delays and higher fulfillment costs: When stock is insufficient, emergency orders and expedited shipping may be necessary, increasing costs.

Stockouts during high demand: Insufficient inventory can lead to missed sales opportunities, negatively impacting customer satisfaction.

Whole-life asset management seeks to balance inventory levels to avoid stockouts while minimizing holding costs.

Question 2

A procurement professional is working with a colleague from finance because the organization has been spending more money recently on inventory items. This is impacting the organization's working capital. In particular, they are concerned that average inventory levels have increased significantly year-on-year. Which of the following should they calculate to help in their investigation?

A. Rate of stock turn B. Age of receivables C. Profit margin D. Cash flow forecast

Answer :

The rate of stock turn (inventory turnover ratio) measures how often inventory is sold and replaced over a period. A lower turnover ratio indicates that inventory is sitting longer, tying up working capital. Calculating this rate helps procurement and finance assess inventory management efficiency, a key focus in whole-life asset management for optimizing working capital and reducing holding costs.

Question 3

Which of the following are advantages of a multi-story warehouse compared to a single-story warehouse?

Heavier, frequently moved items will always be stored on the upper floor of a multi-story warehouse

Order tracking technology will be more effective and efficient in a multi-story warehouse

There are more options for the storage of inventory by volume, weight, and frequency of movement in a multi-story warehouse

The cost of land is likely to be less for a multi-story warehouse compared to a single-story warehouse for a similar product volume

A. 1 and 3 only B. 1 and 2 only C. 2 and 3 only D. 3 and 4 only

Answer :

Multi-story warehouses provide:

Flexible storage options for various inventory types, based on volume, weight, and movement frequency.

Cost savings on land: As vertical space is utilized, less land is needed for the same storage volume, potentially reducing property expenses.

Whole-life asset management considers these factors to maximize storage efficiency while managing real estate costs.

Question 4

The time period between placing an order and its receipt in stock is known as what?

A. Lead time B. Carrying time C. Shortage time D. Over time

Answer :

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.

Question 5

'The main consideration in designing the layout of a warehouse is the size of the storage space utilized.' Is this statement TRUE?

A. Yes, because large space provides assurance that stocks will not run out B. Yes, because suppliers need to be assured that the orders they receive will have storage when delivered C. No, because other considerations such as the traffic flow within the store are important D. No, because the most important consideration in stores design is the location of the main exit

Answer :

While storage space is important, traffic flow and accessibility are crucial for efficient warehouse design. Proper layout ensures safe, quick movement of goods and minimizes bottlenecks, reducing operational costs and enhancing efficiency. In whole-life asset management, effective space utilization and efficient layout planning are key for long-term warehouse performance.

Question 6

Why do you need a life cycle asset management plan?

AIt is the basis of calculating the financial depreciation of the asset

BIt is used to calculate the manpower required to operate the asset

CIt is used to determine what the overall costs of disposing of the asset will be

DIt is a basis for planning resources and budgets to support the asset

Answer : D

A life cycle asset management plan provides a comprehensive framework for planning, budgeting, and resource allocation throughout the asset's life. It considers costs from acquisition to disposal, ensuring that assets are managed efficiently and cost-effectively over their full lifecycle, which is central to whole-life asset management strategies.

Question 7

RFID, or Radio Frequency Identification, is fast emerging as a major commercial technology. Like every new technology, it has advantages and disadvantages. An advantage of using RFID is that ...

Ait is easy to implement and requires little investment in information technology

Bit is better than barcodes as it cannot be easily replicated, and therefore, increases the security on a product

Ctags only store limited data, whereas a barcode can hold unlimited data

Dit is cheaper for many applications, compared to other tracking and identification methods

Answer : B

RFID technology offers higher security compared to barcodes, as tags are harder to replicate. RFID also enables wireless scanning, without line-of-sight, and can store more information than barcodes. This enhances asset tracking and security, essential in whole-life asset management for tracking valuable assets and reducing losses due to theft or misplacement.