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CIPS L4M7 Exam Prep
Whole Life Asset Management (Page 9 )

Updated On: 1-Oct-2026
Page 5 of 28
PDF with 255 Questions

Which of the following are most likely the benefits of using unit loads? Select TWO that apply.
Increase transport time of each item

  1. Minimise space utilisation
  2. Safer handling
  3. Unit loads must be placed on pallets
  4. Reduce handling cost of one unit

Answer(s): B,D

Explanation:

The concept of a unit load is to create a stable and secure, easy-to-move group of stock that is fast to load and unload from vehicles.
The advantages of unit load concepts are as the following:
- More items can be handled at the same time, thereby reducing the number of trips required and, potentially, reducing handling costs, loading and unloading times, and product damage. - Enables the use of standardized material handling equipment.


Reference:

CIPS study guide page 60-61
LO 1, AC 1.3



Which of the following is an assumption of economic-order-quantity model?

  1. The quantity ordered can vary at each reorder point
  2. Demand, ordering costs, and carrying costs are uncertain
  3. No inventory stockouts occur
  4. The purchasing cost per unit is affected by the order quantity

Answer(s): C

Explanation:

Economic order quantity (EOQ) model is the method that provides the company with an order

quantity. This order quantity figure is where the record holding costs and ordering costs are mini- mized. By using this model, the companies can minimize the costs associated with the ordering and inventory holding. In 1913, Ford W. Harris developed this formula whereas R. H. Wilson is given credit for the application and in-depth analysis on this model. If the economic order quantity model is applied, the following assumptions should be met:
- The rate of demand is constant, and total demand is known in advance.
- The ordering cost is constant.
- The unit price of inventory is constant, i.e., no discount is applied depending on order quantity.
- Delivery time is constant.
- Replacement of defective units is instantaneous.
- There is no safety stock level, i.e., the minimum stock level is zero.
- Restocking is made by the whole batch.
Because the demand and lead time are constant, no stockout events can occur.


Reference:

CIPS study guide page 113-114
LO 2, AC 2.3



Which of the following is the character that allows the computer to verify whether a product code is entered correctly?

  1. 3-digit prefix
  2. Check digit
  3. Radio frequency identification
  4. Barcode

Answer(s): B

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.


Reference:

CIPS study guide page 35-36
LO 1, AC 1.2



Which of the following is the cylindrical container that is suitable for liquids or loose material

  1. Tote box
  2. Drum
  3. Industrial container
  4. Storage bag

Answer(s): B

Explanation:

Drum is the container for stock, which is usually cylindrical and can be made from a variety of materials. Contents are usually loose material or liquids



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,...
For larger and bulkier items, industrial containers make it easy to keep things stored and in one spot for transportation. Due to the metal interior, an industrial container is more appropriate for items that -- unlike tools and small pieces of machinery -- lack any surface sensitivity.



Solid containers like bins and totes are far from the only storage devices for the various materials that are needed in abundance at factories and warehouses. Another option is the storage bag, which can be used to hold bulk supplies of items until they're needed for the department shelves or assembly lines.



LO 1, AC 1.1



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?

  1. Reverse logistics
  2. Floor-ready merchandise
  3. Vendor managed inventory
  4. Economic order quantity

Answer(s): C

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.


Reference:

CIPS study guide page 154
LO 3, AC 3.1



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