L4M7 Exam Dumps - Whole Life Asset Management

Explanation

In inventory management, service level is the expected probability of not hitting a stock-out during the next replenishment cycle or the probability of not losing sales.

Key performance indicators (KPIs) can be used to analyse data based on performance objectives and set actionable goals for improvement. KPIs can be developed in conjunction with suppliers as well as others, and can be used to measure the essential elements of the process.

Safety stock is the amount of inventory a business needs to have to achieve a certain level of risk mitigation when it comes to stockouts.

Reorder level (or reorder point) is the inventory level at which a company would place a new order or start a new manufacturing run.

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.

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

Holding costs (carrying costs) are the costs associated with the storage and handling of physical stock. There are two different types of holding costs:

- Costs related to the value of the goods: financial costs (i.e. the interest on the working capital tied up in inventory, which may be the bank borrowing rate or the company's target for return on capital); cost of insurance; losses due to product deterioration; losses due to obsolescence and redundancy of inventory; losses due to theft, accidental damage etc.

- Costs related to the physical characteristics of the inventory include the following: storage space; power, heat and lighting of the store; movement equipment; labour costs; administration costs.

Explanation

A cost-benefit analysis is a process businesses use to analyze decisions (such as capital investment). The business or analyst sums the benefits of a situation or action and then subtracts the costs associated with taking that action.

A cost-benefit analysis (CBA) should begin with compiling a comprehensive list of all the costs and benefits associated with the project or decision.

The costs involved in a CBA might include the following:

- Direct costs would be direct labor involved in manufacturing, inventory, raw materials, manufacturing expenses.

- Indirect costs might include electricity, overhead costs from management, rent, utilities.

- Intangible costs of a decision, such as the impact on customers, employees, or delivery times.

- Opportunity costs such as alternative investments, or buying a plant versus building one.

- Cost of potential risks such as regulatory risks, competition, and environmental impacts.

Benefits might include the following:

- Revenue and sales increases from increased production or new product.

- Intangible benefits, such as improved employee safety and morale, as well as customer satisfaction due to enhanced product offerings or faster delivery.

- Competitive advantage or market share gained as a result of the decision.

An analyst or project manager should apply a monetary measurement to all of the items on the cost-benefit list, taking special care not to underestimate costs or overestimate benefits. A conservative approach with a conscious effort to avoid any subjective tendencies when calculating estimates is best suited when assigning a value to both costs and benefits for a cost-benefit analysis.

Finally, the results of the aggregate costs and benefits should be compared quantitatively to deter-mine if the benefits outweigh the costs. If so, then the rational decision is to go forward with the project. If not, the business should review the project to see if it can make adjustments to either increase benefits or decrease costs to make the project viable. Otherwise, the company should likely avoid the project.

Explanation

Purchase order lead time (POLT) refers to the number of days from when a company places an order for production inputs it needs, to when those items arrive at the manufacturing plant.

LO 2, AC 2.3