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ANTA Logistics is looking for a place to build a new, integrated cold chain facility, “Chill Hub”, to its customers. Which of the following need to be considered when selecting the location of the new facility? Select TWO that apply.
A. Accessibility to roads and highways
B. Availability of product coding system
C. Ease of objective forecasting on inventory level
D. Volume of obsolescent stock
E. Availability of the building
There are many different factors that must be considered when assessing warehouse and stock locations:
• Operating cost of the location or area
• Availability and suitability of warehouses
• Availability of manpower or labour
• Proximity to suppliers and customers
• Access to transport infrastructure (domestic and international)
• The political and security environment of the location LO 1, AC 1.1
The ABC approach involves classifying inventory items by unit cost, with expensive items classified as ‘A' items and low cost items classified as ‘C' items. Is this statement true?
A. Yes, 'A' items represent approximately 20% of total unit prices
B. No, ABC analysis considers the supply risks associated with an inventory item
C. No, ABC analysis considers the usage of each inventory item
D. Yes, 'C' items with the lowest unit prices are the tail spends
ABC analysis is an approach for classifying inventory items based on the items’ consumption values. Consumption value is the total value of an item consumed over a specified time period, for example a year. The approach is based on the Pareto principle to help manage what matters and is applied in this context:
- A items are goods where annual consumption value is the highest. Applying the Pareto principle (also referred to as the 80/20 rule where 80 percent of the output is determined by 20 percent of the input), they comprise a relatively small number of items but have a relatively high consumption value. So it’s logical that analysis and control of this class is relatively intense, since there is the greatest potential to reduce costs or losses.
- B items are interclass items. Their consumption values are lower than A items but higher than C items. A key point of having this interclass group is to watch items close to A item and C item classes that would alter their stock management policies if they drift closer to class A or class C. Stock management is itself a cost. So there needs to be a balance between controls to protect the asset class and the value at risk of loss, or the cost of analysis and the potential value returned by reducing class costs. So, the scope of this class and the inventory management policies are determined by the estimated cost-benefit of class cost reduction, and loss control systems and processes.
- C items have the lowest consumption value. This class has a relatively high proportion of the total number of lines but with relatively low consumption values. Logically, it’s not usually cost-effective to deploy tight inventory controls, as the value at risk of significant loss is relatively low and the cost of analysis would typically yield relatively low returns.
LO 2, AC 2.1
To improve the security of a warehouse, alarm systems are commonly used. Which of the following is an important part of these systems?
XYZ Ltd has been adopting MRP system for years. The system helps the company improve efficiency greatly and generates huge cost-savings. However, MRP system is only limited to production process management and XYZ management team would like to have better insights into resources required across the organisation as a whole. Which software system would help XYZ management team achieve the above objective?
C. MRP II
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