Most Recent CIPS L4M7 Exam Questions & Answers

Material requirement planning (MRP) is a production planning and material (inventory) control system used in manufacturing. Objectives of MRP are to ensure materials are available for production while minimising inventory and to plan production and procurement activities.

Bill of materials (BOM) is an important component of MRP. BOM is also known as product struc-turer. This lists all the items that comprise each assembly and sub-assembly that make up the final product or end item. Therefore, MRP is commonly used to manage dependent demand stock.

LO 2, AC 2.3

Organisations often create their own stock keeping unit (SKU) numbering system, which may or may not have a meaningful structure. Stock keeping unit is a number that is assigned to a product for the purpose of inventory management and is of tracking. In other words, a stock keeping unit is a unique identifier assigned to each product for easier and more efficient record keeping.

An FDA (US Food and Drug Administration) product code describes a specific product and contains a combination of five to seven numbers and letters. The product code submitted with each FDA line item should match the actual product name and/or invoice description of the product.

The International Standard Book Number is a numeric commercial book identifier which is in-tended to be unique. Publishers purchase ISBNs from an affiliate of the International ISBN Agency.

The Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature is an internationally standardized system of names and numbers to classify traded products.

LO 1, AC 1.2

Radio frequency identification (RFID) are items which use radio technology to identify itself and its location subject to having appropriate hardware and software.

RFID tags are made of three different components: an RFID chip, which is an integrated circuit (IC), an antenna, and a substrate.

A RFID Reader is a device that uses radio-frequency waves to wirelessly transfer data between itself and a RFID tag/label in order to identify, categorize and track assets. When combined with the right RFID software, a RFID reader can identify objects quicker, more accurately, at a reduced overall cost, and at various points of the object's lifecycle.

Passive RFID systems use tags with no internal power source and instead are powered by the electromagnetic energy transmitted from an RFID reader. Passive RFID tags are used for applica-tions such as access control, file tracking, race timing, supply chain management, smart labels, and more.

Active RFID systems have three essential parts -- a reader or interrogator, antenna, and a tag. Ac-tive RFID tags possess their own power source -- an internal battery that enables them to have ex-tremely long read ranges as well as large memory banks.

LO 1, AC 1.2

Along with Jidoka, Just-in-time (JIT) production is one of the pillars of the two Toyota Production System. It is a production method that fundamentally changed the way large-scale production oc-curred in the 20th century, and is the basis for Lean Manufacturing (Lean for short), which is the school of thought many modern companies have modeled themselves after.

JIT production is often called a pull system because instead of using traditional push production where scheduling is done based on historical data and demand forecasting, production is scheduled based on actual customer orders. Rather than predicting demands from customers, the JIT method requires that actual customer demand exists. Production doesn't begin before an order triggers it. This system not only reduces the amount of extra inventory, but also reduces the amount of work in progress at one time.

- Just-in-Time Production

- CIPS study guide page 122-127

LO 2, AC 2.3

Price setting mechanisms fall into two main categories: fixed and variable. A fixed price mecha-nism is a straightforward concept which typically results in a relatively stable budget that can be forecast. Variable mechanisms have an element of variable pricing per unit bought.

Setting a fixed price mechanism is in theory a relatively simple and straightforward concept, where the collector and the buyer agree on a fixed price for a specific material or mix of materials, for a certain length of time.

All other pricing mechanisms that are not fixed have an element of variable pricing per unit bought.

The most common variable pricing mechanisms can be divided into two groups:

1. Where the benefit accruing to the buyer from acquiring the material is used to calculate what the payment to the seller should be; or Approaches to Materials Sales: A guide for local authorities

2. Where the price paid is indexed to a published source of market price information. The above scenario demonstrates variable pricing mechanism using published sources on inflation rate and exchange rate. CIPS also refers this mechanism as adjustable prices.

- CIPS study guide page 138-139

- 10.0 Price setting mechanisms

LO 3, AC 3.1