Summary
Summary L2M5 Inventory, Logistics, and Expediting
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Summary of CIPS Level 2 Module 5 (L2M5) course.
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ContentsL2M5 Inventory Logistics and expending ................................................................................... 4
1. Key elements of effective inventory control .......................................................................... 4
1.1 Identify the classifications of different types of inventory .............................................. 6
Opening stock ......................................................................................................................... 6
Work in progress ..................................................................................................................... 7
Safety stock ............................................................................................................................. 7
Finished goods ........................................................................................................................ 7
Obsolescent and redundant stock .......................................................................................... 8
Direct and indirect supplies .................................................................................................... 8
ABC classifications of stock ................................................................................................... 11
Dependent demand and independent demand items of stock ........................................... 12
1.2 Identify the direct and indirect costs of holding inventory ........................................... 13
Direct costs............................................................................................................................ 13
Indirect costs ......................................................................................................................... 13
Options to reduce costs while mitigating any negative impact on service levels ................ 14
1.3 Identify techniques associated with inventory control ................................................. 15
Re-order quantities ............................................................................................................... 15
Re-order timing or levels ...................................................................................................... 16
Surplus disposal .................................................................................................................... 16
MRP and MRP II .................................................................................................................... 16
ERP ........................................................................................................................................ 18
Just in time (JIT) .................................................................................................................... 19
Bar coding ............................................................................................................................. 20
Subjective and objective forecasting .................................................................................... 21
1.4 Identify the key aspects associated with the handling, packaging, packing and storage
of supplies ................................................................................................................................. 22
The use of materials handling the equipment...................................................................... 22
Palletization and unit loads................................................................................................... 23
Packing and packaging and the use of automation in warehousing .................................... 24
High-bay warehousing .......................................................................................................... 24
,2. Principles and processes associated with effective logistics control ................................... 27
2.1 Identify the key principles of stores and warehousing facilities .................................... 28
Effective and efficient flows of inventory ............................................................................. 28
Reduction of life-cycle costs ................................................................................................. 28
Space optimization................................................................................................................ 29
2.2 Identify the strengths and weaknesses associated with modes of freight transportation
31
Road ...................................................................................................................................... 32
Rail......................................................................................................................................... 32
Air .......................................................................................................................................... 32
Sea ......................................................................................................................................... 33
Inland waterway ................................................................................................................... 33
Pipeline.................................................................................................................................. 33
Preparation and packaging ................................................................................................... 34
2.3 Identify types of incoterms in international logistics..................................................... 35
2.4 Identify legislative regulations that affect international sourcing ................................. 38
How to ensure compliance with legislation and regulations for supplies from international
sources .................................................................................................................................. 38
2.5 Describe the documentation that is used in transportation of supplies ....................... 39
Common administrative terms and documents ................................................................... 39
3. Achieving effective expediting in procurement and supply ................................................. 47
3.1 Explain the assessment of costs of inventory and the cost of stock-out....................... 47
Monitor levels of inventories and take actions to mitigate over supply and minimize the
risk of stock-outs ................................................................................................................... 47
The use of forecasting to achieve timely delivery of supplies .............................................. 49
Track deliveries and documentation .................................................................................... 50
Stock keeping records ........................................................................................................... 50
Forecasting difficulties and techniques ................................................................................ 51
3.2 Explain the planning process associates with expediting delivery ................................ 54
Planning milestones and activities........................................................................................ 55
The use of problem solving techniques ................................................................................ 55
Establishing strong relationships .......................................................................................... 56
,3.3 Explain the significance of payment to suppliers and cash flow ................................... 56
Track any deviations from planned payments and take remedial actions to mitigate
disruptions that may be created through difficulties with cash flow .................................. 56
,L2M5 Inventory Logistics and expending
1. Key elements of effective inventory control
,Inventory management: the process of ensuring the safe and efficient storage and control of
stock, including managing demand and movement.
Inventory is also known as stock, stocks, materials, reserves or provisions.
It is a balancing act that aims to provide satisfactory outcomes for all internal and external
customers.
Supply chain: a network of individuals, orgs., technology, activities and resources working
together to make sure goods/services reach the end user.
In the food, pharmaceutical and material processing supply chain it is important to be able to
confirm the origins of the goods by having the right certifications as it might affect the
consumer’s wellbeing.
, 1.1 Identify the classifications of different types of inventory
Classifications of inventory based on where it is in the production process:
Opening stock
Work in progress
Safety stock
Finished goods
Other classifications of inventory/stock:
Direct and indirect
Classified as A, B, or C parts
Dependent demand or independent demand
Obsolescent or redundant
Opening stock
Opening stock: The amount, type and value of goods available for sale at the beginning of a set
period (new day, new shift, accounting period, launch of project).
Sole traders and small businesses > calculating opening stock can be informal, they can rely on
previous experience to estimate required stock.
Large businesses & orgs. > sophisticated methods to control stock is planned and forecasted.
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