Whole-life costing includes all costs from acquisition to disposal, ensuring comprehensive financial planning. Essential components include:

Acquisition and purchase costs : Initial costs incurred to procure the equipment.

Usage costs : Operational expenses, including energy and consumables.

End-of-life costs : Disposal, recycling, or decommissioning expenses.

Whole-life asset management aims to minimize these costs over an asset ' s lifecycle, ensuring value and performance.

Explanation

Costs of operating an asset can widely vary. The following table is an example from Guide to Total Cost of Ownership, New Zealand Government:

Explanation

MRP I was some of the first business software to be widely adopted during the 1970s. Manufacturers sought these systems in order to improve efficiency and accuracy when it came to basic processes such as production scheduling and inventory management.

By the 1980s, manufacturers realized they needed software that could also tie into their accounting systems and forecast inventory requirements. Enter MRP II, which included these integrations in addition to all the capabilities offered by MRP I. Enterprise resource planning (ERP) software features—which we’ll cover later on—are included in the following table for comparison.

Graphical user interface Description automatically generated

Explanation

Void filling is the general term giving to the challenge of filling the space left in a box after the products have been packed. This means that if there is no void filling material, the product inside can move around and could be damaged. Materials to fill voids to secure contents

• Polystyrene (PS) is a synthetic aromatic hydrocarbon polymer made from the monomer known as styrene.[5] Polystyrene can be solid or foamed. General-purpose polystyrene is clear, hard, and rather brittle. It is an inexpensive resin per unit weight. It is a rather poor barrier to oxygen and water vapour and has a relatively low melting point.[6] Polystyrene is one of the most widely used plastics, the scale of its production being several million tonnes per year.[7] Polystyrene can be naturally transparent, but can be coloured with colourants. Uses include protective packaging (such as packing peanuts and CD and DVD cases), containers, lids, bottles, trays, tum-blers, disposable cutlery[6] and in the making of models. Polystyrene is generally considered to be non-biodegradable. However, certain organisms are able to degrade it, albeit very slowly.

• Chips made of bio-degradable materials

• Absorbent and fire-resistant material

• Shredded paper, cardboard or wood-Based material

• Paper or cardboard rolls

• Bubble wrap

• Air-filled cushions

• Self expanding foam

Straps are used to group items into unit load. Polypropylene or polyester are the materials most often used. The wider the strap, the stronger it will be. Using more than one strap and straps for length and width will create a strong place for stock.

Explanation

The net requirements are worked out using the following equation:

Net requirements = Total requirements - Available inventory

Where:

Total requirements = Gross requirements

Available inventory = Inventory on-hand + Units on-order

In the other words: Net requirements = Gross requirements - Inventory on-hand - Units on-order

Inventory on-hand is also known as Inventory level, whereas Units on-order can be called Scheduled receipt.

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.

Explanation

The costs of stockouts - the costs of being out of inventory - include:

- Loss of production output

- Costs of idle time and of fixed overheads spread over a reduced level of output

- Costs of any action taken to deal with the stockout, such as buying from another stockist at an enhanced price, switching production, obtaining substitute materials

- Loss of customer goodwill due to the inability to supply or late delivery.

(Procurement and Supply Chain management - 9th Edition, K. Lysons and B. Farrington, 2016)

LO 2, AC 2.2

Explanation

Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.

The total ordering cost will be equal to ordering cost per order multiply with number of orders.