D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
D470 WGU Transportations & Logistics:
Competency 3 Study Guide on TCO
Management Latest Update.
Competency 3. How Total Cost of Ownership
Management Affects Operations
Learning Objectives
• Explain how total cost of ownership (TCO)
management affects operations.
Key Concepts
Lesson 1: Inventory Management
• Companies might choose or need to hold stocks
for these reasons:
o Minimize production costs.
o Accommodate variations in demand.
o Account for variable lead times.
o Buying costs.
o Utilize quantity discounts.
o To account for seasonal fluctuations.
o Allow for price fluctuations.
o Aid production and distribution operations
to run more smoothly.
o Provide customers with immediate service.
D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
,D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
Page 1 of 20
D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
, D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
o Work-in-progress.
• The main categories of stock types in supply
chain companies are:
o Raw material, component and packaging
stocks
o In-process stocks
o Finished products
o Pipeline stocks
o General stores
o Spare parts
• Other major classifications of stock types
include:
o Cycle stock or working stock
o Safety stock
o Speculative stock
o Seasonal stock
• Excess inventory can be minimized by using the
ABC analysis method:
o ‘A’ lines = fast movers (approximately 20%)
o ‘B’ lines = medium movers (approximately
30%)
o ‘C’ lines = slow movers
o ‘D’ lines = obsolete/dead stock (C+D
representing approximately 50%)
Page 2 of 20
D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
D470 WGU Transportations & Logistics:
Competency 3 Study Guide on TCO
Management Latest Update.
Competency 3. How Total Cost of Ownership
Management Affects Operations
Learning Objectives
• Explain how total cost of ownership (TCO)
management affects operations.
Key Concepts
Lesson 1: Inventory Management
• Companies might choose or need to hold stocks
for these reasons:
o Minimize production costs.
o Accommodate variations in demand.
o Account for variable lead times.
o Buying costs.
o Utilize quantity discounts.
o To account for seasonal fluctuations.
o Allow for price fluctuations.
o Aid production and distribution operations
to run more smoothly.
o Provide customers with immediate service.
D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
,D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
Page 1 of 20
D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
, D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
o Work-in-progress.
• The main categories of stock types in supply
chain companies are:
o Raw material, component and packaging
stocks
o In-process stocks
o Finished products
o Pipeline stocks
o General stores
o Spare parts
• Other major classifications of stock types
include:
o Cycle stock or working stock
o Safety stock
o Speculative stock
o Seasonal stock
• Excess inventory can be minimized by using the
ABC analysis method:
o ‘A’ lines = fast movers (approximately 20%)
o ‘B’ lines = medium movers (approximately
30%)
o ‘C’ lines = slow movers
o ‘D’ lines = obsolete/dead stock (C+D
representing approximately 50%)
Page 2 of 20
D470 WGU Transportations & Logistics: Competency 3 Study Guide on TCO Management Latest Update.
