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SOUTH AFRICAN QUALIFICATIONS AUTHORITY 
REGISTERED UNIT STANDARD THAT HAS PASSED THE END DATE: 

Understand the role of inventory and ordering costs 
SAQA US ID UNIT STANDARD TITLE
377361  Understand the role of inventory and ordering costs 
ORIGINATOR
SGB Manufacturing and Assembly Processes 
PRIMARY OR DELEGATED QUALITY ASSURANCE FUNCTIONARY
-  
FIELD SUBFIELD
Field 06 - Manufacturing, Engineering and Technology Manufacturing and Assembly 
ABET BAND UNIT STANDARD TYPE PRE-2009 NQF LEVEL NQF LEVEL CREDITS
Undefined  Regular  Level 4  NQF Level 03  5 
REGISTRATION STATUS REGISTRATION START DATE REGISTRATION END DATE SAQA DECISION NUMBER
Passed the End Date -
Status was "Reregistered" 		 2018-07-01  2023-06-30  SAQA 06120/18 
LAST DATE FOR ENROLMENT LAST DATE FOR ACHIEVEMENT
2024-06-30   2027-06-30  

In all of the tables in this document, both the pre-2009 NQF Level and the NQF Level is shown. In the text (purpose statements, qualification rules, etc), any references to NQF Levels are to the pre-2009 levels unless specifically stated otherwise.  

This unit standard does not replace any other unit standard and is not replaced by any other unit standard. 

PURPOSE OF THE UNIT STANDARD 
This unit standard is required by people working in the manufacturing environment and tasked with inventory management. The learner will understand and apply the various concepts associated with inventory, will obtain knowledge of ordering cost and perform inventory valuations.

Learners credited with this unit standard are able to:
  • Explain the role of inventory in manufacturing and distribution.
  • Discuss and apply various concepts of ABC analysis.
  • Discuss the elements of ordering costs.
  • Perform inventory valuation.
  • Demonstrate an understanding of financial accounts as they relate to inventory management. 
    		•

    LEARNING ASSUMED TO BE IN PLACE AND RECOGNITION OF PRIOR LEARNING 
  • Mathematical Literacy at NQF Level 3.
  • Communication at NQF Level 3. 
    		•

    UNIT STANDARD RANGE 
    Specific range statements are provided in the body of the unit standard where they apply to particular outcomes or assessments. 

    Specific Outcomes and Assessment Criteria: 

    SPECIFIC OUTCOME 1 
    Explain the role of inventory in manufacturing and distribution. 

    ASSESSMENT CRITERIA     

    ASSESSMENT CRITERION 1 
    Inventory is defined and its role in flow of inventory explained taking each stage of processing into consideration. 

    ASSESSMENT CRITERION 2 
    Various types of inventory are critically discussed and linked to relevant functions using diagrammes. 
    ASSESSMENT CRITERION RANGE 
    Types of inventory are raw materials; work-in process; semi finished assemblies; finished products; distribution inventories; maintenance; repair and operating supplies.
     

    ASSESSMENT CRITERION 3 
    A list is compiled of the various functions that products of your company perform using the supply chain as example. 

    ASSESSMENT CRITERION 4 
    Reasons why inventory may not be desirable are debated using given examples. 

    ASSESSMENT CRITERION 5 
    Customer service objectives and their effect on inventory levels are discussed critically using examples of customer service demands. 

    SPECIFIC OUTCOME 2 
    Discuss and apply various concepts of an inventory classification system. 

    ASSESSMENT CRITERIA     

    ASSESSMENT CRITERION 1 
    The ABC classification system is critiqued based on given data. 

    ASSESSMENT CRITERION 2 
    The differences between the categories of inventory are explained using examples. 
    ASSESSMENT CRITERION RANGE 
    The categories that should be considered are A items; B items; and C items.
     

    ASSESSMENT CRITERION 3 
    An ABC analysis is performed following the four-step approach with given data. 

    ASSESSMENT CRITERION 4 
    The application of the ABC classification system to the process of cycle counting is explained according to procedures. 

    ASSESSMENT CRITERION 5 
    An ABC calculation is performed using given data. 

    ASSESSMENT CRITERION 6 
    Calculate the quality on hand for each item selected from a warehouse inventory against the usage of each selected item. 

    ASSESSMENT CRITERION 7 
    Cycle counting frequency is explained using given examples. 

    ASSESSMENT CRITERION 8 
    The use of the ABC classification system to determine the ordering rules is explained. 

    ASSESSMENT CRITERION 9 
    The use of the ABC classification system in managing the security aspects of inventory and inventory holding is described according to procedures. 

    ASSESSMENT CRITERION 10 
    A survey of a warehouse facility is carried out using a given checklist. 

    SPECIFIC OUTCOME 3 
    Discuss the elements of ordering costs. 

    ASSESSMENT CRITERIA     

    ASSESSMENT CRITERION 1 
    Internal and external customers as receivers and users of inventory are compared and described in line with Operations Management Body of Knowledge (OMBOK). 

    ASSESSMENT CRITERION 2 
    Various cost categories associated with buying and holding inventory are discussed in line with company procedures. 
    ASSESSMENT CRITERION RANGE 
    Cost categories to be considered are item cost; ordering costs; factory ordering costs; purchase ordering costs; carrying costs; inventory carrying costs; stockout costs and capacity related costs.
     

    ASSESSMENT CRITERION 3 
    The costs of ordering from an external supplier are compared to ordering from an internal supply source in line with Operations Management Body of Knowledge (OMBOK). 

    ASSESSMENT CRITERION 4 
    Excess, surplus, and obsolete stock are compared with indication of how each would be handled according to procedures. 

    ASSESSMENT CRITERION 5 
    The role of quality in the management and control of inventory is described using given data. 

    ASSESSMENT CRITERION 6 
    The importance of inventory in helping to maintain a high level of production efficiency is explained in comparison to work-in-process inventories using given problem areas. 

    SPECIFIC OUTCOME 4 
    Perform inventory valuation. 

    ASSESSMENT CRITERIA     

    ASSESSMENT CRITERION 1 
    The need for a company to establish a monetary value for its inventory is explained using given examples. 

    ASSESSMENT CRITERION 2 
    An explanation is provided of the various ways in which inventory can be valued in line with Operations Management Body of Knowledge (OMBOK). 

    ASSESSMENT CRITERION 3 
    The average cost and standard cost are described in terms of why a manufacturing company may choose to value inventory. 

    ASSESSMENT CRITERION 4 
    The issue costs and ending inventory costs are calculated using a variety of valuation methods and data according to procedures. 

    ASSESSMENT CRITERION 5 
    The reasons why LIFO [last in-first out] method of inventory valuation is not accepted by Revenue Services are discussed using given examples. 

    ASSESSMENT CRITERION 6 
    The impact of the method of inventory valuation chosen on the period-end reported profit are explained using given data. 

    SPECIFIC OUTCOME 5 
    Demonstrate an understanding of financial accounts as they relate to inventory management. 

    ASSESSMENT CRITERIA     

    ASSESSMENT CRITERION 1 
    The purpose of financial documents is described in line with given documents. 
    ASSESSMENT CRITERION RANGE 
    Financial documents to be considered are income statement; balance sheet and cash flow forecast.
     

    ASSESSMENT CRITERION 2 
    Inventory classified as an asset is discussed using the balance sheet as guideline. 

    ASSESSMENT CRITERION 3 
    The differences between return on investment [ROI], return on assets [ROA] and return on capital employed [ROCE] are explained using given examples. 

    ASSESSMENT CRITERION 4 
    The returns on capital employed for a period of two years are determined using given data. 

    ASSESSMENT CRITERION 5 
    The differences between two most commonly used inventory performance measures are analysed to determine costing using given examples. 

    ASSESSMENT CRITERION 6 
    The importance of measuring inventory performance at various stages in the supply chain in terms of a costing exercise is followed according to procedures. 


    UNIT STANDARD ACCREDITATION AND MODERATION OPTIONS 
  • Anyone assessing a learner against this unit standard must be registered as an assessor with the relevant ETQA.
  • Any institution offering learning that will enable achievement of this unit standard must be accredited as a provider through the relevant ETQA.
  • Moderation of assessment will be overseen by the relevant ETQA according to the moderation guidelines and the agreed ETQA procedures. 
    		•

    UNIT STANDARD ESSENTIAL EMBEDDED KNOWLEDGE 
  • Inventory.
  • ABC analysis.
  • Elements of ordering costs.
  • Inventory valuation.
  • Financial accounts. 
    		•

    UNIT STANDARD DEVELOPMENTAL OUTCOME 
    N/A 

    UNIT STANDARD LINKAGES 
    N/A 


    Critical Cross-field Outcomes (CCFO): 

    UNIT STANDARD CCFO IDENTIFYING 
    Identify and solve problems and make decisions using critical and creative thinking in determining the importance of inventory. 

    UNIT STANDARD CCFO WORKING 
    Work effectively with others as members of a team as part of inventory management and know one's responsibility in the work environment to make the workplace more productive. 

    UNIT STANDARD CCFO COLLECTING 
    Collect, analyse, organize and critically evaluate information while managing inventory. 

    UNIT STANDARD CCFO COMMUNICATING 
    Communicating effectively using visual, mathematical and/or language skills in the modes of oral and /or written presentations while managing inventory. 

    UNIT STANDARD ASSESSOR CRITERIA 
    N/A 

    REREGISTRATION HISTORY 
    As per the SAQA Board decision/s at that time, this unit standard was Reregistered in 2012; 2015. 

    UNIT STANDARD NOTES 
    N/A 

    QUALIFICATIONS UTILISING THIS UNIT STANDARD: 
      ID QUALIFICATION TITLE PRE-2009 NQF LEVEL NQF LEVEL STATUS END DATE PRIMARY OR DELEGATED QA FUNCTIONARY
    Elective  57712   Further Education and Training Certificate: Generic Management  Level 4  NQF Level 04  Passed the End Date -
    Status was "Reregistered"     		 2023-06-30  As per Learning Programmes recorded against this Qual 


    PROVIDERS CURRENTLY ACCREDITED TO OFFER THIS UNIT STANDARD: 
    This information shows the current accreditations (i.e. those not past their accreditation end dates), and is the most complete record available to SAQA as of today. Some Primary or Delegated Quality Assurance Functionaries have a lag in their recording systems for provider accreditation, in turn leading to a lag in notifying SAQA of all the providers that they have accredited to offer qualifications and unit standards, as well as any extensions to accreditation end dates. The relevant Primary or Delegated Quality Assurance Functionary should be notified if a record appears to be missing from here.
     
    NONE 


    All qualifications and part qualifications registered on the National Qualifications Framework are public property. Thus the only payment that can be made for them is for service and reproduction. It is illegal to sell this material for profit. If the material is reproduced or quoted, the South African Qualifications Authority (SAQA) should be acknowledged as the source.