Warehousing Operations and Stock Control — 2021

KNEC Diploma in Supply Chain Management, Module I. Original examination questions with explained model answers for revision.

July 2021

Paper codes: 2903/107
Time: Not shown in supplied scan
Instructions: Not shown in supplied scan

Question 1(a) — 10 marks

Explain five challenges that an organisation may face when constructing a warehouse for use.

Model answer

  1. Financing: land, materials, labour and specialised facilities require substantial funds before the warehouse earns a return.
  2. Site availability: suitable accessible land of adequate size may be scarce or expensive.
  3. Design decisions: forecasting capacity, goods characteristics and future expansion is difficult, and a poor design can be costly to change.
  4. Construction delays: shortages, contractor problems or adverse weather can postpone completion.
  5. Compliance and approvals: obtaining the necessary planning, environmental and safety approvals requires appropriate design, documentation and time.

Question 1(b) — 10 marks

Outline five documents that are used in the process of receiving goods in an organisation.

Model answer

  1. Purchase order.
  2. Supplier’s delivery note.
  3. Goods Received Note.
  4. Goods inspection report.
  5. Goods rejection or discrepancy note.

Question 2(a) — 10 marks

Explain five measures that may be instituted in a warehouse to enhance the safety of warehouse staff.

Model answer

  1. Train staff: explain safe handling, equipment operation and emergency procedures so that unsafe practices are avoided.
  2. Provide suitable protective equipment: footwear, gloves, helmets or other protection appropriate to the task reduce exposure to injury.
  3. Maintain safe premises: clear aisles, adequate lighting and secure racking reduce slips, falls and falling loads.
  4. Control vehicle movement: marked routes and separation of pedestrians from forklifts reduce collision risk.
  5. Inspect equipment and plan emergencies: maintain handling equipment and provide suitable first-aid, fire-control and evacuation arrangements.

Question 2(b) — 10 marks

Explain five limitations of adopting the blind stock taking approach in a warehouse.

Model answer

Blind counting withholds recorded quantities from counters to reduce bias; the limitations concern the additional work and controls needed.

  1. Longer independent checking: counters cannot use expected balances to quickly identify a possible missed package or unit conversion.
  2. Later detection of differences: discrepancies become apparent only after the independent count is compared with records.
  3. Additional recounts: unexplained differences may require a second visit to the location, increasing time and labour.
  4. Greater identification demands: staff must identify the correct items and units without relying on prefilled quantity information.
  5. More difficult planning of counting effort: the team may lack quantity information needed to estimate how long a location will take.

Question 3(a) — 10 marks

Outline five factors that may render a material coding system to be ineffective in a warehouse.

Model answer

  1. Assigning the same code to different items.
  2. Using excessively complex or ambiguous codes.
  3. Applying inconsistent coding rules across departments.
  4. Failing to allow for new items or changes in the item range.
  5. Inadequate staff training or failure to keep code records current.

Question 3(b) — 10 marks

Describe five features of a good stock location system.

Model answer

  1. Unique identification: each location has a distinct reference that cannot be confused with another.
  2. Simplicity: the arrangement is easy for trained staff to understand and use.
  3. Accuracy: location records correspond to where goods are actually stored.
  4. Accessibility: positions and routes allow safe, prompt retrieval of the required goods.
  5. Flexibility: new items and changing quantities can be accommodated without destroying the logic of the system.

Question 4(a) — 10 marks

Explain five disadvantages of adopting the Periodic Review System for inventory control in an organisation.

Model answer

  1. Delayed shortage detection: stock may fall unexpectedly between scheduled reviews.
  2. Larger buffers: safety stock may need to cover both the review interval and replenishment lead time.
  3. Variable order sizes: changing balances at each review make supplier and delivery planning less predictable.
  4. Poor fit for volatile demand: a fixed review interval may be too slow for rapidly changing or urgent requirements.
  5. Concentrated workload: reviewing and ordering many items at one time creates a periodic administrative burden.

Question 4(b) — 10 marks

Outline five measures that an organisation may put in place to enhance security of automated stock records.

Model answer

  1. Use individual user accounts and strong authentication.
  2. Limit permissions according to each user’s authorised role.
  3. Keep protected backups and test restoration procedures.
  4. Maintain secure systems with appropriate updates and malware protection.
  5. Record changes in audit logs and review unusual activity.

Question 5(a) — 10 marks

Explain five ways in which a stores layout may contribute to cost reduction in warehouse operations.

Model answer

  1. Shorter travel: placing goods and work areas logically reduces movement time and handling labour.
  2. Better space use: suitable racks and zones reduce the need for additional premises.
  3. Less damage: separating incompatible goods and providing safe handling space reduces breakage and loss.
  4. Faster picking: clear locations and convenient access improve output per worker.
  5. Lower congestion: adequate routes and a sensible flow reduce waiting, repeated handling and equipment idle time.

Question 5(b) — 10 marks

Outline five reasons that may make it necessary for the government to regulate the substances used to preserve goods.

Model answer

  1. Protecting consumers from harmful residues or contamination.
  2. Protecting workers who handle the substances.
  3. Preventing pollution of air, water or soil.
  4. Ensuring that substances are suitable and effective for their intended use.
  5. Establishing consistent requirements for labelling, handling and disposal.

Question 6(a) — 10 marks

Outline five benefits that an organisation may derive from using returnable containers for its goods.

Model answer

  1. Lower packaging cost per use over repeated trips.
  2. Reduced quantity of discarded packaging waste.
  3. Consistent dimensions that simplify handling and storage.
  4. Stronger reusable protection where the container suits the product.
  5. Reduced need to buy a fresh container for every consignment.

Question 6(b) — 10 marks

Explain five ways in which an organisation may reduce break downs of its material handling equipment.

Model answer

  1. Preventive maintenance: scheduled servicing addresses wear before it causes failure.
  2. Trained operation: competent operators avoid misuse and unsafe handling that damages equipment.
  3. Respect capacity limits: keeping loads within rated limits prevents excessive stress.
  4. Routine checks: daily inspection and prompt reporting identify faults before operation worsens them.
  5. Suitable operating conditions: clean, maintained routes and appropriate equipment for the environment reduce avoidable strain.

Question 7(a) — 10 marks

Explain five types of stock levels that a warehouse manager may determine in an organisation.

Model answer

  1. Minimum level: the planned lower limit intended to reduce the risk of running out during normal operations.
  2. Maximum level: the upper planned limit that avoids excessive stock, storage cost and capital commitment.
  3. Reorder level: the stock position at which replenishment should be initiated.
  4. Danger level: a critically low level calling for urgent action to prevent interruption.
  5. Average stock level: the typical quantity held over time, useful for assessing storage needs and investment.

Question 7(b) — 10 marks

Outline five circumstances under which an organisation may use the imprest method of issuing goods to internal customers.

Model answer

  1. A department repeatedly uses standard consumable items.
  2. Usage is reasonably stable and a fixed authorised holding can be established.
  3. Frequent small requisitions would create excessive paperwork.
  4. Replenishment can be based on recorded consumption or verified shortages from the fixed holding.
  5. The department has suitable custody and controls to prevent misuse of its allocated stock.

November 2021

Paper codes: 2903/107
Time: Not shown in supplied scan
Instructions: Not shown in supplied scan

Question 1(a) — 10 marks

Outline five types of information that the production department should provide to the warehouse department in order to enhance efficiency in a manufacturing firm.

Model answer

  1. The types and specifications of materials required.
  2. Quantities needed for each production programme.
  3. Dates and sequence in which materials will be needed.
  4. Expected finished-goods output and transfer dates.
  5. Changes in schedules, material requirements or returned surplus materials.

Question 1(b) — 10 marks

Weko Limited has been experiencing increased incidents of dispatching wrong goods to customers by the stores staff in the recent past. Explain five reasons that may account for this situation.

Model answer

  1. Poor identification: unclear labels or similar-looking goods can lead staff to pick the wrong item.
  2. Incorrect documents: incomplete or wrongly entered customer orders give staff misleading picking instructions.
  3. Inaccurate locations: outdated location records direct pickers to unsuitable stock.
  4. Inadequate training or excessive workload: staff may misunderstand item codes or rush checks under pressure.
  5. Weak final checking: dispatching without comparing the picked goods with the approved order allows errors to reach customers.

Question 2(a) — 10 marks

Highlight five types of goods that may be received at a warehouse from the internal sources of an organization.

Model answer

  1. Finished goods transferred from production.
  2. Unused materials returned by user departments.
  3. Goods transferred from another warehouse or branch.
  4. Reusable containers or packaging returned from internal operations.
  5. Scrap, surplus or recoverable materials generated by production or maintenance.

Question 2(b) — 10 marks

Many organisations are increasingly using the bar-coding method for identifying their goods. Explain five reasons that may account for this practice.

Model answer

  1. Faster entry: scanning captures item identifiers more quickly than repeated manual typing.
  2. Fewer transcription errors: correctly assigned and readable codes reduce mistakes in recording item numbers.
  3. Timely stock updates: scans can record receipts, movements and issues immediately in the stock system.
  4. Standard identification: one consistent code distinguishes goods and helps link records across operations.
  5. Better traceability: linking codes to batches and transactions assists investigation of stock movements and discrepancies.

Question 3(a) — 10 marks

Explain five benefits that may accrue to an organization from automating the stock location system in its warehouse operations.

Model answer

  1. Faster retrieval: the system identifies the correct storage position without a lengthy manual search.
  2. More accurate tracking: recorded moves reduce the risk of losing the location of an item.
  3. Better space use: the system can assign available positions according to suitable storage rules.
  4. Efficient picking plans: location data supports logical routes and reduces unnecessary travel.
  5. Timely visibility: staff can see current locations and availability across storage areas.

Question 3(b) — 10 marks

Describe five features of a good stores layout.

Model answer

  1. Logical flow: receiving, storage, picking and dispatch are arranged to minimise unnecessary travel and backtracking.
  2. Adequate access: suitable aisles and clear routes allow safe movement of people and handling equipment.
  3. Efficient space use: appropriate racks and storage positions use available floor and vertical space without unsafe overloading.
  4. Clear identification: marked zones and locations make goods easy to find and reduce errors.
  5. Flexibility and protection: the layout accommodates changing requirements while separating incompatible goods and maintaining essential safety controls.

Question 4(a) — 10 marks

Ponge supermarket has been operating without proper stores preservation methods. Explain five adverse consequences that this situation may pose to the supermarket.

Model answer

  1. Spoilage: unsuitable temperature or humidity can make goods deteriorate before sale.
  2. Pest and contamination losses: unprotected stock may become unsafe or unacceptable to customers.
  3. Reduced product quality: damaged or deteriorated goods may require discounts or rejection.
  4. Financial loss: write-offs, disposal and replacement increase costs and reduce profit.
  5. Lost customer confidence: supplying poor-condition goods leads to complaints and may reduce future sales.

Question 4(b) — 10 marks

Explain five reasons that may have influenced some companies to prefer metallic drums for packaging of their products in Kenya.

Model answer

  1. Strength: suitable drums resist impact and protect contents during handling.
  2. Secure containment: well-sealed drums reduce leakage of compatible liquids or powders.
  3. Reusability: appropriate drums can be cleaned and used again, reducing cost per trip.
  4. Handling convenience: standard forms suit suitable lifting and movement equipment.
  5. Protection from external conditions: intact drums shield contents from moisture, light and contamination where their material and lining are compatible.

Question 5(a) — 10 marks

A proposal by a stores officer to purchase a fork-lift truck to handle goods at Uwezo supermarket has been rejected by the top management. Outline five reasons that may account for the rejection.

Model answer

  1. High purchase and ongoing operating costs.
  2. Insufficient handling volume to justify the investment.
  3. Narrow aisles, weak floors or other unsuitable premises.
  4. Goods or load sizes that are unsuitable for the proposed truck.
  5. Lack of trained operators, maintenance support or safe operating arrangements.

Question 5(b) — 10 marks

Explain five circumstances under which an organisation may find it necessary to develop materials codes for its goods.

Model answer

  1. Many items have similar names: distinct codes prevent confusion during ordering and issue.
  2. The item range is large: compact identifiers make records and searches manageable.
  3. Stock systems are being automated: consistent codes link transactions across software and scanners.
  4. Several departments use different descriptions: a common coding scheme standardises communication.
  5. Detailed analysis is required: codes allow usage, value and replenishment information to be grouped and reviewed consistently.

Question 6(a)(i) — 5 marks

The annual demand for products X is 5000 units. The unit price for the products is Ksh 1,000 and the cost of placing an order is Ksh 50. The stockholding cost is 10% of the unit price. Calculate the: (i) Economic Order Quantity (EOQ);

Model answer

Step Working Result
1. Identify annual demand and order cost D = 5,000 units; S = Ksh 50 per order D = 5,000; S = 50
2. Calculate annual holding cost per unit H = 10% × Ksh 1,000 Ksh 100 per unit per year
3. Apply the EOQ formula EOQ = √(2DS/H) = √((2 × 5,000 × 50)/100) √5,000
4. Calculate and round √5,000 = 70.7107 units About 71 units per order

Question 6(a)(ii) — 3 marks

The annual demand for products X is 5000 units. The unit price for the products is Ksh 1,000 and the cost of placing an order is Ksh 50. The stockholding cost is 10% of the unit price. Calculate the: (ii) Number of order per year.

Model answer

Step Working Result
1. Use the formula Number of orders = annual demand ÷ unrounded EOQ N = D/Q
2. Substitute N = 5,000 ÷ 70.7107 70.7107 orders
3. State the practical approximation Round to a whole number of orders About 71 orders per year

Question 6(b) — 12 marks

Explain six disadvantages to an organisation that uses non-computerized stock recording activities.

Model answer

  1. Slow processing: receipts and issues take longer to enter and total manually.
  2. Greater arithmetic error: calculations and copying can produce incorrect balances.
  3. Delayed information: records may not show recent movements when managers need decisions.
  4. Difficult analysis: preparing usage, value and replenishment reports requires repeated manual work.
  5. Physical storage burden: large quantities of records need space and orderly filing.
  6. Limited sharing and recovery: paper records are difficult to access simultaneously across locations and can be lost through damage or misfiling.

Question 7(a) — 10 marks

Mr. Kabu is a storekeeper in-charge of a storehouse for Kako company. Outline five reasons why he may not be allowed to carry out a stock-taking exercise in such a capacity.

Model answer

  1. He has custody of the stock and should not independently verify his own stewardship.
  2. Personal interest in the results may affect impartiality.
  3. He may be able to conceal shortages for which he is responsible.
  4. Separating custody from verification improves internal control.
  5. An independent team gives management more credible evidence of physical balances.

Question 7(b) — 10 marks

Explain five measures that an organisation may take to enhance safety of staff in warehousing operations.

Model answer

  1. Train staff: explain safe handling, equipment operation and emergency procedures so that unsafe practices are avoided.
  2. Provide suitable protective equipment: footwear, gloves, helmets or other protection appropriate to the task reduce exposure to injury.
  3. Maintain safe premises: clear aisles, adequate lighting and secure racking reduce slips, falls and falling loads.
  4. Control vehicle movement: marked routes and separation of pedestrians from forklifts reduce collision risk.
  5. Inspect equipment and plan emergencies: maintain handling equipment and provide suitable first-aid, fire-control and evacuation arrangements.
PreviousNext