CIPS L4M8 Exam Questions and Answers (100% Guaranteed Pass)

Stage 13: Assest management/end of life The procurement professional should evaluate whether the need is still current. If it is and unchanged, the procurement cycle process commences again but from a different stage as the need is already known and understood. If the need is not required the buyer should manage the end of life by reducing stock levels and informing the supplier Anti-bribery procedures -Proportionate procedures: should be in line with the ype of bribery risk and scale that is likely to be faced -Top level commitment: High level execs should set an example and issue statements, updates and feedback on the procedures and expectations -Risk assessment: Regular and documented risk assessment of the likelihood and impact of bribery -Due diligence: Documented procedures should cover and be enforced by all of the organisation within the supply chain -Communication: Ongoing training and updates should be provided to keep the organisation and its workforce aware of current developments -Monitoring and reviewing: Methods should be implemented to review compliance with the policies and procedures Busisness case for whole life asset management -Introduction -Objective -Approach -Resources -Benefits Procurement Cycle the cyclical process of key steps when procuring goods or services. Steps of the Procurement Cycle 1. Understand Need and develop High level Spec. 2. Market/Commodity and options (inc make or buy assessment). 3. Develop Strategy/plan 4. Pre-procurement market test and market engagement. 5. Develop documentation, PPQ/detailed spec/combine with 1. 6. Supplier selection to participate in ITT/RFQ/negotiation. 7. Issue ITT/RFQ. 8. Bid/Tender Evaluation and validation. 9. Contract award and implementation. 10. Warehouse logistics and receipt. 11. Contract performance review and continuous improvement. 12. SRM and SC management and development. 13. Asset management/end of life and lessons learnt. Terms and Conditions and the Developing of Contracts are a very important element of developing contracts, helping to minimise contractual risks and exposure when doing business. Supplier Evaluation the process of evaluating and approving existing and potential suppliers by quantitative assessment against specific business criteria. Sourcing a critical activity that commands increasing attention as managing supply chains becomes more complex (Trautmann et al., 2009). It is used at both tactical and strategic levels and is concerned with what needs to be purchased (product/service), in what quantities, for what purpose and where. Whole life cycle costing takes into account the total cost of a product or service over its lifetime, from concept through to disposal including purchase, hire or lease, maintenance, operation, utilities, training and disposal. It is important for procurement to take all these elements into consideration when making decisions and comparing the costs of buying, renting or leasing equipment particularly. In most cases the purchase costs are only a small proportion of the cost of operating it. Corporate Social Responsibility (CSR) a way of ensuring that the business monitors its compliance with the law and industry standards. It embraces the company's obligations and creates a positive impact through its activities and in some cases relates to a company going beyond its obligations in terms of its effect on the environment and impact on social welfare. Diversity and Inclusion Businesses not only have a responsibility to respect and value all forms of difference including race and ethnicity, culture and belief, gender and sexuality, age and social status and ability. There is also a huge business advantage to be had: diverse teams are more innovative, but also people want to be part of them and stay part of them. Modern Slavery possession or control of a person deprived of their rights with the intention of exploiting them Sustainable and Ethical Procurement consider the impact of environmental, economic and social factors along with price and quality. This is important in terms of how the buyer conducts their relationship with suppliers, including contract negotiation especially when sourcing globally with unfamiliar work cultures. Supplier Diversity A proactive business program which encourages the use of minority-owned, women owned, veteran owned, LGBT-owned [1], service disabled veteran owned, historically underutilized business, and Small Business Administration (SBA)-defined small business concerns as suppliers. Social Value a way of thinking about how scarce resources are allocated and used. It involves looking beyond the price of each individual contract and looking at what the collective benefit to a community is, when a public body chooses to award a contract. implied terms always present in a contract and are set by the law of the land. Express terms are written into the contract. They usually relate to items that can be negotiated and agreed between the parties involved. Examples include payment terms, the specification, delivery details, quantities, and indemnity clauses, etc. Model Form Contracts are a templated contract comprising of standardised and non-negotiated terms and conditions. Can be used to reduce the time required to negotiate specific terms for each agreement. Conditions are fundamentally at the heart of the contract. If they arebreached, they give the injured party the full range of remedies,including the right to terminate. Warranties are minor terms. If there is a breach, the injured party still have the right to claim compensation but might not be able to take any other form of redress. Liquidated Damages are fixed amounts of money agreed between the parties that becomes payable upon a breach of contract. They are enforceable by law. Unliquidated damages are an unspecified amount of money. And are used when the amount of money that will compensate the aggrieved party is unable to be predetermined. Exclusion clause are used in contracts in order to try and totally exclude the amount of liability which would otherwise arise from some breach of contract. Indemnity Clause are designed to secure an undertaking from the other party that it will accept liability and risk for any loss arising from events in carrying out the contract, and will make good the loss to the injured party or parties. Weighted Scorecard This is a tool that provides a systematic and fair process for selecting suppliers based on predetermined criteria. Whole life asset management relates to fixed assets. It is the process of evaluating the total price and all other costs associated with the item so an informed decision can be made about which option will provide the best value for money for the organization. Fixed Assets assets that are relatively permanent, such as land, buildings, and equipment 1st stage of whole-life cycle asset management identify the need, objectives and risk. For example, objectives could include being more energy efficient, reducing cost or keeping up with the competition. Current Assets Assets that companies expect to convert to cash or use up within one year or the operating cycle, whichever is longer. 2nd stage of whole-life cycle asset management procurement. The procurement team should consider all the elements within the whole-life asset management cycle in their process to be sure that the best value is gained. 3rd stage of whole-life cycle asset management construction. Much of the cost of the asset is derived from this stage. A readily available or mass-produced asset has lower design and manufacturing costs than bespoke items. 4th stage of whole-life cycle asset management commissioning. This means bringing the asset into working condition. Costs incurred at this stage include installation, training, insurance, testing, operational efficiencies and performance and quality. 5th stage of whole-life cycle asset management deterioration and maintenance. Assets that last longer without deterioration represent better value. Depreciation gives an indication of how quickly an asset loses value over time. Maintenance costs include the reliability of the asset, price and availability of spare parts, cost of skilled technicians or engineers, frequency of service requirements and downtime due to maintenance. 6th stage of whole-life cycle asset management condition performance monitoring. This is carried out by a system that monitors key aspects such as temperature, vibration, speed, output, etc in order to identify any defects early so decisions can be made to prevent stoppages. 7th stage of whole-life cycle asset management decommissioning. This means withdrawing an asset from service. Costs incurred at this stage include the costs of removal and transport, labour, and downtime. The asset could be reconditioned at this stage to extend its life-cycle. 8th stage of whole-life cycle asset management renewal and replacement. This is when the whole cycle starts again as the decision is made about whether it is better for the organization to continue using the existing asset or purchase a new one. Hidden costs related to global sourcing language barriers and time differences, behavior that might not meet the organizations ethical guidelines, logistics and lead time, incompatibility and changes in duties or taxes, as well as many others Primary data derived from original work or research through experience. It can be gathered from surveys, interviews, meetings or case studies. Secondary data derived from a previous source, which means that somebody else has gathered the data. This type of data can be gained from books, websites or trade magazines. Four stages of the decommissioning process preparation, dismantling, processing and disposal. Depreciate to decrease in value Corruption an unethical activity undertaken by a person with control or in authority. It includes bribery, deception, abuse of power and embezzlement. Bribery the act of offering something of value in return for influencing a decision. Deception deliberate effort to present false information, withhold information or influence any stage of the procurement cycle in a way that is detrimental to other parties. For example, if a supplier acts in unacceptable ways to ensure that they are awarded the contract. Abuse of power when individuals misuse their position, for example, by awarding a contract to a favoured supplier rather than the one that represents best value. Embezzlement the taking of money or property by a person to whom it has been entrusted. Fraud when a person acts to deliberately secure monies from another party through dishonest methods. Examples from procurement include kickbacks, corrupting influence, collusion, bid rigging, invoicing fraud, substitutions and false claims. Human Rights the statutory ways in which individuals expect to, and should, be treated. They include dignity, fairness, respect, equality, and freedom, and they can relate to sexual orientation, gender, religious beliefs, cultural values, race, ethnicity, or nationality. Human Trafficking the process of seeking, recruiting, transporting and exploiting individuals, to work against their will. Bonded labour an individual's promise to provide services through exploitation as repayment of a debt or other obligation. Forced labour when people are forced to work under the threat of punishment. Child labour the exploitive and illegal employment of children. Domestic slavery when individuals are exploited by working in private households for little or no wages in return for living accommodation. CIPS code of conduct promotes the adoption of ethical processes and responsible sourcing within procurement and supply and encourages any concerns to be raised with a person of authority within the organisation. Examples from CIPS code of conduct -Never engage in unethical or irresponsible sourcing and related activities -Always act in a professional manner, disclose any concerns or conflicts of interest and keep the confidence of allparties within the supply chain -Regularly and thoroughly conduct due diligence on suppliers, report any concerns, and keep up to date with regulations by expanding knowledge through CPD -Set positive and ethical examples for colleagues and suppliers alike -Comply with the country's law in which the procurement function has agreed and, if there is no agreed law, ensuring that CIPS Code of Conduct is followed at all times. Code of Ethics a set of morals, values and principles set out by an organisation to display what they deem to be acceptable conduct and behaviour. Ethical codes outline the values and missions of the organisation and state how professionals within the organisation should behave and perform within their role. Principles of an ethical code accountability, selflessness, integrity, objectivity, leadership, honesty, and openness. Organisations represent good ethical conduct: Chartered Institute of Procurement and Supply(CIPS); International Labour Organisation (ILO); Ethical Trading Initiative (ETI); Fair Trade Foundation; Ethical Company Organisation;and Anti-Slavery International. KPIs that relate to the measurement of ethical supplier performance include -How many complaints have been received regarding diversity? -How much packaging is being recycled? -What percentage of energy is generated by renewable sources? -The percentage of employees that leave each year. This can be an indicator of working conditions. -How many additional deliveries are made per order? This can indicate awareness of pollution from transport. The Triple Bottom Line (or TBL) devised by John Elkington. It advocates measuring sustainability in relation to the performance and investment against the 3Ps: People, Planet and Profit. 3Ps: People the social dimension. It considers the effect that an organisation has on its stakeholders, such as employees, consumers, producers and suppliers. 3Ps: Planet the environmental dimension. It considers the immediate and long-term effect that an organisation has on the environment, in terms of pollution, waste management, renewable energy, and use and replenishment of natural resources. For example, switching to hybrid vehicles to reduce CO2 emissions. 3Ps: Profit the financial dimension. Within TBL, profit is not just about the amount of money made, it is about ensuring the continuity of the organisation and enabling good work to be carried out in the community. For example, re-investing profit in state-of-the-art recycling machinery for waste cardboard Sustainable procurement balancing business needs against economic and social development and environmental protection. Examples of Sustainable practices within procurement -Evaluating and monitoring suppliers in relation to ethical conduct to ensure that only ethical and environmentally aware organizations are awarded contracts. In this way, the supply chain should become a long-term sustainable operation. -Considering TBL as a way of reporting on suppliers' organizations. -Actively working to reduce environmental damage in the supply chain, for example, balancing the needs of 'just in time' with the environmental impact of the additional deliveries. -Evaluating needs and only procuring what is required. -Gaining standards and accreditation's. -Removing waste from the supply chain. -Applying continuous improvement in the supply chain. -Developing the procurement professionals of the future. -Amending specifications. Stage 1: Understand the need and develop a high-level specification Understanding the need that has been generated, this will need to be communicated to the buyer to ensure there is no misinterpretation. The specification should ensure that the final design is fit for purpose. Specifications can be performance or conformance. Differences between Performance/Conformance specifications -Allow supplier innovation/No supplier innovation -Promote competition in the marketplace/Reduce competition -The supplier bares all the risk/The buyer bares all the risk -Buyer may not know exactly what they will be getting/Buyer knows exactly what they are getting -Shorter document/Longer, complex document -Quicker to prepare/More time consuming to prepare -Takes advantage of supplier expertise/Disregards supplier expertise Stage 2: Market commodity options Evaluate the market options. The options to consider include the budget available to spend on procurement, the number of suppliers available and whether to make or buy the product or service. (Porters five forces) Carters outsource Matrix Form a strategic alliance. Some tasks are strategically important, but contribute little to operational performance, so could be outsourced safely to a trusted partner. Retain. Tasks in this quadrant are high in strategic importance and have a big impact on operational performance. Retain these tasks in-house, so that you keep the maximum level of control. Outsource. Activities in this quadrant are important for successful operational performance, but are not strategically important. These can be outsourced with little risk. Eliminate. Some tasks are not important to your organization's overall strategy, and don't make a significant contribution to its day-to-day operational performance. You could think about eliminating these activities completely. Benefits of outsourcing -saving money -reducing overheads -reducing headcount -using external knowledge -focusing internally on core competencies -helping with shortfalls in labour/expertise Disadvantages of outsourcing -losing some control within an organisation -relying on external organisations -reducing quality -losing some internal knowledge Stage 3: Develop a strategy/plan Procurement professionals should think about the external environment when developing this plan and take several factors into account that could affect their decisions. Whether to use an RFQ or ITT.. S.T.E.E.P.L.E Social Technological Economic Environmental Political Legal Ethical Stage 4: Pre-procurement market tests and market engagement Is it the right time to carry out the procurement? The following should be considered: -stakeholder engagement for feedback -supplier engagement -market research -any new legislation/regulations -currency fluctuations -competitors actions Stage 5: Develop Documentation The documents may be RFQs or ITTs. The choice of the document depends on the following: -the urgency of the needs -the type of the need -the sector in which the procurement professional works -regulations and legal obligations -the procurement professionals preferred method of working Documention should contain the following -specification (performance or conformance) -contractual terms (payment terms, exclusions, liability, indemnity) -date for quotation/big to be received by (deadline for prices) -quantity (amount of goods required) -quality standards (conformance to any standards eg ISO) -delivery schedule (when are the goods required) -delivery address (where are the goods required) -key performance indicators (objectives against which the supplier will be monitored) -service level agreements (standards of service the supplier will be expected to meet) Stage 6: Supplier selection Before sending out the documentation ther intended recipients need to be selected. Supplier selection involves evaluating suppliers against pre-determined criteia to assess their suitability to work with the buyer organisation. Carters 10 C's can be used to evaluate suppliers Carter's 10 C's Competency Capacity Consistency Control Cost Commitment Cash Clean Culture Communication Stage 7: Issue invitation to tender/request for quotation Documentation prepared in stage 5 is sent to the pre-evaluated suppliers from stage 6. Stage 8: Bid/tender/quotation evaluation and validation When the bids have been received, the next stage is to evaluate them to select the most suitable supplier to award the contract to. TCA should be calculated. Stage 9: Contract award and implementation the chosen supplier is awarded the contract to supply. The two parties will then negotiate contractual terms before signing. Creating mutually acceptable terms at this stage helps to avoid any conflict further down the line. Stage 10: Warehouse logistics and receipt If the need is tangible the warehouse will need to be prepared for the arrival of the goods. Allocate space in the warehouse and be briefed with to understand the specification Stage 11: Contract performance review and continuous improvement The suppliers performance should be regularly reviewed against key performance indicators. KPIs will have bee agreed during the post contract award negotiations Stage 12: Supplier relationship/contract management managing the supplier relationship aswell as the outcome of the contract is important. It is possible to have a contract that is performing well but a negative overall suppier relationship The 3 types of procurement/buys -a new buy -a re-buy -a modified buy Requisitions an internal document or statement given to procurement about an identified need that goes on to generate a purchase order Four forms that a requisition can take -verbal -handwritten -E-mail -automated what information should be on a requisition -date -description of what is required -supplier if known -quantity required -when its required -where its required -why its required -who identified the need -who approved the need Cycle time the time taken within a manufacturing organisation to produce the end product. Starts when components are delivered and ends when the finished product is ready for despatch Levels of supplier competition -perfect competition -monopolistic competition -oligopoly -monopoly perfect competition a market structure in which a large number of firms all produce the same product monopolistic competition a market structure in which many companies sell products that are similar but not identical Oligopoly A market structure in which a few large firms dominate a market Monopoly A market in which there are many buyers but only one seller. Supplier segmentation Integrated Strategic Collaborative Transactional Ansoff Matrix "A Matrix looking at growth potential of a firms products. It classifies strategies into market penetration, new product development, market development and diversification and measures the degree of risk associated with each strategy." ESI early supplier involvement Early Supplier Involvement Involving suppliers in the early stages of product design. ESI can gain information on the following -technical advice -cycle times -lead times -cost of production -quality -potential problems -risk -supply chain -life cycle Advantages of ESI -reduces cost for buying organisation -improves specifications -enhances quality -access to technology -promotes innovation -availability of expert knowledge -reduces development time -shares risk Disadvantages of ESI -supplier could unfairly influence the buyer -buyer could become reliant on supplier -buyer loses control of product -intellectual property risk Offshoring relocating manufacturing functions overseas Advantages of offshoring -reduced price -increased profit -helping a weak economy -favourable governmental policies Disadvantages of offshoring -loss of control -risk of intellectual property (copyrights, patents) -ethical concerns -environmental concerns -loss of jobs in home country Supplier evaluation should be based on -pre-qualification questionnaires -carters 10 Cs -credit checks -ethics -sustainability -reputation -benchmarking -relationships PQQs can request the following details -company details -trading history -financial information -quality standards -insurance -environmental polices (CSR) -ethical policies -health and safety policies -references COMPETENCY Is the supplier competent with the capabilities to carry out the contractual obligations? CAPACITY Does the supplier have enough capacity to meet the demands of the contract (i.e. space, resources, knowledge)? CONSISTENCY What processes does the supplier have to ensure consistent quality of product or delivery of service? CONTROL Does the supplier have control over its policies, procedures and supply chain? COST Is the cost offered consistent with expectations and the competition? COMMITMENT Is the supplier committed to doing a good job? Does it have accreditations for quality, environmental awareness and health and safety? CASH What is the financial status of the supplier? Is it stable? CLEAN Is the supplier working towards sustainability? CULTURE Is the supplier's culture compatible with the buyer organisations culture? COMMUNICATION How quickly and effectively does the supplier respond? Sustainability concerns the longevity of the organisation, as well as its impact on the natural world. Benchmarking the process of comparing a function, process performance or price to that of another which is best in class. Can be internal or external Relationships are based on the following factors -product/service being procured -how often the product/service is required -level of trust -methods of communication -personalities of the individuals involved -cultures of the organisations involved -length of the relationship -amount of competition in the marketplace Relationship spectrum -adversarial -arms length -transactional -closer tactical -single sourced -outsourced -strategic alliance -partnership -co-destiny Supplier preference matrix -development -nuisance -core -exploitable Stages of the tendering process Stage 1 - Decide which style of tender to use Stage 2 - Prepare invitation to tender (ITT) Stage 3 - Send the ITT Stage 4 - Buying organisation receives bids Stage 5 - Evaluate bids Stage 6 - Award contract and give feedback Stage 7 - Contract management Styles of Tender Open Restricted Negociated Competitive dialogue NDA Non-Disclosure Agreement Evaluation of bids considers the following aspects -supplier organisation -price -quality -payment terms -disposal -service levels -ethics -sustainability -risk -location -warranties COI conflict of interest Supplier relationship management considers the following -behaviour -culture -communication -collaboration -forecasting -transparency Types of communication -face-to-face -telephone -email -body language -active listening Benfits of effective supply management -enhanced control -reduced risk -continuous improvement Ways to conduct supplier management -credit checks -key performance indicators (KPI) -service level agreements (SLA) -regular reviews -audits -benchmarking Service Level Agreement (SLA) A negotiated agreement between the customer and the vendor. The SLA may specify the levels of availability, serviceability, performance, operation, or other commitment requirements. Supplier audits review the following areas -quality processes (ISO 9001?) -environmental policies (ISO 14001?) -general impression -equipment condidtion -warehouse and inventory processes -code of ethics -health and safety -CSR policy -staffing levels -culture sourcing can take place in the following locations Localised (with suppliers who are near) Regional (with suppliers who are in the same area but slightly further away) National (entire country) Global (conducted worldwide) A contract is an agreement made between two or more parties, that is legally enforceable 5 stages of forming a contract -Intention (buyer must have an intention to enter a legally binding contract) -Capacity (buyer must be of sound mind and fully aware of the contractual obligations) -Offer (the promise in exchange for performance from the other party) -Consideration (the exchange of one thing for another within an agreement) -Acceptance (the point where the offeree accepts the proposal from the offeror) Examples of implied terms -Sales of Goods Act -Goods being fit for purpose -Negligence -Confidential breaches Examples of Express terms -Payment terms -Specification -Delivery details -Quantities Model form contracts are agreements between two or more parties where the terms are defined by one party and not open to negotiation Standard Term/Model form contracts include the following elements -Definitions: of names and terms -General terms -Commercial provisions: payment terms, liability, performance and delivery -Secondary commercial: provisions: confidentiality and intellectual property rights -Standard clauses: force majeure and the law of the country to be followed Advantages of Standard term/model form contracts -saves time -saves money -industry standard contracts are widely accepted and understood by both buyers and suppliers Disadvantages of Standard term/model form contracts -bespoke terms may not be included -better terms could be negotiated -buyers do not get experience in creating contracts Express terms include the following -price -specification -payment terms -warranties -conditions -retention of title -damages -exclusion clauses -indemnity clauses -breaches -termination -conflict resolution Negotiation tactics -Take it or leave it -Good cop, bad cop -Salami -One last thing -Russian front -Mother hubbard -Log rolling Take it or leave it tactic This lets the supplier know that you are firm on an issue and will not move. Good Cop/Bad Cop A negotiating strategy involving at least two people on one side of the negotiation; of the two, one is reasonable and agrees with the other, the other is aggressive and unagreeable Salami tactic The buyer divides the conessions that they are willing to make on the price into small 'bite-sized' pieces to discuss with the supplier. This way the supplier may not realise they are conceding as much as they are One last thing tactic The buyer makes one final request of the supplier, just when agreement is about to be made. Russian Front tactic Two offers are presented, but one of them will never be accepted as it is unreasonable. The unreasonable offer is explained first so that the second offer seems much more appealing compared. Mother Hubbard The buyer states that the 'cupboard is empty' and that they cannot offer any more i.e. they cannot afford to increase their bid Log rolling tactic The buyer presents many requests, where some have little or no value. When giving conessions, the low-value requests can be conceded with no negative effect Terms for the specification -technical drawings -industry standards -recipes or formulae -brands -samples Payment terms -Proforma -Net 30 days -Net 45 days -Net 60 days Warranties are a secondary term that are written into the contract as express terms Advantage of an Express term Warranty to make sure that the procurement professionals purchase order is received exactly as required Retention of Title clause (RoT) clause that states when the ownership transfers from supplier to the buying organisation Breach of contract happens when one party fails to perform its legal obligations. Thre categories of a breach of contract -Material: One of the parties fails to perform its agreed responsibilities -Anticipatory: One party has suggested that it will be unable to fulfil its obligations -Fundamental: The injured party is so affected by the failure of performance from the other party that the contract ceases Damages are a sum of money that the supplier pays to the buyer if it fails to carry out its contractual obligations Advantages of Liquidated damages -pre-agreed amount -no need for legal intervention Disadvantage of Liquidated damges could receive less than the actual amount lost Advantage of Unliquidated damages full amount of loss can be recovered Disadvantage of Unliquidated damages has to be awared through a court Types of Termination of a contract -breach -performance -prior agreement -rescission -completion Arbitration the process or act of resolving a dispute Litigation the process of taking legal action Remedies the provisions in a contract that enable the injured party to take action when the other party does not comply with the contract terms Suppliers can be identified by the following ways -existing relationships -prior knowledge -reccomendation -internet searches -trade shows -marketing material If a supplier has financial difficulties it can affect the buyer in the following ways -reduced quality of products -delays in product deliveries -shortages of deliveries -price increases -failure to supply A suppliers financial performance can be reviewed in the following ways -credit ratings -reviewing the balance sheet -reviewing liquidity -reviewing profitability -requesting references from other customers Assets resources owned by a business Liabilities Amounts owed to creditors Balance Sheet A financial statement that reports assets, liabilities, and owner's equity on a specific date. Liquidity how quickly its assests can be converted into cash Current ratio shows whether an organisation can pay its short-term debts Current Ratio Formula Current Ratio = Current Assets / Current Liabilities Profit is the amount of money left over after all expenses have been paid Quick ratio shows whether an organisation can meet its immediate creditors requirements Two most common organisational structures Flat Hierarchical Quick Ratio (Acid Test) formula (Current Assets - Inventory) / Current Liabilities Four dimensions of culture Return on Investment (ROI) a measure of profitability that indicates whether a gain or loss has been generated compared with the initial cost CSR focuses on the following themes -legality -business ethics -protecting the environment -protecting people -charity work Electronic procurement activity -E-purchase orders -E-delivery notes -Barcoding -Scanning -E-payment -E-tendering -E-Invoicing Profit formula Sales - cost of goods sold Force majeure can include the following -flooding -earthquakes -hurricanes -tsunamis -war -terrorism Two main purposes of import duties (taxes) - to give local, or own-grown, procedure an economic advantage - to raise revenue for the country's government Piece part price price per individual item Incoterms are Internationally apporved terms that state how goods are transported from one party to another and when the risk and title passes Incoterms EXW: Ex works FCA: Free Carrier FAS: Free Alongside Ship FOB: Free on board CPT: Carriage paid to DDU: Delivery Duty unpaid DDP: Delivery Duty paid DAP: Delivery at place Mobilisation When a contract shifts from one supplier to another Adversarial Lacking in trust, confrontational, negative Kotter's eight stage change management model shows how to manage change to maximise acceptance from those affected The transfer of undertaking (Protection of Employment) Regulations 1981 (TUPE) Designed to protect employees from losing their jobs if a contract is moved from one supplier to another Four stages of the implementation of contracts Stage 1 - Transistion Stage 2 - Start-up Stage 3 - Operations Stage 4 - Management Kaizen Japanese term for continuous improvement Types of waste -Over-production -Unnecessary motion -Waiting -Transport and handling -Over-processing -Inventory -Defects Training evaluation model Macro environment External factors beyond an organisations controls that will influence its success, such as government policy, technology and social and cultural factors Training is likely to involve the following -operational capabilities -health and safety -accountability -risk assessment -general maintenence Losses within insurance -fire -theft -accidental damage -force majeure Tests that can be conducted -visual test to check for damages -PAT (portable appliance testing) -health and safety test -emissions test -production run - to check the asset can produce/do what it is supposed to Operational efficiences -electrical consumption -products produced per minute -miles per gallon -noise levels -pollution levels Cost of quality Maintenence costs -reliability -price of spare parts -availability -skilled technicians or engineers -frequency of service requirements -downtime due to maintenance The five approaches to condition performance monitoring are -do nothing -reactive -preventative -predictive -proactive Primary Sector The portion of the economy concerned with the direct extraction of materials from Earth's surface, generally through agriculture, although sometimes by mining, fishing, and forestry. secondary sector of the economy the part of the economy that transforms raw materials into manufactured goods Tertiary sector of the economy the part of the economy that involves services rather than goods Business case A document containing the justification and the commercial benefits acheivable for a potential project Hidden costs linked to Global sourcing -internal overheads -transition/mobilisation -language barriers -time differences -post contract reviews -culture differences -ethical behaviour -reputation -supplier financial position -exchange rates -logistics -lead time -inventory -incompatibility -changes in duties/taxes -trade wars Hofstede's Cultural Dimensions power distance, individualism, masculinity, uncertainty avoidance, long-term orientation kickback a form of bribery in which a sum of money is payable to an organisation in exchange for a contract Advantages of agreeing a fixed exchange rate -eliminates fluctuation -eliminates risk -prevents depreciation of currency -enables effective budgeting Disadvantages of agreeing a fixed exchange rate -potential savings could be missed -may incur higher rate than live value -no flexibility -rate could be fixed at the wrong time Costs associated with the logistics process of global sourcing -delays -loss of freight -poor/incorrect communications -confiscation at customs -incorrect exprt/import paperwork -transport breakdown -force majeure costs associated with storing additional products -insurance -heating -lighting -staff -rent of additional space -security Trade war economic conflict that occurs when one or more nations put up trade barriers to punish another nation for trade barriers it erected against them Cross-functionality people with different levels of experience from different departments working together to acheive a mutual goal Belbin's Team Role Theory Tuckman's Model of Group Development 1. Forming 2. Storming 3. Norming 4. Performing 5. Adjourning Examples of bribery -securing of a contract: Money or gifts/accepted in return for the award of a contract -gaining knowledge: ..for inside knowledge to gain an unfair advantage against the competition -winning an order: ..for an order being placed with that supplier even if they are not the best value -ignoring poor performance: ..for turning a blind eye to products or services that are unfit for purpose -obtaining falsified documentation: ..for false documentation being prepared Corruption may include the following -Bribery -Deception -Abuse of power -Embezzlement Influencing styles -Assertive: Forceful -Ingratiating: Charm and flattery -Exchange: Trading favours -Upward appeal: Requesting input for senior mangement -Coalition: United approach with support from team members -Rational persuasion: Bringing in logic and facts to clarify Five types of power legitimate - power that comes with authority reward - power generated from control over resources coercive - Power generated from the ability to make threats expert - power derived from having relevant expertise or knowledge referent - Power from charisma, charm and personality Human Rights include -Dignity -Fairness -Respect -Equality -Freedom Human Rights relate to -Sexual orientation -Gender -Religious beliefs -Cultural values -Race -Ethnicity -Nationality Five basic rights 1. Right to equality 2. Freedom from discrimination 3. Right to life, libert and personal security 4. Freedom from slavery 5. Freedom from torture and degrading treatment Modern slavery includes -Human trafficking -Bonded labour -Forced labour -Child labour -Domestic slavery Maintaining ethical codes of practice Ethical codes outline the values and missions of the organisation and state how professionals within the organisation should behave and perform within their role Nolans 7 principles of Public life 1. Leadership 2. Honesty 3. Openness 4. Accountability 5. Selflessness 6. Intergrity 7. Objectivity Code of ethics cover the following 1. Diversity 2. Equality and inclusion 3. Mission statement and values 4. Conflict of interest 5. Whistleblowing 6. Non-compliance Diversity includes 1. Race 2. Gender 3. Sexual orientation 4. Cultural background 5. Beliefs 6. Values 7. Age 8. Abilities 9. Political views 10. Religion Forms of conflict of interest -Financial -Materialistic -Prejudical -Personal -Professional Whistleblower an employee who exposes unethical or illegal conduct within the federal government or one of its contractors Non-compliance failure to act in accordance with a wish or command Breach of CIPS code of conduct if a CIPS member commits breach against the CIPS code of conduct, they can lose their right to use the CIPS designation after their name and lose their membership of the institute Areas of environmental concerns -Pollution -Recycling -Renewable processes -Sustainability Pollution can be generated from -Factory emissions -Noise -Smell -Transport -Development -Waste disposal renewable energy sources sources of energy able to be replaced through ongoing natural processes such as wind, rain or sun Ethical Trading Initiative (ETI) An alliance of organizations seeking to take responsibility for improving working conditions and agreeing to implement the ETI Base Code, a standard for ethical practices for the firms and its suppliers. Fair trade foundation Promoting fair deals for growers and good prices for workers in developing countries Ethical Company Organisation Research company benchmarking organisations on ethical conduct Anti-Slavery International promoting human rights Amnesty International An influential non-governmental organization that operates globally to monitor and try to rectify glaring abuses of political (not economic or social) human rights. Red Tractor A food standards agency that regulates the source, origin and movement of food through the supply chain Institute of Environmental Management and Assessment (IEMA) A worldwide alliance of professionals aiming to make businesses future-proof through sustainability Carbon Trust assessing carbon footprints awarding the standard for companies acheiving carbon neutral status Examples of unethical behaviour -Disposal of hazardous waste into waterways -Inhumane working conditions -Recyclable waste dumped in landfill -Uequal treatment of different races within an organisation -Unacceptable living conditions for animals Effects of Unethical Behavior on supply chain -Supplier closed down -Shortage of products -Price rise due to demand outstripping supply -Reputation by association -Stakeholder backlash, loss of investment -Reduction in sales/profit Advantages of The Triple Bottom Line theory -Encourages awareness of sustainability -Promotes the use of CSR policies -Supports awareness of the environment Disadvantages of The Triple Bottom Line theory -Is just a reporting tool -No legal requirement to conduct -Hard to measure effectively sustainable practices -Evaluating and monitoring suppliers in relation to ethical conduct -Considering TBL as a way of reporting on suppliers organisations -Actively working to reduce environmental damage in the supply chain -Evaluating needs and only procuring what is required -Gaining standards and accreditations -Removing waste from the supply chain -Applying continuous improvement in the supply chain -Developing the procurement professionals of the future -Amending specifications JIT systems may have a negative impact on the environment More deliveries equates to more transport and more packaging, which ultimately produces more pollution Sustainable procurement is where economic development, social development and environmental protection are balanced against business needs Social impact The effect that an organisation can have on the community and its stakeholders Factors of Social impact -Impact investing -Health -Social entrepeneurship -Human and civil rights -Education -Public sector and public policy -Corporate social impact -International development -Environmental sustainability -Nonprofit and social enterprise Cultural Elements Stories Symbols Power structures Organisational structures Control systems Rituals and routines Negative impact of technological behaviour advances in technology can often result in the lack of requirement for human input and, as such jobs could be lost Social impact key objectives Create Strive Recognise Measure Believe Organisations which display poor behaviour see outcomes such as -reduced brand loyalty -difficulty in recruiting -negative media coverage -reduced sales/profit -reputational damage Orgnaisations which display good behaviour create a positive social impact. The community in which they are based will benefit from -High employment -Fair wages -Low pollution -Sustainable resources -Engagement and involvement with local organisations Reporting Framework A set of criteria to measure an organisations performance Reporting framework usually include -cash flow statement -profit/loss account -balance sheet -shareholder value -predicted versus achieved sales -future budget Reporting on social impact