CIPS L4M1 Study Guide Questions with
Verified Correct Answers
What should always be considered when making a purchase
The 5 rights of procurement and suppluy:
Right Price - not the cheapest but the most value for money
Right Time - Available to sample and available to purchase at right time
Right Place - Relatively close to view/sample/order or deliver in time
Right Quality - To arrive and functions as expected (Iso 9001)
Right Quantity - Enough to be available to and satisfy the customer ( Just in time & Kanban
What is added value
Addition to a feature or capability for which the buyer is willing to pay extra
What are the three types of stock procurements
Raw materials, components, and finished goods
What are raw materials
A type of stock procurement, Raw materials: are extracted from their natural source by the
primary sector. i.e. iron ore
What are components
A type of stock procurement, Components: Are manufactured in the secondary sector from
raw materials and are used to create finished goods. i.e. nuts and bolts
What are finished goods?
A type of stock procurement.Finished goods: Stocked by retail store to sell to consumers , i.e.
washing machine
,How should stock procurements be managed?
Stock Procuments needs to managed well to keep inventory cost effective, if not can lead to
problems. Effective stock control can save money as JCB found when they implemented new
software to manager their inventory
What are Non-stock procurements
Commercial services that help run an organisation and are not listed as inventory. i.e. wifi,
telephone service and insurance.
Just as important to get good value
What are some examples of Non stock procurements
Tangible, often capital purchases
Intangible, Cleaning services, a telephone system, an internet contract, insurance, or an
advertising campaign
Define Direct procurements
Sourcing and supply of a product or service that is directly related to a specific job, such as
the raw materials used to produce a product.
How important are direct procurements ?
Direct procurements are therefore integral to an organisation; without them, there can be no
finished product for the consumer.
How should relationships with direct procurements suppliers be managed?
, Must manage relationships with suppliers well due to the importance of these procurements.
Professionals can use the Kraljic matric to to manage these relationships effectively.
How are supplier relationships assessed?
The Kraljic matrix:
1. High Supply risk+ High spend= Critical
2. High supply risk + low spend = bottleneck
3. Low supply risk+ High spend = leverage
4. Low supply risk + high spend = routine
Define Indirect procurements
Goods and services that are needed for an organisation to continue functioning, but don't
contribute to the bottom line. i.e. marketing or office equipment
How important are indirect procurements and your relationship with these suppliers
?
Can be sourced from several different suppliers so relationships can be different from that of
direct procurement suppliers.
Importance and risk should be assessed by using the Kraljic matrix to identify the relationship
required with the supplier
Define capital expenditures
1. Asset of the organisation. i.e. machinery, buildings, or land.
2. They are procured to help a business develop, make money and keep up with market trends
What do Procurement professionals need to assess when it comes to CAPEX
Verified Correct Answers
What should always be considered when making a purchase
The 5 rights of procurement and suppluy:
Right Price - not the cheapest but the most value for money
Right Time - Available to sample and available to purchase at right time
Right Place - Relatively close to view/sample/order or deliver in time
Right Quality - To arrive and functions as expected (Iso 9001)
Right Quantity - Enough to be available to and satisfy the customer ( Just in time & Kanban
What is added value
Addition to a feature or capability for which the buyer is willing to pay extra
What are the three types of stock procurements
Raw materials, components, and finished goods
What are raw materials
A type of stock procurement, Raw materials: are extracted from their natural source by the
primary sector. i.e. iron ore
What are components
A type of stock procurement, Components: Are manufactured in the secondary sector from
raw materials and are used to create finished goods. i.e. nuts and bolts
What are finished goods?
A type of stock procurement.Finished goods: Stocked by retail store to sell to consumers , i.e.
washing machine
,How should stock procurements be managed?
Stock Procuments needs to managed well to keep inventory cost effective, if not can lead to
problems. Effective stock control can save money as JCB found when they implemented new
software to manager their inventory
What are Non-stock procurements
Commercial services that help run an organisation and are not listed as inventory. i.e. wifi,
telephone service and insurance.
Just as important to get good value
What are some examples of Non stock procurements
Tangible, often capital purchases
Intangible, Cleaning services, a telephone system, an internet contract, insurance, or an
advertising campaign
Define Direct procurements
Sourcing and supply of a product or service that is directly related to a specific job, such as
the raw materials used to produce a product.
How important are direct procurements ?
Direct procurements are therefore integral to an organisation; without them, there can be no
finished product for the consumer.
How should relationships with direct procurements suppliers be managed?
, Must manage relationships with suppliers well due to the importance of these procurements.
Professionals can use the Kraljic matric to to manage these relationships effectively.
How are supplier relationships assessed?
The Kraljic matrix:
1. High Supply risk+ High spend= Critical
2. High supply risk + low spend = bottleneck
3. Low supply risk+ High spend = leverage
4. Low supply risk + high spend = routine
Define Indirect procurements
Goods and services that are needed for an organisation to continue functioning, but don't
contribute to the bottom line. i.e. marketing or office equipment
How important are indirect procurements and your relationship with these suppliers
?
Can be sourced from several different suppliers so relationships can be different from that of
direct procurement suppliers.
Importance and risk should be assessed by using the Kraljic matrix to identify the relationship
required with the supplier
Define capital expenditures
1. Asset of the organisation. i.e. machinery, buildings, or land.
2. They are procured to help a business develop, make money and keep up with market trends
What do Procurement professionals need to assess when it comes to CAPEX
