CIPS L4M1 Scope and Influence of Procurement and Supply Exam With Complete Solutions 2024

CIPS L4M1 Scope and Influence of Procurement and Supply Exam With Complete Solutions 2024 What is Procurement? Procurement is a STRATEGIC function of a business obtains something Tangible as goods or Intangible as services. Include Purchasing Inventory, Logistics, Supply, Waste Management Quality, Cost, Added Value What is Purchasing? Is the ACT of physically ordering and buying something. What is Supply? Is the INFRASTRUCTURE which ensures that products and services get from supplier to the customer. What is inventory? the stock of goods, materials or products What is a stock? Asset available in the warehouse What is asset? Value of everything an organization owns Fixed cost Costs do not change (Salaries, Insurance, Rent) Variable Cost Costs do change as they are linked to the business (Raw Material, Extra hours) Directly Cost (Direct Procurement) Cost associated with the Job or production (Raw material, Man Power) Indirectly Cost (Indirect Procurement) Not associated with the Job (Clean Liquid, Stationary, Mobile phones contracts, MRO - Maintenance repairs and Operations. Primary Sector of the Economy The part of the economy that draws raw materials from the natural environment (Cotton, Oil, Silver, Wheat) Secondary sector of the Economy The part of the economy that transforms raw materials into manufactured goods (Light Bulbs, Nuts and Bolts, Metal housing, Plastic fittings) Finished goods Units of products that have been completed but not yet sold to customers (Shoes, Beds, Clothes, Jewellery) Stock Procurement Includes Can be stored and inventory Raw Material, Components and Finished Goods. Non-Stock Procurement Includes Are not stored and not listed in the Organization inventory (Cleaning Services, Internet Contract, Insurances, Advertising Campaigns) Explain why the procurement department should be consulted before an organization spends money. Procurement can influence the majority of the costs within an organization: 1.- Evaluating potential suppliers 2.- Involved in preparing specifications 3.- Review Quality standards 4.- Assess ethical requirements 5.- Compare buy or lease options 6.- Investigate transport 7.- Review packing options. 8.- Research total life cost 9.- Calculate currency differences 10.- Benchmark prices 11.- Ensure assets are fit for a propose Total life Cost (TLC) The total amount a product will cost an organization. Mentioned some examples of NON-STOCK INTANGIBLE procurements. Insurance, Marketing, Salaries/Pensions, Cleaning, IT and Catering Services, Staff Development, Electricity, Gas, Rent or Mortage. Mentioned some examples of STOCK TANGIBLE procurements. Components, Stationary, Uniforms Mentioned some examples of CAPITAL NON-STOCK TANGIBLE procurements. Machinery, Buildings, Lands, Vehicles CapEx (Capital Expenditure) The cost associated to assets of an Organization (The value of a Capital Purchases reduce overtime, the amount of the asset depreciated) OPEX (Operating Expenditure) Cost Associated with the running of an Organization, such as electricity, labour, transport, rent, the raw material (Day to day running of the business) What is a budget? Financial plan for a set period on how much can spend money. Depreciation The reduction overtime in the value of an asset held by the company. What should a procurement professional consider when sourcing a capital purchase? The TCL - Total Cost of Life, Depreciation. Procurement Process A cross-functional business process that originates when a company needs to acquire goods or services from external sources, and it concludes when the company receives and pays for them. What are the stages of the procurement cycle process? 1.-Understand the need 2.- Market/commodity 3.- Develop a strategy 4.- Pre procure 5.- Develop Documentation 6.- Supplier Selection 7.- ITT/RFQ 8.- BID/TENDER 9.- Contract Award 10.- Warehouse Logistics 11.- Contract Performance