MNP3701 LATEST EXAM
PACK 2025
QUESTIONS AND
ANSWERS
For assistance contact
Email:
, lOMoARcPSD|31863004
PART 1 INTRODUCTION
Study unit 1Introduction to purchasing and supply chain management
Explain and illustrate the following concepts of purchasing and supply management:
Purchasing: is the systematic process of deciding what, when and how much to purchase, the act of purchasing it and the
process ensuring that what is required is received on time in the quantity and quality specified.
Strategic purchasing: is the process of planning implementing evaluating and controlling strategic and operating decisions for
directing all activities of the purchasing function towards opportunities consistent with the firm’s capabilities to achieve its long-
term goals
Supply management: is like a management function…is the identification, acquisition, access, positioning and management of
resources and related capabilities and organization needs or potentially needs in the attainment of its strategic objectives.
Supply chain management: SCM is a management philosophy aimed at proactively integrating and coordinating a network (or
web) of upstream linkages (sources of supply), internal linkages (inside the organization, according to the value chain approach)
and downstream linkages (distribution and ultimate customers) in performing specific key business processes and activities that
will ultimately create and optimize value for the customer in the form of products and services specifically aimed at satisfying
customer demands and expectations.
Value chain: Interlinked value-adding activities that convert inputs into outputs which, in turn, add to the bottom line and help
create competitive advantage. A value chain typically consists of inbound distribution or logistics, manufacturing operations,
outbound distribution or logistics, marketing and selling and after-sales services. These activities are supported by purchasing or
procurement, research and development, human resource development and corporate infrastructure.
Extended value chain: multiples levels of suppliers and customers form the extended vale chain concept which states that
success is a function of successfully managing a linked group of firms past first level suppliers or customers
Supply chain: The supply chain is a network of organizations that are involved, through upstream and downstream linkages, in
the different processes and activities that produce value in the form of products and services that satisfy the ultimate customers‟
needs.
Supply chain vs value chains
Supply chains is a set of 3 or more organizations linked directly by one or more of the upstream or downstream flows of product,
services, finances and information from a source to the customer. It is important to acknowledge that anytime business is
conducted a supply chain will exist.
Value chains The process or activities by which a company adds value to an article, including production, marketing, and the
provision of after-sales services. Includes support activities. Composed of primary and support activities‟ that can lead to a
competitive advantage when configured properly.
Supply Chain illustration PAGE 15
Put the phrase "a new competitive environment" in perspective
New competitive environment
Increasing numbers of world-class competitors (domestically and internationally)
Forced to improve internal process
Demanding customer base; higher quality, reduced prices, faster delivery
Widely available information sources due to Technology (Internet, Twitter, social media)
Balance of power between buyers and suppliers
Greater outsourcing
Why Purchasing Is important /The importance of effective purchasing in an organization PAGE 8
Increased value and savings – As companies struggle to increase customer value by improving performances, many
companies are turning their attention to purchasing and supply management. The impact suppliers can have on the firm’s
total cost. The supply base is important part of the supply chain. Supplier capabilities can help differentiate a producer’s
final good or service, increasing their value to the final customer.
Building relationships and driving innovation – Building relationships to jointly reduce costs of the product and
service (P&S) and in turn the supplier contributes innovative ideas that add value to P&S
Improving Quality and reputation – outsourcing, relationships - firms are looking to outsource to concentrate on areas
of specialization and competence
Reducing time to market – early including of suppliers and engineers to improve product and process design
Managing supplier risk- such as poor-quality natural disasters and high transport costs
Generating economic impact – ISM report on business - purchasers have the power to move financial markets
Contributing to competitive advantage – effective purchasing, reputation
, lOMoARcPSD|31863004
Purchasing and supply chain benefits / Explain how an organisation can achieve purchasing and supply chain
benefits
To minimize inventory losses and investment in inventory
Innovative products - To purchasing goods and services of the required quality, competitively at minimum cost
Better supply chain relationships - To trace or develop reliable alternative sources and maintain sound lasting relations
with reliable suppliers
Reduced product lines - To develop and operationalize policy procedures and systems that will ensure that the
administrative costs of purchasing are kept to a minimum
Standardisation
Partnerships - To identify and analyses problem areas and rectify them effectively.
Supply chain umbrella PAGE 18
Activities: Supply chain management.
Purchasing
Inbound transportation
Quality control
Demand and supply planning
Receiving, materials handling and storage
Order processing
Production planning, scheduling and control
Warehousing/distribution
Shipping
Outbound transportation
Customer service
Four enablers of purchasing and supply chain management PAGE 20
Capable human resources Supply chain professionals should have certain knowledge and skills which should include:
Supplier relationship management; total cost analysis; purchasing strategies; supplier analysis and competitive market
analysis. Therefore, effective supply chain management requires close collaboration with suppliers, as well as internal
coordination with engineering, procurement, logistics, customers, and marketing, to coordinate activities and material
flows across the supply chain.
Proper organisational design Proper organisational design refers to the process of assessing, selecting or developing
the structure and formal system of communication, a division of labour, coordination, control, authority and responsibility
required to achieving organisational goals and objectives, including supply chain objectives.
Real-time and shared information technology capabilities The development of information technology (IT) software
and platforms that support an end- to-end supply chain.
Right measures and measurement systems System should be in place to measure and improve performance
PART 2 PURCHASING OPERATIONS AND STRUCTURE
Study unit 2 The purchasing process
, lOMoARcPSD|31863004
Purchasing objectives PAGE 42
Objective 1: Supply continuity and assurance: perform a number of activities to satisfy the operational requirement of internal
customers, supports the needs of operations through purchase of services, raw materials, components, subassemblies and
repair and maintenance items. Purchasing sources products and services at the right price from the right source at the right
specification to meet users‟ needs un the right quantity and arrange for delivery or service performance at the right time to the
right internal customers
Objective 2: Manage the purchasing process efficiently and effectively: by determining staffing levels, developing and
adhering to administrative budgets, providing professional training and growth opportunities for employees and introducing
improved buying channels with procure to pay systems that lead to improved spending visibility, efficient invoicing and payment
and user satisfaction.
Objective 3: Develop supply base management: must keep abreast of current condition in supply markets to ensure that
purchasing selects suppliers that are competitive, identifies new suppliers that have the potential for excellent performance and
develops closer relationships with these suppliers, improves existing suppliers and develop new suppliers that are not
competitive with current suppliers. Supplier performance management requires that purchasing peruses better relationships with
external suppliers and develop reliable, high quality supply sources.
Objective 4: Develop aligned goals with internal functional stakeholders: global organisations have resulting in limited cross
functional interaction and cross boundary communication. Purchasing must communicate closely with cross functional group that
represents their stakeholders therefore purchasing activities are largely driven by shareholder requirements.
Objective 5: Develop integrated supply strategies that support organisational goals and objectives: purchasing can
directly affect the long-term growth, revenue and operating outcomes and plans of stakeholders and business units. A supply
management executive that us actively involves in the business strategy discussions can provide critical supply market
intelligence, budget forecasts and other insights that can contribute to a more effective business strategy, an eg would be
updates on supply market conditions and trends and translations of these impacts on key business outcomes.
Objective 6: address Broad-Based Black Economic Empowerment: empowering disadvantaged groups by preferential
procurement practises. Ensure that diversity suppliers receive a reasonable share of the purchasing organisations business
Purchasing and supply responsibilities
1. Evaluating and selecting suppliers
2. Acting as the primary contact with suppliers
3. Determining the method of awarding purchase contracts
Strategic Supply Management roles and responsibilities PAGE 46
Spend analysis
Demand management and specifications
Category management and supplier evaluation/selection
Contract management
Cost management
Managing the Procure to Pay Process
Supplier relationship management
Establish a supply management strategy
Improving the procure to pay process PAGE 51
Procure to pay process 6 major stages:
1. Forecast and plan requirement
2. Need clarification: Requisitioning
3. Supplier identification/selection
4. Contract/purchase order generations
5. Receipt of material or service and documents
6. Settlement, payment, and measurement of performance
Approval, contract and purchase order preparation
After the supplier is selected there are certain steps to follow to conclude the purchasing process
Purchase order, blanket order, material purchase release
Receipt and inspection, material packing slip, bill of lading
Receiving discrepancy report, invoice settlement and payment
Record maintenance
Manage and measure supplier performance
Reengineer the procure to pay process
Types of purchases PAGE 73
PACK 2025
QUESTIONS AND
ANSWERS
For assistance contact
Email:
, lOMoARcPSD|31863004
PART 1 INTRODUCTION
Study unit 1Introduction to purchasing and supply chain management
Explain and illustrate the following concepts of purchasing and supply management:
Purchasing: is the systematic process of deciding what, when and how much to purchase, the act of purchasing it and the
process ensuring that what is required is received on time in the quantity and quality specified.
Strategic purchasing: is the process of planning implementing evaluating and controlling strategic and operating decisions for
directing all activities of the purchasing function towards opportunities consistent with the firm’s capabilities to achieve its long-
term goals
Supply management: is like a management function…is the identification, acquisition, access, positioning and management of
resources and related capabilities and organization needs or potentially needs in the attainment of its strategic objectives.
Supply chain management: SCM is a management philosophy aimed at proactively integrating and coordinating a network (or
web) of upstream linkages (sources of supply), internal linkages (inside the organization, according to the value chain approach)
and downstream linkages (distribution and ultimate customers) in performing specific key business processes and activities that
will ultimately create and optimize value for the customer in the form of products and services specifically aimed at satisfying
customer demands and expectations.
Value chain: Interlinked value-adding activities that convert inputs into outputs which, in turn, add to the bottom line and help
create competitive advantage. A value chain typically consists of inbound distribution or logistics, manufacturing operations,
outbound distribution or logistics, marketing and selling and after-sales services. These activities are supported by purchasing or
procurement, research and development, human resource development and corporate infrastructure.
Extended value chain: multiples levels of suppliers and customers form the extended vale chain concept which states that
success is a function of successfully managing a linked group of firms past first level suppliers or customers
Supply chain: The supply chain is a network of organizations that are involved, through upstream and downstream linkages, in
the different processes and activities that produce value in the form of products and services that satisfy the ultimate customers‟
needs.
Supply chain vs value chains
Supply chains is a set of 3 or more organizations linked directly by one or more of the upstream or downstream flows of product,
services, finances and information from a source to the customer. It is important to acknowledge that anytime business is
conducted a supply chain will exist.
Value chains The process or activities by which a company adds value to an article, including production, marketing, and the
provision of after-sales services. Includes support activities. Composed of primary and support activities‟ that can lead to a
competitive advantage when configured properly.
Supply Chain illustration PAGE 15
Put the phrase "a new competitive environment" in perspective
New competitive environment
Increasing numbers of world-class competitors (domestically and internationally)
Forced to improve internal process
Demanding customer base; higher quality, reduced prices, faster delivery
Widely available information sources due to Technology (Internet, Twitter, social media)
Balance of power between buyers and suppliers
Greater outsourcing
Why Purchasing Is important /The importance of effective purchasing in an organization PAGE 8
Increased value and savings – As companies struggle to increase customer value by improving performances, many
companies are turning their attention to purchasing and supply management. The impact suppliers can have on the firm’s
total cost. The supply base is important part of the supply chain. Supplier capabilities can help differentiate a producer’s
final good or service, increasing their value to the final customer.
Building relationships and driving innovation – Building relationships to jointly reduce costs of the product and
service (P&S) and in turn the supplier contributes innovative ideas that add value to P&S
Improving Quality and reputation – outsourcing, relationships - firms are looking to outsource to concentrate on areas
of specialization and competence
Reducing time to market – early including of suppliers and engineers to improve product and process design
Managing supplier risk- such as poor-quality natural disasters and high transport costs
Generating economic impact – ISM report on business - purchasers have the power to move financial markets
Contributing to competitive advantage – effective purchasing, reputation
, lOMoARcPSD|31863004
Purchasing and supply chain benefits / Explain how an organisation can achieve purchasing and supply chain
benefits
To minimize inventory losses and investment in inventory
Innovative products - To purchasing goods and services of the required quality, competitively at minimum cost
Better supply chain relationships - To trace or develop reliable alternative sources and maintain sound lasting relations
with reliable suppliers
Reduced product lines - To develop and operationalize policy procedures and systems that will ensure that the
administrative costs of purchasing are kept to a minimum
Standardisation
Partnerships - To identify and analyses problem areas and rectify them effectively.
Supply chain umbrella PAGE 18
Activities: Supply chain management.
Purchasing
Inbound transportation
Quality control
Demand and supply planning
Receiving, materials handling and storage
Order processing
Production planning, scheduling and control
Warehousing/distribution
Shipping
Outbound transportation
Customer service
Four enablers of purchasing and supply chain management PAGE 20
Capable human resources Supply chain professionals should have certain knowledge and skills which should include:
Supplier relationship management; total cost analysis; purchasing strategies; supplier analysis and competitive market
analysis. Therefore, effective supply chain management requires close collaboration with suppliers, as well as internal
coordination with engineering, procurement, logistics, customers, and marketing, to coordinate activities and material
flows across the supply chain.
Proper organisational design Proper organisational design refers to the process of assessing, selecting or developing
the structure and formal system of communication, a division of labour, coordination, control, authority and responsibility
required to achieving organisational goals and objectives, including supply chain objectives.
Real-time and shared information technology capabilities The development of information technology (IT) software
and platforms that support an end- to-end supply chain.
Right measures and measurement systems System should be in place to measure and improve performance
PART 2 PURCHASING OPERATIONS AND STRUCTURE
Study unit 2 The purchasing process
, lOMoARcPSD|31863004
Purchasing objectives PAGE 42
Objective 1: Supply continuity and assurance: perform a number of activities to satisfy the operational requirement of internal
customers, supports the needs of operations through purchase of services, raw materials, components, subassemblies and
repair and maintenance items. Purchasing sources products and services at the right price from the right source at the right
specification to meet users‟ needs un the right quantity and arrange for delivery or service performance at the right time to the
right internal customers
Objective 2: Manage the purchasing process efficiently and effectively: by determining staffing levels, developing and
adhering to administrative budgets, providing professional training and growth opportunities for employees and introducing
improved buying channels with procure to pay systems that lead to improved spending visibility, efficient invoicing and payment
and user satisfaction.
Objective 3: Develop supply base management: must keep abreast of current condition in supply markets to ensure that
purchasing selects suppliers that are competitive, identifies new suppliers that have the potential for excellent performance and
develops closer relationships with these suppliers, improves existing suppliers and develop new suppliers that are not
competitive with current suppliers. Supplier performance management requires that purchasing peruses better relationships with
external suppliers and develop reliable, high quality supply sources.
Objective 4: Develop aligned goals with internal functional stakeholders: global organisations have resulting in limited cross
functional interaction and cross boundary communication. Purchasing must communicate closely with cross functional group that
represents their stakeholders therefore purchasing activities are largely driven by shareholder requirements.
Objective 5: Develop integrated supply strategies that support organisational goals and objectives: purchasing can
directly affect the long-term growth, revenue and operating outcomes and plans of stakeholders and business units. A supply
management executive that us actively involves in the business strategy discussions can provide critical supply market
intelligence, budget forecasts and other insights that can contribute to a more effective business strategy, an eg would be
updates on supply market conditions and trends and translations of these impacts on key business outcomes.
Objective 6: address Broad-Based Black Economic Empowerment: empowering disadvantaged groups by preferential
procurement practises. Ensure that diversity suppliers receive a reasonable share of the purchasing organisations business
Purchasing and supply responsibilities
1. Evaluating and selecting suppliers
2. Acting as the primary contact with suppliers
3. Determining the method of awarding purchase contracts
Strategic Supply Management roles and responsibilities PAGE 46
Spend analysis
Demand management and specifications
Category management and supplier evaluation/selection
Contract management
Cost management
Managing the Procure to Pay Process
Supplier relationship management
Establish a supply management strategy
Improving the procure to pay process PAGE 51
Procure to pay process 6 major stages:
1. Forecast and plan requirement
2. Need clarification: Requisitioning
3. Supplier identification/selection
4. Contract/purchase order generations
5. Receipt of material or service and documents
6. Settlement, payment, and measurement of performance
Approval, contract and purchase order preparation
After the supplier is selected there are certain steps to follow to conclude the purchasing process
Purchase order, blanket order, material purchase release
Receipt and inspection, material packing slip, bill of lading
Receiving discrepancy report, invoice settlement and payment
Record maintenance
Manage and measure supplier performance
Reengineer the procure to pay process
Types of purchases PAGE 73
