CIPS L4M1 - Question & Answer Past exam questions latest 2023/2023

CIPS L4M1 - Question & Answer Past exam questions latest 2023/2023 O1. Outline FIVE differences between purchasing goods and purchasing services. 1. Goods are tangible, services are intangible: 2. Services cannot be separated from their supplier: 3. Heterogeneity: goods are usually uniform in nature while services are unique at each delivery 4. Services 'perish' immediately on delivery whereas goods can be stored until required 5. Products are easier to specify, being tangible O2. Explain THREE circumstances in which a competitive tendering exercise might not be the best approach to making a purchase. 1. Urgency 2. Commercial confidentiality or national security (e.g. military organisations): 3. Value of the purchase: 4. Production costs cannot be measured accurately: 5. Price is not the only criterion for supplier selection and contract award 6. Intellectual Property Rights and monopoly O2. Describe TWO e-sourcing tools and their use in procurement and supply. 1. E-Catalogues 2. E-Tendering 3. E. Auction 4. Reverse Auctions 5. Online suppleir evaluation data O3. Explain the role of a shared services unit (SSU). SSUs reflect a desire to centralise and share services The shared service provider becomes a dedicated provider of services such as; finance, HR, IT and procurement which continue to be provided internally An SSU manages costs and quality SLAs to demonstrate value for money. An SSU's benefits may be summarised as: • cost effective internal service; • liaison with its customers; • anticipating future demand; • employing resources and providing higher levels of service more cost effectively than if they were provided by a department or an external provider. O3. A manufacturer of electrically powered tools for the engineering industry consists of four separate business units, each of which undertakes its own purchasing activities. Discuss THREE benefits of centralising all purchasing activities with those of retaining the present decentralised structure. (1 of 2) Centralisation' and 'decentralisation' refer to the degree to which responsibility and authority is delegated. Arguments for centralisation can only be evaluated in the context of specific organisational environment and might include: 1. Policies & procedures 2. Consolidation of requirements 3. Location 4. Supply market structure 5. Expertise required: 6. Customer demands O3. A manufacturer of electrically powered tools for the engineering industry consists of four separate business units, each of which undertakes its own purchasing activities. Discuss THREE benefits of centralising all purchasing activities with those of retaining the present decentralised structure. (2 of 2) The benefits of retaining the present de-centralised structure include: 1. Local responsibility 2. Knowledge of the local environment, culture and customer needs 3. Skills development of buyers in each unit 4. Better communication and coordination between procurement and operating departments, 5. Customer focus: buyers are 'closer' to internal and external customers developing understanding of user needs and problems. 6. Quicker response to operational and user needs, 7. Smaller purchase quantities: 8. Accountability: d 9. Freeing central procurement units to focus on higher-level, value-adding tasks. O3. Explain the following IT systems used by the procurement or supply chain function: (i) 'Enterprise Resource Planning' (ii) 'Materials Requirement Planning' (iii) 'Purchase to Pay (P2P)'. ERP is a single data base to manage a wide range of functions and resources across a business. It offers real time solutions. MRP is a set of records, decision rules and procedures to manage demand. P2P is a two way flow of transactions taking a purchase requisition through to payment of invoice. O1. FIVE elements of the total cost of ownership of capital equipment 1. pre acquisition costs 2. purchase price 3. operating costs 4. maintenance and repair costs 5. downtime costs and end of life/decommissioning costs O1. It is widely believed that it is important to attempt to reduce costs and add value throughout the supply chain. Explain THREE innovative strategies that might achieve such goals 1. value engineering 2. lean supply 3. agile supply 4. TQM 5. JIT and 6. value added negotiations/relationships O2. Explain THREE ways in which electronic systems can be used in the sourcing process. 1. internet 2. e-tendering (RFI/RFP/RFQ/RFX) 3. e- catalogues 4. e-auctions and reverse auctions 5. intranet. explain how each can be used in sourcing process O2. Describe FOUR ways in which added value may be created for a buying organisation through an effective sourcing process Value might include getting the requirement correct first time and covering all requirements, stakeholder engagement and compliance, specifications to avoid rework and pre qualifying only the suppliers capable to meet the business needs. Motivating and including suppliers in the process can encourage longer-term investment, cost reductions, innovation, improved quality, stock and wastage reduction and sharing market knowledge. O3. Explain THREE advantages to an organisation when adopting a devolved procurement structure 1. being close to stakeholders helps build relationships, understand requirements, communication, tap into user expertise. 2. Quicker response to environmental and requirements changes is also an advantage. 3. Closeness to local suppliers helps market knowledge, reduced transport times, cost and general supplier management. 4. Inventories can be reduced CSR use of SME's can be satisfied. Local accountability is improved and if a central procurement team remains, that team can focus on high value activities O3. Describe FOUR benefits delivered to an organisation by an outsourced procurement function. benefits of expertise, skills, access to aggregated volumes (with other customers) leading to cost reductions, business can focus on core competencies, quality and service assured through KPIs and flexibility to resource through peaks and troughs in requirements O4. ways in which the objective of profitability in a private sector organisation might impact on its procurement activities. pressure to focus on price and cost reduction, conflict with quality and CSR, adversarial approach to negotiations and transactional relationships, missed opportunities to create value O1. potential benefits of a supply chain management (SCM) approach to procurement and supply derive from eliminating waste activities, improving responsiveness in the continuous flow of value and other efficiency projects. Other benefits might include access to resources and expertise throughout the chain, collaborative quality management, improved communication, integrated systems and data share, co-ordinated demand forecasting, agility in faster lead-times and innovation, transparency reducing stock levels and waste. O1. Outline why supply chain management (SCM) may be unattractive for some organisations. high investment in finances and resource, a closer supplier relationship might not be appropriate if transactional purchases are involved, there are risks associated with closer relationships such as complacency and loss of control over confidential information. O2. Explain the activities that could be undertaken by an organisation to identify and appraise potential suppliers as part of a sourcing process. market analysis using current databases, the internet, trade shows, catalogues and directories, networking. Pre-qualification/appraisal ensures a supplier is able to perform a contract. Capacity, financial and technical capabilities can be appraised. The activities involved can be in the form of questionnaires, site visits, using set criteria (Caters 10Cs for example). Other activities include data gathering from certifications, references, samples, credit rating companies O2. activities that take place post contract award there are a vast range of answers to choose from such as expediting orders, payment, contract management, supplier management, contract review and learning lessons, any activity within the purchase to pay process and contract termination preparation O3. Define the term 'ethics'. A definition is required and a variety of wording is expected but should reference that 'Ethics' are moral principles or values about what constitutes 'right' and 'wrong' behaviour. At a corporate level, there are the issues that face an organisation as it formulates strategies and policies about how it interacts with its stakeholders, including Corporate Social Responsibility, which covers policies that the organisation adopts for the good and wellbeing of stakeholders. O3. examples of ethical or unethical behaviour that could be addressed in an ethical code for procurement professionals. A range of examples are available and might include gifts, hospitality, personal interest, supplier favouritism, tendering when there is a definite supplier in mind, impartiality, accuracy and openness in information provided to suppliers, confidentiality, legal compliance, ensuring environmental issues and corporate social responsibility is followed by supplier O4. factors that impact on purchasing activities in the retail sector. Factors might include the product mix, bottom line thinking, broad assortment of suppliers and stock lines, use of supplier specifications, supplier choice limited by brand, short feedback loop. There is a marketing element to buyers role and seasonal issues and fashion trends must be accounted for. Perishability is a factor to consider in food retail for example O1. Explain FIVE differences between operational expenditure and capital expenditure.` Capital expenditure items are charged to a capital account, whereas operational expenditure is charged to a profit and loss account Capital items are procured for a long period of time and have a lifespan of many years. Operational items are procured for short term consumption Capital items tend to be high value assets, whereas operational items tend to be comparatively inexpensive The procurement of capital items involves complex requirements and decisions about expenditure are likely to involve a wide range of stakeholders. Operational expenditure is usually less complex and often involves repeat spends Preparation work on capital expenditure is likely to be lengthy and will involve building a business case, investment appraisal and the option to buy or lease. Operational expenditure tends to be more straight forward and budgets are pre-set for regular demand Capital procurement is less frequent than the procurement of operational items, which is usually on a regular basis O2. Outline THREE benefits that may result from the use of electronic systems in the sourcing process Cost savings, through streamlining and speeding up processes; examples include data input and transfer and calculating Improved communication and transparency of information throughout the internal and external supply chain, to support decision making Greater accuracy of data input, manipulation and transfer Reduced cycle and lead times, through streamlining procurement processes and more accurate data for demand forecasting O2. Describe FOUR potential costs of using electronic systems in procurement and supply. The high capital investment and set-up costs of the electronic systems, including hardware and software items The high initial learning curve costs, where users of the electronic systems will have to be trained to use them efficiently Possible costs arising from the failure of data security; this may be because of malicious access to data or loss of data The cost of compatibility issues, because suppliers will have to invest in the necessary technology to be able to work with their customers Possible redundancy costs, because electronic systems are faster and more efficient, meaning that fewer staff will be required O3. Explain what is meant by the term 'devolved procurement' in relation to procurement structures.