CIPS Module 1 - Introduction to
Procurement and Supply - 1.1 UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Describe the basic function of procurement - CORRECT ANSWER - A strategic process
of obtaining something, this may be tangible (physical product) or intangible (not a physical
product)
Procurement involves the buying of goods and services that enable an organisation to operate
their supply chains, in a profitable and ethical manner
State 5 elements of procurement - CORRECT ANSWER - Added value
Cost
Inventory
Logistics
Purchasing
Quality
Supply
Waste management
Define the following
Inventory
Strategic
Purchasing
Supply
Expediting - CORRECT ANSWER - The stock of goods, materials or products which are
accessible
High level planning, including setting direction and long term goals
,Act of physically ordering and buying something, including ordering and expediting.
The infrastructure which ensures that products or services get from the supplier to the customer
The process involved in the progress of an order to ensure stock is received as quickly as
possible
Can procurement be done without purchasing - CORRECT ANSWER - No, they go hand
in hand one cannot happen without the other
What is added value? - CORRECT ANSWER - The difference between the selling price of
a product and the cost of materials and components
Aiming to reduce the cost when obtaining products without compromising of quality
What is the difference between procurement, purchasing and supply? - CORRECT
ANSWER - Procurement is a strategic process of obtaining something for the lowest total
cost of ownership
Purchasing is the physical transaction involving buying something.
Supply is the infrastructure which ensures that products and services get from supplier to
consumer
Purchasing = wider and less limited approach, functions involved in buying goods and services,
emphasis on cost not value, reactive approach
Procurement = broader approach, involving more events before, during and after, related to
acquiring good and services, emphasis on value not cost, proactive approach
The Purchasing process - CORRECT ANSWER - 1. Define Specification.
2. Select Supplier
3. Contract Agreement
, 4. Ordering
5. Expediting
6. Evaluation Follow up
Outline FIVE differences between purchasing goods and purchasing services (10) - CORRECT
ANSWER - • Goods are tangible, services are intangible: therefore, services cannot be
measured, weighed or otherwise inspected: an SLA is usually needed.
• Services cannot be separated from their supplier: goods can be delivered and stored before they
are required, whereas, services are produced and consumed simultaneously.
• Heterogeneity: goods are usually uniform in nature while services are unique at each delivery
because the personnel and circumstances are always different, making them difficult to
'standardise'.
• Services 'perish' immediately on delivery whereas goods can be stored until required. Planning
ahead is required so that the service is available when needed. • Products are easier to specify,
being tangible. Services are harder to prescribe because of their intangible and heterogeneous
nature.
• Ownership: services have no transfer of ownership making it difficult to define when a service
has been fulfilled and when risk and liability have passed from seller to buyer.
• Services require a higher level of human involvement and interaction especially services
carried out for people (e.g. travel services). Quality will depend, to some extent, on the behaviour
of the recipient as well as the service provider.
• Goods are usually purchased for immediate use whereas services may be purchased for long
periods of time.
What does cost mean within an organisation? - CORRECT ANSWER - A cost within an
organisation is an amount payable in return for receiving something, usually involving money.
Examples include:
Time
Effort
Materials
Opportunity
Procurement and Supply - 1.1 UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Describe the basic function of procurement - CORRECT ANSWER - A strategic process
of obtaining something, this may be tangible (physical product) or intangible (not a physical
product)
Procurement involves the buying of goods and services that enable an organisation to operate
their supply chains, in a profitable and ethical manner
State 5 elements of procurement - CORRECT ANSWER - Added value
Cost
Inventory
Logistics
Purchasing
Quality
Supply
Waste management
Define the following
Inventory
Strategic
Purchasing
Supply
Expediting - CORRECT ANSWER - The stock of goods, materials or products which are
accessible
High level planning, including setting direction and long term goals
,Act of physically ordering and buying something, including ordering and expediting.
The infrastructure which ensures that products or services get from the supplier to the customer
The process involved in the progress of an order to ensure stock is received as quickly as
possible
Can procurement be done without purchasing - CORRECT ANSWER - No, they go hand
in hand one cannot happen without the other
What is added value? - CORRECT ANSWER - The difference between the selling price of
a product and the cost of materials and components
Aiming to reduce the cost when obtaining products without compromising of quality
What is the difference between procurement, purchasing and supply? - CORRECT
ANSWER - Procurement is a strategic process of obtaining something for the lowest total
cost of ownership
Purchasing is the physical transaction involving buying something.
Supply is the infrastructure which ensures that products and services get from supplier to
consumer
Purchasing = wider and less limited approach, functions involved in buying goods and services,
emphasis on cost not value, reactive approach
Procurement = broader approach, involving more events before, during and after, related to
acquiring good and services, emphasis on value not cost, proactive approach
The Purchasing process - CORRECT ANSWER - 1. Define Specification.
2. Select Supplier
3. Contract Agreement
, 4. Ordering
5. Expediting
6. Evaluation Follow up
Outline FIVE differences between purchasing goods and purchasing services (10) - CORRECT
ANSWER - • Goods are tangible, services are intangible: therefore, services cannot be
measured, weighed or otherwise inspected: an SLA is usually needed.
• Services cannot be separated from their supplier: goods can be delivered and stored before they
are required, whereas, services are produced and consumed simultaneously.
• Heterogeneity: goods are usually uniform in nature while services are unique at each delivery
because the personnel and circumstances are always different, making them difficult to
'standardise'.
• Services 'perish' immediately on delivery whereas goods can be stored until required. Planning
ahead is required so that the service is available when needed. • Products are easier to specify,
being tangible. Services are harder to prescribe because of their intangible and heterogeneous
nature.
• Ownership: services have no transfer of ownership making it difficult to define when a service
has been fulfilled and when risk and liability have passed from seller to buyer.
• Services require a higher level of human involvement and interaction especially services
carried out for people (e.g. travel services). Quality will depend, to some extent, on the behaviour
of the recipient as well as the service provider.
• Goods are usually purchased for immediate use whereas services may be purchased for long
periods of time.
What does cost mean within an organisation? - CORRECT ANSWER - A cost within an
organisation is an amount payable in return for receiving something, usually involving money.
Examples include:
Time
Effort
Materials
Opportunity
