CIPS L4M1 QUESTION AND ANSWER
Define procurement - Answers - Procurement is the process of obtaining goods or
services through following a process that includes identifying the need through to goods
or services being delivered.
Define purchasing - Answers - Purchasing is the act of physically ordering and buying
something.
Define supply - Answers - Supply is the infrastructure which ensures goods/services
can be delivered
Define value - Answers - Value is the worth of something, the difference between what
we pay and what a potential customer is willing to pay
What is a good - Answers - A good is a tangible physical item such as raw materials,
components
What is a service - Answers - A service is an intangible item such as cleaning, training
What are constructional works - Answers - Constructional works include both goods and
services, such as concrete, architecture
What are stock items - Answers - Stock items are ones we can hold inventory of such
as raw materials, components
What are non-stock items - Answers - Non-items are ones which cannot be held, such
as capital procurements, services
Outline what is meant by direct and indirect procurements - Answers - Direct material -
traceable to units of production such as wood into furniture
Indirect material - not traceable to specific units such as sanding paper into sanding
machinery
Direct labour - directly involved in the making of units
Indirect labour - Indirectly involved in the making of units such as maintenance
engineers
Direct expense - variable costs which are rare such as paying royalties on each unit
produced
Indirect expense - fixed or step-fixed, such as factory rent
What are primary activities in Porter's value chain - Answers - Inbound logistics
Operations
Distributional logistics
, Marketing & sales
Services
What are support activities in Porter's value chain - Answers - Firm infrastructure
Human resource management
Technology development
Procurement
What is a capital expense - Answers - expenses incurred for future benefit which
depreciates over time, such as machinery, building
What is an operational expense - Answers - the day-to-day running costs of a business
such as office supplies, wages
What are the key features of capital procurements - Answers - Charged to capital
account
Procured for a long time period and long lifespan
Tend to be high-value assets
Procurement involves complex requirements and many stakeholders
Involves developing a business case
Less frequent and irregular
What are the key feature of operational procurements - Answers - Financed from
resource budget
Purchased for short-term consumption
Tend to be low-value
Less complex repeat spends
Straight-forward, following pre-set budgets
What are the key features of services procurements - Answers - Intangibility - specifying
services levels is challenging
Heterogeneity - every instance is unique
Perishable - provided in real time and cannot be stored
Location - can only be performed in specific locations
Evaluate - they are difficult to assess due to subjectivity
Changing - requirements may change from initial specification
What are the 5 rights of procurement and their definitions - Answers - price - securing all
of the below at a reasonable, affordable, and competitive price
place - goods delivered to the appropriate point and transported to ensure good
condition on arrival
quality - goods which are fit for purpose
quantity - sufficient quantity to meet demand while minimising excess stock holding
time - goods delivered at the right time, not so early as to incur inventory costs
What is the right price - Answers - Supplier:
Define procurement - Answers - Procurement is the process of obtaining goods or
services through following a process that includes identifying the need through to goods
or services being delivered.
Define purchasing - Answers - Purchasing is the act of physically ordering and buying
something.
Define supply - Answers - Supply is the infrastructure which ensures goods/services
can be delivered
Define value - Answers - Value is the worth of something, the difference between what
we pay and what a potential customer is willing to pay
What is a good - Answers - A good is a tangible physical item such as raw materials,
components
What is a service - Answers - A service is an intangible item such as cleaning, training
What are constructional works - Answers - Constructional works include both goods and
services, such as concrete, architecture
What are stock items - Answers - Stock items are ones we can hold inventory of such
as raw materials, components
What are non-stock items - Answers - Non-items are ones which cannot be held, such
as capital procurements, services
Outline what is meant by direct and indirect procurements - Answers - Direct material -
traceable to units of production such as wood into furniture
Indirect material - not traceable to specific units such as sanding paper into sanding
machinery
Direct labour - directly involved in the making of units
Indirect labour - Indirectly involved in the making of units such as maintenance
engineers
Direct expense - variable costs which are rare such as paying royalties on each unit
produced
Indirect expense - fixed or step-fixed, such as factory rent
What are primary activities in Porter's value chain - Answers - Inbound logistics
Operations
Distributional logistics
, Marketing & sales
Services
What are support activities in Porter's value chain - Answers - Firm infrastructure
Human resource management
Technology development
Procurement
What is a capital expense - Answers - expenses incurred for future benefit which
depreciates over time, such as machinery, building
What is an operational expense - Answers - the day-to-day running costs of a business
such as office supplies, wages
What are the key features of capital procurements - Answers - Charged to capital
account
Procured for a long time period and long lifespan
Tend to be high-value assets
Procurement involves complex requirements and many stakeholders
Involves developing a business case
Less frequent and irregular
What are the key feature of operational procurements - Answers - Financed from
resource budget
Purchased for short-term consumption
Tend to be low-value
Less complex repeat spends
Straight-forward, following pre-set budgets
What are the key features of services procurements - Answers - Intangibility - specifying
services levels is challenging
Heterogeneity - every instance is unique
Perishable - provided in real time and cannot be stored
Location - can only be performed in specific locations
Evaluate - they are difficult to assess due to subjectivity
Changing - requirements may change from initial specification
What are the 5 rights of procurement and their definitions - Answers - price - securing all
of the below at a reasonable, affordable, and competitive price
place - goods delivered to the appropriate point and transported to ensure good
condition on arrival
quality - goods which are fit for purpose
quantity - sufficient quantity to meet demand while minimising excess stock holding
time - goods delivered at the right time, not so early as to incur inventory costs
What is the right price - Answers - Supplier:
