CIPS MODULE 1 – KEY STEPS WHEN PROCURING
GOODS AND SERVICES -2.1 QUESTIONS AND
ANSWERS
Describe stage 1 of the procurement cycle? - ANSWER Developing a high
level specification
Understanding the needs of the business as well as the customer is important
Customers can be internal or external to the organisation
The customer need will be communicated either by 'verbal, paper requisition,
electronic communication'
1. what is required
2. quantity of requirement
3. Delivery time and place of what is required
4. Quality of what is required
It is an important part of the process as it may add value or reduce costs
Describe stage 2 of the procurement cycle? - ANSWER Market commodity
and options - researching the best means to meet the requirements
Will making or buying be the most effective solution
In house vs external have varying amounts of risk with external having higher
risk
Relation to the importance of having direct control and availability of having
competence and capacity
To take into account the above, buyers should scan the market by appraising the
following:
, Economic situation - depending on the need it may be best to use an overseas
supplier, this may supply better value
Currency fluctuations - when purchasing the exchange rate should be taken into
consideration, to make sure that we can add value when buying
Supply and demand rates - prices will be more favourable if the supply is
greater than the demand.
Describe stage 3 of the procurement cycle? - ANSWER Upon decision being
made as to whether we make or buy, we need to develop a strategy
A plan should include -
Wholesaler type to approach, whether local, national, or international. If the
company has a local purchase policy, then that should be followed, otherwise
look at what is most suitable.
Analyze the potential competition using 'porters 5 sources', analyze the market
competition
RFQ vs ITT-which one is more relevant; if it's a one-time product, RFQ would
be more relevant; a tender, on the other hand, if the service/product is more
complicated.
Competition in the market-the company should be appreciated and investigated.
If one company has a monopoly, they may not be easy to negotiate with.
Compare and contrast ITT vs RFQ - ANSWER ITT
Document sent out to invite bid
Formal
Suppliers often pre evaluated
Used when purchasing complex products or services
GOODS AND SERVICES -2.1 QUESTIONS AND
ANSWERS
Describe stage 1 of the procurement cycle? - ANSWER Developing a high
level specification
Understanding the needs of the business as well as the customer is important
Customers can be internal or external to the organisation
The customer need will be communicated either by 'verbal, paper requisition,
electronic communication'
1. what is required
2. quantity of requirement
3. Delivery time and place of what is required
4. Quality of what is required
It is an important part of the process as it may add value or reduce costs
Describe stage 2 of the procurement cycle? - ANSWER Market commodity
and options - researching the best means to meet the requirements
Will making or buying be the most effective solution
In house vs external have varying amounts of risk with external having higher
risk
Relation to the importance of having direct control and availability of having
competence and capacity
To take into account the above, buyers should scan the market by appraising the
following:
, Economic situation - depending on the need it may be best to use an overseas
supplier, this may supply better value
Currency fluctuations - when purchasing the exchange rate should be taken into
consideration, to make sure that we can add value when buying
Supply and demand rates - prices will be more favourable if the supply is
greater than the demand.
Describe stage 3 of the procurement cycle? - ANSWER Upon decision being
made as to whether we make or buy, we need to develop a strategy
A plan should include -
Wholesaler type to approach, whether local, national, or international. If the
company has a local purchase policy, then that should be followed, otherwise
look at what is most suitable.
Analyze the potential competition using 'porters 5 sources', analyze the market
competition
RFQ vs ITT-which one is more relevant; if it's a one-time product, RFQ would
be more relevant; a tender, on the other hand, if the service/product is more
complicated.
Competition in the market-the company should be appreciated and investigated.
If one company has a monopoly, they may not be easy to negotiate with.
Compare and contrast ITT vs RFQ - ANSWER ITT
Document sent out to invite bid
Formal
Suppliers often pre evaluated
Used when purchasing complex products or services
