CIPS Level 4 Module 1 Practice Questions and Correct Answers

The Purchasing process 1. Define Specification. 2. Select Supplier 3. Contract Agreement 4. Ordering 5. Expediting 6. Evaluation Follow up Definition of Procurement & Supply recognition of the fact that the purchasing function has a role in not just "buying inputs" but in "securing supply" Direct Costs These are costs which can be identified directly with the production of a good or service; e.g. raw materials. Usually strategic or leverae suppliers Indirect Costs These are costs which cannot be matched against each product because they need to be paid whether or not the production of good or services takes place; e.g. rent on the premises. Kraljic Matrix A tool for portfolio analysis: a four-box matrix that reflects the segmentation of spend based on an assessment of the value of the spend relative to the market risk to acquire 1. Leverage Suppliers 2. Strategic Suppliers 3. Routine Suppliers 4. Bottleneck Suppliers CAPEX is 1. Capital expenditures are for major purchases that will be used in the future. 2. The life of these purchases extends beyond the current accounting period in which they were purchased. 3. Because these costs can only be recovered over time through depreciation, companies ordinarily budget for 4. CAPEX purchases separately from preparing an operational budget. OPEX Operating expenses are the costs for a company to run its business operations on a daily basis. CAPEX 1. Useful beyond its curent year 2. Lump sum up front 3. 3-10 year accounting lifespan for depreciaiton 4. Listed as preprty or equipment 5. Tax deducted as asset depreciated Name the 13 stages of the procurement cycle 1. Understand the need. 2. Market Commodity options. 3. Develop Stratgey/ Plan. 4. Pre-procurement / market test. 5. Develop required documentation. 6. Supplier Selection. 7. Issue invitation to tender. 8. Bid / tender evaluation. 9. Contract Award. 10. Warehouse logistics & receipt. 11. Contract performance review and continuous improvement. 12. Supplier relationships / contract management. 13. Asset management / end of life. Scope of Procurement 1. Contributor of Added Value 2. Manages cost of procured materials & services on behalf of an organisation 3. Helps manage inventory 4. Works alongside logistics partner function 5. Helps mange quality in procurement 6. Manages delivery performance 7. Manages & controls waste in the supply chain Porters Value Chain Primary - Inbound Logistics, Operations, Outbound Logistics, Marketing & sales, Services