CIPS L4M8 Chapter 2 Questions and
Comprehensive Answers Graded A+ 2024-2025
Sourcing involves - ✔️✔️identifying and vetting those suppliers who are able to supply the
product or service, as required in a specification from a procurement professional
Different stages of Ordering - ✔️✔️- User need
- Raise requisition
- Approved process
- Issue PO
- Receive goods/service
- Approve invoice
Different stages of Sourcing - ✔️✔️- Understand the need
- Develop strategy
- Raise requisition
- Source suppliers
- Issue ITT/RFQ
- Negotiate and award contract
- SRM/contract management
Sourcing can take place in the following locations - ✔️✔️- Localised
- Regional
- National
- Global
Localised sourcing - ✔️✔️conducted with suppliers who are near to the buying
organisation
Regional sourcing - ✔️✔️conducted with suppliers in the same area, but slightly further
away than the localised choices
National sourcing - ✔️✔️conducted throughout an entire country. EG suppliers may be
hundreds of miles away from the buying organisation but they are still controlled by the
same legislation and regulations
Global sourcing - ✔️✔️conducted worldwide. This type of sourcing often involves different
legislation and regulations to those of the buying organisation
The buyer needs to think about the following factors when deciding which type of
sourcing is best - ✔️✔️- Urgency of need: local suppliers shorter lead times
- Volume of need: larger quantities for economies of scale better for global sourcing
- Quality of need: high quality may need further than local
,- Budget allocated to need: low budget may need global sourcing
Contracts can either be - ✔️✔️Verbal or Written
The five stages of forming a contract - ✔️✔️1. Intention
2. Capacity
3. Offer
4. Consideration
5. Acceptance
Stages of a contract: 1.Intention - ✔️✔️the contracting parties must intend to enter into a
legal contract. If there is no intention to create a legal relationship, the contract is not
legally binding
Stages of a contract: 2. Capacity - ✔️✔️all parties should be of sound mind and fully
aware of their contractual obligations
Stages of a contract: 3. Offer - ✔️✔️the promise in exchange for performance from the
other party
Stages of a contract: 4. Consideration - ✔️✔️the exchange of one thing for another within
an agreement
Stages of a contract: 5. Acceptance - ✔️✔️the point where the offeree accepts the
proposal from the offeror. Offers can be accepted by body language, a formal letter or
email or by paying for the goods/services
Invitation to treat - ✔️✔️an expression of willingness to negotiate with the intention of
forming a contract
Implied terms - ✔️✔️are always present in a contract in a contract and are set by national
law. The do not have to be written or verbally agreed: they always exist
Express terms are - ✔️✔️terms that are negotiated and created rather than being
automatically included. They are agreed between the parties negotiating the contract
Examples of Implied terms - ✔️✔️- Sale of Goods Act
- Goods being fit for purpose
- Negligence
- Confidential breaches
Examples of Express terms - ✔️✔️- Payment terms
- Specification
- Delivery details
- Quantities
, Standard term contract - ✔️✔️A pre-written contract that leaves little or no room for
negotiation on terms between the parties
Standard term, or model, contracts include the following elements - ✔️✔️- Definitions
- General terms
- Commercial provisions: payment terms, liability, performance and delivery details
- Secondary commercial provisions: confidentiality and intellectual property rights
- Standard clauses: force majeure and the law of the country to be followed
Advantages of standard/model contracts - ✔️✔️- Saves time
- Saves money
- Industry standard contracts are widely accepted and understood by both buyers and
suppliers
Disadvantages of standard/model contracts - ✔️✔️- Bespoke terms may not be included
- Better terms could be negotiated
- Buyers do not get experience in creating contracts
Express terms include the following - ✔️✔️- Price
- Specification
- Payment terms
- Warranties
- Conditions
- Retention of title
- Damages
- Exclusion clauses
- Indemnity clauses
- Breaches
- Termination
- Conflict resolution
Price can be affected by several of the following factors, which should be considered
when negotiating terms - ✔️✔️- Profit levels of the supplier
- Budget of the buyer
- Currency fluctuations
- Economic market
- Quality
- Volume
- Supply and demand
- Material availability
- Skill of the workforce
- Immediacy of the requirement
Comprehensive Answers Graded A+ 2024-2025
Sourcing involves - ✔️✔️identifying and vetting those suppliers who are able to supply the
product or service, as required in a specification from a procurement professional
Different stages of Ordering - ✔️✔️- User need
- Raise requisition
- Approved process
- Issue PO
- Receive goods/service
- Approve invoice
Different stages of Sourcing - ✔️✔️- Understand the need
- Develop strategy
- Raise requisition
- Source suppliers
- Issue ITT/RFQ
- Negotiate and award contract
- SRM/contract management
Sourcing can take place in the following locations - ✔️✔️- Localised
- Regional
- National
- Global
Localised sourcing - ✔️✔️conducted with suppliers who are near to the buying
organisation
Regional sourcing - ✔️✔️conducted with suppliers in the same area, but slightly further
away than the localised choices
National sourcing - ✔️✔️conducted throughout an entire country. EG suppliers may be
hundreds of miles away from the buying organisation but they are still controlled by the
same legislation and regulations
Global sourcing - ✔️✔️conducted worldwide. This type of sourcing often involves different
legislation and regulations to those of the buying organisation
The buyer needs to think about the following factors when deciding which type of
sourcing is best - ✔️✔️- Urgency of need: local suppliers shorter lead times
- Volume of need: larger quantities for economies of scale better for global sourcing
- Quality of need: high quality may need further than local
,- Budget allocated to need: low budget may need global sourcing
Contracts can either be - ✔️✔️Verbal or Written
The five stages of forming a contract - ✔️✔️1. Intention
2. Capacity
3. Offer
4. Consideration
5. Acceptance
Stages of a contract: 1.Intention - ✔️✔️the contracting parties must intend to enter into a
legal contract. If there is no intention to create a legal relationship, the contract is not
legally binding
Stages of a contract: 2. Capacity - ✔️✔️all parties should be of sound mind and fully
aware of their contractual obligations
Stages of a contract: 3. Offer - ✔️✔️the promise in exchange for performance from the
other party
Stages of a contract: 4. Consideration - ✔️✔️the exchange of one thing for another within
an agreement
Stages of a contract: 5. Acceptance - ✔️✔️the point where the offeree accepts the
proposal from the offeror. Offers can be accepted by body language, a formal letter or
email or by paying for the goods/services
Invitation to treat - ✔️✔️an expression of willingness to negotiate with the intention of
forming a contract
Implied terms - ✔️✔️are always present in a contract in a contract and are set by national
law. The do not have to be written or verbally agreed: they always exist
Express terms are - ✔️✔️terms that are negotiated and created rather than being
automatically included. They are agreed between the parties negotiating the contract
Examples of Implied terms - ✔️✔️- Sale of Goods Act
- Goods being fit for purpose
- Negligence
- Confidential breaches
Examples of Express terms - ✔️✔️- Payment terms
- Specification
- Delivery details
- Quantities
, Standard term contract - ✔️✔️A pre-written contract that leaves little or no room for
negotiation on terms between the parties
Standard term, or model, contracts include the following elements - ✔️✔️- Definitions
- General terms
- Commercial provisions: payment terms, liability, performance and delivery details
- Secondary commercial provisions: confidentiality and intellectual property rights
- Standard clauses: force majeure and the law of the country to be followed
Advantages of standard/model contracts - ✔️✔️- Saves time
- Saves money
- Industry standard contracts are widely accepted and understood by both buyers and
suppliers
Disadvantages of standard/model contracts - ✔️✔️- Bespoke terms may not be included
- Better terms could be negotiated
- Buyers do not get experience in creating contracts
Express terms include the following - ✔️✔️- Price
- Specification
- Payment terms
- Warranties
- Conditions
- Retention of title
- Damages
- Exclusion clauses
- Indemnity clauses
- Breaches
- Termination
- Conflict resolution
Price can be affected by several of the following factors, which should be considered
when negotiating terms - ✔️✔️- Profit levels of the supplier
- Budget of the buyer
- Currency fluctuations
- Economic market
- Quality
- Volume
- Supply and demand
- Material availability
- Skill of the workforce
- Immediacy of the requirement
