CIPS L4M1 CHAPTER 1-2

Stakeholders types

• Internal - Employees, management, departments

• External - Governments, local communities, Media, Trade Unions

• Connected - Shareholders, Customers, Suppliers, Finance providers

Mendelow's matrix framework

• High Power - Low Interest: Shareholders-keep satisfied

• High Power - High Interest: Senior Managers-manage closely

• Low Power - Low Interest: Small Suppliers/Customers-minimum effort

• Low Power - High Interest: Local Activist Groups-keep informed

Procurement related Factors

• Added Value

• Cost

• Supply

• Quality

• Logistics

Added value of WLC / TCO

• Better value for money decisions

• Avoiding hidden and unexpected costs

• Improved budgeting and financial planning

• Optimizing replacements and asset management decisions

• Supporting cmpetitive advntage via cost and pricing

FIVE elements of the TCO of capital equipment

• Acquisition costs

• Commissioning and Implementation

• Operational and Maintenance

• Spares, inventory and storage support

• End of life, Decomissioning and Disposal

THREE methods or techniques reduces cost and adds value

• Aggregation of spend and volume discounts

• Open book costing and price analysis

• Innovation and collaboration with Supplier

Capex and OpEx - 5 differences

1. Nature and purpose of spend

2. Payment pattern and funding

3. Accounting treatment and impact over time

4. Typical value and scale

5. Flexibility of approval process

Five benefits of SCM

1. Reduced costs across the chain

2. Improved value and competitive advantage

3. Reduced Risk and continuity of supply

4. Stronger management of Ethics

5. Better service and CRM

Procurement and purchasing difference

• Strategic vs Transactional/tactical focus

• Lifecycle and Value orientation

Five ways quality improve can add value

1. Meeting customer expectations and approval

2. Ensuring products are exactly as required

3. Reducing scrap, rework or other non-value costs

4. Supporting a good reputation and customer willingness to buy

5. Improving SC performance through Quality Management and KPIs

FOUR challenges of purchasing services

1. Intangibility and qualitative specifications

2. One-off, low quantity, no inventory buffer

3. Application of Five Rights

4. Indirect nature and different SRM

Three circumstances organizations buy and keep items in stock

• To avoid stockout, protect production and sales

• To gain lower unit prices through EoS

• To avoid long lead times, lifecycle and seasonal effects

FIVE differences of purchasing goods and services

1. Tangible vs Intangible

2. Repeat orders vs One-off

3. Lead time vs Immediacy

4. Quantitative vs Qualitative specs

5. Can be stored vs no shelf life

FIVE methods/approaches that can add value to procurement

1. Aggregation of spend and volume discounts

2. Obtaining price comparisons and benchmarking via RFQ

3. Negotiation to improve commercial terms

4. WLC

5. Reduced costs through Supplier collaboration

Characteristics of purchasing category

• Commodities - goods that are used as the production inputs

• Goods for Resale - Goods that are bought to be sold

• Maintenance, repair and operattional supplies

FIVE benefits of buying for Stock

1. Prevent stock outs and production stoppage

2. Lower price via EoS

3. To cope with longer lead times and SC risk

4. When demand is predictable inventory can be managed profitably

5. To respond to lifecycle and seasonal effects or favourable market conditions