CIPS L4 M1 1-2

Pre contract stages of CIPS Cycle

1. Define Business Needs and develop specifications: Description, Quantity, Delivery, Quality, tangible, intangibe

2. Market Analysis, Make-or-Buy decision: Economic environment, Currency, Supplly availability, make or buy, 5forces,

3. Develop strategy and plan: Decide ITT or RFQ, stepleed

4. Pre procurement Market testing: Seasonal, Lifecycle,

5. Develop documentation and detailed specification: Description, Specifications, SLA, Terms& Conditions, delivery details

6. Supplier selection to participate in tender: PQQ(history, finances, CSR, capability, HSE etc), RFI (Carter's 10C)

7. Issue tender docs

8. Bid and tender evaluation and validation: Cross-functional evaluation, WLC analysis etc

Post Contract stages of CIPS Cycle

1. Contract award and implementation

2. WH, Logistics and receipt: Incoterms, packed, barcodes, place

3. Contract performance and improvement: KPIs

4. SRM: Kraljic for SRM

5. Asset Management: wlam, end of life, decommissioning etc

Added value of TCO

1. Better value for money decisions between options

2. Avoiding hidden and unexpected future costs

3. Improved budgeting an final shoul planning

4. Optimizing replacement and Asset Management decisions

5. Supporting competitive Advantage through cost and pricing

3 methods/techniques that might reduce cost and add value throughout SC

1. Aggregation of spend and volume discounts

2. Open book costing and price analysis

3. Innovation and collaboration with suppliers

Capex and opex five differences

1. Nature and purpose of the spend

2. Payment percent an founding

3. Accounting treatment and impact over time

4. Typical value and scale

5. Flexibility and approval process

Five potential benefits of a supply chain management

1. Reduced costs across the chain

2. Improved value and competitive advantage

3. Reduced risk and greater continuity of Supply

4. Stronger management of ethics, environment and sustainability

5. Better customer relationship management and service

Why supply chain management may be unattractive for some organizations?

1. Increase dependency and vulnerability

2. Need for common standards and ethical practices

3. Complexity and management effort.

Differences between direct and indirect procurement

Direct procurement suppliers: Strategic, Bottleneck

Indirect procurement suppliers: Leverage and Routine

Three distinctive features of services

1. No ownership, intangible

2. Low volume or one off

3. Different application of five rights

Two difference of procurement from purchasing

1. Strategic scope versus transactional Focus

Procurement is strategic end to end function. Purchasing is tactical day-to-day process of ordering or receiving goods and services.

2. Life cycle and value orientation.

Procurement is focused on entire iceberg. Purchasing is concerned with executing individual orders efficiently.

How improving quality can add value for an organization.

1. Meeting customer approval and expectations.

2. Ensuring products are exactly as required with no variance.

3. Reducing scrap rework and other non-value adding costs

4. Supporting a good reputation and customer willingness to buy.

5. Improving supply chain performance through quality management and KPIs.

Four challenges for procurement when purchasing services

1. Intangibility and qualitative specifications.

2. One-off or low quantity and no inventory buffer.

3. Application of the five rights to Services.

4. Indirect nature and different supplier relationships

5 circumstances that organization buy and hold items in stock.

1. To avoid stockouts and protect production or sales.

2. To gain economies of scale and lower unit prices

3. To cover long lead times or SC risk

4. To cope with life cycle and seasonal effects.

5. To gain profit from inventory (favourable market condition)

Five differences between purchasing goods and purchasing services

1. Tangible vs intangible

2. Repeat orders vs one-off orders

3. Lead time vs immediacy

4. Quantifiable vs qualitative specification

5. Can be stored vs No shelf life

Five methods that can add value in procurement (either cost or op. efficiency)

1. Aggregation of spend and volume discounts

2. Obtaining price comparisons and benchmarking via RFQs

3. Negotiation to improve commercial terms.

4. Whole life costing and TCO

5. Reduced input costs through supplier collaboration.

Category management: purchasing categories

1. Commodities

2. Goods for resale

3. Maintenance repair and operating supplies.

Explain the characteristics:

1. Indirect purchase:

2. Capital purchase: money spent to make money, High value, depreciates.

3. Purchase of stock: raw materials, goods for resale or for production or operations

4. Purchase of construction work: direct costs: bricks, cement, indirects: mobile charges, office rent

5. Purchase of service: intangible, non-stock, one -off

Added value of an accurate specification

1. Ensures the right quality and value for money

2. Supports effective sourcing and internal communication

3. Opens up the supplier market and promotes innovation.

Three risks that a careful supplier selection can avoid

1. Risk of supply failure and interruption

2. Risk of failing to achieve the five rights

3. Risk of ethical and reputational damage

Five sequential states of a typical tendering process

1. Develop documentation and detailed specification

2. Select suppliers to participate in tender

3. Issue tender documents

4. Receive clarify and evaluate bids

5. Negotiate and award the contract

Three benefits of structured sourcing process

1. Improved clarity of requirements and reduced errors

2. Better value for money through competition and whole life evaluation

3. Reduced risk from unsuitable and unethical suppliers

4. More informed decisions on make or buy and market approach

Activities undertaken to identify and appraise suppliers

1. Pre- procurement Market testing: Analyze demand, price levels, lifecycles and seasonal trends.

2. Use of e-catalogs to research suppliers and offerings

3. Selection using PQQs and online evaluation systems: financial power, ethics, csr etc.

Added value of supplier selection to Sourcing

1. Removes unsuitable or high risk suppliers early

2. Improves value for money by shortlisting capable suppliers

3. Reduces risk of reputational damage and Supply failure

Added value created through an effective sourcing.

1. Securing better prices and value for money

2. Achieving the five rights of procurement

3. Reducing risk through Supply evaluation and sustainability checks

4. Improving who life cost and asset decisions.

Five possible sources of information for finding potential suppliers at the Analyzing the supply market stage

1. E-catalogue on websites and intranets

2. Play procurement, Market testing and marketing engagement

3. Online supplier evaluation systems.(Sedex)

4. PQQs and RFIs

5. Organizations’ supplier database built from previous PQQs and RFIs

Three benefits of implementing electronic systems and two disadvantages

1. Increased efficiency and speed of transactions (a)

2. Reduced administrative cost and better spend visibility (a)

3. Improved traceability and control of documents and payments (a)

4. High initial investment and implementation challenges (d)

5. Dependence on technology and reduced personal contact (d)

Explain three advantages and treat disadvantages of e-catalogues

1. Information is always available and up to date (a)

2. In depth, product details and environmental benefits (a)

3. Time savings (a)

4. Dependence on technology and access problems (d)

5. Reduce the relationships building with suppliers (d)

6. Navigation difficulties for buyers (d)

E-Procurement systems and their components

1. EProcurement = ESourcing+ EPurchasing

2. ESourcing= Pre Contact stages= eRequisitioning + eCatalogue + eAuctions + eTendering

3. Post contract stages= EPurchasing = eOrdering (via MRP, ERP etc)+ ePayment

4. Increases efficiency control and relationships

EProcurement systems within CIPS procurement cycle

1. E-Requisitions in defining needs

2. E-catalogs for market research and product selection

3. E- Tendering for issuing and managing tender documents

4. Online supplier evaluation systems for supplier selection

5. E-specifications, eRFQ,eITT and e-negotiation

Five ways e sourcing can help the company

1. Faster and more efficient communication with suppliers

2. Lower administrative cost and easier bit management

3. Better supplier screening and reduced risk

4. More accurate specifications and clearer supplier understanding

5. Improved Negotiation and contract finalisation

Three benefits of electronic system in sourcing process

1. Time savings and increased efficiency

2. Improved traceability and control of sourcing documents.

3. Better supplier visibility and screening.

For potential costs of using electronic systems.

1. High initial investment in system and infrastructure

2. Ongoing software platform and maintenance costs

3. Training and process standardization costs

4. Risk-related costs from technology, dependence and security

Three functions included in a P2P system

1. E-requisitioning

2. E-ordering and goods receipt linkage

3. Invoice approval and e-payment

When the Competitive tendering is not the best approach?

1. When there is a bottleneck supplier holding a monopoly

2. When lead times are very short and urgency is high

3. When the purchase is low value and tender preparation costs are high

Four impacts of regulation in the public sector

1. Stricter supplier selection

2. Greater fairness and transparency

3. Higher risk of legal challenge

4. Stronger audit and value for money pressure

Anti-Competitive regulations

1. Preventing unfair competition

2. Controlling harmful Market behavior

3. Supports reporting and investigation

Potential impact of complex compliance requirements

1. Supports ethical and sustainable supplier selection

2. Improves workflow and consistency

3. Protects reputation and customer outcomes.

4. Reduces legal and operational risk

Added value of contract management

1. Monitoring contractual performance

2. Identifying and resolving issues early

3. Supporting continuous improvement

4. Managing supplier relationships for continuity of Supply

5. Reviewing ongoing need and end-of-life decisions

Application of the Kraljic Matrix

1. Assessing organizational inputs by cost and risk

2. Applying the Matrix to direct and indirect inputs

• Leverage inputs: High cost low risk

• Strategic inputs: High cost high risk

• Routine or non-critical inputs: Low cost Low risk

• Bottleneck inputs: Low cost High risk

Contractual terms

1. Implied terms: linked to common law

2. Express terms

• Core operational terms: quality, delivery requirements. Lead time, quantity, price

• Commercial and administrative terms: payment terms, packaging term and currency

• Legal protection terms: law notice and dispute resolution