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CIPS Level 4 Module 1 Solved 100% Correct!!
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CIPS Level 4 Module 1 Solved 100% Correct!!
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CIPS Level 4 Module 1 Solved 100% Correct!!The Purchasing process - Answer 1. Define Specification.
2. Select Supplier
3. Contract Agreement
4. Ordering
5. Expediting
6. Evaluation Follow up
Definition of Procurement & Supply - Answer recognition of the fact that the purchasing function has a role in not just "buying inputs" but in "securing supply"
Direct Costs - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer Operating expenses are the costs for a company to run its business operations on a daily basis.
CAPEX - Answer 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 - Answer 1. Understand the need.
2. Market Commodity options.
3. Develop Stratgey/ Plan.
4. Pre-procurement / market test.
5. Develop required documentation. CIPS Level 4 Module 1 Solved 100% Correct!!
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 - Answer 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 - Answer Primary - Inbound Logistics, Operations, Outbound Logistics, Marketing & sales, Services
Support Activities - Firm Infrastructure, HR Management, Technology, Procurement
Action points for CAPEX purchasing - Answer 1. Documentation or guidline and standard procedure
2. Cross-functional team for appraisal & evaluation
3. Appropriate project evaluation methology
4. Process automation (E-platform)
5. TCO / Life cycle costing
6. Regular review for better control & monitoring
5 rights of procurement - Answer Right Quality
Right Quantity
Right Price
Right Place
Right Time
Right Quality - Answer goods which are of satisfactory quality and fit for their intended purpose e.g. ensuring an accurate specification of the requirement and its quality standards.
Right Quantity - Answer sufficient to meet demand and maintain service levels while minimising stock holding e.g. by ensuring that there is accurate demand forecasting and efficient inventory management.
Right Place - Answer goods delivered to the appropriate delivery point, packaged and transported so as to secure their safe arrival in good condition e.g. by including transport instructions including packaging requirements as part of purchase orders. CIPS Level 4 Module 1 Solved 100% Correct!!
Right Time - Answer delivery of goods at the right time to meet demand, i.e. not too late but not so early as to incur unnecessary inventory costs e.g. by ensuring accurate demand management, placing orders in time for suppliers to provide timely delivery and ensuring that suppliers are aware of delivery requirements.
Right Price - Answer securing all of the above at a reasonable, fair, competitive and affordable price. Ideally, minimising procurement costs in order to maximise profit e.g. by carrying out price and supplier cost analysis and/or by carrying out competitive tendering and negotiation. The 'right' price is one that represents good value for money.
Life Cycle cost (LLC) - Answer The total cost throughout its life including planning, design, acquisition and support costs and any other costs directly attributable to owning or using the asset".
Total Cost of Ownership (TCO) - Answer 1. TCA
2. Tooling
3. Insurance
4. Operation
5 Maintenance
6 Training
7. Storage
8. Disposal
TCO Acquisition costs - Answer Acquisition/Physical Hardware costs include the cost of equipment or property before taxes, but after commissions, discounts, purchasing incentives, and closing costs.
Sometimes this will include one-time peripheral equipment or upgrades necessary to
installation or utilisation of the asset.
TCO Operating costs - Answer Operating costs include subscriptions or services needed to put the item into business use. This includes utility costs, direct operator labour, and initial training costs.
TCO Personnel costs - Answer Personnel overhead may include administrative staffing, support personnel to the equipment, facility housing the equipment and operators.
This may include ongoing training and troubleshooting labour for maintenance purposes.
Opening Considerations 1 of 2 - Answer 1. Procurement involcves something which may be tangible (goods) or intangible (services
2. The procurement process begins by indentifying a need and is completed once the goods or services that meet the need are delivered.
3 Procurement is increasingle becoming a strategic function of the business and involves a high level of skill CIPS Level 4 Module 1 Solved 100% Correct!!
4. Procurement takes place in most of all organisations; everything that needs sourcing and buying for an organisation involves procurement. Therefore, the costs of an organisation can be linked to procurement
Supply Chain - Answer a network of individuals, organisations, technology, activities and resources that work together to make sure goods or services flow.
If one part of the chain fails, every organisation further along the chain can also fail.
Suppl chain managment aims to - Answer 1. Reduce costs
2. Improve Value
3. Reduce risk
Should give the supplying organisation a competitive advantage by adding value throughout the process, and achieving it in the most effective, efficient and ethical way.
SCM - Answer Supply chain management and procurement are not the same thing, although they are inter-related
Without procurement, there would be no supply chain
1. Procurement as part of supply chain management
2. Procurement is about procuring products and servicing as a response to a need, while a supply chain is the infrastructure involved in physically getting the products or
services needed.
Procurement includes the following
3. Preparing specifications
4. Monitoring quality
5. Sourcing
6. Buying
7. Stock control
8. Disposal of waste
What is logistics - Answer The process of planning, implementing and controlling procedures for the efficient transporting and storage of goods, including services and
related information, from the point of origin to the point of consumption, for the purpose of conforming to customer requirements.
Logistics can be - Answer 1. Inbound and outbound
2. Internal logistics (processes related to getting materials into the desired end state-
Extraction/production /Manufacturing /Warehousing/storage
3. External logistics (Distribution /Transport/ Retail )
Logistics requires several areas to be managed - Answer 1. Demand planning - knowing what is required and when
2. Fleet management - solutions to physically transport goods from one place to another
3. Inventory management -knowing amount of stock available
4. Materials management - handling, storage, inspection and issuing of raw materials, components and finished goods
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