Chapter 2

Question 1

Can you name each stage of the CIPS procurement cycle?

Remember, stage 1-9 is the sourcing process, 10 onwards is contract management

Answer 1

1. Understanding the need and developing a high level specification - Remember, 5 rights and performance vs conformance spec here.
2. Market/ commodity and options - market research, supplier research, monopolies or similar market structures, make vs buy, currency fluctuation, lead times etc.
3. Develop strategy/ plan - decide whether to use RfI, RfQ, ITT, PQQ porters 5 forces to help select suppliers
4. Pre procurement, market test and market engagement - extension of point 2
5. Develop documentation - prepare relevant documentation RfQ, ITT, PQQ, T&Cs, SLAs
6. Supplier selection to participate in RfQ or ITT - on site audit or RfI/ PQQ based. Docs should be based on carters 10c’s
7. Issue ITT/ RfQ
8. Tender bid/ quotation evaluation - TCO, cross functional team, value for money etc
9. Contract award and implementation - advise preferred supplier first incase they decline and you need to award to 2nd preferred. Then advise the unsuccessful ones. This stage also involved finalising contracting process to SoW and start.
10. for psychical purchases, area for receipting goods need preparing and area for storing products need preparing. Warehouse teams should be notified in advance of size, weight, packaging, numbers etc
11. Contract performance review - suppliers performance should be reviewed against KPI and T&Cs on a regular basis
12. SRM & SCM development - kraljic matrix can be used to priortised what resources should be given to each supplier
13. Asset management lessons learned - contract needs reviewing to see if it still meet the businesses requirement and drive value or if the procurement process needs to be restarted and implement another supplier or solution.

Question 2

What is market engagement?

Answer 2

Process of gaining advance understanding of a market trends

Question 3

What are Carters 10c’s?

Question 4

What’s the difference between SRM and SCM?

Answer 4

SRM - management of key suppliers to increase value to the relationship for both parties. SRM 4 main factors: manage relationship, monitor performance, maintain strategy, manage change

SCM - management of flow of goods and services

Question 5

Remember, Pre contract award stage is all stages before stage 9 contract award and implementation. Post contract award is all stages after stage 9.

Question 6

What are 4 example of what an Offer is not?

Answer 6

Invitation to treat – Where the supplier can discuss willingness to make an offer but has not discuss the terms for doing so yet. I.e., a tender if an invitation to treat as the buyers is discussing their willingness to make a deal but the tender and its documents do not act as the terms to offer. Another example is where a product is on display as an invitation, however, an offer doesn’t exist as the seller can refuse to sell.

Declaration of intention – where an offer was intentional, however, later declined. i.e., an auction house advertising a product for sale, but cancel event thereby declining to offer.

A mere puff (or boast) – Anything not intended to be taken literally. i.e., an exaggerated TV ad which isn’t true. A silly statement that a soft drink can make you stronger etc.

Provision of information – i.e., a plaintiff requests the price of a product, which supplier confirm back price only. This is not an offer to sell. This is just provision of information.

Question 7

Remember, public sector procurement must advertise contracts that are valued over a certain threshold. Tender are advertised via The OJEU - Official Journal of Economic Union. This ensure that contracts bid are opened up to all European supplier to drive competition and avoid discrimination by country preference

Question 8

As part of SRM, there are two styles of negotiation. What are they?

Answer 8

Collaborative - win-win

Distributive - win lose. One party focuses on themselves

Question 9

What E systems exist according to CIPS?

Answer 9

E-Requisition - raising and sending reqs via electronic method

E-Catalgoue - online brochure showing products

E-Sourcing - online auctions, reverse auction, supplier categorization etc

E-Payment - transferring funds electronically

Question 10

What factors do CIPS suggest should form part of supplier evaluation criteria?

Answer 10

Price, quality and delivery 
Financial stability 
Long term relationship 
Total quality performance and philosophy 
E-commerce capability

Question 11

How does CIPS describe waste?

Answer 11

Anything that does no add value. Lean thinking highlights 7 waste which are:

DIMWOOD

Motion - movement of people and object unnecessarily. Perhaps new technology could reduce the movement

Inventory - introduce an MRP to order the minimal amount of stock also JIT could be implemented

Over production

Waiting - use of e requisitions and automated can avoid waiting for someone to raise an order especially if that person is on leave

Defects

Over processing - duplication of work check, handling of paperwork or materials

Transportation -

Question 12

What are the stages of continuous improvement?

Answer 12

Identify - areas for improvement
Plan - how can it be improved
Execute - implement change
Review - how are the changes working/ performing?

Question 13

What is an EDI system?

Answer 13

Electronic data exchange - the exchange of date between companies in computerised format. These often include POs, delivery notes and invoices.

Question 14

What is compliance?

Answer 14

Adhering to regulations, legislation and conforming to rules.
Areas covered by compliance include:
Standards
Regulation
Legislation
Controls
Strategies
Policies 
Audits
Risk

Question 15

What is the difference between mark up and margin?

Answer 15

Mark up - profit shown as a percentage of costs
(price - cost)/ cost * 100

Margin - profit expressed as a percentage of price
(price - cost)/ price * 100