L4M2

Question 1

What is the difference between value analysis and value engineering?

Answer 1

Value analysis is used for existing goods or
services whereas value engineering is conducted at the design stage of new goods and services.

Question 2

If established suppliers in a market start a price war, is this a form of competitive rivalry?

Answer 2

Yes. it is an aggressive strategy, one firm’s gain is another firm’s loss

Question 3

What is acceptance testing?

Answer 3

A form of testing used to determine if the requirements of a specification or contract are met.

Question 4

What is an annual planning cycle?

Answer 4

Planning involves a number of activities, such as analysis of opportunities, setting aims, exploring options, producing detailed plans and reviewing the plan against expectations. A cycle of activities as the result where each activity revised before the final plan is accepted.

Question 5

Arms Length relationship

Answer 5

The relationship between two parties each of whom have no obligation to the other. It means that the transaction is based on fair market value and that each party is acting in his own self-interest, without any pressure or influence from the other party

Question 6

Bargaining power

Answer 6

The ability of a company or individual to influence another

Question 7

Cost benefit analysis

Answer 7

a technique for deciding whether to follow a particular course of action based on its financial impact.

Question 8

What is the term used in describing the manner in which customers purchases goods or services?

Answer 8

Order pattern

Question 9

What is the disadvantage of sourcing from a
supplier which is a monopoly in the market?

Answer 9

The buyer has a lack of negotiating power on
cost

Question 10

What is a Design specification

Answer 10

A detailed document that sets out the precise way that a product must be built or a service delivered and includes any technical drawling, standards that must be met and dimensions.

Question 11

What is Differentiation

Answer 11

When a product or brand stands out as being unique to customers when compared to its competitors.

Question 12

What is a Framework agreement

Answer 12

An agreement that sets out the terms and conditions under which a call off can be made.

Question 13

What are Indirect costs

Answer 13

The general running costs of the organisation - these costs cannot easily be attributed to specific products or services (known as overheads)

Question 14

What does Limitation of liability mean?

Answer 14

A limit placed on the financial obligations of a party within a contract.

Question 15

What is a Logarithmic scale?

Answer 15

A scale in which the distance of a point from the scale’s zero is proportional to the logarithm of the number rather than to the number itself.

Question 16

Define Modified re buy

Answer 16

The purchase of an item that was purchased last time there was a need, but with changes to the specification or supplier.

Question 16

Define competitive assessment/’teardown’

Answer 16

The act of disassembling a competitor or suppliers’ product into its component parts so that its costs can be estimated.

Question 17

What is meant by open book costing?

Answer 17

This buyer and supplier agree which costs are eligible and the supplier agrees to allow the buyer access to its finances to scrutinize these costs.

Question 18

What is a performance specification?

Answer 18

A description of the outputs or outcomes that are expected with the detailed design of the product or service left to the supplier to decide.

Question 19

What is a premium price?

Answer 19

When a product is sold for higher price than its competitors. an example of this would be designer brands that sell ordinary products but are branded and therefore can sell their product for a premium price.

Question 20

Define procurement specification.

Answer 20

A document that presents prospective suppliers with a clear, accurate and full description of the organization’s needs and enables them to propose a solution to meet those needs.

Question 21

What is Pugh analysis?

Answer 21

A tool for facilitating a team-based approach that converts customer expectations into a number of potential solutions and then evaluates them to choose the best one.

Question 22

What is ‘Should cost’ analysis?

Answer 22

A technique used by procurement for determining what a purchased product or service should cost based on materials, components, processes and overheads of the supplier.

Question 23

What is a straight re buy?

Answer 23

The purchase of an item that was purchased last time there was a need rather than considering an alternative.

Question 24

What is a technical specification?

Answer 24

A detailed technical description together with acceptance criteria that forms the basis of a product design.

Question 25

Define through life contracts

Answer 25

A contract that gives a contractor sole accountability for the design, acquisition, operation, maintenance and disposal of an asset.

Question 26

What are zero based budget?

Answer 26

A method of budgeting in which every expense must be justified starting from a base of zero.

Question 27

What is the definition of New Purchases?

Answer 27

Made when the organisation identifies a completely new requirement not purchased before.

Question 28

What is a Market?

Answer 28

A Market is a place where goods are bought and sold or where buyers meet sellers to trade products and services.

This can relate to a specific location or to the general economic environment

Question 29

What are the industry classifications?

Answer 29

Primary activities (extractive e.g. mining)

Secondary activities (manufacturing)

Tertiary activities (services)

Question 30

What are three ways of segmenting a market?

Answer 30

Grouping needs based on buying groups

Grouping needs based on distribution channels

Grouping needs based on geography