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L4 > L4M4- Chapter 3- Compliance with sourcing > Flashcards

L4M4- Chapter 3- Compliance with sourcing Flashcards

1
Q

What are the key areas of regulation that organisations must follow?

A

Data protection
Ethical Practice
Health, safety and environment and workers rights
Marketplace competition
Product safety standards

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2
Q

What is the BSI?

A

British standards institution

Produces technical standards that products must conform to

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3
Q

What difference does being in the public sector have on legislation applied to sourcing?

A

Bound by the laws of the nation they operate in

Must still comply with laws that affect the private sector

In the UK they must also abide by:
1) The freedom of information act- anyone can access info held by a public sector organisation
2) UK public contract regulations- govern how public sector organisations should carry out procurement

Public sector tendering over a certain amount must be open to competition

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4
Q

How does the EU Public Procurement Directive affect tendering?

A

Public sector tendering over a certain amount must be open to competition

Must start with advertising a call for competition in the OJEU (in the UK it is the Government Contract Register)

If you are not ready to issue a call for competition you may issue a PIN

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5
Q

What is a call for competition?

A

A notice released by a buying organisation through OJEU to make potential suppliers aware they may participate in tendering. It gives info about the process and allows for involvement

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6
Q

What is the OJEU?

A

Official Journal of the EU

In the UK it is the Government Contract Register

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7
Q

What is a PIN?

A

Prior information notice

A notice released to suppliers through the OJEU that flags the intent to tender in the future

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8
Q

The UK public contract regulation 2015 contains rules for public sourcing, what are they?

A

Procedures must be followed for format of the tender (inc advertisement, eligibility and information provided by suppliers)

Stages that must be followed when conducting a tender

Timescales

Contract award criteria

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9
Q

How is private sector sourcing different to public?

A

Private may choose not to conduct competitive tendering

Private sector are still bound by the laws of the country in which they operate

Main purpose is to make a profit

Also need to keep stakeholders and customers satisfied

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10
Q

What is different about third sector sourcing/ not for profit

A

Similar to private sourcing

Some charities may not have specialist procurement teams/ knowledge

Still bound by the laws of the country in which they operate but also have some additional regulations vs private eg. things that regulate how they operate depending on which country they are in

They do not need to make a profit but are looking to support causes they deem important

Mainly NGOs and funded by donations which means cash flow can be difficult so procurement teams still need to save money

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11
Q

What are the ESG considerations within sourcing?

A

Corruption- inc cultural considerations (what is and isnt accepted- aka cultural relativism), anti corruption legislation

Bribery

Fraud

Conflicts of interest

Human rights

Modern slavery

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12
Q

What is cultural relativism?

A

This is where in different cultures there will be different perceptions on what is and isnt acceptable. Ie what is normal may be different from culture to culture. An example is facilitation payments.

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13
Q

What are facilitation payments?

A

AKA a grease payment

A form of bribery in which a sum of money is payable secure or speed up the delivery of an action.
In some cultures it is acceptable but in others it is not.

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14
Q

What is a code of conduct?

A

A series of rules set by an organisation that outline suitable behaviours and values. This is used to uphold uniformity and standards of an organisation

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15
Q

What is bribery?

A

Corrupt exchange of something of value by one party to ensure a favourable outcome

They can take other names, for example a facilitation payment could be considered a bribe

It is not always explicit, it can for example be gifts/ hospitality

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16
Q

What is fraud?

A

It involves someone unlawfully obtaining funds or resources for their own benefit

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17
Q

What is workplace fraud?

A

Small scale thefts taking place in the workplace that are difficult to detect e.g. taking inexpensive stationary home

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18
Q

What is embezzlement?

A

Rather than direct theft or money, individuals misuse funds or resources that they have authority over that benefit them

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19
Q

What are the 3 reasons someone commits fraud?

A

Perceived pressure- e.g. personal debt

Perceived opportunity- e.g. vulnerability in a system allows an individual to exploit

Rationalisation- e.g. internal dialogue justifies it (I will only do it once)

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20
Q

What are the common types of fraud?

A

Advance fee- where the victim is asked to pay up front but never receives the goods or services

Corporate fraud- targeting an organisation

Identity- A false identity is created to commit the fraud

Individual fraud- targeting one person

Can include cybercrime- phishing, account theft, money muling (where people receive stolen money and are told to withdraw it), fake official requests

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21
Q

How can fraud affect supply chains?

A

Often it is via trust or through lying in a contracting process e.g. it is fraudulent to deliberately exaggerate the scale of capacity when agreeing a contract

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22
Q

What is a conflict of interest?

A

a situation in which a person is in a position to derive personal benefit from actions or decisions made in their official capacity

Example would be nepotism (using perceived or actual power to benefit friends and family)

Conflicts of interest can be declared and tracked to ensure fair audit and not to incriminate people

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23
Q

What is the universal declaration of human rights?

A

30 rights that apply to the UN from 1948. Includes the right to freedom, free speech etc. They are not guaranteed in every country

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24
Q

What can a procurement professional do if they suspect a supplier of modern slavery?

A

Due diligence checks
Contact the modern slavery helpline if UK based
Review the suppliers conduct documents to ensure they reject slavery
Introduce yourself to workers when visiting

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25
Q

How should the public sector source?

A

Find best value for money (not always cheapest, may be best ESG)
Held accountable to public scrutiny due to funding
Openly auditable
Use competitive tendering to ensure transparency and ethical conduct
Buyers can still use different tender processes (open, restricted, competitive with negotiation, competitive dialogue and innovation partnership) but need to be selected appropriately

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26
Q

What are the pros and cons of open procedure tenders for public sector?

A

Used for well specified requirements with no pre-requirements

Allow for a wide range of submissions and highly competitive

Means theres a lot to review

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27
Q

What are the pros and cons of restricted procedure tenders for public sector?

A

Used when interest is likely to be high. Buyers may want to assess technical and financial capabilities and choose a selected group of suppliers

Due to clear spec there should not be follow on negotiations

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28
Q

What is competitive with negotiation tenders for public sector?

A

Suppliers that respond to the call for competition are invited to join by invitation only and lets bidders know there may be negotiations following their bids

This can help get the best possible outcome for the buyer

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29
Q

What are the pros and cons of competitive dialogue tenders for public sector?

A

Similar to restricted but allows the buyer to speak to suppliers after selection but before evaluating bids

When buyers have clarity on the specific requirement they can discuss with the suppliers and issue/review final bids

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30
Q

What are the pros and cons of Innovation partnership tenders for public sector?

A

This is effectively a new to market product

suppliers require expertise and capacity and can form a partnership to take an idea through to realisation

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31
Q

What are the key stages within the procurement process that must be followed in the public sector?

A

1) Specification- requirements, avoid favouritism, define requirements, methods required

2) Selection- review regulations, exclude unsuitable suppliers, review financial and technical suitability

3) Award- MEAT, investigate abnormally low tenders

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32
Q

What are the regulatory challenges of importing internationally?

A

Documentation
Duty and Tariffs
Customs controls
Exchange rates/ currency

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33
Q

What is an NGO?

A

Non Governmental organisation

Usually these are non profit making but have an important role in the economic development of developing countries. Including for example after natural disasters

Also fund caregiving e.g. Oxfam
Also highlight topical issues and aim to correct them- e.g. WWF

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34
Q

What documents are used within the EU for movement of goods?

A

T1 document- must accompany goods whilst in transit

Import/Export license

Single Administrative document- used for goods either entering or leaving the EU

Computerised transit system

Customs declaration service- used to submit import/export requests

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35
Q

What is a BOI?

A

Binding Origin Information

A legally binding decision on the origin of goods provided by an EU member state (can be difficult if an element of production, testing or manufacture happens in another country)

Used in the EU and EEA

36
Q

What is preferential and non preferential origin?

A

Both are types of origin used with EU and EEA and describe whether certain criteria have been fulfilled

Preferential = goods traded between countries and no duty or charges apply

Non preferential= goods that are subject to tariff quotas or commercial regulations

37
Q

What is a certificate of origin?

A

Shows the economic nationality of goods in international trade

38
Q

Which documents are used for international imports and exports (outside of EU too)?

A

Purchase order- purchase request

Bill of lading- What is required of those involved in transporting, carrying and consigning goods until delivery

Insurance certificate- Coverage of a suitable insurance policy

Certificate of origin- officially specifies the origin of a delivery of goods

Carnet- allows free movement of goods for a specified purposed, within a boundary or along a route (free movement is allowed in the EU but not in Japan, Singapore and India)

Clear contract between buyer and supplier

39
Q

What are duties and tariffs?

A

Duty is a tax charged when importing into a country and must be paid before goods can enter

Tariffs outline the specific rules like the quantity of goods that can be imported. Tariffs can apply to import of specific commodities. Duty charges can be found within the tariffs

40
Q

What is ad valorem?

A

An estimated value of the goods being imported, based on the value of goods plus other factors like insurance, freight etc.

41
Q

What is a trade bloc?

A

An economic group formed of different countries to form preferential trade conditions

Can differ by level of cooperation and integration:
- Common market
- Free trade

42
Q

What is a tariff?

A

Rules regulating the type of good, their quantity and their import duty from specific countries

43
Q

What is import duty?

A

Taxes collected on goods imported from another country- the amount of tax is based on its value

44
Q

What does a stronger currency mean?

A

A stronger currency is, when doing a currency exchange, the one which can buy more of the other with 1 unit. Aka it is worth more than the another nations currency

E.g. 1 EUR buyer 15 South African Rand the Euro is stronger
1 pound buys 1.3 EUR the pound is stronger
1 EUR buys 0.8 Dollars then the dollar is stronger

Currency valuation is based on FOREX trading and can be due to conflict, economic stability, political leadership etc of a country

45
Q

How is currency regulated for international sourcing?

A

Access to the currency- not all currencies are freely traded, some termed ‘exotic’ are infrequently traded (e.g. Colombian peso). Some currencies are non convertible and other may align with the dollar

Ability to make and receive payments- check to make sure you can pay when bills are due

General considerations- there has been a general tightening of payments to safeguard against money laundering and terrorism

46
Q

What is dollarisation?

A

Alignment of a national currency to the dollar

47
Q

International sourcing can be:

A

Standard product sourcing from another country

Outsourcing

Offshoring

48
Q

What are the benefits of international sourcing?

A

Reduced cost
Exposure to world class tech
Availability of materials and skill not present in your country
Quality
Wider selection of suppliers than a national view
Collaboration between nations
Stimulate growth in other countries

49
Q

What are the risks of international sourcing?

A

Lead times
Import/export requirements and regulations
Currency exchange
Payment methods and guarantees inc letters of credit
Cultural differences
quality issues
Logistical problems
IP problems
Relationship/trust challenges
Hard to resolve conflicts
Political challenges blocking trade
Ethical standards
Language barriers

50
Q

What is a letter of credit?

A

A letter from a bank guaranteeing that a buyers payment to a seller will be received on time and for the correct amount

51
Q

What would be some reasons to limit the use of imported goods?

A

National defence products (strict controls and IP)
Protecting the end use (could be harmful)
Protection of ‘infant’ industries nationally which you want to support (or could be damaged by international competition)
More strictly monitor goods from a country that has historic problems

52
Q

What is an Incoterm?

A

Commercial terms that cover the allocation of cost and transfer of risk between buyer and seller.

Abbreviated to 3 letter codes.

Buyers can take control over the level of transport and delivery risk by defining how it should be carried out within a contract or a purchase order

Crucially outline where a deliverable is no longer the responsibility of the supplying organisation and transfers the risk to the buyer

53
Q

What do Incoterms represent?

A

The big benefit is an incoterm removes the need for lengthy contract terms by outlining the terms of the contract/ PO with regards to transport or deliver.

The point at which goods are considered delivered

Who takes responsibility for transport and in what form it takes

Which party pays insurance

Who pays for duty/tariff

54
Q

What types of payment mechanism are there for international trade?

A

Top one benefits the buyer the most, the bottom one benefits the supplier most

Credit account- supplier delivers good before receiving payments but will be paid within a set number of days from invoice

Bills of exchange- its a draft, essentially a payment instruction- a promise to make payment at a specified time. They can take many forms but some examples are:
1) Term/time draft- guarantee from the buyers bank where the supplier retains the title of the goods until the buyer receipts them where payment is made
2) Sight draft- guarantee from the buyers bank where the seller retains the title until receipt and payment is made- there can be no delay from receipt to payment

Letter of credit- guarantee from a bank that payment will be made from an escrow account when the conditions have been agreed

Cash in Advance- buyer pays before receipt

55
Q

Why is it lower risk as a buyer to specify prices in your own currency during international sourcing?

A

It is a simple way to safeguard against potential currency fluctuations. However, if the currency got weaker and the suppliers currency got stronger then the supplier would benefit if the contract takes time to deliver.

Paying upfront removes all risk but benefits the supplier most

56
Q

How can you mitigate risk with currency and international sourcing?

A

Currency hedging
Paying upfront
Agreeing to pay in your own currency

57
Q

What is the vienna convention?

A

UN convention on the international sale of goods- a treaty that established a uniformly recognised framework for international trade

It is designed to be a non bias, uniform approach to international trade and overcome local laws and barriers

58
Q

What is CISG?

A

Contracts for the international sale of goods

59
Q

What is WTO?

A

World trade organisation

60
Q

Who regulated international trade?

A

CISG, WTO through the vienna convention

61
Q

What is the CIPS code of conduct?

A

Helps abide by ESG and source responsibly

It is a set of values, behaviours and actions that CIPS members must uphold as part of their professional practice

62
Q

What are the 5 areas of the CIPS code of conduct? PEMEF

A

Promote the eradication of unethical business practice e.g. due diligence, knowledge development, flag when stuff comes to light

Enhance and protect the standing of the profession e.g. not accepting bribery

Maintain the highest standards of integrity in relationships e.g. no conflict of interest or fraud

Enhance the stature of the profession e.g. developing skills

Full compliance with the laws- adhere to the laws of the country

63
Q

What is an ethical code of practice?

A

A document outlining an organisations accepted behaviours and principles of working

They can vary greatly by profession, sectors and companies

There may even be conflicts between organisations on adopted practices

64
Q

In order for KPIs to be effective and measurable they need to be SMART , what does it stand for?

A

Specific
Measurable
Achievable
Realistic
Time bound

65
Q

What sort of KPIs could be used for ESG KPIs?

A

Need to demonstrate the suppliers commitment to ESG goals:
- measurement of waste sent to landfill
- Consumption of energy on an annual basis

The KPIs should not place too much of a burden on the supplier as it could be costly or time consuming to meet

66
Q

Sometimes verbal commitment to ESG is not enough, what processes can suppliers have in place to promote commitment to ESG and ethical considerations?

A

Accreditations from professional bodies
Internal policies
Mission statements on a company website
Internal processes that govern individuals work
Monitoring suppliers ethical performance
Encouraging dialogue with suppliers on improvement processes
Identifying and addressing conflicts of interest

67
Q

What is an audit?

A

An official inspection by the procurement organisation or an independent body to ensure compliance with requirements and standards

It is an objective, fair and repeatable way of ensuring a suppliers performance is upholding ethical standards and practices

68
Q

What is scope creep?

A

Changes in scope or requirement over time that are intentional or unintentional but result in adjustment for time, resources or money

E.g. time wasted observing the incorrect things
Not being properly completed
Money wasted on unnecessary checks
Misinterpreted results
Over burden of resources on buyer and supplier

69
Q

Why should audits be unannounced if possible?

A

Prevent suppliers from taking short term actions to make it appear like it was abiding by requirements:
- creating documents the auditors may want to see
- Cleaning equipment to give the impression of being well maintained
- Suddenly mandating the use of PPE
- Coaching staff in ways to pass an audit

Attempting to do the above is considered unethical practice.

70
Q

What is a supplier development programme?

A

Carried out by a buyer to strengthen the relationships with suppliers and to strengthen there capability and competencies. It is often a collaborative approach to solving problems.

71
Q

What is sustainable development?

A

Development that meets the needs of the existing population without depleting resources for future generations/populations.

Can form part of the ESG process and practices for an organisation

72
Q

What sustainability questions can be asked about a supplier during the product life cycle?

A

DURING MANUFACTURE:
How efficient is the suppliers manufacturing process
Are there harmful by products
Are they sourced under challenging circumstances with conflict (e.g. diamonds)
Are staff protected from harm?

IN USE, STORAGE or FURTHER MANUFACTURE:
Does it need to be stored, handled or used in a way to prevent harm

DISPOSAL:
Can is be recycled?
How long will it take to biodegrade
Does it need special disposal techniques?

73
Q

What is a direct or non direct impact?

A

A direct impact is where an organisation carries out an activity with the intention of imposing a positive or negative social impact. E.G. changes to HR policy- making a conscious effort to employ local people, banning smoking on site etc. the change directly impact employees and in some cases the wider public

Indirect are social impacts that are unintentional

74
Q

What are some examples of standards within ESG?

A

ISO 20400:2017
The sustainable agriculture standard (rainforest alliance)
Standards for hired labour (fairtrade standards)

Required standards of a buying organisation can be outlined in the specification.

Standards are recognised globally

75
Q

What is offset/ industrial participation? AKA offset requirements

A

Often done by a government with an international sourcing agreement. An agreement that a foreign organisation will invest into the country of the procuring government as part of its contractual obligations

AKA the effort to ensure that the process of manufacturing goods benefits the economy of the country manufacturing them

Examples could be investing in local housing, research, access routes

76
Q

Which areas of compliance will need to be met to be compliant with law, regulation and standards?

A
  • Data protection
  • Ethical practice
  • H&S
  • Environmental
  • Worker/employment rights
  • Marketplace competition
  • Product safety standards
77
Q

What is a harmonisation code?

A

A standardized numerical method of classifying traded products. It is used by customs authorities around the world to identify products when assessing duties and taxes and for gathering statistics

78
Q

What are the 4 groups of incoterms?

A

C- The seller arranges for carriage but once dispatched its obligations are complete

D- Obligation extend to the delivery of goods at the specified destination

E- The sellers only duty is to make the goods available at its own premises

F- Seller undertakes all pre carriage duties but main carriage arrangements are responsibility of buyer

79
Q

What are the 5 sections of the CIPS code of conduct?

A

1) Enhance the standing of the profession

2) Maintain the highest standard of integrity in all business relationships

3) Eradicate of unethical business practices

4) Enhance the proficiency and stature of the profession

5) Compliance with laws and regulation

80
Q

Which KPIs could be related to ESG?

A

Amount of waste sent to landfill
Energy consumption
Carbon emissions

81
Q

UK public contract regulations 2015 contain rules on what for public sourcing?

A

Procedures to be followed e.g. advertisement
Stages a buyer must follow
Timescales
Contract award criteria

82
Q

Which incoterms are specific to transport in water?

A

FAS- free alongside ship0 named loading port
FOB- free on board- named loading port
CFR- cost and freight- at named port
CIF- Cost insurance and freight- at named port

83
Q

What are bills of exchange?

A

Often referred to as a draft and is basically a payment instruction

Time/term draft- supplier owns stock until buyer has receipted them, then gets paid
Sight draft- Supplier owns stock until buyer has receipted and paid

84
Q

What is an escrow account and what type of payment does it sit under?

A

A third party account used to facilitate international transactions

Falls under a letter of credit

Will be paid once the conditions in the letter are met

85
Q

What is a harmonisation code?

A

Used by customs to classify items being shipped
6 digits

L4 (12 decks)

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