Chapter 1.1 - Apply the key stages of the procurement cycle to the practical procurement and supply contexts Flashcards
1
Q
Name the 13 stages of the CIPS procurement cycle
A
- Define business needs and develop specification
- Market analysis and make or buy decision
- Develop the strategy and plan
- Pre-procurement market testing
- Develop documentation and detailed specification
- Supplier selection to participate in tender
- Issue tender documents
- Bid and tender evaluation and validation
- Contract award and implementation
- Warehouse, logistics and receipt
- Contract performance and improvement
- Supplier relationship management
- Asset management
2
Q
Name 4 examples of a need in a business
A
- Tangible
- Intangible
- Direct
- Indirect
3
Q
What is a need in a business
A
Something that is required for an individual or an organisation to be able to carry out an objective
4
Q
Tangible needs
A
Things that can be touched or seen
5
Q
Intangible needs
A
Cannot be touched or seen
6
Q
Direct needs
A
Needs that are directly related to the end cost of the product or service that the organisation manufactures or supplies
7
Q
Indirect needs
A
Not directly related to the end cost of the product or service
8
Q
Name 4 ways needs are usually communicated
A
- Verbally
- Automated such as via an online platform that supports requisitions
- Handwritten or paper requisition, which needs to be physically given to the buyer for a purchase to be made
9
Q
What should be done by the procurement professional after clearly understanding the need
A
Develop a specification
10
Q
Performance specification
A
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
11
Q
Conformance (technical) specification
A
Specifies which standards a requirement must meet or exceed
12
Q
Name 2 types of performance specification
A
- Output
- Outcome
13
Q
Name a type of conformance specification
A
Technical standards
14
Q
Name 7 features of a performance specification
A
- Allow supplier innovation
- Promote competition in the marketplace
- The supplier bears the risk
- Buyer may not know exactly what they will be getting
- Shorter document
- Quicker to prepare
- Takes advantage of supplier expertise
15
Q
Name 7 features of a conformance specification
A
- No supplier innovation
- Reduce competition
- The buyer bears the risk
- Buyer knows exactly what they are getting
- Longer, complex document
- More time consuming to prepare
- Disregards supplier expertise
16
Q
Variance
A
A measure of dispersion of data across a range
17
Q
Commodity
A
A raw material that can be bought or sold
18
Q
Whats the next stage after developing the specification?
A
Evaluate the market options
19
Q
Name 3 market options you should consider after developing a specification
A
- The budget available to spend on the procurement
- The number of suppliers available
- Whether to make/deliver the product or service in-house or source from an external provider
20
Q
What should procurement professionals do once the procurement budget has been finalised?
A
Research the market to learn how commodity prices are behaving in the relevant sector and how many potential suppliers are available
21
Q
What model should you use to assess market competition?
A
Porters 5 forces
22
Q
Name the 5 aspects of Porters 5 forces
A
- Rivalry among existing competitors
- Threat of new entrants
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of substitutes
23
Q
Core competencies
A
The processes that are critical to an organisation achieving success and competitive advantage
24
Q
What industry is the make or buy decision common?
A
Manufacturing organisations
25
What should you focus on during a make or but decision?
Whether the item in question is a core competency to the organisation
26
What are make or buy decisions about?
Whether a product or service should be made within the organisation or bought-in from an external supplier
27
What model should you use when deciding whether to make or buy?
Carter's Outsource Matrix
28
Name the 2 strategies for non-core activities in accordance with carter's outsource matrix
1. Eliminate
2. Outsource
29
Name the 2 strategies for core activities in accordance with carter's outsource matrix
1. Strategic alliance
2. Retain
30
Name 12 other mechanisms or considerations procurement professionals can use to analyse and test the market (Carters outsource matrix already aware)
1. STEEPLED
2. SWOT analysis
3. Porters 5 forces
4. Levels of supplier competition
5. Supply and demand
6. Push and pull
7. Supplier segmentation
8. Product life cycle
9. Ansoff matrix
10. Early supplier involvement
11. Make or buy
12. Offshoring
31
Outsourcing
Taking an operation/process/function that the procurement organisation has previously undertaken itself and using a supplier under contract to deliver this instead e.g. customer service
32
Overheads
An ongoing business expense within a business
33
Name 6 benefits of outsourcing
1. Saving money
2. Reducing overheads
3. Reducing headcount
4. Using external knowledge
5. Focusing internally on core competencies
6. Helping with shortfalls in labour/expertise
34
Name 4 disadvantages of outsourcing
1. Losing some control within an organisation
2. Relying on external organisations
3. Reducing quality
4. Losing some internal knowledge
35
Invitation to tender (ITT)
A formal invitation sent to suppliers inviting them to make an offer to supply goods or service
36
Request for quotation (RFQ)
An invitation to suppliers to bid on specific products or services
37
What should you do after evaluating the market
Develop the strategy or plan of how to achieve the procurement
38
Name 3 things a strategy should address
1. An analysis of market competition
2. Which type of supplier to approach
3. Whether an ITT or an FRQ is more appropriate for communicating the need to suppliers
39
Name 2 types of analysis that should take place when developing a strategy or plan
1. SWOT analysis
2. STEEPLED
40
Name the themes of STEEPLED
Social
Technological
Economic
Environmental
Political
Legal
Ethical
Demographic
41
Name 6 things you should take into account when ensuring it is the right time to carry out the procurement
1.Stakeholder engagement for feedback
2. Supplier engagement
3. Market research
4. Any new legislation / regulations
5. Currency fluctuations
6. Competitor's actions
42
Service Level Agreement (SLA)
Document outlining the expected minimum level of service between a service provider and a client. It clarifies the scope of service, responsibilities of each part and how to escalate among other factors. A service level agreement is legally enforceable if it is referred to in a contract
43
Key Performance Indicators (KPIs)
These are measurable values that will enable a buyer to track how well a supplier is performing. KPIs are tracked over time and will enable the buyer to decide when remedial action may be needed to improve performance
44
Name 5 things that must be included in the documents sent out to potential suppliers
1. Terms and conditions
2. Quantity required
3. Description and specification of goods or services to be provided
4. Delivery details
5. Service level agreement (SLA) or key performance indicators (KPIs)
45
Pre-qualification questionnaires (PQQs)
A document sent to potential supplier to find out their suitability to be included in the procurement process
46
Requests for information (RFI)
A document used to gather information about suppliers and their capabilities prior to a formal procurement process
47
Corporate social responsibility (CSR)
An organisational sustainability framework to embed into strategy and operations and supply chains to have a positive global impact
48
Code of conduct
A series of rules set by an organisation that define suitable behaviours and values that should be used and applied by a member of that organisation, for the purpose of acting in a suitable manner, as well as demonstrating uniformity and upholding the standards of the organisation
49
Name 4 things procurement professionals may ask from the suppliers to see who is most suitable?
1. Undertake site visits
2. Conduct audits
3. PQQ completion
4. RFI completion
50
Name 2 things suppliers can be audited for
1. To ensure they have a CSR policy
2. To ensure they have an ethical code of conduct
51
Name 8 things evaluating suppliers should be based on
1. PQQs
2. Sustainability
3. Carters 10C's
4. Reputation
5. Credit checks
6. Relationships
7. Ethics
8. Benchmarking
52
What is the best way to understand a supplier
A site visit
53
What sectors are PQQs more frequently used?
Public sector
54
Name 8 details PQQs request from potential suppliers
1. Company details
2. Trading history
3. Financial information
4. Quality standards
5. Insurance
6. Health and safety policies
7. References
8. Ethical policies and environmental policies
55
Code of ethics
A document detailing acceptable behaviour within an organisation
56
ESG
Environmental, social and governance - a measurable sustainability assessment, similar to CSR but more measurable. Financial performance remains key and so can create a sustainable credit rating for the organisation and investors
57
Name 12 pieces of information that may be requested at PQQ
1. General information
2.Registration numbers
3. Licences or required trade organisations
4. Persons of significant control
5. Offences committed and action taken as a result
6. Financial standing
7. Relevant experience
8. Insurance cover
9. health and safety
10. Data protection / data security
11. Equality, diversity & human rights
12. Environmental controls
58
Name a model procurement professionals can use to evaluate potential suppliers
Carter's 10 Cs
59
Name Carter's 10 C's
1. Competency
2. Capacity
3. Consistency
4. Control of process
5. Cost
6. Commitment to quality
7. Cash
8. Clean
9. Culture
10. Communication
60
Name 10 things that should be considered when reviewing a potential supplier's ethical policy
1. Modern slavery
2. Human trafficking
3. Working conditions
4. Discrimination
5. Equality
6. Fair pay
7. Bribery
8. Corruption
9. Environmental awareness
10. Sustainability awareness
61
Fit for purpose
The product or service is capable of doing what it was designed to do
62
Name 8 areas where reputation is important
1. Association
2. Quality
3. Sustainability
4. Ethics
5. Delivery
6. Fit for purpose
7. Supplier relationships
8. Contract management
63
What is benchmarking
The process of comparing a function, process, performance or price to that of another, which is best in class
64
Name 2 types of benchmarking
1. Internal
2. External
65
Name the 4 categories internal benchmarking can be broken down in to
1. Departmental
2. Product
3. Team
4. location
66
Name the 3 categories external benchmarking can be broken down in to
1. Competitive
2. Functional
3. Generic
67
What does internal benchmarking involve?
Comparing performance, processes or procedures within an organisation
68
What does external benchmarking involve?
Comparing performance, processes or procedures to those of an external organisation such as a competitor
69
What type of benchmarking is benchmarking prices for procurement?
external
70
Name 8 factor the style of relationship is based on?
1. Product/service being procured
2. How often it is required
3. Level of trust
4. Methods of communication
5. Personalities of the individuals involved
6. Cultures of the organisations involved
7. Length of the relationship
8. Amount of competition in the marketplace
71
CIPS Relationship Spectrum
A model positioning different relationships from 'adversarial' and 'transactional' through to 'collaborative' and 'co-destiny'
72
Name the 11 relationship styles in the CIPS relationship spectrum
1. Adversarial
2. Arms length
3. Transactional
4. Moderate
5. Bespoke
6. Single source
7. Outsourced
8. Strategic
9. Collaborative
10. Partnership
11. Co-destiny
73
Name 5 considerations for the level of commitment to the relationship from both the buyer and supplier
1. Trust
2. Transparency
3. Information sharing
4. Risk management and mitigation
5. Communication
74
Name the 4 sections of Steele & Court's Supplier Preferencing Matrix
1. Nuisance - Low value, low attractiveness
2. Exploitable - High value, low attractiveness
3. Development - Low value, high attractiveness
4. Core - High value, high attractiveness
75
Supplier scorecard
A way to evaluate suppliers against a set criteria
76
Whole life costs
An estimate used to help buyers determine the end-to-end cost of providing a service, manufacturing or procuring a product. Also commonly referred to as total cost of ownership (TCO), or total life-cycle costs (LCC). the use of the terms vary dependent on industry and sector
77
Name 7 features of a whole life cost
1. The price
2. The delivery
3. Installation costs
4. After-sales service
5. Training and support
6. Decommissioning
7. Disposal or recycling costs
78
Lead Time
The time between placing an order with a supplier and receipt of the goods
79
Tangible
An item or product which you are able to touch, feel and importantly measure
80
Intangible
Something you cannot physically see or touch
81
Supply chain
A channel of goods distribution, which starts with the supplier of raw materials or components, moves through an operational process to the distributor and retailer, and finally to the consumer
82
Supplier relationship management (SRM)
Holistic management of relationship formed between buyers and suppliers based on the criticality of the goods or services being procured
83
Supply chain management (SCM)
Management of the flow of goods, services and suppliers from raw materials to the consumption by the consumer, requiring a network of suppliers that link the supply chain together
84
What 4 things do the stores or warehouse departments need to know if the contract is awarded for a tangible need
1. Prepare for the arrival of the goods
2. Workers will need to allocate space for the products
3. Be advised when to expect deliveries
4. Understand the specifications so that they can carry out quality check accurately
85
When are KPIs agreed
During the post-contract award negotiation
86
Name the 5 steps that CIPS use to define continuous improvement
1. Map the process workflows and identify any opportunities for improvement
2. Plan how the existing processes can be modified for improvement
3. Action - allocate the required resources and implement the changes
4. Review the implemented changes
5. Identify and amend any relevant areas for improvement, and return to step 1 (Map)
87
What kind of relationship do strategic products and services demand
A more collaborative style because of the complexity and risk associated with them
88
Name 4 criteria that the relationship between buyers and suppliers depends on
1. Type of product/service supplied
2. Length of contract
3. Stage of contract
4. The competitiveness of the marketplace
89
What is the Kraljic matrix used for
Managing supplier relationships
90
Name the 4 types of supplier according to the Kraljic matric and the type of management they may need
1. Strategic - managed closely
2. Botteneck - managed relatively closely
3. Routine - little management
4. Leverage - take time to build a relationship
91
Name the 3 types of procurements/buys
1. New purchase
2. Straight rebuy
3. Modified rebuy
92
What parts of the cips procurement cycle do new purchases and straight re-buys need?
new purchases - all
straight rebuy - does not require all stages of the cycle
93
Name 7 things that could be changed in a modified rebuy
1. The specification
2. The price
3. The quantity
4. The delivery
5. The supplier
6. The quality
7. The contractual terms
94
Coercion
The act of forcing a person or organisation to do something through threatening behaviour
95
Name 4 things policies may be based on
1. Regulation
2. Legislation
3. Organisational objectives
4. Standards
96
Name 7 benefits of using structured procurement policies, processes and procedures
1. Protects individuals within the organisation from being exposed to coercion
2. Helps to promote ethical behaviour
3. Can protect an organisation from breaches of regs
4. Ensures organisations have a back-up supplier, contingency plan or substitute product available
5. Enhance efficiency
6. Can be used as a training referencw
7. Aid organisations in audits or applications for accredited status
97
Sector
A classification given to an area of industry, society or the economy to distinguish it from other areas
98
Name 5 limitations of using structured procurement policies, processes and procedures
1. They may become outdated quickly
2. Old documents may be used instead of new ones
3. They dont have to be documented
4. Just because someone have procedures it doesnt mean that they understand them
5. Processes may be too limited and hold organisations back from suggestions for better ways of working
99
Name 3 key factors the private and third sector depend on
1. Their organisational objectives and purpose
2. How they are funded
3. Their policies regarding profits
100
Whats the objectives of the public sector
Provide the general public with services
101
Whats the objective of the private sector
provide goods and services, make a profit
102
Whats the objective of the third sector
Promote and support social, environmental and cultural objectives
103
Public sector
A sector of the economy that is owned, financed and run by the government or state owned enterprises
104
Private sector
A sector of the economy that is owned, financed and run by private individuals
105
Third or not-for-profit sector
The term usually used for charities, NGOs and not-for-profit organisations
106
Charity
A not-for-profit organisation with the objective of raising awareness or helping its chosen cause
