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L4M4 - Ethical and Responsible Sourcing > Chapter 1.1 - Identify the sourcing (pre-contract stages 1-8 in the CIPS Procurement Cycle) process in relation to procurement > Flashcards

Chapter 1.1 - Identify the sourcing (pre-contract stages 1-8 in the CIPS Procurement Cycle) process in relation to procurement Flashcards

1
Q

Define sourcing

A

The ‘location, acquisition and management of all the vital inputs required for an organisation to operate. This includes raw materials, component parts, products, labour in all its forms, location and services’

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2
Q

Define tactical / operational sourcing

A

Low-level sourcing for low risk or routine items

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3
Q

Define strategic sourcing

A

High-level sourcing for core products or services

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4
Q

Name 4 attributes to tactical/operational sourcing

A
  1. Low-level decision-marking
  2. High-profit, low-risk items
  3. Short-term projects
  4. Transactional relationships
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5
Q

Name 4 attributes to strategic sourcing

A
  1. Top-level decision making
  2. High-profit, high-risk items
  3. Long-term projects
  4. Collaborative relationships
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6
Q

Name 6 attributes to value for money

A
  1. Price
  2. Delivery
  3. Quality
  4. Ethics
  5. Sustainability
  6. Availability
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7
Q

Define lead time

A

The amount of time from placing the order to the goods/services being delivered

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8
Q

Define fit for purpose

A

The products or service is capable of doing what it was designed to do

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9
Q

Define specification

A

A detailed description of the products or service required

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10
Q

Define ethical codes of practise

A

A document outlining an organisations accepted behaviours and principles of working

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11
Q

Define sustainability

A

Sustainability holistically considers the governance of an organisations environmental, social and economic viability to ensure organisations exist for the long term, and the needs of the present are met without compromising the needs of future generations

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12
Q

Define new buy

A

A brand new requirement - the first time the product or service has been sourced

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13
Q

Name the 11 stages of Novack & Simco’s sourcing process

A
  1. Identify needs
  2. Define user requirements
  3. Decide whether to make or buy
  4. Identify purchase type
  5. Carry out market analysis
  6. Identify potential suppliers
  7. Pre-screen suppliers and create a shortlist
  8. Evaluate shortlisted suppliers
  9. Supplier selection
  10. Final product
  11. Evaluate supplier performance
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14
Q

Define modified rebuy

A

A product/service that has been sourced before but requires a slight change prior to being rebought

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15
Q

Define in-house

A

An activity conducted within an organisation by its own workforce

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15
Q

Define straight rebuy

A

Straightforward repurchase of an item bought previously, rather than considering an alternative

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15
Q

Name the 13 steps of the CIPS procurement cycle

A
  1. Define business need & develop specification
  2. Market analysis & make or buy decision
  3. Develop the strategy and plan
  4. Pre-procurement market testing
  5. Develop documentation & detailed specification
  6. Supplier selection to participate in tender
  7. Issue tender documents
  8. Bid and tender evaluation and validation
  9. Contract award and implementation
  10. Warehouse, logistics and repeat
  11. Contract performance and improvement
  12. Supplier relationship management
  13. Asset management
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16
Q

Define outsourcing

A

Contracting an external supplier to manage and run a function that was previously handled in-house

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17
Q

Name 6 reasons why outsourcing may be a preferred option for a procurement organisation

A
  1. Financial
  2. Technological
  3. Resource
  4. Skillset
  5. Improved focus
  6. Reduce risk
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18
Q

Define core activities

A

Activities that are key to an organisations success

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19
Q

Define assets

A

Items of value owned by an organisation, which can be used to meet debts

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20
Q

Define economies of scale

A

Cost savings made as a result of increased levels of production, alternatively the financial benefit gained from purchasing more units of an item resulting in lower unit costs

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21
Q

Define logistics

A

The movement of something from one place to another

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22
Q

What is the make or buy decision

A

Whether to manufacture a product or provide a service in house, or to source it from an external supplier

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23
Q

Name 4 factors to consider during a make or buy debate

A
  1. Product or service - if it is core to the organisation, the decisions should be to keep control in-house
  2. The organisations current position
  3. The current market situation
  4. The amount of competition
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24
Q

What model can help you to understand the levels of competition and may help inform the make or buy decision?

A

Porters 5 forces

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25
Q

Name porters 5 forces?

A
  1. Rivalry among existing competitors
  2. Threat of new entrants
  3. Bargaining power of suppliers
  4. Bargaining power of buyers
  5. Threat of substitutes
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26
Q

Is porters 5 forces micro or macro?

A

Micro

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27
Q

Name 9 reasons why you may make instead of buy a product

A
  1. Strategy of the organisation is to be self-sufficient
  2. Enhanced control over processes
  3. Improved quality control
  4. Workforce remains stable
  5. Continuity of supply
  6. No suitable ‘buy’ suppliers
  7. Economies of scale available
  8. Reduced risk
  9. Easier to amend volumes/specification
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28
Q

Name 9 reasons why you may buy instead of make a product

A
  1. Specialised knowledge available
  2. Technological advancements available
  3. Small volumes are not cost effective for ‘make’
  4. Cheaper to buy in than manufacture/deliver
  5. ‘Make’ organisation does not have the machinery required
  6. Economies of scale available
  7. No capacity in-house
  8. Less inventory
  9. Reduced overheads
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29
Q

Define stakeholder

A

An individual or organisation with either an interest or an influence in (however slight) or who will be affected in any way by, the decisions and/or actions of a project, product, service or venture

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30
Q

What model can remind you of external factors that can affect the market?

A

STEEPLE

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31
Q

What does STEEPLE stand for?

A

Social
Technological
Economic
Environmental
Political
Legislative
Ethical
Demographics

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32
Q

What kind of model is STEEPLE?

A

Macro

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33
Q

Who should be consulted before any make or buy decision?

A

Stakeholders

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34
Q

Intracompany trading

A

Business conducted within a company, i.e. betweem two departments or locations

35
Q

Centralised procurement

A

A structure where procurement for the whole organisation is carried out by a centralised function often from one centralised location

36
Q

Decentralised procurement

A

A purchasing structure whereby individual locations are responsible for their buying activity

37
Q

CLAN network

A

Centre Led Action Network where policy is determined by the centre but applied in the regions

38
Q

SCAN network

A

Strategically Controlled Action network where the centre sets strategy and has some control in local markets

39
Q

Distributed network

A

A structure where there is no defined centre and organisations have more of a virtual organisation

40
Q

Raw materials

A

The base material from which a product is made, e.g. steel

41
Q

Components

A

A part that makes up a product

42
Q

Mark-up

A

The amount of profit expressed as a percentage of cost

43
Q

Profit margin

A

The amount of profit made on a sale

44
Q

Inter-trading

A

Trading between companies that are owned by different entities

45
Q

What is transfer pricing?

A

Transfer prices are the amounts of money payable between divisions of the same organisation that have conducted business with each other

46
Q

Why is transfer pricing audited closely?

A

To ensure that there is no dishonest activity occuring within an organisation, such as tax evasion

47
Q

What is the objective of transfer pricing arrangements?

A

To reduce the burden of taxes payable on profits that are generated

48
Q

What is the aim of transfer pricing arrangements?

A

For organisations to push the profits that they make into the global areas where tax rates are most favourable to them

49
Q

What is the benefit of transfer pricing?

A

They have encouraged and promoted global trading within organisations, which has contributed towards economic growth in many areas

50
Q

What does OECD stand for?

A

Organisation for Economic Cooperation and Development

51
Q

What does the OECD do?

A

They regulate international tax laws

52
Q

Name 5 advantages of transfer pricing

A
  1. Global tax bills can be reduced
  2. Simplifies internal accounting procedures
  3. Entire organisation can have fixed pricing on products/services
  4. Divisions can be easily evaluated based on spend
  5. No physical money needs to be transferred between divisions
53
Q

Name 5 disadvantages of transfer pricing

A
  1. Some countries economies can be negatively effected
  2. Careful and strict monitoring is required to avoid tax evasion
  3. Sourcing locally may be more cost effective
  4. Negative effect on local economy
  5. Inter-organisational competition
54
Q

Name 5 costs associated with sourcing

A
  1. Procurement professionals salary
  2. Resources, such as computers and telephones
  3. Training
  4. Development of policies and procedures
  5. Time
55
Q

Kraljic Matrix

A

Strategic tool to help managers recognise the weaknesses of their organisation and form strategies to guard against disruption of suppliers

56
Q

Routine/non-critical

A

Goods or services which have a low supply risk for the buyer and a low level of buyer spend

57
Q

Leverage

A

To use the market to one’s best advantage

58
Q

What is the Kraljic matrix used for?

A

To identify where a product or service sits in relation to the impact it has on the organisations profit and the level of supply risk it poses to the organisation

59
Q

Name the 4 categories of the kralijc matrix

A
  1. Routine or non-critical
  2. Leverage
  3. Strategic
  4. Bottleneck
60
Q

Describe routine/non-critical along with the procurement style and relationship

A

Low profit impact, low supply risk
Tactical
Arms-length

61
Q

Describe leverage along with the procurement style and relationship

A

High profit impact, low supply risk
Tactical
Transactional

62
Q

Describe strategic along with the procurement style and relationship

A

High profit impact, high supply risk
strategic
collaborative

63
Q

Describe bottleneck along with the procurement style and relationship

A

Low profit impact, high supply risk
tactical
moderate

64
Q

Name 4 costs of outsourcing

A
  1. procurement involvement to establish whether outsourcing is a practical option
  2. Procurement involvement in evaluating, selecting and awarding the contract to suppliers
  3. Management of outsourced contract i.e. performance levels and quality
  4. Outsourced contract managers to oversee the performance and remove the responsibility from procurement
65
Q

Name 4 key benefits of outsourcing

A
  1. Increased expertise
  2. Core activity focus
  3. Potential reduction in risk
  4. Lower operating costs
66
Q

Low cost countries

A

Countries that have a slow-growing economy and where rates of pay are significantly lower than in countries with more affluent economies

67
Q

Name 4 benefits linked to market development through the growth of outsourcing

A
  1. Cost saving to the developed country
  2. Ability to further grow organisations due to non-core functions being outsourced
  3. Increased employment in developing countries and enhanced connectivity
  4. Ethical and sustainable behaviour promoted in developing countries
68
Q

Connectivity

A

Global connectivity as a result of the development of international telecommunication networks

69
Q

Is outsourcing core functions recommended?

A

No

70
Q

Name the 4 sections of the outsourcing decision matrix?

A
  1. Strategic alliance
  2. Retain in-house
  3. Eliminate function or task
  4. Outsource
71
Q

Outsourcing

A

Taking a non-core operation/process/function that the procurement organisation has previously undertaken itself and using a supplier under contract to deliver this instead

72
Q

Insource

A

To bring a function of activity back in-house after previously being outsourced

73
Q

Name the 4 outcomes when using the outsourcing decision matrix

A
  1. Eliminate
  2. Form a strategic alliance
  3. Retain
  4. Outsource
74
Q

Offshored

A

The relocation of business or processes, for example, a customer service call centre or the manufacturing of a product, to a country where the costs of production are lower. usually this country will be located overseas

75
Q

Reshored

A

To bring a function of activity back within the organisations national boundaries while still leaving the supply with a third party

76
Q

Onshored

A

Moving the supply of goods or services back from overseas and close to the organisations home market without any import risks

77
Q

Name 7 functions that are frequently outsourced

A
  1. IT support
  2. Catering
  3. Cleaning
  4. Marketing
  5. Social media
  6. Human resources
  7. Accountancy & payroll
78
Q

When can insourcing only occur?

A

When an activity or function has previously been outsourced

79
Q

Non-disclosure agreement (NDA)

A

Sometimes known as a confidentiality agreement (CA), this signed document is a legal agreement that information received will not be shared and remains the property of the originator

80
Q

Intellectual Property

A

An intangible asset, such as a process created through human intellect; such assets may be protected by trademarks, copyright or patents

81
Q

Prototype

A

A sample or model if an idea or concept

82
Q

Patent

A

A way of protecting intellectual property, excluding other parties from using, marketing or making products that relate to it

83
Q

Name 10 potential risks of outsourcing

A
  1. Loss of control
  2. Supplier resilience
  3. Confidentiality
  4. Quality
  5. Intellectual property
  6. Reputation
  7. Loss of technology, innovation & expertise
  8. Inflexibility
  9. Cultural, language and time zone differences
  10. Single source
84
Q

TUPE

A

TUPE stands for Transfer of Undertakings (Protection of Employment). TUPE regulations protect the rights of the employees where work they were employed to undertake is transferred to a new business

85
Q

Name the 2 main advantages of the TUPE regulations

A
  1. Continuity of supply for the buying organisation
  2. Continuity of employment for the workers
86
Q

International Labour Organisation (ILO)

A

A UN agency specialising in international labour activities

87
Q

Fairtrade foundation

A

An international charity which attempts to get a fair deal for farmers and workers in developing countries

L4M4 - Ethical and Responsible Sourcing (12 decks)

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