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L4M4 - Ethical and Responsible Sourcing > Chapter 1.3 - Define the options and trade-offs when sourcing requirements from external suppliers > Flashcards

Chapter 1.3 - Define the options and trade-offs when sourcing requirements from external suppliers Flashcards

1
Q

Supplier prequalification

A

An early process within procurement to find out if potential suppliers meet the buying organisations criteria on capability, capacity and financial stability

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2
Q

Supplier Appraisal

A

A process of evaluating a suppliers ability to carry out a contract in terms of quality, delivery, price & other contributing factors

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3
Q

Name 6 techniques used to prepare a list of potential suppliers

A
  1. Previous knowledge
  2. Recommendations
  3. Internet research
  4. Market publications
  5. Trade shows
  6. Networking
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4
Q

Pre-qualification questionnaire (PQQ)

A

A document sent to potential suppliers to find out their suitability to be included in the procurement process

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5
Q

Name 7 details PQQs may request

A
  1. Quality assurance
  2. Labour standards
  3. Environmental awareness and sustainability
  4. Financial capabilities
  5. Technical capabilities
  6. Credit rating scores
  7. Systems capability
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6
Q

What is a useful tool when defining award criteria?

A

Carters 10 C’s

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7
Q

What are carters 10 C’s

A
  1. Competency
  2. Capacity
  3. Commitment to quality
  4. Control of process
  5. Cash
  6. Cost
  7. Consistency of delivery
  8. Culture
  9. Clean
  10. Communication
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8
Q

Quality assurance (QA)

A

Systematic processes and activities that together have the effect of preventing mistakes in the manufacture of a product or delivery of a service

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9
Q

ISO 9001

A

An international standard for quality management

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10
Q

Name the 2 types of specification

A
  1. Performance (output or outcome focused)
  2. Confirmance
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11
Q

What is a performance specification

A

States what the product or service should do but does not give instructions on how this has to be achieved

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12
Q

What is a conformance specification

A

More structured and details exactly how the product or service must be made

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13
Q

Continuous improvement

A

An ongoing effort to improve products, processes and services

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14
Q

Total quality management (TQM)

A

Organisation-wide efforts, across all departments within an organisation to improve processes, products and services

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15
Q

What is continuous improvement sometimes known as

A

Kaizen

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16
Q

Name the 5 steps CIPS use to define continuous improvement

A
  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
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17
Q

Define waste

A

Anything that does not add value during a process

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18
Q

Name the 8 wastes of lean

A
  1. Motion
  2. Inventory
  3. Over-production
  4. Waiting
  5. Defects
  6. Over-processing
  7. Transportation
  8. Skills
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19
Q

Name a useful acronym to recall the 8 wastes of lean

A

TIM WOODS

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20
Q

Consumer

A

The end user of a product or service

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21
Q

Name the 5 aspects of total quality management

A
  1. Focus on consumer
  2. Continuous improvement
  3. Quality improvement
  4. Accurate evaluation
  5. Involve all employees
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22
Q

Environmental, social and governance (ESG)

A

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

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23
Q

Corporate social responsibility (CSR)

A

An organisational sustainability framework to embed into strategy and operations and supply chains to have a positive global impact

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24
Q

Due dilligence

A

The process of ensuring a prospective supplier is who they claim to be and is capable of delivering the services to the standard required. Due dilligence tasks include financial checks, reference checks and ensuring the legal set-up of their organisation is correct

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25
Q

Modern slavery

A

The ‘ownership’ and exploitation of humans in a workplace

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26
Q

Child labour

A

The use of children to undertake work or other activities which can be illegal / exploitative

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27
Q

Samples

A

A small part of, or examples of, the product that is potentially being supplied

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28
Q

Credit check

A

A process to evaluate an organisation to determine ts financial stability

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29
Q

Invitation to tender (ITT)

A

A formal invitation sent to suppliers inviting them to make an offer to supply goods or services

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30
Q

Request for quotation (RFQ)

A

An invitation to suppliers to bid on specific products or services

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31
Q

Breach of contract

A

A situation where one party fails to deliver against the agreement made

32
Q

Name 8 impacts an organisation could face if it does not conduct the pre-qualification or appraisal process

A
  1. Poor quality
  2. Environmental damage
  3. Failed delivery
  4. Stakeholder dissatisfaction
  5. Breach of contract
  6. Financial concerns
  7. Ethical concerns
  8. Reputational damage
33
Q

Name 3 implications of selecting the wrong supplier

A
  1. If its not fit for purpose it could lead to dissatisfaction
  2. If poor quality it may mean faulty products are produced
  3. The above could also have significant implications on an organisations reputation
34
Q

How may organisations resolve a breach of contract

A

Look at dispute resolution methods

35
Q

Name 3 ESG implications

A
  1. Environmental concerns
  2. Social concerns
  3. Governance concerns
36
Q

Do financial checks form part of due dilligence?

A

Yes

37
Q

Cash flow

A

The amount of money going into and out of a business

38
Q

What may happen if a supplier has financial issues?

A

There may be a delay in delivering products or services to the customer or even a failure to supply

39
Q

Lease

A

A legal commitment with terms and conditions allowing the lessor (who owns the asset) to charge ‘rental’ fees to a lessee (who will be able to use the asset). The terms and conditions will detail the responsibilities for maintenance, insurance and end-of-contract rights and responsibilities

40
Q

Service level agreements

A

Document outlining the expected minimum level of service between a service provider and a client. It clarifies the scope of the service, responsibilities if each party and how to escalate among other factors. A service level agreement is legally enforceable if it is referred to in a contract

41
Q

STEEPLED model

A

An acronym to help remember the eight external factors that affect an organisation or market

42
Q

What will procurement professionals consistently monitor performance against?

A

KPIs or SLAs

43
Q

Name 4 documents procurement professional can view when carrying out their own independent financial reviews

A
  1. Profit and loss account/income statement
  2. Balance sheet
  3. Cash flow statement
  4. Chairmans statement
44
Q

Revenues

A

Income to an organisation

45
Q

What does a profit and loss account do?

A

Summarises the revenues, costs and expenses that have been incurred within a financial period

46
Q

What is the main objective of organisations within the private sector?

A

To generate a profit

47
Q

Name the basic formula on which the outcome of a profit and loss account is created

A

Gross profit = total revenue - cost of sales

48
Q

Total revenue

A

The total amount of income received

49
Q

Cost of sales

A

The amount leaving the organisation to pay for goods/services that have been provided

50
Q

Gross profit

A

The total amount of profit before taxes and other deductions

51
Q

Total operating expenses

A

Costs associated with salaries, overheads and depreciation

52
Q

Interest

A

Any money leaving the organisation in relation to creditor loans

53
Q

Net profit

A

The amount of profit made after expenses

54
Q

Number of shares

A

The number of shares the organisation has

55
Q

Earning per share

A

The amount of money each share has earned in the financial period

56
Q

Shareholder equity

A

The owners of the organisations residual claim once all debts have been paid

57
Q

What does a balance sheet give information on?

A

An organisations financial position at a particular point in time

58
Q

What is the purpose of a balance sheet?

A

To show assets, liabilities and shareholder equity or shareholder funds

59
Q

What is the formula for shareholder equity?

A

The total amount of assets - the amount of liabilities = the shareholders equity

60
Q

What details do cash flow statements contain?

A

Details about the amount of money that came into and went out of an organisation during its accounting period

61
Q

What is the aim of a cash flow statement?

A

To assess how well am organisation is managing its cash in relation to paying its creditors and funding new investments, such as fixed assets

62
Q

What do cash flow statements log?

A

Cash coming in and leaving an organisation from three different activities

63
Q

Name the 3 cash flow activities

A
  1. Operating activities
  2. Investing activities
  3. Financing activities
64
Q

Name 4 examples of operating activities

A
  1. Cost of materials
  2. Sales of goods and services
  3. Payment of salaries
  4. Payment of taxes
65
Q

Name 2 examples of investing activities

A
  1. Interest received
  2. Payment of loans
66
Q

Name 1 example of a financing activity

A

Payments to shareholders

67
Q

What does a procurement professional use a cash flow statement for?

A

To determine whether a potential or existing supplier has enough cash coming in to be able to pay its expenses as well as to assess the long term strength of the organisation

68
Q

Profitability

A

The organisations revenues minus its total costs

69
Q

Liquidity

A

A solvency measure to determine whether an organisation is able to meet its liabilities (short-term debts) when they come due from net current assets

70
Q

Gearing

A

A measure of how the business is being funded, based on its ratio of debts to equity, quality of debt or cost of debt

71
Q

Return of investment (ROI)

A

A measure of profitability that indicates whether a gain or loss has been generated compared with the initial cost

72
Q

Name 5 reasons why it is important to understand whether a potential supplier is making a profit for several reasons

A
  1. If an organisation is generating a profit, this shows that all of its costs have been covered
  2. Shareholders desire a return on their investment and if an organisation is making a profit they will get one
  3. if an organisation makes a profit, it can return money to the business to protect its longevity
  4. Without profit, a supplier may not be able to trade in the long-term
  5. A lack of profit could result in a lower-quality product being supplied
73
Q

What do profitability ratios measure?

A

The extent to which an organisation has traded profitability over a period of time

74
Q

What do liquidity ratios calculate?

A

If an organisation has sufficient assets to meet its liabilities

75
Q

What do gearing ratios measure?

A

The cost and quality of the proportion of an organisations borrowing against its equity

L4M4 - Ethical and Responsible Sourcing (12 decks)

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