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L4M4 - Ethical and Responsible Sourcing > Chapter 2.1 - Analyse commonly used sources of information on market data that can impact on the sourcing of requirements from external suppliers > Flashcards

Chapter 2.1 - Analyse commonly used sources of information on market data that can impact on the sourcing of requirements from external suppliers Flashcards

1
Q

Pareto principle

A

The theory that 80% of outcomes result from 20% of inputs, for example, 80% of sales are the top 20% of customers; 80% of spend on inventory is accounted for by the top 20% stock items. The Pareto Principle is also known as the 80/20 rule

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2
Q

ABC analysis

A

A simplistic segmentation approach based loosely on Pareto analysis. ABC analysis can be used to break down an organisations total external spend based on value so its resources are used to manage these expenditures and prioritised accordingly

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3
Q

Explain ABC categories of the ABC analysis

A

A -represent 20% of total spend (suppliers responsible for the highest level of spend)
B - suppliers collectively responsible for a smaller percentage of spend
C - suppliers responsible for the smallest amount of spend

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4
Q

CIPS relationship spectrum

A

A model positioning different relationships from ‘adversarial’ and ‘transactional’ through to ‘collaborative’ and ‘co-destiny’

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5
Q

Name the 11 parts of the CIPS relationship spectrum

A
  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
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6
Q

Name 6 considerations for the level of commitment to the relationship from both buyer and the supplier

A
  1. Trust
  2. Transparency
  3. Information sharing
  4. Risk management
  5. Mitigation
  6. Communication
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7
Q

Name the style of relationship for each part of the ABC analysis

A

A - Strategic
B - Moderate
C - Transactional

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8
Q

Kraljic Matrix

A

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

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9
Q

What does the ABC analysis help a procurement professional do?

A

Break down complex data into three segments, which are then easier to understand and manage

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10
Q

Tangible

A

An item or product which you are able to touch, feel and importantly measure

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11
Q

Economy

A

The state of a region, country or the world in relation to its production and consumption of goods and services

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12
Q

Indices

A

An index or indices are recognised factors that are intended to reflect the movement of a broad and hyothetical collection of products. Examples include the US stock market NASDAQ, or the Retail Price Index or Consumer Price Index

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13
Q

Stock markets

A

A place where public limited companies’ stocks and shares are traded (bought and sold)

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14
Q

FTSE 100

A

The United Kingdom’s stock exchange

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15
Q

NASDAQ

A

North American National Stock Exchange

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16
Q

SENSEX

A

India’s stock exchange

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17
Q

Name 7 examples of an indices

A
  1. Stock markets
  2. Gross domestic product (GDP)
  3. Producer price index (PPI)
  4. Consumer Price Index (CPI)
  5. Commodity indices
  6. Small business lending index (SBLI)
  7. CIPS Procurement managers index
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18
Q

What do the stock markets measure

A

The value of public limited companies’ stocks and shares

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19
Q

What does GDP measure?

A

The monetary value of the goods and services manufactured or supplied in a financial period

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20
Q

What does PPI measure?

A

Average changes in prices that a producer receives in return for its goods or services

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21
Q

What does CPI measure

A

A weighted measurement that evaluates the average cost of a ‘basket’ of gods bought by a consumer

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22
Q

What do commodity indices measure?

A

The value of a particular commodity at a point in time

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23
Q

What does SBLI measure?

A

An indicator of small business lending trends

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24
Q

What does the CIPS procurement managers index measure?

A

A highly accurate set of facts about current industry conditions in manufacturing, construction and services

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25
Q

How can you review the economy using indices?

A

Procurement professionals can gain an insight into how profitable a supplier may be and whether supply is plentiful

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26
Q

Commodity pricing

A

The market average price charged for a product

27
Q

Name the 5 categories of commodities traded on a stock exchange

A
  1. Energy
  2. Agricultural
  3. Metals
  4. Livestock
  5. Environmental credits
28
Q

How are commodity prices tracked?

A

They are tracked individually for comparison on a daily, weekly, monthly and annual basis although prices in the market are updated every few seconds

29
Q

Fixed-price contract

A

A contract where the price remains the same for the agreed period

30
Q

Name 8 examples of a commodity

A
  1. Oil
  2. Natural gas
  3. Wheat
  4. Cotton
  5. Cocoa
  6. Steel
  7. Gold
  8. Live cattle
31
Q

Monopoly

A

A situation where one supplier has the entire market share and there is no competition

32
Q

Market share

A

The portion or percentage of a market owned or controlled by a supplier or product

33
Q

Hedge

A

A technique of taking a position either in current stock or future stock to offset potential losses should the price move. A hedge will have a cost of trading and may involve the use of technical financial contracts

34
Q

Name 10 factors that can affect commodity pricing

A
  1. Supply, demand and volatility
  2. Currency fluctuation
  3. Political situation
  4. Overarching risk appetite
  5. Conflict
  6. Force majeure
  7. Severe or unreasonable weather conditions
  8. Prices of competitors
  9. Prices of substitutes
  10. Speculation
35
Q

Name 4 things experts attempts to forecast prices based on

A
  1. Historical data
  2. Supply and demand
  3. The state of the economy
  4. Global events
36
Q

Futures exchange

A

A marketplace where the seller of a commodity agrees to sell or buy a certain amount of the commodity to a buyer at a particular price on a specific date in the future

37
Q

Name 4 examples of futures exchange

A
  1. LME - London Metal Exchange
  2. NASDAQ - National Association of Securities Dealers Automated Quotation
  3. CME - Chicago Mercantile Exchange
  4. ICE - Intercontinental exchange
38
Q

How does futures exchange data help procurement professionals?

A

It means they can forecast the likely price of a commodity in the future. They can make decisions accordingly to achieve the best value for money for their organisation

39
Q

Primary data

A

Data that comes directly from the source and constitutes new data for a specific purpose

40
Q

Name 4 ways primary data can be collected

A
  1. Direct communication
  2. Networking
  3. Specifically-commissioned market research
  4. Trade fairs and exhibitions
41
Q

Name 7 pieces of information that can be gained from sources of primary data

A
  1. Product availability
  2. Pricing strategies
  3. Trends and forecasts
  4. Contact details
    5.Company strategy
  5. Organisational pressures
  6. Personal opinions and views
42
Q

Secondary data

A

Data that has been collected previously and will be used for a new specific requirement that is different to the reason it was collected for

43
Q

Demographics

A

Data relating to trends within the population

44
Q

Name 9 places that you can collect secondary data from?

A
  1. Economic indices
  2. Supplier websites
  3. Financial journals
  4. Professional magazines
  5. Published surveys
  6. Professional bodies
  7. Third party comparison websites
  8. Published price-lists
  9. Organisations promoting trade
45
Q

How can primary data be distorted?

A

Researcher bias

46
Q

How can secondary data be distorted

A

By going through more channels before reaching the procurement professional

47
Q

Why should you use both primary and secondary data together

A

To act as a form of safeguarding to establish data that is both current and accurate

48
Q

Name 6 signs that indicate financial instability

A
  1. Reduced levels of quality and performance
  2. High customer churn
  3. A change of bank
  4. Rumours
  5. Requested payment before the agreed due date
49
Q

Customer churn

A

The turnover of customers

50
Q

Staff churn

A

The turnover of employees in an organisation

51
Q

Financial statements

A

A company’s formal financial statements are their published year end accounts - in most countries it is a legal requirement for companies to publish these statements soon after their year end accounting date

52
Q

Name 3 documents that financial statements usually contain

A
  1. Income statement / profit and loss account
  2. Balance sheet
  3. Cash flow statement
53
Q

Name 3 ways that a procurement professionals financial analysis can be limited

A
  1. The figures are historic so they cant give an up to date and accurate conclusion for future supplier viability
  2. If the economy strengthens or weakens over the duration of the contract then the results from any ratios may be incorrect due to fluctuations in inflation, interest or exchange rates
  3. The supplier may have undergone recent operational changes. The results from any significant recent changes would not show in historical data and therefore any analysis could give an incorrect picture of the current situation
54
Q

What do credit agencies assess?

A

The financial stability of an organisation

55
Q

Name 6 places credit rating agencies get their data?

A
  1. Banks and other financial institutions
  2. Lenders
  3. Creditors
  4. Public information
  5. Financial reports
  6. Court judgements for debt
56
Q

Weighted score

A

A score calculated by using a scoring system that emphasises the areas with the highest level of importance

57
Q

Name 5 potential credit score elements

A
  1. Payment history
  2. Amounts owed
  3. Credit mix
  4. New credit
  5. Length of credit history
58
Q

Are credit rating scores weighted?

A

Yes

59
Q

Cyberattack

A

A malicious act attempting to disrupt or steal information using computers

60
Q

Cybercrime

A

Crime that involves computers or networks

61
Q

Cybersecurity

A

The protection of computers and networks against cybercrime and cyberattacks

62
Q

Name 3 reasons that are not linked to poor credit why a supplier with a low score may be classified as higher risk

A
  1. They may have recently set up as a new organisation
  2. They may have no loans, including credit cards
  3. They may have no high value assets
63
Q

Name 2 clauses buyers may use to engage with a supplier with a low score

A
  1. Contract to pay the supplier in a shorter period of time than the standard terms and conditions
  2. Organisation may accept products more regularly in small quantities
64
Q

What do new styles of credit checks evaluate?

A

The potential risk a supplier and its supply chain has of being a victim of cybercrime

L4M4 - Ethical and Responsible Sourcing (12 decks)

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