Chapter 2.1 - Apply the pre-contract stages (stages 1-8) of the CIPS Procurement cycle to the practical procurement and supply environment Flashcards
1
Q
What stages of the CIPS Procurement cycle relate to pre-contract award
A
Stages 1-8
2
Q
What stages of the CIPS Procurement cycle relate to post-contract award
A
9-13
3
Q
At what point do the pre and post contract award stages come together?
A
The contract award and implementation
4
Q
Name 3 examples of needs with different economic sector classifications
A
- Public sector - may have an objective to create new buildings within a school due to population growth within an area
- private sector - may have identified a need for new automated machinery to improve process efficiency and production output.
- TSO Charity - may have identified a need to purchase branded running apparel for people running a marathon to raise finding for its cause
5
Q
Name 5 people that can establish a need
A
- Individuals noticing that a product is running low on stock
- Individuals using the last of something
- Individuals making errors and needing replacements
- Individuals working on projects and understanding future requirements
- Individuals needing to recruit personnel
6
Q
Name 4 groups of people in an organisation who can raise needs
A
- project teams that establish new requirements
- Departmental goals whose fulfilment depends on certain needs
- Organisational strategic objectives which define needs to meet the company vision
- Suppliers who outline needs in order to fulfil contractual obligations
7
Q
Name 4 stakeholders that can raise needs
A
- Consumers who change their requirements
- Community groups which request a change in the function of an organisation
- Legislation changes which generate additional needs
- Technological developments which create needs
8
Q
Requisition
A
An internal document raised by a user or a store to communicate to procurement the need to buy the product or service specified
9
Q
What should organisations do to ensure that needs that reach procurement are justified?
A
Have a process in place to evaluate whether the need is a genuine requirement
10
Q
Name a process that ensures needs are justified
A
- Individual, group or stakeholder advises the team leader/manager of the need
- Team leader/manager assesses whether the need is justified
- If need is justified team leader / manager notified procurement via a requisition using a method in accordance with organisational policy but if it is not justified the team leader takes no further action
11
Q
Name 4 advantages of expressing a need verbally
A
- Information passed quickly
- Personal
- Informal
- Exact quantity stated
12
Q
Name 5 disadvantages of expressing a need verbally
A
- Open to interpretation
- Buyer could forget
- No proof of requisition has been placed
- High risk of human error
- Procurement has to check requisition raiser has authority
13
Q
Name 4 advantages of expressing a need handwritten
A
- Contains detail for reference
- Informal
- Exact quantity stated
- No need for technology
14
Q
Name 6 disadvantages of expressing a need handwritten
A
- Risk of getting lost
- Waste of paper
- Risk of buyer forgetting to action
- Difficult to establish the generator
- Risk of human error
- Procurement has to check requisition raiser has authority
15
Q
Name 5 advantages of expressing a need via email
A
- Information sent quickly
- Can track if email has been read
- Contains full details
- Easy to establish generator
- Permanent record
16
Q
Name 5 disadvantages of expressing a need via email
A
- Impersonal
- Risk of email not being read
- Generator may not respond to emails
- Risk of human error
- Procurement has to check requisition raiser has authority
17
Q
Name 5 advantages of expressing a need automatedly
A
- Fast and efficient
- Full details included
- Pre-authorised
- Cost effective
- Low risk of human error
18
Q
Name 3 disadvantages of expressing a need automatedly
A
- Impersonal
- Larger quantity than needed requested
- High investment in technology
19
Q
Paperless
A
Organisations that function without paper and use electronic methods of communication
20
Q
Name the 4 forms a requisition can take
A
- Verbal
- Handwritten
- Automated
21
Q
Why are requisitions most commonly raised using email or automated methods?
A
They are less exposed to risk and all sectors are keen to reduce their carbon footprint and promote sustainability
22
Q
Globalisation
A
The process by which the world is becoming more interconnected, which means that events in one location are shaped by things that happen many miles away. Companies are also increasingly affected by global and long-wave economic cycles
23
Q
Centralised
A
A procurement structure where all the ordering is conducted from one central point - all requisitions flow to one office, which could be in a different town, region or country from the generator
24
Q
Name 9 things a requisition should contain?
A
- The date it is raised
- Description of what is required, including any quality requirements and specifications
- Supplier if known
- The quantity required
- When the need is required
- Where the need is required
- Why the need is required
- Who identified the need
- Who approved the need
25
Inventory
Components, raw materials, work in progress, finished goods and supplies required for the creation of goods and services for the customer. It can also refer to the number of units and/or value of the stock of goods held by a company
26
What are automated processes used to generate requisitions based on?
Materials planning requirements (MRP) system
27
What is the aim of MRP systems
To remove the human element of monitoring stock and raising requisitions
28
Name the 3 main goals of an MRP system
1. To ensure that materials/components are always available as required
2. To keep inventory as low as possible
3. To plan manufacturing, procurement and delivery schedules
29
Name 6 pieces of information used by MRP systems to generate requisitions for procurement
1. Bill of materials
2. Minimum order quantities
3. Current stock levels
4. Sales demand or planning run
5. Cycle time
6. Lead time
30
Can all sectors use STEEPLED and SWOT analysis'?
Yes
31
What 6 decisions are STEEPLED and SWOT analysis good for?
1. When is the right time to procure?
2. What quantity is most economically viable?
3. Which currency is the most favourable to buy in?
4. Should the product or service be made or bought in?
5. Should the product or service be re-sourced?
6. Should the product or service be replaced?
32
What is an onligopoly
When a market sector has a few large organisations that supply the product or service
33
What is a duopoly
Where only 2 suppliers exist in the market
34
What is perfect competition?
Where there are many suppliers offering the same products or services
35
What is monopolistic competition?
(Imperfect competition) - where there are many suppliers offering a seemingly similar product but there are significant variances in quality, brand and design
36
Name 3 features of an oligopoly
1. A few companies dominate the market
2.Pricing is controlled by a few companies
3. Very difficult to compete
37
Name 3 features of a monopoly
1. One company dominates the market
2. Pricing is controlled by one company
3. Competition is almost impossible
38
Name 3 things the supply and demand equilibrium show
1. If the demand increases and supply remains static, a shortfall occurs, and buyers can expect to see an inflated price
2. If the demand decreases and the supply remains static, a surplus occurs, and buyers can expect to see a reduced price
3. The ideal market balance is where the demand and supply are equal to each other
39
Is the price of a product or service directly related to supply and demand?
Yes
40
Just in time (JIT)
A philosophy used in manufacturing that is based on suppliers delivering goods at the point that they are needed. It aims to reduce inventory costs and reduce waste in the supply chain
41
What is a push strategy
Based on forecasting requirements
42
What is a pull strategy
Reacts to customer needs
43
What strategy do suppliers working with just in time systems usually use?
Pull
44
Name 6 features of push systems
1. Low demand variability
2. Low product personalisation
3. Better economies of scale
4. Low manufacturing variability
5. Low set up change costs
6. Lower lead times
45
Name 6 features of pull systems
1. High demand variability
2. High product personalisation
3. Low economies of scale
4. High manufacturing variability
5. High set up change costs
6. Higher lead times
46
Name the 4 ways suppliers can be segmentated
1. Integrated
2. Strategic
3. Collaborative
4. Transactional
47
What can the Ansoff matrix allow procurement professionals to do
Further analyse and test the market before placing any purchase orders in relation to generated needs
48
Name the 4 options in the Ansoff matrix
1. Market penetration strategy
2. product development strategy
3. Market development strategy
4. Diversification strategy
49
Name how the 4 options in the Ansoff matrix are linked to decisions organisations can make to grow their business
1. Market penetration - lowest level of risk, based on increasing sales of a current product within a known market
2. Product development - an element of risk, based on introducing a new product to the current customer base
3. Market development - based on trying to introduce an existing product into a new market or t a different type of customer
4. Diversification - highest level of risk, based on introducing a new product into a new market
50
Early supplier involvement (ESI)
The involvement of a supplier in the product development process from a very early stage in order to use the supplier's experience and expertise
51
Collaborative
Working together for mutual benefit
52
Economies of scale
Cost savings are made as a result of increased levels of production, alternatively the financial benefit gain from purchasing more units of an item resulting in lower unit costs
53
Name 9 product aspects that procurement professionals can gain information on through ESI
1. technical advice
2. Cycle times
3. Lead times
4. Cost of production
5. Quality
6. Potential problems
7. Risk
8. Supply chain
9. Life cycle
54
Name 9 advantages of ESI
1. Reduces cost for buying organisation
2. Improves specification
3. Enhances quality
4. Access to technology
5. Promotes innovation
6. Availability of expert knowledge
7. Reduces development time
8. Shares risk
9. Awareness of supplier cost driver
55
Name 5 disadvantages of ESI
1. Supplier could unfairly influence buyer
2. Buyer could become reliant on supplier
3. Buyer loses control of product
4. Intellectual property risk
5. Market may become aware of the plan
56
Name 5 situations when outsourcing is an acceptable strategy
1. When the product or service is not core to the organisation
2. When the product or service is a temporary addition to workload
3. When the product or service is beyond the skills of the organisation
4. When the product or service is generating a loss for the organisation
5. When the product or service could be provided more effectively through an external provider
57
Offshoring
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
58
Name 4 features of a country that you may decide to offshore to because they can offer a lower price to produce the goods
1. Lower costs of living
2. Lower rates of pay
3. Weaker currency
4. Lower costs of overheads
59
Name 5 advantages of offshoring
1. Reduced price
2. Increase profit
3. Helping a weak economy
4. Favourable government policies
5. Access to raw materials
60
Name 5 disadvantages of offshoring
1. Loss of control
2. Risk of intellectual property
3. Ethical concerns
4. Environmental concerns
5. Loss of jobs in home country
61
Name 5 features of an ITT
1. Documents sent out to invite bids
2. Formal
3. Suppliers are often pre-evaluated
4. Used when purchasing complex products or services
5. Used when purchasing high-value products or servoces
62
Name 5 features of a RFQ
1. Documents sent out to invite quotations
2. Informal
3. Suppliers not usually pre-evaluated
4. Used when purchasing standard, regularly used products or services
5. Used when purchasing low-value products and services
63
Bid
Offer of a price, may be a response to an invitation to tender
64
Quotation
A formal statement from a supplier detailing the cost to provide goods or services. May often include other considerations such as minimum order and lead times
65
Market engagement
A process to gain advance understanding of he market prices or trends
66
Macroeconomic
The economics of a nation, industry or market
67
Name the 3 aims of the pre-procurement market testing phase
1. How best to develop the specification
2. If it is the right time to enter the marketplace or fulfil the need
3. What the cost implications and optimum contracting terms might be
68
Name the 4 stages of product life cycles
1. Introduction
2. Growth
3. Maturity
4. Decline
69
Name 9 pieces of documentation that need to be prepared
1. Specification
2. Contractual terms
3. Date for quotation / bid to be received by
4. Quantity
5. Quality standards
6. Delivery schedule
7. Delivery address
8. Key performance indicators
9. Service level agreements
70
Name 7 ways a procurement professional can identify suppliers
1. Existing relationships
2. Internet searches
3. Prior knowledge
4. Trade shows
5. Recommendation
6. Marketing material
7. Direct approaches
71
Name 7 advantages of selecting a supplier that is known to the organisation and has a relationship with the buying department
1. Existing trading relationship
2. Awareness of policies and procedures
3. Due dilligence already carried out
4. Reduced risk against the unknown
5. Knowledge of systems/technology
6. Possibility of economies of scale
7. Shared innovation
72
Name 5 disadvantages of picking a supplier who is known to the organisation
1. Reduced scope for negotiation
2. Reduced competition
3. Could be a better supplier available
4. Over-reliance
5. Reduced innovation
73
What is the advantage of using a supplier who is new to the organisation but known to the procurement professional?
The risk is reduced
74
Name 9 pieces of supplier information that you can usually find online?
1. Contact details
2. Location
3. Personnel
4. Product range
5. Quality standards
6. Internal policies
7. Service levels
8. Value and mission statements
9. Financial performance
75
Network
A process where professionals meet to exchange contacts and ideas
76
What are trade shows
Events where business professionals can network and learn about industry standards and up-and-coming technology
77
Name 4 reasons why procurement professional may attend trade shows
1. Meet contacts they have never seen face-to-face
2. Understand what products/services are coming to market
3. Discuss industry concerns with like-minded professionals
4. Meet potential new suppliers
78
Name 12 pieces of information procurement professionals should research about potential suppliers after they have been selected
1. Financial performance
2. Org structure
3. Culture
4. Ethical policy
5. CSR
6. Sustainability
7. Environmental awareness
8. Reputation
9. Quality
10. Global accreditations
11. Location
12. Technology
79
Due diligence
The process of ensuring a prospective supplier is who they claim to be and is capable of delivering the services to the required standard. Due diligence tasks include financial checks, reference checks and ensuring the legal set up of their organisation is correct
80
Statement of Financial position
A financial document showing what an organisation owes and owns
81
Liquidity
A solvency measure to determine whether an organisation is able to meet its liabilities (short-term debts) when they come from net current assets
82
Profitability
The organisation's revenues minus its total costs
83
Name 5 ways a supplier having financial difficulties could affect the buying organisation
1. Reduced quality of products/services supplied
2. Delays in product delivery
3. Shortages of deliveries
4. Price increases
5. Failure to supply
84
Name 6 ways you can evaluate a supplier's financial performance
1. Credit ratings
2. Reviewing the statement of financial position and the statement of income and expenditure
3. Reviewing liquidity
4. Reviewing profitability
5. Requesting references from other customers
6. Gearing analysis
85
Assets
Items of value owned by an organisation, which can be used to meet debts
86
Liabilities
Monies that an organisation owes
87
What does a statement of financial position list?
All of an organisation's assets and liabilities at a set point in time
88
Creditors
A person or company to whom money is owed
89
Return on investment (ROI)
A measure of profitability that indicates whether a gain or loss has been generated compared with the initial cost
90
Name the 2 ratios you can use to help assess how liquid an organisation is
1. Current ratio
2. Quick ratio
91
What does the current ratio calculate?
An organisation's ability to pay short-term financial obligations
92
What is the quick ratio also known as
The acid test
93
What does the quick ratio aim to reveal?
An organisation's ability to meet its creditors immediate demands
94
What are quick assets
Assets that are available quickly and easily such as cash or items that can be quickly converted into cash
95
What is ROI used to evaluate?
The benefit of a financial investment
96
What is gross profit
The amount of money an organisation has left at the end of a financial period, after deducting all costs associated with producing, selling and providing its products or service
97
What is profit
The amount of money left after all expenses have been paid
98
Name the 4 most common types of org structures
1. Flat
2. Hierarchal
3. Matrix
4. Virtual or distributed
99
What is a flat structure
Organisations that have no, or very few, layers between the employees
100
What are hierarchal structures
Used in larger organisations and include many layers between the employees, from junior level up to the CEO
101
Name 8 features of a flat structure
1. Good communication
2. Good relationships between staff and senior managers
3. Fast decision making
4. Easy for organisation to develop
5. Employees have a high level of responsibility
6. Internal confusion as staff do not have a specific manager
7. Lack of specialist resources
8. Little chance of promotion
102
Name 8 features of a hierarchical structure
1. Departmental communication may be poor
2. Limited relationships between staff and senior managers
3. Slow decision making
4. Harder to make change happen
5. Employees have low levels of responsibility
6. Levels of authority are clearly defined
7. Employees can specialise in their areas
8. Lots of chances for promotion
103
Name the 4 dimensions of culture (Handy)
1. Power
2. Role
3. Task
4. Personal
104
Name 7 statements that should be included in an ethics document
1. Bribery
2. Corruption
3. Fraud
4. Human rights
5. Modern slavery
6. Working conditions
7. Conflicts of interest
105
ESG
Environmental, social, 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
106
CSR
An organisational sustainability framework to embed into strategy and operations and supply chains to have a positive global impact
107
Name 4 types of positive contributions ESG and CSR policies should outline
1. Customers
2. Consumers
3. Investors
4. Community
108
What is the objective of ESG and CSR policies
To promote a sustainable and ethical organisation
109
Name 4 things organisations attempt to do when writing and implementing an ESG policy
1. Minimise or repair the damage they do to the environment
2. Become more sustainable
3. Contribute positively to their local community
4. Be seen to be compliant and eradicate corrupt practises from the supply chain
110
Name the 5 themes ESG policies focus on
1. Legality
2. Business ethics
3. Protecting the environment
4. Protecting people
5. Charity work
111
DEI (diversity, equality and inclusion)
Equally ensuring that every individual has fair and equal treatment and opportunities, regardless of their background, identity or experience. Diversity recognises that, although people have things in common with each other, they are also different in many ways such as the protected characteristics - age, disability, sex, race and religion. Inclusion is where those differences are seen as a benefit and where different perspectives are shared and heard, leading to better decisions. Everyone should have equal opportunity to participate and reach their full potential
112
What may suggest that a supplier takes quality seriously?
An ISO9001 accreditation
113
What is a total quality management system?
A long-term strategic approach to business where the focus is on customer satisfaction
114
Name 8 things that are included in a TQM system
1. Process thinking
2. Customer satisfaction
3. Total employee commitment
4. Strategic thinking
5. Integrated system
6. Decisions based on fact
7. Continuos improvement
8. Effective communications
115
Name 5 common global standards that may be requested by a buying organisation
1. ISO 9001: quality management
2. ISO 14001: effective environmental management
3. Investors in people
4. International labour organisation
5. BRC
116
Name 7 examples of electronic procurement activity
1. E-purchase orders
2. E-delivery notes
3. Barcoding
4. Scanning
5. E-payment
6. E-tendering
7. E-invoicing
117
Business to business (B2B)
Commercial trade transactions between businesses (as opposed to B2C)
118
Business to consumer (B2C)
A transaction between a business and a consumer
119
Name 3 types of risks that could occur due to the location of a supplier
1. Political
2. Economic
3. Force Majeure
120
Name 3 economic factors that relate to politics
1. Taxes
2. Currency fluctuations
3. Supply and demand
121
Name 6 things force majeure can include
1. Excessive rain
2. Earthquakes
3. Hurricanes
4. Tsunamis
5. War
6. Terrorism
122
Name 6 situations when a tender process would be used
1. The need is a large or complex project
2. The law requires it
3. Company policy states it
4. The value is high
5. A large selection of bids is required
6. There is lots of competition
123
Name the 7 core stages of tendering
1. Decide which style of tender to use
2. Prepare ITT
3. Send the ITT
4. Buying organisation receives bids
5. Evaluate bids
6. Award contract and give feedback
7. Contract management
124
Prior information notice (PIN)
A notice released by a buying organisation through the OJEU to make potential suppliers aware of a sourcing competition that it intends to run in the future
125
OJEU
Official Journal of the European Union
126
Name the 5 core types of tender
1. Open procedure
2. Restricted procedure
3. Negotiated procedure
4. Competitive dialogue
5. Innovation partnership
127
How is an open tender advertised
Through relevant media platforms and a PIN
128
Name 4 media platforms tenders can be advertised on
1. Organisations websites
2. Trade magazines
3. Online databases
4. OJEU
129
Name the 2 stages of restricted tendering
1. Shortlist suppliers using PQQ
2. Send out the ITT once shortlisted
130
When is negotiated tendering used?
When the project has very high value and there are multiple solutions to meet the identified need
131
Expression of interest (EOI)
An informal notice from a potential supplier that they are interested in supplying goods or services to the buying organisation, possibly following publication of a PIN or other notification of an upcoming opportunity
132
Name the 5 steps of negotiated tendering
1. An opportunity is advertised without any specification on how the need should be met
2. Interested suppliers can submit and EOI
3. They are asked to fill in a PQQ
4. Selection and dialogue phase
5. Invited to submit their bid
133
Name the 4 steps of competitive dialogue tendering
1. Opportunity is advertised and
2. Supplier's are pre-evaluated
3. Successful suppliers meet to discuss and agree a solution
4. Once a solution has been agreed the procurement team creates the tender docs and gives it to the suppliers which respond with their bids
134
Name 11 items an ITT is likely to include
1. Opening letter/brief
2. Company details
3. Overview of the project
4. NDA
5. Specification of the requirement including KPIs and SLAs
6. Evaluation criteria
7. Submission date
8. Compliance requirements
9. Bid style
10. Contact details for queries
11. Terms and conditions of contract
135
NDA
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
136
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 party and how to escalate among other factors. A SLA is legally enforceable if it is referred to in a contract
137
Name 2 rules that must be followed when sending the ITT
1. Provide the documents to all potential suppliers at the same time
2. Provide exactly the same documents to all suppliers
138
Name 12 aspects of a bid that evaluation criteria may consider
1. Supplier organisation and associated benefits
2. Price aspects
3. Quality/specification conformance
4. Ethics
5. Sustainability
6. Risk
7. Payment terms
8. Whole-life costs and considerations such as disposal
9. Service levels, including communication
10. Location of supplier and transportation methods
11. Warranty
12. Order quantities
139
Warranty
A commitment that the product will perform as stated for the specified period. The detailing of the warranty will determine the rights of the owner and responsibilities of the seller. A warranty for a period longer than the guarantee (or with enhanced rights) may be offered for an additional cost
140
Name 4 things you can use to check that something is fit for purpose
1. Technical drawings
2. Samples
3. Demonstrations
4. Testing
141
Sample
A small part of or examples of the product that is potentially being supplied
142
Tooling
Machinery, jigs, dies or patterns specifically used for one job
143
Aesthetics
The way something looks
144
Name 7 tests you may conduct on a sample
1. Aesthetics
2. Durability
3. Weight
4. Size
5. Strength
6. Tolerances
7. Reliability
145
Name 3 forms a conformance specification may take
1. Chemical formulae
2. Technical drawings
3. Recipes
146
Exchange rate
The value of one currency compared with another, which can vary from day to day
147
What are the two main purposes of import duty
1. To give local, or own-grown, produce an economic advantage
2. To raise revenue for the country's government
148
Name 3 organisations/treaties that aim to reduce the amount of import duties
1. World Trade Organisation
2. North American Free Trade Agreement
3. The Trans-Pacific Partnership
149
Piece part price
Price per individual item
150
What do economies of scale reduce?
Piece part price
151
What is the formula for economic order quantity
square root of (2* cost per order * annual demand) / (cost of holding one unit for a year)
152
Incoterms
Series of commercial terms published by the International Chamber of Commerce covering the allocation of costs and transfer or risks between buyer and seller. the various options are abbreviated to three-letter codes
153
On cost
A cost in addition to the quoted price
154
Name 7 incoterms
1. Ex works
2. Free carrier
3. Carriage paid to
4. Carriage and insurance paid to
5. Delivered at place unloaded
6. delivered duty paid
7. Free on board
155
Name one part of dealing with international freight
Agreeing incoterms
156
Life cycle costs (LCC)
Relates to all costs of acquisition, owning and running the asset but does not include disposal
157
Whole life costing (WLC)
An estimate used to help buyers to 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
158
Name the 10 areas included in whole life costing
1. Purchase
2. Delivery
3. Installation
4. Training
5. Operation
6. Maintenance
7. Water
8. Energy / fuel use
9. Health and safety
10. Disposal
159
Name 4 types of cost mechanisms
1. Total cost of acquisition
2. Total cost of ownership
3. Life cycle costing
4. Whole life costing
160
Total cost of acquisition
The total cost incurred in acquiring a product from sourcing to receiving and installing
161
What kind of costs do LCC and WLC consider?
Medium and long term costs
162
Social value
The output from a contract that benefits society at large, rather than the purchaser or end user
163
Corruption
Dishonest conduct, often by individuals who hold senior positions within organisation - can include bribery
164
Bribery
The offer of a gift financial gain or incentive to influence a decision
165
Fraud
Financial deception
166
Weighted scorecard
A tool with a systematic and fair process for selecting suppliers, based on predetermined criteria
167
What does the weighted scoring system help to do
Make a decision based on the criteria set out at the beginning of the RFQ or tender process
168
Conflict of interest
Where an individual is unable to remain impartial due to a personal, professional or public interest
