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CIPS L4M2 - Defining Business Need > Chapter 2.3 > Flashcards

Chapter 2.3 Flashcards

1
Q

What is very important when it comes to negotiating?

A

An understanding of supplier costs and the prices they charge

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2
Q

How are costs usually split?

A

Direct and indirect costs

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3
Q

Define direct costs

A

Those that are incurred in delivering a service or in making a product

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4
Q

Define indirect costs

A

Costs incurred in activities that support the production or service delivery

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5
Q

Can direct and indirect costs be both fixed and variable?

A

Yes

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6
Q

Define fixed costs

A

Costs that do not change with the level of output

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7
Q

Define variable costs

A

Costs that are directly related to the volume of output

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8
Q

Name 6 information sources that can be used in a market analysis

A
  1. Company annual reports
  2. Market data
  3. Technical data
  4. Requests for information (RFI)
  5. Plant vistis
  6. Discount lists
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9
Q

Define company annual reports

A

Reports released once a year as a way of communicating with shareholders about the performance of a company

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10
Q

Define line of best fit

A

The line that goes through approximately the middle of the data points with an equal number of data points above and below it

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11
Q

What do company annual reports usually contain?

A

Statements from the directors and chief executive about the main issues facing the organisation, how the organisation has faced those issues in the current year and its plans for the future. They also contain financial statements

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12
Q

What can a company’s annual report be used for?

A

Deducing some potential information for further analysis and comparison

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13
Q

Name 3 examples of companies that specialise in collecting and analysing information on a range of markets and selling the subsequent reports

A
  1. Mintel
  2. Gartner
  3. Forrester
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14
Q

Name 2 things market reports should contain

A
  1. Primary research
  2. Financial analysis
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15
Q

Name 8 pieces of information that market reports should illiustrate

A
  1. Number of companies in the market
  2. Analysis of those companies
  3. Market share analysis
  4. Market segmentation
  5. Trends in the market
  6. Innovation
  7. Customer insights
  8. Benchmarks
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16
Q

Who would technical data be provided by?

A

An organisations technical staff

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17
Q

What can accounting systems do?

A

Collect cost data which can be analysed into direct and indirect costs. The indirect costs are then apportioned to the products or services on an agreed basis

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18
Q

When would you use cost synthesis/should-cost analysis?

A

When you have a bought-in product because there is no access to the supplier’s accounting systems so you cannot determine their direct and indirect costs

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19
Q

What is a should-cost analysis

A

Where procurement staff work with their colleagues in operations who understand how the supplier’s product is made or service is delivered

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20
Q

Define request for information (RFI)

A

A standard process often used to collect information when an organisation is not yet sure of the details of the product or service that it wishes to produce

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21
Q

How can you adapt a request for information?

A

To ask potential suppliers for information on their direct and indirect costs. if they are reluctant to divulge that information the organisation could ask for the ratio between the two

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22
Q

Name 6 aspects that plant visits can give an organisation insight into

A
  1. How well the company is doing
  2. How old the equipment is
  3. The work practises
  4. How efficient the suppliers own buying is
  5. Are the buildings modern and pleasant to work in or run down
  6. What is the operating culture and morale like in the business
23
Q

When may a company be willing to give discounts

A
  1. Once their break-even point is reached in order to win market share
24
Q

What may the extent to which a company is willing to give discounts and the size of the discount for different additional order volumes provide insight in to?

A

Its fixed and variable costs as well as its direct and indirect costs

25
Q

Whats one of the most important documents in any company?

A

The budget

26
Q

What does the budget set out?

A

The plan for next year as to how much the company is expecting to sell and how much profit it is planning to make

27
Q

What does a budget do in the public sector?

A

Sets out how the organisations funding is to be used

28
Q

Define bill of materials

A

A comprehensive list of components, items and materials and parts to create a product, essentially a recipe for the production of an item

29
Q

What can direct and indirect costs be used to assess?

A

The scope for price or cost variability when negotiating with suppliers

30
Q
A
31
Q

What is one of the best ways to negotiate lower prices?

A

Having a thorough understanding of the cost build up of the item that the organisation buys so that ways to reduce the cost without reducing quality can be identified

32
Q

Define evidence-based negotiation

A

Having a thorough understanding of the cost build up of the item that the organisation buys so that ways to reduce the cost without reducing quality can be identified

33
Q

Name 6 questions you should ask a supplier during negotiation

A
  1. Can any of the materials be swapped to alternatives that cost less?
  2. Would a change in specification allow different machines to be used that have a higher utilisation as this would give a lower unit cost?
  3. Can its own manufacturing engineers offer alternatives with or without a change to the specification of the product
  4. Can the utilisation of machinery be improved with better production planning?
  5. Are staff properly trained?
  6. What are the indirect costs for this product
34
Q

What is an important document in controlling an organisations costs

A

A purchasing budget for bought-in products and services

35
Q

What is an important and essential input to preparing a budget?

A

An understanding of the direct and indirect costs of the supplied product or service

36
Q

Name an acronym used for collecting and analysing the data and information needed in any field

A

OWN-IT

37
Q

What does OWN-IT stand for

A

Outline
Wide search
Narrow search
Increase your stockpile of information
Transform your stockpile into new knowledge

38
Q

Name the 4 steps to creating an outline

A
  1. Be specific
  2. Define what is already known
  3. Create the outline
  4. Define any gaps
39
Q

Why is creating the outline important?

A

It allows the researcher to share the topics for research with others so that they can confirm the correct areas are being addressed.
It also creates a checklist so that the researcher can test the data that has been collected for all areas and that each area is covered sufficiently

40
Q

How is data different to information?

A

Data is raw material that has to be processed to create a product that is useful to the user. The product that is useful to the user is information

41
Q

What does the wide search do for the researcher?

A

Gives them a general feel for what information is available to fill the gaps identified in the previous step

42
Q

What is a useful tool for a wide search?

A

The internet

43
Q

Name 4 ways that you can refine a google search

A
  1. Intitle operator search - returns searches containing a specific key word
  2. Inurl operator search - search is limited to pages that contain the phrase specified in the page URL
  3. Define operator search - returns pages with definitions of the term that has been entered
  4. Filetype operator search - returns pages that end in the filename suffix used
44
Q

Why are powerpoints more powerful than lists of ideas?

A

By mapping out thoughts and memories and facts, the brain uses associations, connections and triggers to stimulate further ideas

45
Q

Name a 5 step process to skim reading

A
  1. Read the introduction and conclusion
  2. Quickly skim through the book noting any diagrams, pictures, graphs or anything else of a visual nature
  3. During skim reading note any main headings
  4. Those steps will have given a feel for which parts of the book contain the most relevance, so go back and read those parts more carefully
  5. Whilst doing steps 1-4 make a mindmap of what you read
46
Q

When may you skim read

A

When narrowing the search

47
Q

Name 2 places you can skim read books

A

In the library or online

48
Q

What is the objective when narrowing the search?

A

To create a stockpile of relevant information from the material that has been identified in the broad and narrow searches

49
Q

What is the best way to get information from Subject Matter Experts?

A

To interview them - either in person or on the phone

50
Q

Name one way of condensing information

A

Theme it

51
Q

What does a procurement price cost analysis help to do?

A

Answer key questions that ultimately determine the cost of what an organisation buys

52
Q

When would you issue a word of caution on a procurement price cost analysis

A

If it was being done on a new product or service

53
Q

What may you have to do as well as a price cost analysis?

A

Benchmark the resulting price

CIPS L4M2 - Defining Business Need (12 decks)

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