L2.1 Explain each stage of the CIPS Procurement Cycle

Question 1

PRE-contract award stages
Stage 1: Define business needs and develop the specification

Answer 1

= having KNOWLEDGE of what the customer REQUIRES
1. a need can be tangible/intangible, ie. a product/service
2. must have 4 details of DESCRIPTION, QUANTITY, DELIVERY TIME & PLACE, QUALITY of what is required
3. within the description, there should be a PERFORMANCE or CONFORMANCE SPECIFICATION

4. this stage may take a SIGNIFICANT amount of TIME, but…
5. …is VERY IMPORTANT as can add value or incur costs if wrong items/services supplied

Question 2

PRE-contract award stages
Stage 2: Market analysis & make or buy decision

+ 3 situations to evaluate when reviewing the market & availability of goods/services required
+ MAKE OR BUY DECISION

Answer 2

• buyers assess if need can be fulfilled internally
• if not, REVIEW MARKET to decide where to source
• even if need can fulfilled internally, buyers should still explore external market to decide whether making IN-HOUSE is the most effective method

3 situations
1. ECONOMIC SITUATION
- if economy of one country is weaker than buyer’s country, buying from abroad may offer better value
2. CURRENCY FLUCTUATIONS
- consider EXCHANGE RATE
3. SUPPLY & DEMAND
- if supply > demand, price will be more favourable than other way round

• if the need is NOT CRITICAL to success of customer/their org, then BUY IN GOODS/OUTSOURCE SERVICES -> but reduces the level of CONTROL the org. has & thus increases RISK