L4M1 Deck 2

Question 1

Describe the advantages/disadvantages of PERFORMANCE specifications…

Answer 1

PERFORMANCE - outlines what the product or service is to do or achieve: 
Can be short
Cheap (on time and cost)
Simple
Allows supplier innovation
Allows healthy competition

BUT
Higher risk
Doesn’t guarantee the right solution
Potentially not fit for purpose

Question 2

Describe the advantages/disadvantages of CONFORMANCE specifications…

Answer 2

CONFORMANCE - details exactly what the product or service will consist of (e.g. recipe or chemical compound)
Usually a long document
Time consuming
Difficult to prepare
Technical
Restricts innovation and competition

BUT
Less risk
Specific to the need
More likely to be fit for purpose

Question 3

What are the various aspects to consider when calculating TOTAL COST OF OWNERSHIP?

Answer 3

TCA - lead time, purchase price, quality, haulage & insurance
TOOLING
INSURANCE
OPERATION & QUALITY
MAINTENANCE
TRAINING 
STORAGE
DISPOSAL (including potential re-sale value)

Question 4

Describe the differences between CAPEX and OPEX

Answer 4

CAPITAL EXPENDITURE (CAPEX) relates to capital purchases - often one-off assets, high value, complex purchases such as heavy machinery, land or property - “spend money to make money” - also mention depreciation - assets’ value is treated as a cost in annual accounts

OPERATIONAL EXPENDITURE (OPEX) - relates to the day-to-day running of an organisation - eg raw materials, rent, insurance, salaries, transport, utilities

Question 5

Define “VALUE FOR MONEY” (VfM)

Answer 5

TCO/TCA
THE 5 R's
CURRENCY/EXCHANGE RATES
ENVIRONMENTAL FACTORS (eg sustainability)
FREIGHT COST
MAINTENANCE COSTS
PACKAGING
PAYMENT TERMS (eg cashflow)
PLACE
PRODUCT/SERVICE PRICE

Question 6

Describe the simple stages of a supply chain

Answer 6

UPSTREAM: RAW MATERIALS > SUPPLIERS > MANUFACTURERS

DOWNSTREAM: MANUFACTURERS > DISTRIBUTORS > CUSTOMERS

Question 7

Describe ways in which Supply Chain Management (SCM) improves value

Answer 7

EFFECTIVE MANAGEMENT OF
PRICE (negotiation, economies of scale)
ENVIRONMENT
DELIVERY
SUSTAINABILITY
STORAGE
COMMUNICATION
ETHICS
QUALITY

Question 8

What stages of the CIPS Procurement Cycle that are commonly carried out electronically (e-systems)

Answer 8

E-REQUISITIONING - raising and receipt of requisitions
E-CATALOGUES - researching product ranges
E-ORDERING/E-SOURCING
E-PAYMENT

Question 9

What are the advantages of E-REQUISITIONING

Answer 9

Quick
Traceable
Consistent
More control
Reduced risk
Saves cost in the long term

Question 10

Describe the disadvantages of E-REQUISITIONING

Answer 10

Large investment to install e-system
Less personal
Individuals may resist change
Reliant on technology
Individuals need training
Affected by power failure

Question 11

What are the advantages of E-CATALOGUES

Answer 11

Information is always available
Information is always up to date
In-depth details are readily available
E-catalogues can be viewed at all times
Environmentally friendly