L4M1 LO1 Part 2 Flashcards by Petrus Lemba

Q6C1

Give Intro for:

Question 6: Explain, with examples, the three different ways one can categorise procurement spend (CatProcSp): direct vs indirect, capital expenditure vs operational expenditure and stock vs non-stock items. (25 points)

CatProcSp for Effi. Mang. resources
Make Strat. decisions.
Talk 6 (3 Diff.) ways to CatProc spend
Terms of names (Dir. & Indir.)
Distinctions helps Org optimising
ProcStrat + resource allocation

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Q6C2

Explain Direct spend

*Use cake (manu.) for examples

(Critical) Items inc. in final goods
E.g. Raw Mat.: Flour, Sugar for cake manu.
Affect timing of cake production +
Customer Satis. + Brand rep.

This shows:
- Essential for continuity of supply +
- Collab. Supp. Rela.

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Q6C3

Explain Indirect spend

*Use cake (manu.) for examples

AKA, overheads
Items Org. needs + not inc. in end product
E.g. Items For maintenance
E.g. Cleaning products + MRO supplies
May not inc. critical items +
Many Supp. options = Transactional Rela.

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Q6C4

Explain Capital Expenditure (CAPEX)

*Use cake (manu.) for examples

Large one-off purchases
E.g. buying giant oven to cook cakes
Must consider TCO + Buy vs Lease
Are Strat. High-Val. + High-Risk items

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Q6C5

Explain Operational Expenditure (OPEX)

*Use cake (manu.) for examples

Regular purchases for d-t-day function
E.g. Factory Workers + Cleaning PPE
Invo. in Cake Manu.
Items can be anywhere on Kraljic matrix.

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Q6C6

Explain Stock Items

*Use cake (manu.) for examples

Held in inv. until needed
As Procured in advance - ∴ Req. accu. forecast
E.g. Cake Manu. factory`s PPE
Hairnets + gloves for workers
High demand in Spring/Summer
Peak in Weddings + Grads
Org. will bulk purchase +
Kept in stock cupboard,
Using when required

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Q6C7

Explain Non - Stock Items

*Use cake (manu.) for examples

Items ordered + bought for immediate use
E.g. Eggs needed + directly put in cakes
Eggs go off if bought in advance due to BBD
Req. EOQ tool to achieve JIT/Lean Manu.
To ↓ Stock C-Hold. + ↓ Stock wastage

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Q6C8

Give conclusion for:

CatProcSp diff. ways…
Essential for Strat. resource mang.
Despite diff. ways
Items aren`t not mutually exclusive
Item can be MultiCat.
E.g. Item may be direct + operational
Or indirect and stock.
MultiCat. = CatFlex.
Allows Org. to tailor their ProcStrat.
Based on their specific needs
Ensures Effi. resource allocation +
Effective SCM
Diff. Org. may adopt varying Cat.Appr.
Depends on industry + size +
Operational requirements.

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Q7C1

Give intro for:

Question 7: Describe the main characteristics of, and differences between, procuring goods, services and construction works (GSConstrW) (25 points)

Note: This question is similar to give characteristics & differences between procuring/purchasing goods and services (25 marks)

Proc. is multifaceted field
GSConstrW pivotal for Effe.mang.
Essay explores main characteristics
That differentiate these Cat.

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Q7C2

Describe characteristics of, and differences between, procuring goods, services and construction works:

Tangible / Intangible

G = Tangible items
Can be physically seen + touched
E.g. raw mat. like wheat + sugar
These are ManuOrg.`s tangible goods
S = Intangible items
Results can be observed + untouchable S.
E.g. Factory cleaning contract
Cleaning effects are visible
While service remains intangible
Construction = tangible + intangible mixture
Tangible = construction materials
E.g. bricks and windows
Intangible = labour to complete the project

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Q7C3

Describe characteristics of, and differences between, procuring goods, services and construction works:

Heterogeneous / Homogeneous

G = homogeneous = Always the same
E.g. Steel purchased for Manu. purposes
Will always be the same.
S = heterogeneous = varies each time
E.g. Customer service
Diff. each time cos of dynamic nature of customer interactions.
Construction = Either Ho/He
Depends on project
Is it a one off unique building?
Or large housing estate of same-build properties?

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Q7C4

Describe characteristics of, and differences between, procuring goods, services and construction works:

Transfer of Ownership (ToO)

G = When procured
Upon delivery + payment = ToO
Product becomes buyer property
S = No ToO = no physical entity to transfer
Construction = ToO is complex
Varies depending on project
Usually buyer will retain land ownership
Throughout project
But construction company on few occasions
Take ownership for insurance purposes.

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Q7C5

Describe characteristics of, and differences between, procuring goods, services and construction works:

Storable (Separable/ Inseparable):

G = storable + separable
Allows purchase on 1 day + use on another - E.g. factory can buy plastic for manu. toys
It`s stored in inv. until the time to make toys
S = consumed @ purchase point
Means Inseparable + can`t be stored
It`s bought and utilized simultaneously.
It`s same for construction.

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Q7C6

Describe characteristics of, and differences between, procuring goods, services and construction works:

Ability to Outsource

G = rarely outsourced
typically purchased directly from suppliers.
S = can be easily outsourced
E.g. outsourcing in finance + cleaning
Or security services.
Construction = commonly outsourced
Hire external companies to execute projects.

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Q7C7

Describe characteristics of, and differences between, procuring goods, services and construction works:

Complexity of the Supply Chain (SC)

Serv. contracts inc. simple two-party rela.
Bet. buyer & supplier.
G and construction have complex SC
E.g. procuring a pen
It inv. SC with various steps
Inc. raw MatSupp (Chuugoku company)., Manu. + a wholesaler (Hamley`s)
Construction works features TSC
With subcontractors playing crucial roles
Simplified: LNG/Chili Package in Mozambique

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Q7C8

Describe characteristics of, and differences between, procuring goods, services and construction works:

Construction as a Hybrid

Construction Proc. represents a hybrid
It incorporates G + S elements
S: E.g. bricklayer for laying bricks
G: E.g. procuring tangible goods -> Bricks.
It`s challenging separating G from S
In construction, as often it`s intertwined
both elements are paid for simultaneously

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Q7C9

Give conclusion for:

Describe characteristics of, and differences between, procuring goods, services and construction works:

GSConstrW distinctions
Essential for effective SCM
The unique characteristics + diff. of each Cat.
Allows Org to tailor their ProcStrat.

Q8C1

Give Intro for:

Question 8: Provide a definition of a stakeholder (5 points) and describe 3 categories of stakeholders (20 points).

Stakeholder is an indiv., group, or entity
Has a vested interest or concern
in Org.activities + decisions + outcomes (ado)
Stakeholders can (affected by / affect) Org.
Crucial role in influ. success + Sust. + repu.
SHolder Mang. key for Org. Gov`ce and deci-ma
Essay explores 3 Cat. of stakeholders.

Q8C2

Describe Internal stakeholders (ISHolder) and 2 Cat. of ISHolder

ISHolder are indiv. or groups linked to Org.
Daily ops. + mang.
More vested in company succeeding
Depend on company for income / livelihood
Contributes to company’s internal functions

CatInc.:

1) Employees (Seb):
- Critical internal stakeholders.
- Influence + Impact on Org. success

Their Engagement, Satis. + productivity
Impact overall Perf.

2) Management and Executives (James):
- Has a sig. influence De-ma +
- Org`s StratDir.
- Decisions shapes company’s future

Q8C3

Describe Connected stakeholders (CSHolder) and 2 Cat. of CSHolder

i/gr. vested Interest in Org. + not in d-t-d ops.
(work) Contractual Rela. with Org.
E.g. banks, mortgage lenders + suppliers
Have interest in business succeeding
<than ISHolder
E.g. Crucial Org. has good rela. with
bank / mortgage provider/ supplier
Or if Payment (loan/owe) failure
Results in taking legal action against Org.
Always be Kept Satisfied
Cos depends on them

CatInc. :

(1) Shareholders/Investors:
- Has financial stakes in Org. + Seeks RoI
- have vested interest in the company’s financial performance.

2) Suppliers and Partners:
- External entities provides, G+S
- Ensure Collab.Rela. with Org. impacts ops. Qual.+ Effi.

Q8C4

Describe External stakeholders (ESHolder) and 2 Cat. of ESHolder

ESHolder: entities outside of Org.
Can influence / be influenced by Org actions
Affected by company + no work in InterOps.
Have ↓ power to influence decisions < SHolders
Inc. Gov, Prof. bodies, pressure groups +
Inc. Local community
Pressure groups success degrees
Depends on subject matter.

CatInc. :

1) Customers:
- Dir. impact on Org.`s Revenue
- Key: their satisfaction + loyalty
- Impacts company’s success.

2) Gov. and Reg. Bodies:
- Oversee industry Regs. + pass Legis. to reg.industry
- To Org: Regs. compliance.
- Crucial for rep. and legal standing
- No power in d-t-d company affairs

Q8C5

Give Conclusion for:

Question 8: Provide a definition of a stakeholder (5 points) and describe 3 categories of stakeholders (20 points).

*Talk about diff. Entities + interest
* Varies it`s impact/ impacted by
* Give how illegal action
* Or pollution affect SHolders & Org e.g. Volkswagen 2016
* Give benefit Org for SHolders

- SHolders are diverse entities +
Vested interest in an Org.s activities.
The three SHolders categories shows
Many groups sig. (influence / are influenced) - By Org.
Shows importance in Recog. + address
SHolders needs and concerns
For sustainable + responsible business practices.

*Extra marks

SHolders can harmed by / benefit from Org.
Which affects / affected by Org.
E.g. if Org. invo. in illegal or immoral practs.
E.g. Org. pollutes local rivers
This harms SHolders (local community)
Benefit by Org.`s for local community
For ↑ in employment levels

Q9C1

Give Intro for:

Question 9: What is meant by Stakeholder Mapping (SHolderMap.)? Describe a tool that can be used by a Procurement Professional to map the stakeholders at their organisation (25 points)

SHolderMap. = Org`s SHolder analysis
Cat. ÷ by characteristics
Reps as graph or matrix

2 - Variation Helps + Decide mang. style
- For each SHolder group
- Divided due to interests & Expectations
- That are similar or conflicting

3 - Essay explores the tool, in a 2x2 matrix

Q9C2

Describe a tool that can be used by a Procurement Professional to map the stakeholders at their organisation (25 points)

*Hint: MP/I Matrix

Tool: Mendelow’s Power / Interest Matrix

Maps SHolders in 2x2 grid
via Influencing Power +
Motivation strength to use that power.
Both Pow (y) & Interest in matrix as Hi/Lo
Provides 4 Strat. for SHolders mang.
Based on which grid Quad. SHolder falls into

Q9C3 Give a QuadCat. of MP/I Matrix *Hint = KS

Keep satisfied - high Pow. + low interest - If SHolder is concerned + Dissatisfied - Their interest may peak e.g. Withdraw £ / Legis. - E.g. Reg. bodies (Biden), SHolders + senior mang. (Pops) - Ensure they`re kept up to date - Informed of what`s going on, - Don`t inc. not needed info.

Q9C4 Give a QuadCat. of MP/I Matrix *Hint = MC

Manage Closely - AKA Key players - inc. major Cust. + key Supp. - Inc. Partners + Senior mang. - Both Hi Pow. + Interest - Need to know all that`s going on + - Approve of what is going on - Reco`dedStrat. is early involvement and Partic. - ∫ their goals with yours. - ReqRegCommu. + meetings - Should take their opinions on board

Q9C5 Give a QuadCat. of MP/I Matrix *Hint = M or ME

Monitor OR Minimum effort Req. *Equiv. to routine/non-critical - ↓ priority group = Lo Pow + Interest - Inc. General employees + non-critical support staffs - Doesn`t need to receive RegComm.

Q9C5 Give a QuadCat. of MP/I Matrix *Hint = KI *What does I in KI help with ? Ans. I

Keep informed - Hi Interest + Lo Pow. - If they`re not kept in the loop + - understand need for decisions - Will lobby together to protect their interest - If they feel threatened. - CatInc. Proc. Staff + C-Func. Teams + - Com`nity groups - Inc. Supp. - Group should receive RegComm.

Q9C6 Give Conclusion for: Question 9: What is meant by Stakeholder Mapping (SHolderMap.)? Describe a tool that can be used by a Procurement Professional to map the stakeholders at their organisation (25 points) *Note* : Use a manager throughout a process as example.

* Talk of & why MPI is used * SHolders move through matrix with example * Matrix redo per project * For & Against in a Quad - Drawback/Disad **************** - MPI is Popular mang. tool since `91 - Due to simplicity -SHolders can move through matrix -E.g. @ Project beginning - A Dept. manager is classed ‘low priority’ - Seen with no interest + Pow. in project. - As Project progress... - manager becomes interested. - ∴ manager transferred to KI Cat. - ∴ matrix should be redone regularly - throughout Project`s lifetime - To capture any movements. - Redo Matrix each project - Can`t make assumption that a SHolder - With interest in one project - Would be interested in another *Bonus Point - This also relates to M`s Matrix Disad. - No consideration on SHolders` Pos. - On the project (For or against Proj.) - So it doesn`t fully help on SHolder mang. - E.g. 2 SHolders in ‘manage closely’ section - One is for & other against the project - They are to be handled diff.

Q10C1 Give Intro for: Question 10: Sarah has recently been hired as the new Head of Procurement at Alpha Ltd, a manufacturer of small electronics such as hairdryers and alarm clocks. Alpha Ltd has a large factory based in Birmingham where many of the products are manufactured. One of the large pieces of machinery in the factory has recently broken and Sarah has been charged with replacing it as quickly as possible. Sarah is considering using the Whole Life Costing approach to this procurement. What is meant by Whole Life Costing? (5 points). Discuss 5 factors that Sarah should consider when buying new machinery (20 points).

Intro -> Use SOMEL Statement Of Mission + EXP + Link

Q10C2 What is meant by Whole Life Costing? (5 points)

- WLC = £TC (Asset Lifecycle) = £TC (Acquisition -> Dis) - Inc. £TC M(R)OD - Shows AsFI over time

Q10C3 Discuss 5 factors that Sarah should consider when buying new machinery (20 points). 1st Factor = *IP£P*

1) Initial Purchase Price (IP£P) - Critical factor + WLC app. is beyond this - Sarah must inc. IP£P + L-Term £Cs - To align F.Strat. + WLC`s def.

Q10C4 Discuss 5 factors that Sarah should consider when buying new machinery (20 points). 2nd Factor = *£C[Op]*

2) Operational Costs (£C[Op]) - Sarah needs to analyse this - £C[Op] inc. MRO Expenses e.g. E-Consump - Soln for Sarah: Procure E-Effi. + reliable machinery - Results ↑ Csave via ↓£C[Op], causing ↑IP£P

Q10C5 Discuss 5 factors that Sarah should consider when buying new machinery (20 points). 3rd Factor = *T & ∫*

3) Training and Integration (T&∫) - By training: £C [Employees training] incu. - By ∫: Machinery ease ∫ to current workflow For Sarah: - If ∫ not easy -> ↑ £C[ET] = Add`l T. program - Impacts current + L-Term £Cs + - Machinery Selection Considerations

Q10C6 Discuss 5 factors that Sarah should consider when buying new machinery (20 points). 4th Factor = *D & P*

4) Downtime and Productivity - Sarah should assess Machinery D & P - By D & P: Reliability + Perf. (Cond. related) - Will Mac. maintain Perf. lvls + ↓disruptions - Affects Op.Effi. = Impacts Csave & Environ. *Downtime selection crucial in annual yr

Q10C7 Discuss 5 factors that Sarah should consider when buying new machinery (20 points). 5th Factor = *Techgrade & Ada.*

5) Techno Upgrades and Adaptability (TUA) - Sarah must take TUA into Mac. Sel. consid. - Mac. Adaptability & ∫ to Upgrades - To ↓ need to proc. diff. Mac. near future - = Csave & maintain competitive + resilient - Of Alpha Ltd *** E.g. International Space Station Parts

Q10C8 Give Conclusion for: Question 10: Sarah has recently been hired as the new Head of Procurement at Alpha Ltd, a manufacturer of small electronics such as hairdryers and alarm clocks. Alpha Ltd has a large factory based in Birmingham where many of the products are manufactured. One of the large pieces of machinery in the factory has recently broken and Sarah has been charged with replacing it as quickly as possible. Sarah is considering using the Whole Life Costing approach to this procurement. What is meant by Whole Life Costing? (5 points). Discuss 5 factors that Sarah should consider when buying new machinery (20 points).

Conclusion: - SOH = Statement Of Help - LADPO = List Adv. & Disad + Potential Outcomes