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CIPS Level 4 Module 1 Exam Questions & Answers
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CIPS Level 4 Module 1 Exam Questions & Answers
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CIPS Level 4 Module 1 ExamQuestions & Answers
The Purchasing process - -1. Define Specification.
2. Select Supplier
3. Contract Agreement
4. Ordering
5. Expediting
6. Evaluation Follow up
-Definition of Procurement & Supply - -recognition of the fact that the
purchasing function has a role in not just "buying inputs" but in "securing
supply"
-Direct Costs - -These are costs which can be identified directly with the
production of a good or service; e.g. raw materials.
Usually strategic or leverae suppliers
-Indirect Costs - -These are costs which cannot be matched against each
product because they need to be paid whether or not the production of good
or services takes place; e.g. rent on the premises.
-Kraljic Matrix - -A tool for portfolio analysis: a four-box matrix that reflects
the segmentation of spend based on an assessment of the value of the
spend relative to the market risk to acquire
1. Leverage Suppliers
2. Strategic Suppliers
3. Routine Suppliers
4. Bottleneck Suppliers
-CAPEX is - -1. Capital expenditures are for major purchases that will be
used in the future.
2. The life of these purchases extends beyond the current accounting period
in which they were purchased.
3. Because these costs can only be recovered over time through
depreciation, companies ordinarily budget for 4. CAPEX purchases separately
from preparing an operational budget.
-OPEX - -Operating expenses are the costs for a company to run its
business operations on a daily basis.
-CAPEX - -1. Useful beyond its curent year
2. Lump sum up front
3. 3-10 year accounting lifespan for depreciaiton
,4. Listed as preprty or equipment
5. Tax deducted as asset depreciated
-Name the 13 stages of the procurement cycle - -1. Understand the need.
2. Market Commodity options.
3. Develop Stratgey/ Plan.
4. Pre-procurement / market test.
5. Develop required documentation.
6. Supplier Selection.
7. Issue invitation to tender.
8. Bid / tender evaluation.
9. Contract Award.
10. Warehouse logistics & receipt.
11. Contract performance review and continuous improvement.
12. Supplier relationships / contract management.
13. Asset management / end of life.
-Scope of Procurement - -1. Contributor of Added Value
2. Manages cost of procured materials & services on behalf of an
organisation
3. Helps manage inventory
4. Works alongside logistics partner function
5. Helps mange quality in procurement
6. Manages delivery performance
7. Manages & controls waste in the supply chain
-Porters Value Chain - -Primary - Inbound Logistics, Operations, Outbound
Logistics, Marketing & sales, Services
Support Activities - Firm Infrastructure, HR Management, Technology,
Procurement
-Action points for CAPEX purchasing - -1. Documentation or guidline and
standard procedure
2. Cross-functional team for appraisal & evaluation
3. Appropriate project evaluation methology
4. Process automation (E-platform)
5. TCO / Life cycle costing
6. Regular review for better control & monitoring
-5 rights of procurement - -Right Quality
Right Quantity
Right Price
Right Place
Right Time
, -Right Quality - -goods which are of satisfactory quality and fit for their
intended purpose e.g. ensuring an accurate specification of the requirement
and its quality standards.
-Right Quantity - -sufficient to meet demand and maintain service levels
while minimising stock holding e.g. by ensuring that there is accurate
demand forecasting and efficient inventory management.
-Right Place - -goods delivered to the appropriate delivery point, packaged
and transported so as to secure their safe arrival in good condition e.g. by
including transport instructions including packaging requirements as part of
purchase orders.
-Right Time - -delivery of goods at the right time to meet demand, i.e. not
too late but not so early as to incur unnecessary inventory costs e.g. by
ensuring accurate demand management, placing orders in time for suppliers
to provide timely delivery and ensuring that suppliers are aware of delivery
requirements.
-Right Price - -securing all of the above at a reasonable, fair, competitive
and affordable price. Ideally, minimising procurement costs in order to
maximise profit e.g. by carrying out price and supplier cost analysis and/or
by carrying out competitive tendering and negotiation. The 'right' price is
one that represents good value for money.
-Life Cycle cost (LLC) - -The total cost throughout its life including planning,
design, acquisition and support costs and any other costs directly
attributable to owning or using the asset".
-Total Cost of Ownership (TCO) - -1. TCA
2. Tooling
3. Insurance
4. Operation
5 Maintenance
6 Training
7. Storage
8. Disposal
-TCO Acquisition costs - -Acquisition/Physical Hardware costs include the
cost of equipment or property before taxes, but after commissions,
discounts, purchasing incentives, and closing costs.
Sometimes this will include one-time peripheral equipment or upgrades
necessary to installation or utilisation of the asset.
, -TCO Operating costs - -Operating costs include subscriptions or services
needed to put the item into business use. This includes utility costs, direct
operator labour, and initial training costs.
-TCO Personnel costs - -Personnel overhead may include administrative
staffing, support personnel to the equipment, facility housing the equipment
and operators.
This may include ongoing training and troubleshooting labour for
maintenance purposes.
-Opening Considerations 1 of 2 - -1. Procurement involcves something
which may be tangible (goods) or intangible (services
2. The procurement process begins by indentifying a need and is completed
once the goods or services that meet the need are delivered.
3 Procurement is increasingle becoming a strategic function of the business
and involves a high level of skill
4. Procurement takes place in most of all organisations; everything that
needs sourcing and buying for an organisation involves procurement.
Therefore, the costs of an organisation can be linked to procurement
-Supply Chain - -a network of individuals, organisations, technology,
activities and resources that work together to make sure goods or services
flow.
If one part of the chain fails, every organisation further along the chain can
also fail.
-Suppl chain managment aims to - -1. Reduce costs
2. Improve Value
3. Reduce risk
Should give the supplying organisation a competitive advantage by adding
value throughout the process, and achieving it in the most effective, efficient
and ethical way.
-SCM - -Supply chain management and procurement are not the same
thing, although they are inter-related
Without procurement, there would be no supply chain
1. Procurement as part of supply chain management
2. Procurement is about procuring products and servicing as a response to a
need, while a supply chain is the infrastructure involved in physically getting
the products or services needed.
Procurement includes the following
3. Preparing specifications
4. Monitoring quality
5. Sourcing
6. Buying
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