L4M4 - Chapter 2 Questions and Answers 100% Pass

L4M4 - Chapter 2 Questions and Answers 100% Pass How does the Pareto Principle differ to the ABC Analysis? - Correct Answer ️️ -Instead of the Pareto 80/20 split, the figure splits the suppliers into three categories. 'A', 'B', 'C'. They are categorised according to their levels of importance/spend to the buying organisation. Figure 2.1 : 'A' suppliers represent 20% of the total spend (these suppliers are responsible for the highest level of spend, most important). 'B' suppliers are collectively responsible for a smaller percentage of spend. Majority of suppliers fall into category 'C' (they are responsible for the smallest amount of spend) What management style does the ABC Analysis use? - Correct Answer ️️ -A - Strategic B - Closer tactical C - Transactional What are the main economic indices? - Correct Answer ️️ -Stock markets (e.g. FTSE 100, SENSEX) - The value of public limited companies stocks and shares Gross Domestic Product (GDP) - The monetary value of the goods and services manufactured or supplied in a financial period Producer Price Index (PPI) - Average changes in price that a producer receives in return for its goods or services Consumer Price Index (CPI) - A weighted measurement that evaluates the average cost of a 'basket' of goods bought by a consumer Commodity indices - The value of a particular commodity at a point in time (e.g. steel, oil, wheat) Small Business Lending Index (SBLI) - An indicator of small business lending trends CIPS Purchasing Managers' Index - A highly accurate set of facts about current industry conditions in manufacturing, construction and services Why should procurement professionals review economy indices? - Correct Answer ️️ - They can gain an insight into how profitable a supplier may be and whether supply is plentiful. This helps highlight any risks the buying organisation may be exposed to. How can primary data be collected? - Correct Answer ️️ -Direct communication - one to one communication with suppliers through conversations or emails Networking - meeting professionals at events & exchanging information Specifically-commissioned market research - focus groups, interviews & questionnaires Trade fairs and exhibitions - seeing products or services first hand at events How can secondary data be collected? - Correct Answer ️️ -Economic indices - Consumer Price Index (CPI), Producer Price Index (PPI), Consumer Confidence Index (CCI), Current Employment Statistics (CES) Supplier websites - online databases & business listings Financial journals - published documents containing information on market analysis and current trends Professional magazines - publications such as 'Supply Management' which give information on current procurement trends and concerns Published surveys - information published by governments on demographics and social trends Professional bodies - CIPS Organisations promoting trade - embassies, trade associations or unions sharing global information What 4 categories can commodities traded on a stock exchange be divided into & give examples of each - Correct Answer ️️ -1. Energy - oil, natural gas 2. Agricultural - wheat, cotton, cocoa 3. Metals - steel, gold 4. Livestock - live cattle, lean pigs What factors can affect commodity pricing? - Correct Answer ️️ -Supply and demand - price drops if supply is greater than demand. price increases if demand is greater than supply Currency fluctuations - price increases for buying organisation if supplier's currency is strong against the buyer's currency Conflict - if countries are engaged with conflict, it may become harder to import and export products, prices will increase Force majeure - (earthquake/volcanic eruption occurs) supply of commodities could be restricted, inflate prices Prices of competitors - suppliers react to competition, lots of competition means prices reduce. limited or no competition means prices increase Speculation - if media reports suggest product is short in supply, price will increase What do experts forecast prices against? - Correct Answer ️️ -Historical data Supply and demand The state of the economy Global events Give some futures exchange examples - Correct Answer ️️ -LME - London Metals Exchange NASDAQ - National Association of Securities Dealers Automated Quotation CME - Chicago Mercantile Exchange ICE - Intercontinental Exchange What tools and methods can be used to analyse potential sales? - Correct Answer ️️ - Porter's Five Forces Supply and Demand Historical sales data analysis Trends Expert opinions What does analysing potential sales mean? - Correct Answer ️️ -Work closely with internal team so the procurement function can be proact