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CIPS Flashcards L4M1 QUESTIONS & ANSWERS(RATED A)
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Define procurement - ANSWER Procurement is the process of obtaining goods or services through following a process that includes identifying the need through to goods or services being delivered. Define purchasing - ANSWER Purchasing is the act of physically ordering and buying something. Defi...

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  • October 3, 2024
  • 22
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • cips flashcards l4m1
  • cips flashcards l4m1 questions answersrated a
  • define procurement answer procurement is the pro
  • define purchasing answer purchasing is the act o

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CIPS Flashcards L4M1 QUESTIONS &
ANSWERS(RATED A)
Define procurement - ANSWER Procurement is the process of obtaining goods or services through
following a process that includes identifying the need through to goods or services being delivered.



Define purchasing - ANSWER Purchasing is the act of physically ordering and buying something.



Define supply - ANSWER Supply is the infrastructure which ensures goods/services can be delivered



Define value - ANSWER Value is the worth of something, the difference between what we pay and what
a potential customer is willing to pay



What is a good - ANSWER A good is a tangible physical item such as raw materials, components



What is a service - ANSWER A service is an intangible item such as cleaning, training



What are constructional works - ANSWER Constructional works include both goods and services, such as
concrete, architecture



What are stock items - ANSWER Stock items are ones we can hold inventory of such as raw materials,
components



What are non-stock items - ANSWER Non-items are ones which cannot be held, such as capital
procurements, services



Outline what is meant by direct and indirect procurements - ANSWER Direct material - traceable to units
of production such as wood into furniture

Indirect material - not traceable to specific units such as sanding paper into sanding machinery

, Direct labour - directly involved in the making of units

Indirect labour - Indirectly involved in the making of units such as maintenance engineers

Direct expense - variable costs which are rare such as paying royalties on each unit produced

Indirect expense - fixed or step-fixed, such as factory rent




What are the key features of services procurements - ANSWER Intangibility - specifying services levels is
challenging

Heterogeneity - every instance is unique

Perishable - provided in real time and cannot be stored

Location - can only be performed in specific locations

Evaluate - they are difficult to assess due to subjectivity

Changing - requirements may change from initial specification



What are the 5 rights of procurement and their definitions - ANSWER price - securing all of the below at
a reasonable, affordable, and competitive price

place - goods delivered to the appropriate point and transported to ensure good condition on arrival

quality - goods which are fit for purpose

quantity - sufficient quantity to meet demand while minimising excess stock holding

time - goods delivered at the right time, not so early as to incur inventory costs



What is the right price - ANSWER Supplier:

- A price the market will bear

- Allows seller to win business

- Covers costs and allows for a healthy profit

Buyer:

- the purchaser can afford, allowing for a profit when the product is sold

- fair and reasonable, representing value for money for the total package of benefits

- gives the purchaser an advantage over competitors

, - reflects sound purchasing practices



What are the 2 methods used to determine if the price is right - ANSWER - Price analysis - determines if
the offered price is fair and appropriate for the purchased goods.

- Cost analysis - looks how the quoted price relates to the supplier's costs of production



What are the internal and external factors affecting supplier cost setting - ANSWER Internal:

- Cost of production

- How badly the supplier needs business

- How attractive a customer is

- Risk management

- Financial position

- Shareholder expectations

External:

- Prices charged by competitors

- Extent of competition

- Nature of competition

- Customer perception of value

- Cost of raw materials

- Environmental factors affecting demand and affordability



What are the 2 models of supplier pricing - ANSWER Cost-based models - cost mark-up pricing, marginal
pricing

Market-driven models - Market share, market skimming, promotional pricing, price volume



What are factors which affect the total cost of ownership - ANSWER Delivery

Training

Maintenance

Repair

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