Cips Flashcards L4m1 Questions And
Answers With Verified Solutions Already
Passed Latest Updated 2024
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 primary activities in Porter's value chain - ANSWER✔✔Inbound
logistics
Operations
Distributional logistics
Marketing & sales
Services
What are support activities in Porter's value chain - ANSWER✔✔Firm
infrastructure
Human resource management
Technology development
Procurement
What is a capital expense - ANSWER✔✔expenses incurred for future benefit
which depreciates over time, such as machinery, building
What is an operational expense - ANSWER✔✔the day-to-day running costs of a
business such as office supplies, wages
What are the key features of capital procurements - ANSWER✔✔Charged to
capital account
Procured for a long time period and long lifespan
Tend to be high-value assets
Procurement involves complex requirements and many stakeholders
Involves developing a business case
Less frequent and irregular
What are the key feature of operational procurements - ANSWER✔✔Financed
from resource budget
Purchased for short-term consumption
Tend to be low-value
Less complex repeat spends
Straight-forward, following pre-set budgets
, 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
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