Summary
Summary CIPS L2M4 Systems Technology
Summary of CIPS Level 2 Module 4 course.
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ContentsL2M4 Systems Technology ......................................................................................................................... 4
1 How systems technology and databases contribute to effective procurement and supply ................ 4
1.1 Using systems technology and databases to contribute to effective procurement and supply .. 4
Analyzing ............................................................................................................................................... 4
Sourcing ................................................................................................................................................ 5
Contracting............................................................................................................................................ 6
Requisitioning ....................................................................................................................................... 6
Purchasing ............................................................................................................................................. 7
Paying .................................................................................................................................................... 7
1.2 How the use of the internet, intranets and extranets leads to effective procurement and
supply 8
The use of internet search engines to locate details about suppliers and customers ......................... 8
Other uses of the internet .................................................................................................................... 9
The use of social media to obtain feedback on supplier performance ................................................ 9
Sharing what we have – the power of an intranet ............................................................................... 9
Outside in – using an extranet .............................................................................................................. 9
Using a supplier extranet .................................................................................................................... 10
The e-marketplace – a different way to buy....................................................................................... 10
1.3 The role of e-sourcing and e-tendering systems in procurement and supply ............................ 11
Using e-sourcing.................................................................................................................................. 11
Helping with compliance..................................................................................................................... 11
Getting a lower price........................................................................................................................... 11
Helping to choose suppliers ................................................................................................................ 11
Making a choice using more than just price ....................................................................................... 12
Making it easy for suppliers ................................................................................................................ 12
Finding new ideas and innovation ...................................................................................................... 12
2 Types of systems technology for supplier selection, ordering and payment ..................................... 13
2.1 Describe the use of electronic sourcing systems for supplier selection and profiling ............... 13
E-sourcing............................................................................................................................................ 13
Informing suppliers ............................................................................................................................. 13
Engaging suppliers in the sourcing process ........................................................................................ 14
Selecting a supplier ............................................................................................................................. 14
, Making a proposal............................................................................................................................... 15
Summary ............................................................................................................................................. 15
2.2 Identify systems used in procurement and supply ..................................................................... 16
Web portals......................................................................................................................................... 16
Server or the cloud.............................................................................................................................. 16
Types of system................................................................................................................................... 17
Integrated or separate systems .......................................................................................................... 20
2.3 Identify the use of P2P (procure to pay) systems for ordering from suppliers and payment to
suppliers .................................................................................................................................................. 21
Requisitions and e-catalogues ............................................................................................................ 21
Purchasing ........................................................................................................................................... 23
The goods receipting process ............................................................................................................. 24
Processing supplier invoices ............................................................................................................... 24
Paying suppliers .................................................................................................................................. 25
P2P systems ........................................................................................................................................ 25
3 Why quality management is important in procurement and supply ................................................. 27
3.1 Identify components of quality management in procurement and supply ................................ 27
Quality as a philosophy ....................................................................................................................... 27
Total quality management .................................................................................................................. 27
3.2 Identify the costs of quality ........................................................................................................ 32
The cost of quality ............................................................................................................................... 32
Calculating the costs of quality ........................................................................................................... 33
How much should quality cost ............................................................................................................ 34
The impact of quality on reputation .................................................................................................... 34
3.3 Identify techniques associated with quality assurance and quality management ..................... 36
Analyzing ............................................................................................................................................. 36
Sourcing .............................................................................................................................................. 36
Contracting.......................................................................................................................................... 37
Requisitioning ..................................................................................................................................... 40
Purchasing and paying ........................................................................................................................ 40
Quality improvement models and techniques ................................................................................... 41
Kaizen .................................................................................................................................................. 42
Lean philosophy .................................................................................................................................. 42
,Six Sigma ............................................................................................................................................. 46
,L2M4 Systems Technology
1 How systems technology and databases contribute to effective
procurement and supply
Systems technology provides procurement and supply with ways to:
Review what was purchased in the past and plan for the future.
Find and select suppliers.
Manage contracts with suppliers.
Make purchases.
Pay suppliers.
1.1 Using systems technology and databases to contribute to effective procurement and
supply
Analyzing: using data to understand what an org. has spent, which suppliers it has used and
what it needs to buy in the future.
Sourcing: happens when an org. needs to look for suppliers to buy goods/services from.
Contracting: puts arrangements in place with suppliers for the goods/services that the org. is
buying. Details include price to be paid, how the goods will be delivered, etc.
Requisitioning: when the org. makes a request to buy goods/services.
Purchasing: when the order is placed and goods/services are supplied.
Paying: at the end of the process, when the supplier is paid.
Analyzing
Data provide information about the goods/services an org. has bought and can be used in
meetings with stakeholders and negotiations, as well as making prediction for future demand.
IT system: the part of systems technology an org. uses to store, process or send data (database)
and can be used to:
, Paying employees.
Recording financial information.
Invoicing customers.
Managing production processes.
Data can be used to look at historical data that happened in the past like:
Quantitative data from a purchasing IT system.
Spend data from a payment IT system.
Price data from a contract database or catalogue.
Consolidating demand: is an example of economy of scale, where it allows an org. to group
demand helping the org. to buy things in an organized way, helping them to negotiate a better
price since they’re buying in bulk.
Demand management: understanding the demand for a commodity and seeking to change
patterns of consumption to minimize costs.
Take action to reduce what it buys and thus make savings.
Optimize demand by buying exactly the right amount at the right time.
It helps suppliers by smoothing demand.
Overspend: a variance when spend is greater than the budget.
Underspend: a variance when spend is less than the budget.
Sourcing
An org. needs to:
Understand the market and suppliers of a commodity.
Use a sourcing process to find and select suppliers.
Internet
Figure 1 An example of information that can be found using internet search
, E-marketplaces: Where suppliers register and transact online like Alibaba.com or diytrade.com.
E-sourcing: system technology that an org. uses for the sourcing process.
Contracting
Contract register: a contract database to store/organize multiple contracts information.
Standard terms and conditions: jurisdiction clause, termination clause, payment clause.
Catalogues: a list of items for sale contains pictures, descriptions, prices, etc. an electronic copy
is called e-catalogue.
Sustainability: supporting future ecological balance by not harming the environment or
depleting its resources, it also includes impact on people, incomes and economies.
Requisitioning
- The stage where the buyer decides it is time to make a purchase.
e-procurement system ensures that:
- The correct data is input.
- Buying rules at the organizations are being followed.
- Contracts and catalogues are being used.
When a purchase is avoided the organization makes a saving (spend avoided).
The start of the buying process is called raising a requisition.
Some of the areas that requisition rules can cover:
- Who can buy, what they can buy, what’s the approval policy.
- Do you need to choose from a catalogue? Do you need to use a particular supplier?
Having rules for the requisitioning process help promote contract compliance.
Contract compliance: where items purchased conform to the agreed contract.
Getting things right in the requisition stage helps to create useful data that an organization can
use for analyzing.
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