Summary
Summary of CIPS L2M1 Introducing Procurement and Supply
Summary of CIPS Level 2 Module 1 course.
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ContentsL2M1 Introducing Procurement and Supply .............................................................................. 4
1. The role of procurement and supply within an organization ...................................... 4
1.1 Common terms that describe aspects of procurement & supply ............................. 4
1.2 The roles & benefits of procurement & supply in organization ............................... 7
Responsibilities of procurement & supply professionals:............................................. 7
Achieving good value for money ............................................................................................. 8
Sustainability in procurement & supply............................................................................... 8
The roles of staff in the procurement department ........................................................... 9
The roles of procurement & supply staff in making expenditures with suppliers
........................................................................................................................................................... 10
The tiers of a supply chain ...................................................................................................... 10
1.3 The components of a supply chain .................................................................................... 11
Customers and their customers ............................................................................................ 11
Customer and consumers........................................................................................................ 11
Suppliers and their use of suppliers ................................................................................... 12
Global aspects of supply chain .............................................................................................. 12
2. The organizational impact of procurement & supply .................................................. 13
2.1 How effective procurement impacts on organizational efficiency ....................... 13
How does effective procurement impact on profitability? ........................................ 13
Creating savings and improving efficiency ...................................................................... 13
Budgets and budget monitoring ........................................................................................... 14
How effective procurement helps achieve targets ........................................................ 14
Total cost of ownership or whole life cost (TCO) .......................................................... 15
The different objectives of a procurement and supply function.............................. 15
Creating centralized, devolved & lead buying structures of procurement &
supply functions.......................................................................................................................... 15
2.2 The 5 rights of procurement and supply ........................................................................ 16
Defining value for money ........................................................................................................ 16
3. How are products & services received from suppliers & delivered to customers
17
3.1 The delivery of products & services from external suppliers ................................ 17
The need for suppliers of products & services from external suppliers ............... 17
Outsourced services .................................................................................................................. 18
, Seeing suppliers as part of the supply chain.................................................................... 18
3.2 The delivery of products & services to customers ...................................................... 19
What are products & services?.............................................................................................. 19
The role of the customer.......................................................................................................... 19
Seeing customers as part of the supply chain ................................................................. 19
4. The stages of the sourcing process ...................................................................................... 21
4.1 Stages of the sourcing process ............................................................................................ 21
Identification of needs .............................................................................................................. 21
Producing specifications.......................................................................................................... 22
Requesting quotations.............................................................................................................. 22
Receiving quotations................................................................................................................. 22
Assessing supplier quotations............................................................................................... 22
Making contract award recommendations ...................................................................... 23
Contract authorization ............................................................................................................. 23
Order placement, frameworks/blanket call-off orders ............................................... 23
Performance and delivery....................................................................................................... 24
Payment of suppliers ................................................................................................................ 24
Expediting deliveries ................................................................................................................ 25
Reviewing outcomes and processes ................................................................................... 25
Pre and post-award stages of sourcing process ............................................................. 25
5. Effective & efficient administration of purchases from external suppliers ......... 26
5.1 effective and efficient administrations ............................................................................ 26
Defining administration ........................................................................................................... 26
Reviewing the steps taken in forming agreements with suppliers......................... 28
Defining effectiveness and efficiency.................................................................................. 29
5.2 The administration of the pre-contract stages of a sourcing process ................. 29
The creation of requisitions and requirements .............................................................. 29
The use of specifications, KPIs and contract terms ....................................................... 30
The creation of requests for quotations or invitation to tender .............................. 30
The use of prequalification questionnaires (PQQ) ........................................................ 31
The submission of quotations or tenders for requirements ..................................... 31
The assessment of quotations and tenders ...................................................................... 31
5.3 The administration of the award and post award stages of a sourcing process
................................................................................................................................................................ 32
, The creation of orders or tender award documentation ............................................ 32
Order acknowledgments and delivery notes ................................................................... 32
Receiving invoices ...................................................................................................................... 32
Invoices matching and dealing with non-compliance.................................................. 32
5.4 The need for approvals in the administration of procurement & supply .......... 33
Typical procedures for authorizing budgets, requisitions, orders, tenders ........ 33
The separation of duties .......................................................................................................... 33
Contract recommendation and authorization................................................................. 34
Levels of delegated authority for contracts ..................................................................... 34
Ensuring an efficient approval process ............................................................................. 34
6. The importance of ethics and responsible procurement in organizations &
supply chains ......................................................................................................................................... 35
6.1 Good ethical practices and procedures within the context of the procurement
and supply function ........................................................................................................................ 35
Application of the CIPS Code of Conduct ........................................................................... 35
Details included in ethical codes affecting procurement and supply .................... 35
The use of ethical codes of practice..................................................................................... 36
The use of documented policies & procedures for the work of procurement and
supply.............................................................................................................................................. 37
The principles of corporate governance ........................................................................... 37
Forms of bonded and exploitative labor than can exist in supply chains ............ 37
,L2M1 Introducing Procurement and Supply
1. The role of procurement and supply within an organization
1.1 Common terms that describe aspects of procurement & supply
Procurement: the act of obtaining something whether it’s tangible (product) or
intangible (service).
Strategic: high-level planning usually related to long-term goals.
Procurement Process
1- Identify the needs
2- Develop specs
3- Research & evaluate suppliers
4- Send RFQ or ITT (invitation to tender)
5- Evaluate responses & award contract
6- Manage contract & review
Purchasing: part of procurement process concerned with acquiring goods/services,
including payment of invoices.
Procurement ≠ purchasing
Buying: the physical act of placing orders to make a purchase.
Supply: the act of physically getting something from the supplier to the buyer
(customer). How much/many of a product/service an organization has to sell.
Supply chain: a network of individuals, organizations, technology, activities &
resources working together to make sure goods/services reach to the end user.
Materials management: part of procurement process that makes sure the
organizations have the materials they need to operate.
Inventory: part of materials management, the stock of goods, materials or
products.
Logistics: the control of the flow of goods/services between 2 points. (Handling,
packaging, inventory, warehousing & transportation).
Distribution: process of moving materials/products from one supply chain
participant to another.
, Expeditor: the person in the buying organization who carries out the
expediting function in procurement, which means following the issues of a purchase
order/contract from receipt of order by supplier to delivery, dealing with delivery
problems as they arise.
Contracts management: buyers responsibility to hold meeting w/ suppliers, give
them feedback and address any issues. It includes:
- Monitoring supplier performance
- Monitoring quality
- Monitoring prices
Types of procurement
1- Capital & revenue purchases: procurement of something of value to an org.
o Products whose value depreciates with time (machines, buildings).
o Capital purchases become assets: value of everything an org. owns.
2- Products: tangible. (Office supplies, components in a factory).
3- Services: intangible. (Valet parking, energy contract)
4- Direct & indirect
o Direct: relates to spend raw material (purchasing paper for the
production if a book)
o Indirect: relate to spend on goods/services needed for day-to-day
running (maintenance cost, utility bills, employees laptops)
, 5- Outsourcing: contracting w/ an outside org. to carry out a service. (Catering,
IT support, social media, cleaning services).
6- Insourcing: where the org. undertakes it own processes/services.
The Outsource Matrix is used to help decide whether a product should be
outsourced or made in-house.
Economy: the sate of money flow, manufacturing, distribution, consumption and
availability of goods/services/energy/labor or other resources at country level.
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