costs associated with the running of an org electricity, labour.
Service procurement contracts Correct Ans-An intangible procurement. Specification
needs to be detailed to explain exactly what is required.eg a cleaning service.
1.2 Analyse the different sources of added value in procurement and supply. Correct Ans-
You will understand
Five rights of procurement
Total cost of acquisition and total cost of ownership.
Sources of added value and value for money.
, L4M1 Scope of influence of procurement and supply
Questions and Answers
Five rights of procurement should always be considered when procuring to add value.
Correct Ans-1) The right quantity 2) The right price 3) The right place 4) The right quality 5)
The right time.
1) The right quantity Correct Ans-Issues - too much - storage problems and costs.
too little - production could stop, consumer needs not met, economies of scale can be gained
by ordering in large quantities.
The right quality Correct Ans-Quality is meeting the needs and expectations of customers
with a fit for purpose product. can be achieved through:
Stating quality standards.
Producing a specification.
Quality standards Correct Ans-ISO 9000 - International organisation for standardisation.
Globally recognised standard of quality.
Product specification Correct Ans-An accurate specification ensures that standards of
quality are achieved. Typical elements of a specification:
1) Description of product
2) Drawings with exact size, dimensions, material, weight.
3) Colour
4) quantity
, L4M1 Scope of influence of procurement and supply
Questions and Answers
5) packaging
6) quality e.g quality standards BSI, ISO.
Types of specification Correct Ans-1) Conformance - details exactly what the product or
service will consist of e.g chemical formulae.
2) Performance - outlines what the product or service is to do or achieve.
LO1 Added value that can be achieved through procurement and supply.chain management.
Correct Ans-1.1 Describe the categories of spend that an organisation may purchase.
1.2 Analyse the different sources of added value in procurement and supply.
1.3 Compare the concepts of procurement and supply chain management.
1.4 Differentiate the stakeholders that a procurement or supply chain function may have.
Purchasing versus procurement Correct Ans-Purchasing is the act of physically buying
something, it is:
>transactional
>tactical
>reactive
>focus can just be on price
Procurement is a strategic function of a business, it is:
>proactive
>relational
, L4M1 Scope of influence of procurement and supply
Questions and Answers
>involves high level of skill
1.1 Categories of spend that an organisation may purchase Correct Ans-Definitions of
procurement and purchasing.
Breakdown of organisational costs.
stock and non stock
direct and indirect
Capital and operations expenditure
Service procurement.
Expediting Correct Ans-The process involved in the progress of an order to ensure stock is
received as quickly as possible.
Organisational costs Correct Ans-Fixed - don't change with the output. e.g. salaries, rent.
Variable - Relate to output and change accordingly e.g raw materials. Direct costs - related
directly to a job e.g raw materials. indirect - not directly associated e.g overheads salary rent.
The role of the procurement department Correct Ans-1) Capital purchases - evaluating
suppliers, involved in preparing specifications, compare buy or lease options, research total
life costs, benchmark prices, review quality and standards, ethical requirements.
2) Marketing - Sourcing promotional materials, booking events, stands for good value.
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