The Purchasing process - ANSWER 1. Define Specification.
2. Select Supplier
3. Contract Agreement
4. Ordering
5. Expediting
6. Evaluation Follow up
Definition of Procurement & Supply - ANSWER recognition of the fact that the purchasing function has a role in not just "buying inputs" but in ...
CIPS Level 4 Module 1 CORRECT 100%
The Purchasing process - ANSWER 1. Define Specification.
2. Select Supplier
3. Contract Agreement
4. Ordering
5. Expediting
6. Evaluation Follow up
Definition of Procurement & Supply - ANSWER recognition of the fact that the purchasing function has a
role in not just "buying inputs" but in "securing supply"
Direct Costs - ANSWER These are costs which can be identified directly with the production of a good or
service; e.g. raw materials.
Usually strategic or leverae suppliers
Indirect Costs - ANSWER These are costs which cannot be matched against each product because they
need to be paid whether or not the production of good or services takes place; e.g. rent on the premises.
Kraljic Matrix - ANSWER A tool for portfolio analysis: a four-box matrix that reflects the segmentation of
spend based on an assessment of the value of the spend relative to the market risk to acquire
1. Leverage Suppliers
2. Strategic Suppliers
3. Routine Suppliers
4. Bottleneck Suppliers
CAPEX is - ANSWER 1. Capital expenditures are for major purchases that will be used in the future.
2. The life of these purchases extends beyond the current accounting period in which they were
purchased.
, 3. Because these costs can only be recovered over time through depreciation, companies ordinarily
budget for 4. CAPEX purchases separately from preparing an operational budget.
OPEX - ANSWER Operating expenses are the costs for a company to run its business operations on a daily
basis.
CAPEX - ANSWER 1. Useful beyond its curent year
2. Lump sum up front
3. 3-10 year accounting lifespan for depreciaiton
4. Listed as preprty or equipment
5. Tax deducted as asset depreciated
Name the 13 stages of the procurement cycle - ANSWER 1. Understand the need.
2. Market Commodity options.
3. Develop Stratgey/ Plan.
4. Pre-procurement / market test.
5. Develop required documentation.
6. Supplier Selection.
7. Issue invitation to tender.
8. Bid / tender evaluation.
9. Contract Award.
10. Warehouse logistics & receipt.
11. Contract performance review and continuous improvement.
12. Supplier relationships / contract management.
13. Asset management / end of life.
Scope of Procurement - ANSWER 1. Contributor of Added Value
2. Manages cost of procured materials & services on behalf of an organisation
Support Activities - Firm Infrastructure, HR Management, Technology, Procurement
Action points for CAPEX purchasing - ANSWER 1. Documentation or guidline and standard procedure
2. Cross-functional team for appraisal & evaluation
3. Appropriate project evaluation methology
4. Process automation (E-platform)
5. TCO / Life cycle costing
6. Regular review for better control & monitoring
5 rights of procurement - ANSWER Right Quality
Right Quantity
Right Price
Right Place
Right Time
Right Quality - ANSWER goods which are of satisfactory quality and fit for their intended purpose e.g.
ensuring an accurate specification of the requirement and its quality standards.
Right Quantity - ANSWER sufficient to meet demand and maintain service levels while minimising stock
holding e.g. by ensuring that there is accurate demand forecasting and efficient inventory management.
, Right Place - ANSWER goods delivered to the appropriate delivery point, packaged and transported so as
to secure their safe arrival in good condition e.g. by including transport instructions including packaging
requirements as part of purchase orders.
Opening Considerations 1 of 2 - ANSWER 1. Procurement involcves something which may be tangible
(goods) or intangible (services
2. The procurement process begins by indentifying a need and is completed once the goods or services
that meet the need are delivered.
3 Procurement is increasingle becoming a strategic function of the business and involves a high level of
skill
4. Procurement takes place in most of all organisations; everything that needs sourcing and buying for an
organisation involves procurement. Therefore, the costs of an organisation can be linked to procurement
Supply Chain - ANSWER a network of individuals, organisations, technology, activities and resources that
work together to make sure goods or services flow.
If one part of the chain fails, every organisation further along the chain can also fail.
Suppl chain managment aims to - ANSWER 1. Reduce costs
2. Improve Value
3. Reduce risk
Should give the supplying organisation a competitive advantage by adding value throughout the process,
and achieving it in the most effective, efficient and ethical way.
SCM - ANSWER Supply chain management and procurement are not the same thing, although they are
inter-related
Without procurement, there would be no supply chain
1. Procurement as part of supply chain management
2. Procurement is about procuring products and servicing as a response to a need, while a supply chain is
the infrastructure involved in physically getting the products or services needed.
Procurement includes the following
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