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.
Defi...
CIPS Flashcards L4M1 QUESTIONS &
ANSWERS(RATED A)
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 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
- Risk management
- Financial position
- Shareholder expectations
External:
- Prices charged by competitors
- Extent of competition
- Nature of competition
- Customer perception of value
- Cost of raw materials
- Environmental factors affecting demand and affordability
What are the 2 models of supplier pricing - ANSWER Cost-based models - cost mark-up pricing, marginal
pricing
What are factors which affect the total cost of ownership - ANSWER Delivery
Training
Maintenance
Repair
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