CIPS Level 4 Module 1 |215 Questions and Answers(A+ Solution guide)
The Purchasing process
Definition of Procurement & Supply
Direct Costs
Indirect Costs
Kraljic Matrix
CAPEX is
OPEX
CAPEX
Name the 13 stages of the procurement cycle
Scope of Procurement
Porters Value Chain
Action points...
Ans: recognition of the fact that the purchasing function has a role in not just "buying
inputs" but in "securing supply"
3). Direct costs
Ans: 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
4). Indirect costs
Ans: 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.
5). Kraljic matrix
Ans: 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
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, 6). Capex is
Ans: 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.
7). Opex
Ans: Operating expenses are the costs for a company to run its business operations
on a daily basis.
8). Capex
Ans: 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
Ans: 1. Contributor of Added Value
2. Manages cost of procured materials & services on behalf of an organisation
3. Helps manage inventory
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, 4. Works alongside logistics partner function
5. Helps mange quality in procurement
6. Manages delivery performance
7. Manages & controls waste in the supply chain
Support Activities - Firm Infrastructure, HR Management, Technology, Procurement
12). Action points for capex purchasing
Ans: 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
13). 5 rights of procurement
Ans: Right Quality
Right Quantity
Right Price
Right Place
Right Time
14). Right quality
Ans: 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.
15). Right quantity
Ans: 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.
16). Right place
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, Ans: 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.
17). Right time
Ans: delivery of goods at the right time to meet demand, i.e. not too late but not so
early as to incur unnecessary inventory costs e.g. by ensuring accurate demand
management, placing orders in time for suppliers to provide timely delivery and ensuring
that suppliers are aware of delivery requirements.
18). Right price
Ans: securing all of the above at a reasonable, fair, competitive and affordable price.
Ideally, minimising procurement costs in order to maximise profit e.g. by carrying out
price and supplier cost analysis and/or by carrying out competitive tendering and
negotiation. The 'right' price is one that represents good value for money.
19). Life cycle cost (llc)
Ans: The total cost throughout its life including planning, design, acquisition and
support costs and any other costs directly attributable to owning or using the asset".
Ans: Acquisition/Physical Hardware costs include the cost of equipment or property
before taxes, but after commissions, discounts, purchasing incentives, and closing
costs.
Sometimes this will include one-time peripheral equipment or upgrades necessary to
installation or utilisation of the asset.
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