O1. Outline FIVE differences between purchasing goods and purchasing
services. - ANSWER-1. Goods are tangible, services are intangible:
2. Services cannot be separated from their supplier:
3. Heterogeneity: goods are usually uniform in nature while services are
unique at each delivery
4. Services 'perish' immediately on delivery whereas goods can be stored
until required
5. Products are easier to specify, being tangible
O2. Explain THREE circumstances in which a competitive tendering exercise
might not be the best approach to making a purchase. - ANSWER-1. Urgency
2. Commercial confidentiality or national security (e.g. military
organisations):
3. Value of the purchase:
4. Production costs cannot be measured accurately:
,5. Price is not the only criterion for supplier selection and contract award
6. Intellectual Property Rights and monopoly
O2. Describe TWO e-sourcing tools and their use in procurement and supply.
- ANSWER-1. E-Catalogues
2. E-Tendering
3. E. Auction
4. Reverse Auctions
5. Online suppleir evaluation data
O3. Explain the role of a shared services unit (SSU). - ANSWER-SSUs reflect a
desire to centralise and share services
The shared service provider becomes a dedicated provider of services such
as; finance, HR, IT and procurement which continue to be provided internally
An SSU manages costs and quality SLAs to demonstrate value for money.
An SSU's benefits may be summarised as:
• cost effective internal service;
• liaison with its customers;
• anticipating future demand;
,• employing resources and providing higher levels of service more cost
effectively than if they were provided by a department or an external
provider.
O3. A manufacturer of electrically powered tools for the engineering industry
consists of four separate business units, each of which undertakes its own
purchasing activities.
Discuss THREE benefits of centralising all purchasing activities with those of
retaining the present decentralised structure. (1 of 2) - ANSWER-
Centralisation' and 'decentralisation' refer to the degree to which
responsibility and authority is delegated. Arguments for centralisation can
only be evaluated in the context of specific organisational environment and
might include:
1. Policies & procedures
2. Consolidation of requirements
3. Location
4. Supply market structure
5. Expertise required:
6. Customer demands
, O3. A manufacturer of electrically powered tools for the engineering industry
consists of four separate business units, each of which undertakes its own
purchasing activities.
Discuss THREE benefits of centralising all purchasing activities with those of
retaining the present decentralised structure. (2 of 2) - ANSWER-The benefits
of retaining the present de-centralised structure include:
1. Local responsibility
2. Knowledge of the local environment, culture and customer needs
3. Skills development of buyers in each unit
4. Better communication and coordination between procurement and
operating departments,
5. Customer focus: buyers are 'closer' to internal and external customers
developing understanding of user needs and problems.
6. Quicker response to operational and user needs,
7. Smaller purchase quantities:
8. Accountability: d
9. Freeing central procurement units to focus on higher-level, value-adding
tasks.
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