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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Devise a business case for requirements sourced externally | 20-25% | - Criteria for creating business cases
|
| Topic 2: Stakeholder management in defining needs | 15-20% | - Align needs with organisational objectives
|
| Topic 3: Legal and regulatory considerations | 10-15% | - Sustainability and ethical requirements
|
| Topic 4: Use specifications in procurement and supply | 20-25% | - Types of specifications
|
| Topic 5: Market management in procurement and supply | 20-25% | - Analyse market structures and competition
|
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NEW QUESTION # 166
Andrew is responsible for procurement of capital assets at Lumber Ltd. He is devising new business case for the purchase of a new band saw. The purchase price of the saw is $50,000. Andrew estimates that the machine will generate $10,000 per year of net cash flow. What is the payback period of this band saw?
Answer: D
Explanation:
Payback period is the time in which the initial outlay of an investment is expected to be recovered through the cash inflows generated by the investment. It is one of the simplest investment apprais-al techniques.
Since cash flow estimates are quite accurate for periods in the near future and relatively inaccurate for periods in distant future due to economic and operational uncertainties, payback period is an indicator of risk inherent in a project because it takes initial inflows into account and ignores the cash flows after the point at which the initial investment is recovered.
The formula to calculate the payback period of an investment depends on whether the periodic cash inflows from the project are even or uneven.
If the cash inflows are even (such as for investments in annuities), the formula to calculate payback period is:
Payback Period = Initial Investment / Net Cash Flow per Period
When cash inflows are uneven, we need to calculate the cumulative net cash flow for each period and then use the following formula:
Payback Period =A + (B/C)
Where,
A is the last period number with a negative cumulative cash flow;
B is the absolute value (i.e. value without negative sign) of cumulative net cash flow at the end of the period A; and C is the total cash inflow during the period following period A Cumulative net cash flow is the sum of inflows to date, minus the initial outflow.
NEW QUESTION # 167
One of the disadvantages of using standards in specification is that...
Answer: B
Explanation:
Using standards in specification is very convenient. They reduce the time and effort to produce. They tend to be very accurate with correct technical terminologies. They are well recognised and accepted by a wide range of suppliers and buyers. However, since a standard is very specific, complex and lengthy, it requires a lot of time to be drafted and approved. Therefore, standard tends to be static and don't encourage innovation. It may also not accommodate latest technology and trends.
NEW QUESTION # 168
Which of the following is an assumption of Kano model?
Answer: B
Explanation:
Kano model of excitement and basic quality (Kano et al, 1984; Berger et al, 1993; Matzler et al, 1996) brings a different perspective for the analysis of improvement opportunities in products and services because it takes in consideration the asymmetrical and non-linear relationship between performance and satisfaction. The Kano model classifies customers requirements in three categories (figure 3):
a) Basic Requirements. The basic requirements fulfill the basic functions of a product. If they are not present or their performance is insufficient, customers will be extremely dissatisfied. On the other hand, if they are present or have sufficient performance, they don ' t bring satisfaction. Customers see them as prerequisites.
For instance, for luxury automobiles, " air bags " are considered basic. A customer won ' t feel satisfied if the automobile has " air bag " , however he/she will not buy it if "air bag" is not present.
b) Performance Requirements. As for these requirements, satisfaction is proportional to the performance level
- the higher the performance, the higher the customer ' s satisfaction will be and vice-versa. Gas consumption in automobiles is an example of these requirements. Usually customers explicitly demand performance requirements.
c) Excitement Requirements. These requirements are key to customer satisfaction. If they are pre-sent or have sufficient performance, they will bring superior satisfaction. On the other hand, if they are not present or their performance is insufficient, customers will not get dissatisfied. For instance, a surprise gift at the end of a dinner in a restaurant will certainly bring satisfaction, but it will not cause dissatisfaction if not offered. These requirements are not demanded nor expected by customers.
Two other types of requirements may be identified in the Kano model: neutral and reverse ones. Neutral requirements do not bring either satisfaction or dissatisfaction. Reverse requirements bring more satisfaction if absent than if present.
Diagram Description automatically generated
Reference:
- Integrating Kano model and QFD for Designing New Products
- CIPS study guide page 171-172
NEW QUESTION # 169
Which of the following are ' secondary sources ' of data for costs and prices?
* Industry press
* Published economic indices
* Trade fairs
* Buyer ' s database on market data
Answer: C
Explanation:
In procurement, secondary data refers to information that has already been collected and published by external sources.
According to the CIPS L4M2 Study Guide, Chapter 2: Market and supplier research, secondary sources include:
"Published economic data, industry reports, trade journals, professional body publications, and market index reports." Review of each item:
* 1. Industry press - A secondary source, as it's published and interpreted for general use.
* 2. Published economic indices - Also secondary data, created by third parties like government agencies or industry groups.
* 3. Trade fairs - These are sources of primary data because buyers collect information directly from suppliers.
* 4. Buyer ' s database on market data - Usually considered primary data, as it's generated internally for specific business purposes.
The correct answer is A (1 and 2 only).
CIPS Study Guide Reference:
* Module: L4M2 - Defining Business Needs
* Chapter 2: Market management
* Topic: Primary and Secondary Data Sources
NEW QUESTION # 170
A consulting firm in London had previously had static budgets. They were set once and locked in for the year.
This resulted in departments meeting their budgets early and doing virtually nothing the rest of the accounting period. To address this imbalance, the company tossed out the static budget and developed a new one for each department of the next 18 months. And each month, real sales figures are analyzed against the plan and the budget is adjusted accordingly. Then the company adds another month into the budgeting plan. What type of budget this company is using?
Answer: B
Explanation:
A rolling budget is continually updated to add a new budget period as the most recent budget period is completed. Thus, the rolling budget involves the incremental extension of the existing budget model. By doing so, a business always has a budget that extends one year into the future.
Think of continuous (rolling) budgets as waves rolling ashore on the beach. A new wave comes in each time, replacing the one that was there before. From a financial perspective, the wave is your budget, and the time between waves is longer! These reporting time frames can be monthly, quar-terly, yearly, etc.
An incremental budget is a budget prepared using a previous period's budget or actual performance as a basis with incremental amounts added for the new budget period.
Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a "zero base," and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one.
Activity-based budgeting (ABB) is a system that records, researches, and analyzes activities that lead to costs for a company. Every activity in an organization that incurs a cost is scrutinized for potential ways to create efficiencies. Budgets are then developed based on these results.
Reference: CIPS study guide page 52-59
LO 1, AC 1.4
NEW QUESTION # 171
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A lot of progress is being made in the CIPS sector today. Many companies offer job opportunities to qualified candidates, but they have specific L4M2 certification criteria to select qualified candidates. Thus, they can filter out effective and qualified candidates from the population. Defining Business Needs (L4M2) must be taken and passed to become a certified individual.
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