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| Section | Objectives |
|---|---|
| Topic 1: Understand the use of specifications in procurement and supply | |
| Topic 2: Understand how to develop a business case for requirements to be sourced from external suppliers | - Analyse how market factors affect procurement |
| Topic 3: Understand market management in procurement and supply | - Compare the competitive forces that influence markets
|
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NEW QUESTION # 139
A company uses eight different floor cleaning products at different premises and has decided to standardise on just one. This product is available from a large number of suppliers. What benefits should the company expect to achieve?
Answer: C
Explanation:
Comprehensive and Detailed Explanation (paraphrased from CIPS L4M2 content) Standardising from many similar products to one common product is a classic variety reduction / standardisation decision.
In CIPS L4M2, when standardisation is discussed, the benefits highlighted include:
* Economies of scale - buying larger quantities of a single product allows for better prices and volume discounts.
* Reduced administration and handling costs - only one product code to manage, fewer invoices and orders, simpler stock control.
* Simplified quality control - one specification and one performance profile to monitor.
Because the product is available from many suppliers, competition remains strong. This supports lower prices, not higher.
* Option A (Lower costs) - correct, due to economies of scale and reduced process/handling complexity.
* Option B (Fewer staff) - staff numbers are driven by overall workload, not just the number of product variants; standardising doesn't automatically cut headcount.
* Option C (Increased stock levels) - if anything, standardisation often reduces safety stock (you can pool demand into one line).
* Option D (Increased costs) - contradicts the expected benefits of standardisation and competition between many suppliers.
Relevant CIPS L4M2 areas:
* Standardisation and variety reduction in specifications
* Economies of scale and cost drivers in sourcing decisions
* Managing supply markets with multiple potential suppliers
NEW QUESTION # 140
Which of the following is an assumption of Kano model?
Answer: C
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 # 141
FSB Group is developing a specification for the construction of a new building. The project stakeholders need the specification to set specific criteria to ensure fair labour practices and local employment opportunities are prioritised. Which of the following describes this type of sustainability criteria?
Answer: B
Explanation:
Detailed Explanation:Social sustainability focuses on ethical considerations like fair labour practices, inclusivity, and community development. By addressing these criteria, FSB Group aligns with responsible business practices. Reference: CIPS Level 4, Sustainability in Procurement.
NEW QUESTION # 142
A procurement team is categorising their purchased items into four quadrants of Kraljic ' s supply chain portfolio matrix. They realise that there are some low-value items which come from very few suppliers in the market. The organisation is critically dependent on these suppliers. The team plans to reduce the dependence by finding alternative sources. Is this a right course of action?
Answer: A
Explanation:
According to Kraljic portfolio matrix, the low-value items with high supply risk are bottleneck items.
The purchasing strategy that is commonly recommended for these products is primarily based on acceptance of the dependence and reduction of the negative effects of the unfavourable position. An alternative strategy suggested by purchasing practitioners is to find other suppliers and move towards the non-critical quadrant.
- Accept dependence, reduce negative consequences: The main focus of this strategy is to assure supply, if necessary even at additional cost. Examples of this strategy are keeping extra stocks of the materials concerned or developing consigned stock agreements with suppliers. By performing a risk analysis firms can identify the most important bottleneck products and consider the implications. A possible action for dealing with unexpected bad dependence positions for certain products is to employ contingency planning.
- Reduce dependence and risk, find other solutions: This strategy is geared towards reducing the dependence on the supplier. The most common way to achieve this is to broaden the specifications of the product or to search for new suppliers.
The procurement team in the scenario has selected reducing dependency by finding alternatives. This is a right strategy for bottleneck item.
Reference:
- CIPS study guide page 82-84
- Purchasing strategies in the Kraljic matrix-A power and dependence perspective, Marjolein C.J. Caniels, Cees J. Gelderman LO 2, AC 2.1
NEW QUESTION # 143
John has been asked to develop a business case before obtaining approval to purchase a large piece of capital equipment for a glove manufacturing unit. Is this the right thing to do?
Answer: D
Explanation:
Detailed Explanation:A business case allows for the evaluation of alternatives and ensures alignment with strategic goals. It also assesses risks, benefits, and financial impact, providing a comprehensive basis for decision-making. Reference: CIPS Level 4, Capital Expenditure and Business Case Development.
NEW QUESTION # 144
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