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| Section | Objectives |
|---|---|
| Understand how to develop a business case for requirements to be sourced from external suppliers | - Analyse how market factors affect procurement |
| Understand the use of specifications in procurement and supply | |
| Understand market management in procurement and supply | - Compare the competitive forces that influence markets
|
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NEW QUESTION # 47
Which of these are variety reduction initiatives? Select the THREE that apply.
Answer: A,C,E
NEW QUESTION # 48
Synergy Ltd is a fast-growing tool and hardware retailer. The company's customer services team has been using Excel worksheets to manage customer relationships. When the company is expend-ing its market presence, this way of working leads to poorer customer services as the database is scattered around in spreadsheet, leading to patchy and inconsistent conversations with customers. The company decides to purchase a CRM system. What requirement should Synergy's procurement team take into account in the specification for CRM system?
Answer: B
Explanation:
The purpose of this question is to test the student's ability to identify the problems and translate those problems to actionable requirements before communicating with the suppliers. The scenario suggests that Synergy Ltd's customer services team is using Excel spreadsheets, they lack a centralised customer database.
This leads to problems in communications with customers.
A CRM system can solve the communication problem. But a question arises: If a CRM system is employed, how will the previous data be imported? If the CRM system can support bulk import from Excel tables, it will save a lot of time.
Reference: CIPS study guide page 10-18
LO 1, AC 1.1
NEW QUESTION # 49
Which of the following are the causes of material cost variance?
1. The buyer updates purchase-to-pay system to track payment and delivery
2. An unprocessed goods received note is missing
3. The employees must work overtime to catch up with the customers' orders
4. The purchase is made in emergency
Answer: B
Explanation:
The difference between the standard cost of direct materials specified for production and the actual cost of direct materials used in production is known as Direct Material Cost Variance. Material Cost Variance gives an idea of how much more or less cost has been incurred when compared with the standard cost. Thus, Variance Analysis is an important tool to keep a tab on the deviations from the standard set by a company.
Material Cost Variance can be due to less purchase price being paid than the standard or because of change in the quantity of material used. Thus, Material Cost Variance is made up of two components namely; Material Price Variance and Material Usage Variance.
Among the 4 options:
- 'The buyer updates purchase-to-pay system to track payment and delivery': The use of e-procurement system can increase the productivity and create labour cost variance, not material cost variance.
- 'An unprocessed goods received note is missing': If a goods received note is missing, the buyer won't pay for that batch, which create quantity variance.
- 'The employees must work overtime to catch up with the customers' orders': Overtime salary can cause labour variance, not material cost variance.
- 'The purchase is made in emergency': Normally, the price in emergency situation is higher than usual. This can cause price variance.
Reference:
- CIPS study guide page 57-59
- Material Variance | Cost, Price, Usage Variance Formula, Example - eFM (efinancemanage-ment.com) LO 1, AC 1.4
NEW QUESTION # 50
XYZ Ltd operates in the plumbing and heating industry. The company has developed and patented a new range of alternative products, using a different material from conventional brass that offers substantial cost savings. XYZ Ltd plans to launch the full range of new products. Will this change the impact on competitive forces in the market?
Answer: B
Explanation:
Creating a new product that replaces conventional options (like brass in this case) is an example of introducing a substitute product.
The CIPS L4M2 Study Guide, Chapter 2: Market Management, refers to Porter ' s Five Forces and explains:
"The presence of substitute products creates competitive pressure, as buyers may switch to newer, better or cheaper alternatives, thereby weakening the position of existing suppliers." Assessment:
* A. Substitute products - Correct. The new material-based products directly replace traditional brass products, qualifying them as substitutes.
* B. Threat of new entrants - Not applicable. XYZ is an existing company, not a new entrant.
* C. No impact on supplier bargaining power - Incorrect. Substitutes reduce supplier power if their traditional products can now be replaced.
* D. No impact on buyer bargaining power - Incorrect. Buyers gain more power with more choices
/substitutes.
Correct answer: A
CIPS Study Guide Reference:
* Module: L4M2 - Defining Business Needs
* Chapter 2: Market Management
* Topic: Porter's Five Forces - Threat of Substitutes
NEW QUESTION # 51
Halfords is a major bicycle and car parts retailer with long history in the market. Its suppliers are plentiful and there is no threat of forward integration. Some other smaller retailers are applying 3D-printing technology to make personalized bicycle parts but their market share is relatively low. 3D-printing technology is an example of which competitive force?
Answer: D
Explanation:
3D-printed parts can replace traditional metal parts. They are also more easily customised to fit customer's needs. This technology is an example of threat of substitute in Porter's Five Forces model.
Substitute goods or services that can be used in place of a company's products or services pose a threat. Companies that produce goods or services for which there are no close substitutes will have more power to increase prices and lock in favorable terms. When close substitutes are available, customers will have the option to forgo buying a company's product, and a company's power can be weakened.
Reference:
- CIPS study guide page 85-96
- Porter's 5 Forces Definition: Analyzing Businesses (investopedia.com) LO 2, AC 2.2
NEW QUESTION # 52
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