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| Section | Weight | Objectives |
|---|---|---|
| Devise a business case for requirements sourced externally | 20-25% | - Estimate costs and prices for procurement activities
|
| Market management in procurement and supply | 20-25% | - Evaluate market information sources
|
| Use specifications in procurement and supply | 20-25% | - Types of specifications
|
| Stakeholder management in defining needs | 15-20% | - Align needs with organisational objectives
|
| Legal and regulatory considerations | 10-15% | - Legislation affecting requirements definition
|
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NEW QUESTION # 41
To improve the productivity, Plantation Ltd is planning to purchase a tractor, which it has never bought before. The project must be quick to catch up with the next growing season. Leanne, a jun-ior procurement staff at the company, assumes that she could skip market analysis stage to save time. Is this assumption reasonable?
Answer: A
Explanation:
Market analysis is a stage in CIPS Procurement and Supply Cycle. This stage informs the purchaser about the number of suppliers, the average pricing, and product trends. Even urgent purchase should undergo market analysis. Without undertaking this stage, the buying organisation may not purchase the right product, or they may purchase at higher price.
NEW QUESTION # 42
Which one of the following would allow an established company to develop a competitive advantage over new entrants to its market?
Answer: C
NEW QUESTION # 43
A charity is reviewing their spend and budget after an operation in flooded areas. They realise that the operators save money against the budgeting plan. This saving is known as...?
Answer: B
Explanation:
The difference between the actual spend and budgeted spend is known as variance. The formula for variance is:
Variance = Actual spend - Budgeted spend
Variances can be adverse/unfavourable or favourable ie they can be positive or negative.
Be very careful with these terms. A positive or a negative variance may be favourable or it may be adverse/ unfavourable.
Adverse variances
Adverse variances are those variances that are unfavourable to the firm. Examples would be sales below plan; costs above budget, cash receipts lower than expected, and overtime payment more than forecast.
Favourable variances
Favourable variances are those variances that are beneficial to the business. Examples would be sales ahead of plan, costs below budget, and wages below forecast.
Positive variance
A positive variance occurs where 'actual' exceeds 'planned' or 'budgeted' value. Examples might be actual sales are ahead of the budget.
Negative variance
A negative variance occurs where 'actual' is less than 'planned' or 'budgeted' value. Examples would be when the raw materials cost less than expected, sales were less than predicted, and labour costs were below the budgeted figure.
When the operators create saving, it means that the Actual spend is less than Budgeted spend. Therefore the variance is negative.
NEW QUESTION # 44
Over the life of a product, which of the following would be considered non-value adding costs?
* Rework costs
* Production costs
* Maintenance costs
* Waste disposal costs
Answer: C
Explanation:
In procurement and supply, particularly during the development of specifications and planning, it ' s critical to distinguish between value-adding and non-value-adding costs in order to ensure efficient and economical procurement strategies.
According to the CIPS L4M2 Defining Business Needs Study Guide, under Chapter 3: Whole-life costing and cost management, the following is explained:
" Non-value adding activities and costs are those that do not add any value from the customer ' s perspective, and they often involve unnecessary rework, delays, excessive motion, overproduction, and waste. These costs should be identified and reduced or eliminated wherever possible. " Examples of non-value adding costs include:
* Rework due to poor quality or defects
* Waste disposal of unused or excess materials
* Excessive transportation
* Waiting time or delays in process
Let's break down each option:
* 1. Rework costs # These result from fixing errors or defects. As they do not improve the product or service beyond its intended standard, they are non-value adding.
* 2. Production costs # These are necessary and directly tied to creating the product or service. They are considered value-adding.
* 3. Maintenance costs # These are planned and essential to keeping the asset or product functioning as required, making them value-adding.
* 4. Waste disposal costs # These occur at the end of a process or product lifecycle and do not contribute value. Hence, they are non-value adding.
NEW QUESTION # 45
Kelly Strong, a procurement manager, receives a quotation 5% over budget. Market prices of known materials are significantly lower than estimated. What should Kelly's next step be?
Answer: A
Explanation:
Comprehensive and Detailed Explanation (from CIPS L4M2: Business Case & Cost Analysis) When the quoted price seems higher than expected and market data suggests lower costs, CIPS advises to:
* Seek a detailed cost breakdown to identify which components are inflating price.
* This supports negotiation and ensures transparency, aligning with should-cost analysis and cost-based negotiation methods.
Options A and C would act prematurely; B (delay) is unnecessary.
Relevant CIPS L4M2 Sections:
* Cost breakdown and cost analysis
* Supplier pricing transparency and negotiation preparation
NEW QUESTION # 46
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