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This is the L4M1 PDF format which contains real L4M1 exam questions. You can print it and make a hard copy of this PDF file as well which helps you to prepare on the go. It comes in handy format and helps you prepare well with updated Scope and Influence of Procurement and Supply exam questions. Moreover, this PDF has questions that are according to the present content of the test. This PDF format helps you to enhance your understanding of each topic which you need to self-evaluate to boost your CIPS L4M1 Exam Score.
NEW QUESTION # 45
What is an electronic system? Describe the following: e-requisitioning, e-catalogues, e-sourcing, e-payment technologies (25 marks)
Answer:
Explanation:
See the solution in Explanation part below
Explanation:
How to approach this question:
- Your response will need 5 definitions. For 25 points that means 5 points per section so think about the level of detail you'll need to include. It would be 5 points for electronic system (i.e. your introduction and conclusion), and then do a paragraph on each of the technologies. In the description you could talk about why it's used and the advantages, and give some examples if you know any.
- Definition of electronic system - a system which uses some form of technology and automates a procurement process than would otherwise have been completed manually.
- E-Requisitioning - a way of ordering goods or services. Includes the use of integrated ordering systems such as: ERP/ ERP II / MRP / MRP II
- E-Catalogue- an electronic display of what goods can be ordered. A simple example of this may be a supplier displaying the goods they offer on their website and the prices to purchase the goods.
- E-Sourcing - this involves the early stages of the tender process- using an electronic portal to find a supplier and / or conduct a tender exercise.
- E-Payment - the P2P part of the cycle (procure to pay) - may involve electronic POs and Invoices, BACS, CHAPS and SWIFT payment systems, and the use of Purchasing Cards Example essay:
Electronic systems, commonly refered to as E-procurement, is the business-to-business or business-to-consumer purchase of goods or services, typically using the Internet or other information/ networking systems such as ERP systems. It has developed in the past 20 years as technology has improved and replaces time-consuming manual processes and is now considered the 'norm'. Electronic systems and e-procurement can be used throughout the entire supply chain- not just between a single buyer and supplier. Examples of electronic systems including the following:
E-requisitioning
This is often used in manufacturing organisations to order raw materials. An electronic 'bill of materials' is created and stock levels are automatically updated. As materials get used and a pre-determined level is reached, this triggers a new order which is placed via an e-requisitioning system such as MRP. It is a technological version of the traditional kan-ban (2 bin) system. E-requisition tools are often cloud-based. It helps buyers simplify the buying process, track orders and provides higher levels of visibility on spend. The main disadvantage to this technology is that it requires technology interfacing between the buyer and suppler, which may be expensive.
E-catalogues
This is a digital or online version of a catalogue- a document that details what you can buy and at what price. There are two main types - buy side catalogues and sell side catalogues. A buy-side catalogue is an internal system used by a buyer which hosts a list of pre-approved suppliers from whom purchases can be made. It may include details of commonly bought items and the prices. The use of this reduces maverick spending and ensures consistency in purchases (e.g. whenever lightbulbs need to be ordered, the same lightbulbs are ordered so the office lighting is consistent). A sell-side catalogue is provided by a supplier and details what they offer- it often includes prices, any discounts for bulk buying and may also let buyers know of availability (e.g. the website may say only two items remaining). This may be as simple as a price list on their website, available for anyone to view.
E-sourcing
This is a tool that helps a buyer find the most suitable supplier. Examples include e-tendering websites where a buyer can host a competition to find a supplier. E-auctions are also a type of e-sourcing tool. The tool (often a website) hosts all of the tendering documents and allows for buyers and suppliers to communicate during the tender process (for example if there are any clarifications needed on the specification). Using this tool allows for transparency and equal treatment, but also saves time in completing the tender exercise. PQQs can be automated and some e-sourcing tools include the use of Artificial Intelligence which can 'read' tender submissions and automatically exclude suppliers who do not fulfil the required criteria.
E-payment technologies
These are methods to pay for goods and services that replace the need for cash and cheques. Examples include online bank transfers, electronic Purchase Orders and Invoices and the use of Pre-Payment cards. These act like credit cards for employees to use when they need to buy supplies. For example, if you have a maintenance team that frequently need to purchase low-value items like screws and paint, you could issue the team with a Pre-Payment card with a certain limit (e.g. £500/ month) so they can buy what they need. The company will then automatically be sent a monthly invoice for all of the purchases. This saves time from having to issue the maintenance team with petty cash for the purchases and allows for greater visibility over spend (e.g. how many screws are typically bought per year?). Another typical use is for staff travel.
In conclusion, procurement teams benefit significantly from leveraging electronic tools, including e-requisitioning, e-catalogues, e-sourcing, and e-payment technologies. The adoption of these electronic tools brings about various advantages that enhance efficiency, transparency, cost-effectiveness, and overall effectiveness in the procurement process. Moreover E-procurement tools has helped develop the procurement function into a professional and respected function and allows for a more pro-active rather than reactive approach to purchasing.
Tutor Notes:
- Fun Fact! In the public sector, it is mandated that electronic systems are used in procurement (Public Contract Regulations 2015) as this helps to achieve the objectives of transparency and equal treatment. Where manual systems are used, it is easy to manipulate the tender process. For example, a buyer could read some tender submissions before the deadline for submission and no one would know, but with an electronic system this is impossible as it locks evaluators out until the deadline has passed and all bidders have submitted their responses. (note PCR 2015 is being replaced in 2024- details are still TBC but the above fun fact will still remain in the new legislation- they're definitely still going to make it compulsory).
- You could also mention the names of systems if you know any. For example, e-sourcing tools include MyTenders.com and Delta E-Sourcing. PO / Invoice systems include Sage, Xero and QuickBooks.
- The question doesn't ask for advantages of using these technologies but you could mention this in your answer. Just be sure that this isn't the focus of your response- the question asks specifically for you to DESCRIBE the systems so detailed s and examples are where you will secure the most points.
- p.108
NEW QUESTION # 46
What is meant by a structured procurement process? (10 marks) Why is this important? (15 marks).
Answer:
Explanation:
See the solution inExplanation partbelow.
Explanation:
- Definition of 'structured procurement process' - when an organisation provides a sequence of actions / steps to take to get the outcome (the procurement of an item). This involves an organisation providing guidelines and instructions of how things should be done. Basically following a step-by-step process.
- Why this is important - Ensures all tasks that need to be done are done, maintains consistency, prevents conflict and suboptimal behaviour, improves efficiency, better managerial control, compliance (with laws and standards), assists with continuous improvement, may result in time/ cost savings, reduces risks such as fraudulent spending.
Example essay:
The first part of the question is worth 10 points, so you could include a few of the following points. It would also be good to include examples:
- Structured procurement involves creating rules on how procurement should be done
- This is in contrast to reactive / maverick spending
- May come about due to company policy, external regulations or through trying to achieve Competitive Advantage
- Examples include an organisation having set procedures for ordering items of different spend- e.g.
Procurement Assistants can purchase items up to £500. Items between £500-£1000 require a manager's approval and anything over £1000 requires a written Business Case in order to procure
- Structures Procurement Processes will usually also include the use of a designated e-procurement tool. E.g.
an organisation may insist that all tenders use a certain online system and that invoices are sent via X system within 30 days.
The second part of the question is worth slightly more points, so spend more time on this. You could put each of the reasons why it is important in a separate paragraph. Also use examples where you can;
- Ensures all tasks that need to be done are done- having structured processes means having a step-by-step guide to how to procure. This means activities are well co-ordinated and there are no gaps, no duplications of effort and no conflicting efforts. It may involve assigning different people in the team different roles e.g.
someone makes the requisition and someone else approves it. It also means that nothing is forgotten.
- Maintains consistency- having standardised processes means each procurement exercise follows the same process. This may include using a standard template for a requisition or ITT. Where there is consistency, this results in time being saved and less mistakes being made as everyone (including supply partners) is familiar with the processes.
- Prevents conflict and suboptimal behaviour- in organisations that use structured procurement processes everyone does the same. This means there is no conflict (e.g. one person doing things one way and another person does it differently and arguing which way is best). It also means no one can do procurement 'wrong' - there are written guides and procedures to follow. This is particularly helpful for new starters.
- Efficiency - time and money can be saved where there are standard procedures as people don't have to plan each procurement activity individually. Structured Procurement Processes may also involve completing bulk orders and co-ordinating activity within the organisation which means less orders are placed over the year and efficiency savings can be made. For example, a factory may create an order of cleaning products once a quarter, compared to ordering products just as and when they are required. This will save time of the procurement department overall throughout the year and allows them to focus on other more value-adding tasks.
- Better managerial control - Managers have more oversight when using structured procurement. There are clear rules as to when managers need to be involved and provide sign-off. This visibility makes it easier for managers to make decisions and allows for early intervention where someone needs assistance. It will reduce maverick spending and fraudulent spending. For example, it is much harder to provide kick-backs to suppliers when there are clear processes and audit trails and managers have visibility over all processes.
- Compliance (with laws and standards) - particularly in the Public Sector there are rules and regulations regarding procurement practices. Using standardised processes allows organisations to demonstrate compliance with appropriate legislation. It also protects them from 'challenge'. This is when a bidder who is unsuccessful challenges the decision to award a contract to someone else. Using a structured procurement process allows the organisation to demonstrate that they procured the item correctly and the challenge is unfounded.
Tutor Notes
- This topic isn't as well explained in the new study guide as it used to be. It's all pretty obvious stuff but the language is slightly different. The guide now talks about 'compliance with processes' and the benefits this brings. Which is exactly the same as why do you follow a structured process. This is on p. 114.
- If you're feeling clever, you could mention the difference between Public and Private Sector- e.g. a private organisation may use standardised processes for efficiency and cost savings, whereas a public sector organisation may use it more for compliance purposes.
NEW QUESTION # 47
Describe the main differences between a traditional procurement approach and supply chain management approach to buying (25 points)
Answer:
Explanation:
See the solution in Explanation part below
Explanation:
- The question is asking you to explain the following:
- With this type of question you would be expected to discuss 3- 5 differences, giving examples.
Example Essay Structure
Introduction - explain what is meant by 'procurement' and 'SCM' - procurement is the traditional way and is to do with purchasing goods, SCM is the new way which is a more multifaceted way of securing goods and is the result of longer, more complex and more globalised supply chains.
Paragraph 1 - the objectives of each approach (5 Rights vs added value) Paragraph 2 - the approach (reactive buying vs proactive ordering) Paragraph 3 - the way of working (silo working vs cross-functional working) Paragraph 4 - the relationships with suppliers (transactional vs collaborative) Conclusion - There are many differences between the two approaches, and different companies may favour one over the other depending on their specific circumstances. E.g. small organisations that make low value and low risk purchases may take a traditional procurement approach and large multi-national organisations may require a SRM approach due to the volume of suppliers and com-plexities of the supply chains.
Example essay:
Procurement and Supply Chain Management (SCM) represent two distinct approaches to acquiring goods, reflecting the evolution of purchasing practices. Procurement, the traditional method, in-volves the straightforward purchase of goods. In contrast, SCM is a more intricate approach, born out of longer, more complex, and globalized supply chains. This essay explores the main differences between these two approaches, highlighting their objectives, methods, ways of working, and suppli-er relationships.
In the traditional procurement approach, the focus is on achieving the "5 Rights" - getting the right goods, in the right quantity, at the right quality, for the right price, and at the right time. This en-sures efficiency in the purchasing process. On the other hand, SCM goes beyond these basic objec-tives, aiming to add value to the entire supply chain. This might involve developing strategic rela-tionships with suppliers, ensuring sustainability, and aligning with broader organizational goals. For example, a company employing a traditional procurement approach might emphasize getting the lowest price, while an SCM approach could involve working with suppliers to enhance product in-novation or reduce environmental impact.
Secondly, the traditional procurement approach is often reactive, responding to immediate needs or demands. Companies using this method typically make purchases as required, without a long-term strategy. In contrast, SCM involves proactive ordering, anticipating future needs and trends. For instance, a company employing SCM might engage in demand forecasting, allowing for better plan-ning and inventory management. This proactive approach helps prevent stockouts, reduce costs, and enhance overall supply chain efficiency.
Moreover, traditional procurement often involves silo working, where different departments operate independently. The procurement team may not collaborate closely with other departments like pro-duction or marketing. In SCM, there's an emphasis on cross-functional working, breaking down de-partmental barriers for a more integrated approach. For example, an SCM team might work closely with production to ensure materials are aligned with manufacturing schedules, fostering efficiency and minimizing disruptions.
Lastly, in traditional procurement, the relationship with suppliers is transactional - focused solely on the exchange of goods for money. Conversely, SCM promotes collaborative relationships, emphasiz-ing long-term partnerships. A company using SCM might work closely with suppliers to improve processes, share information, and jointly address challenges. For instance, an SCM approach might involve collaborating with suppliers to implement just-in-time inventory systems, leading to cost savings and improved responsiveness.
In conclusion, the differences between traditional procurement and SCM are substantial and nu-anced. While a traditional procurement approach may suit smaller organizations with low-value and low-risk purchases, larger multinational companies with complex supply chains often find SCM more suitable. Understanding these differences allows companies to tailor their approach based on their unique circumstances, emphasizing the importance of flexibility and strategic alignment with organizational goals in the ever-evolving landscape of buying and supply chain management.
Tutor Notes
- This question is taken from learning outcome 1.1.1 (p2 onwards). The new study guide has drasti-cally simplified the information on this topic compared to the old syllabus (the table above comes from the old syllabus). This may be good news for students in that you don't need to know as much, but I do wonder if the study guide gives students enough 'content' to write an essay on the subject.
- If a question is to come up from LO 1.1 it would be likely be something like: definitions and dif-ferences between procurement and SCM, difference between a supply chain and a supply network, elements of SCM, or how to add value in the supply chain.
NEW QUESTION # 48
Describe the main stages of the CIPS Procurement and Supply Cycle (25 points)
Answer:
Explanation:
See the solution inExplanation partbelow.
Explanation:
How to respond to this question:
- Include as many of the stages as you can, but it's not vital to remember them all. You should aim to remember at least 8 of the 13 steps.
- The steps are; Define Business Need, Market Analysis + Make vs Buy, Develop Strategy and Plan, Pre-Procurement Market Testing, Develop Documents and Specification, Supplier Selection, Issue Tender, Bid Evaluation, Contract Award and Implementation, Warehouse Logistics, Contract performance and Improvement, Supplier Relationship Management and Asset Management Essay Plan:
Introduction - Explain what the CIPS Procurement and Supply Cycle is- a tool to be used by procurement professionals which tracks a procurement exercise from inception to close. It's helpful as it ensures procurement exercises are done correctly and steps are completed in the right order.
- Describe (briefly) what happens at each stage of the cycle, giving examples. You should put each stage into a separate paragraph. It's also a good idea to name the stages in chronological order. Some ideas of things you could mention include:
1) Define Business Need and Develop Specification - Identify what the need is, what type of purchase, put together a business case and outline the requirements
2) Market Analysis and Make vs Buy Decision - analyse the market using market segmentation (e.g. by buyer, product, geography etc) or use Porter's 5 Forces (buyer and supplier power, threat of new entrants, threat of substitutions, supplier rivalry). Looks at if what you want to procure is actually available.
3) Develop Strategy / Plan - you could use a STEEPLE and SWOT analysis. Consider if this is the right time to procure. Create timelines and budgets.
4) Pre-Procurement Market Testing - consider stakeholder engagement, supplier engagement, new / upcoming legislation, currency fluctuations, market, competitor actions. Is this the best time to procure? Will it be successful?
5) Develop Documentation / Creation of Contract terms- firm up the requirements and create the formal documents for the tender exercise. This may be a RFQ or ITT. Define the offer. Include KPIs.
6) Supplier Selection - May not be required for rebuys but an important step for new buys. May use a list of pre-approved suppliers or this may be going out to the open market. You can shortlist suppliers by sending out a pre-qualification questionnaire.
7) Issue Tender - Electronically, consider whether to use an open vs closed procurement exercise
8) Bid / Tender Evaluation - Very flexible for companies in the private sector but there are guiding principles for doing this for public procurement; transparency, equal treatment, proportionality. Often considers both price and quality.
9) Contract Award and Implementation- Organisations may have different processes for different values (e.g.
large purchases may need senior management approval, but under £500 just needs a manager's signature).
May require post-award negotiation. Contract is drafted and signed.
10) Warehouse Logistics and receipt - includes POs and Invoices. Battle of the Forms. Goods Inwards = receiving and inspecting goods- may use quality control.
11) Contract performance review - ensuring contract obligations are fulfilled includes P2P procedures, database management, budgeting / costs monitoring, reporting and dispute resolution.
12) Supplier Management - will depend on the relationship but includes; contact / meetings with the supplier, motivating / incentivising the supplier, working with them on performance issues, ensuring KPIs are met.
13) Asset Management / End of Life- considers TCO, ongoing maintenance and costs, insurance and warrantees and disposal of the item once it has reached the end of its life.
Conclusion - The CIPS Procurement Cycle is cycle rather than process as it is a continuous loop and needs constantly emerge. It never ends. New buys are more likely to follow all the stages of the cycle, rebuys may skip steps Tutor Notes:
- Often steps 11 and 12 are confused or merged together but they are different. It's possible to have great contract management and a poor supplier relationship i.e. the contract is working effectively and the supplier is delivering in line with the contract BUT the relationship may be fraught with tension and the buyer and supplier don't like each other.
- To get a high score I would include examples of all of the stages, but remember you only have 45 minutes to answer the question, so balance detail with timing so you don't overwrite
- The procurement cycle is on p. 70 or you can download it here: Procurement Supply Cycle | CIPS
NEW QUESTION # 49
Describe the key drivers for organisations who operate in the public, private and third sector (25 marks)
Answer:
Explanation:
See the solution in Explanation part below.
Explanation:
- There's 2 main approaches to layout you could take for this question. Firstly, divide your essay into three sections for the public, private and third sectors and talk about the key drivers for each sector separately.
Alternatively, you could select a couple of drivers and form paragraphs around them, explaining in each paragraph whether the driver is strong or weak or even applicable for the different sectors.
- Drivers you could talk about include attitudes towards money, survival in the industry, differentiation, need for transparency, resources available, stakeholders, regulatory compliance
- Your answer should say why these are drivers in each of the industries, whether these drivers are strong or weak and why.
Example essay:
Organizations across the public, private, and third sectors operate within different paradigms, driven by distinct motivations and constraints. Understanding these key drivers is essential for comprehending how these organizations function and achieve their objectives. This essay explores the fundamental drivers of organizations in each of these sectors, focusing on attitudes towards money, survival, differentiation, need for transparency, resource allocation, and stakeholder management.
Attitudes Towards Money:
The approach to profit significantly differentiates the sectors. In the private sector, profit is a primary driver, essential for survival and rewarding shareholders. Conversely, the public sector is not profit-driven; its primary aim is to provide essential services to society, regardless of financial gain. The third sector, often termed 'not-for-profit', also requires profit generation, but uniquely, all profits are reinvested into the organization to further its aims, rather than being distributed as shareholder dividends. The Public-Sector needs to 'balance the books' but it is not a profit-generating area of the economy. The priority around money is ensuring that taxpayer money is well spend and that procurement activities represent value for money.
Survival in the Industry:
Survival strategies vary across sectors. Private and third sector organizations must focus keenly on survival, necessitating efficiency and sound business processes. The public sector, by contrast, can continue operating even when inefficient or running at a deficit, as seen in cases like local councils operating with budget shortfalls. This difference underscores a greater urgency for efficient management in the private and third sectors.
Differentiation:
Differentiation is a key driver in the private sector due to competition. Private entities often strive to distinguish their goods or services to gain a competitive edge, either through cost competitiveness or unique offerings. However, differentiation is less of a driver in the public and third sectors, where organizations are often sole providers of certain services or focus on specific social causes without direct competition.
Need for Transparency and Regulatory Compliance:
Transparency and adherence to regulations are paramount in the public and third (not-for-profit) sectors.
These sectors are highly regulated, with public organizations adhering to regulations like the Public Contract Regulations 2015 and third sector organizations following guidelines set by bodies like the Charities Commission. The public's right to information through mechanisms like Freedom of Information requests further underscores this need for transparency. In contrast, the private sector faces less pressure for transparency, though it is not entirely exempt from regulatory compliance.
Resource Availability:
The availability and management of resources are different across sectors. Public and third sector organizations often operate with limited funds, making value for money a critical driver. They must achieve their objectives within these financial constraints. In contrast, the private sector generally has greater flexibility in resource acquisition, able to raise funds through loans or share sales, providing them with a broader scope for investment and expansion.
Stakeholder Management:
Stakeholder dynamics vary significantly among sectors. Public and third sector organizations often have a wide range of stakeholders, though these stakeholders may not wield significant power. Conversely, stakeholders in private organizations, like employees, can exert considerable influence, as seen in cases where employees might strike for better working conditions. Therefore, managing and satisfying stakeholders can be a more pressing concern in the private sector compared to the public sector, where actions like strikes can be legally restricted.
Conclusion:
In summary, organizations in the public, private, and third sectors are driven by different motivations and constraints. While profit is a major driver in the private and third sectors, it serves different purposes in each.
Survival strategies, the need for differentiation, transparency requirements, resource management, and stakeholder relations all vary significantly across these sectors, reflecting the distinct roles and responsibilities they hold in society. Understanding these key drivers is crucial for anyone looking to navigate or interact with these diverse organizational landscapes effectively.
Tutor Notes:
- If you're asked about different sectors of the economy it can be difficult to know what to talk about. An easy way to remember topics you can discuss in your essay is the acronym CAROLS which stands for:
Competition, Activity, Responsibilities, Objectives, Legal Restrictions and Stakeholders. This acronym may generate some ideas of things you can discuss in your essay.
- This question takes some content from different Learning Outcomes throughout L4. Charities are discussed separately from Public and Private Sectors in LO 4.4 p.230.
NEW QUESTION # 50
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