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| Section | Objectives |
|---|---|
| Topic 1: Understand market management in procurement and supply | - Contrast direct costs and indirect costs
|
| 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 the use of specifications in procurement and supply |
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NEW QUESTION # 66
The procurement team of an IT hardware manufacturer has been set a target by senior management to reduce the rates paid to the sole supplier of a new and innovative power-saving battery. Which action should the procurement team first consider?
Answer: D
Explanation:
Detailed Explanation:Dual or multiple sourcing introduces competition, reducing the sole supplier's bargaining power and leading to cost reductions. Framework agreements (A) or economies of scale (D) may not address the immediate need to reduce rates. Reference: CIPS Level 4, Sourcing Strategies.
NEW QUESTION # 67
A supplier of software has received a request to quote for a product. The software supplier considers that the buying organisation making the request provides relatively little benefit or alignment to their own strategy. Which one of the following options describes how the supplier might react to the buyer?
Answer: A
Explanation:
Detailed Explanation:When the buyer does not align with the supplier's strategic interests, the supplier may take advantage by charging higher prices to compensate for the perceived lack of value. This approach maximizes the supplier's benefit from a transactional relationship. Reference: CIPS Level 4, Supplier Engagement and Negotiation Strategies.
NEW QUESTION # 68
Total cost of ownership of a solar panel is $5,000 and it is expected that the panel will make a sav-ing of
$1,000 each year. So it would take 5 years for the benefits to repay the investment. Therefore, the firm plans to keep the solar panel for at least 5 years. Is payback period calculation right for making the business decision?
Answer: B
Explanation:
There are many factors that need to be considered when making a business decision. Costs and benefits are among those factor. To estimate the length of time in which an investment reaches a break-even point, businesses often use the payback period. The payback period refers to the amount of time it takes to recover the cost of an investment.
'Yes, because it takes everything into account': It ignores the time value of money (TVM), unlike other methods of capital budgeting such as net present value (NPV), internal rate of return (IRR), and discounted cash flow.
'No, because payback period doesn't take into account price fluctuations': Though it doesn't take into account price fluctuation, payback period is still useful in financial and capital budgeting.
'No, because payback period can be only used to calculate the depreciation of a fixed asset': Payback period only calculates the length of time in which the benefits of a charge repay its costs.
LO 1, AC 1.3
NEW QUESTION # 69
A company wants to purchase a piece of equipment that will achieve a particular level of output. It is inviting tenders and has written a conformance specification. Is this the right specification to issue with the invitation to tender?
Answer: D
NEW QUESTION # 70
Lider Ltd is a leading bathroom furniture manufacturer in Indi
a. The company has more than 30 years experience in the market with extended knowledge of engineering and customers' taste. Lider is planning to launch a new type of bath fitting next year which offers Bluetooth connectivity and thermostat display. The company gathers a team of multi-disciplines, including engineering, procurement, sales and marketing. At the first team meeting, the project leader tells the team to discuss which functions will be valued by the customers, and how to deliver those functions with the lowest costs possible. Which of the following describes the process that the project team is undertaking?
Answer: A
Explanation:
From the scenario, you can see that the project team is developing a new product. They start with analysing the functions, and the costs of delivering those functions. This is a typical process of value engineering. You may read more on value engineering from the reference paper.
Reference:
- CIPS study guide page 171-173
- Value Analysis - Norwood Whittle (cimaglobal.com)
- A CASE STUDY ANALYSIS THROUGH THE IMPLEMENTATION OF VALUE ENGI-NEERING (researchgate.net) LO 3, AC 3.4
NEW QUESTION # 71
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