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| Section | Objectives |
|---|---|
| Understand and analyse the added value that can be achieved through procurement and supply chain management | - Compare the concepts of procurement and supply chain management
|
| Understand and analyse the need for compliance with requirements when undertaking procurement activities in different sectors | - Analyse the impact of the third sector on procurement and supply
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| Understand and analyse aspects of organisational infrastructure that shape the scope of procurement and supply chain functions | - Analyse the impact of organisational policies and procedures on procurement and supply
|
| Understand and analyse the key steps when procuring goods or services | - Explain how electronic systems can be used at different stages of the CIPS Procurement Cycle
|
>> Latest L4M1 Practice Questions <<
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NEW QUESTION # 33
What is an electronic system? Describe the following: e-requisitioning, e-catalogues, e-sourcing, e-payment technologies (25 marks)
Answer:
Explanation:
See the solution inExplanation partbelow.
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 detailedExplanation:s and examples are where you will secure the most points.
- p.108
NEW QUESTION # 34
Explain the main differences between the Public Sector and the Private Sector (25 marks)
Answer:
Explanation:
See the solution in Explanation part below.
Explanation:
Bottom of Form
Top of Form
- This is an open question. You could really talk about anything. Here's some ideas of content:
Example Essay
The public and private sectors, while both essential to a nation's economy, operate under different paradigms, primarily due to their distinct drivers, stakeholders, regulations, procurement aims, and supplier relationships.
Drivers
The most fundamental difference lies in their drivers. Private sector organizations are primarily profit-driven; their existence hinges on their ability to generate profits. This profit influences their strategies, operations, and overall objectives. Conversely, public sector organizations are not driven by profit. Funded by taxpayer money, their primary objective is to deliver services effectively and efficiently to the public. Their success is measured not in financial terms, but in how well they meet the service levels required by the citizens who finance them through taxes.
Stakeholders
The range and influence of stakeholders in the two sectors also differ markedly. In the public sector, the stakeholder base is much broader, encompassing every member of society who interacts with or benefits from public services like healthcare, policing, and road maintenance. However, these stakeholders typically have less power to influence policy or practices. In contrast, stakeholders in the private sector, such as shareholders and customers, often have a more significant influence on company policies and practices. The private sector's narrower stakeholder base allows for more direct impact and influence from these groups.
Regulations
Regulations in the public sector are generally more stringent than in the private sector. Public sector entities, governed by regulations like PCR 2015, must demonstrate sound procurement practices and are accountable to society at large. This contrasts with the private sector, where companies have more latitude in choosing suppliers and are not obliged to justify their decisions publicly. The private sector faces fewer regulatory constraints, allowing for more flexibility in business decisions.
Procurement Aims
Procurement in the public sector is guided by the principles of efficiency, economy, and effectiveness, often summarized as the '3 Es'. The focus is on achieving value for money, considering both quality and price. In contrast, private sector procurement is more diverse in its aims, reflecting the organization's specific goals, which could range from profit maximization to innovation or sustainability. The private sector's procurement decisions are more closely aligned with the organization's unique values and objectives.
Supplier Relationships
Finally, the nature of supplier relationships differs significantly between the two sectors. The public sector is mandated to maintain a certain distance from its suppliers, ensuring equal treatment and open competition, as dictated by regulations like the PCR. This contrasts with the private sector, where companies are free to develop closer, more strategic relationships with preferred suppliers. The private sector can engage in practices like partnerships and Early Supplier Involvement, which are typically not permissible in the public sector due to the need for impartiality and fairness.
In summary, while both sectors aim to deliver services or products effectively, the public sector's focus on service delivery for the public good, stringent regulations, broad stakeholder base, and specific procurement principles, sets it apart from the private sector's profit-driven, flexible, and more narrowly focused approach.
Tutor Notes
- At Level 4 the questions are usually explain or describe, so don't worry too much about doing an in depth
'compare and contrast' style of answer. They don't expect that level of detail here. Simply saying Public Sector does X and Private Sector does Y is all you need.
- I have mentioned PCR 2015 - if you're taking this exam in 2025 you may need to update this reference with the new regulations.
- LO 4.3 p.220 / p. 226
NEW QUESTION # 35
Describe the CIPS Code of Conduct providing examples of how an organisation can ensure compliance with the standard (25 points)
Answer:
Explanation:
See the solution in Explanation part below
Explanation:
How to approach this question:
- This is the type of question you either know or you don't. You can't really guess it. So do memorise it. There's not really a shortcut here.
- The CIPS Code of Conduct is an ethical standard and framework which is used profession-wise. The purpose is to standardise ethics across the profession.
- There are 5 aspects to the Code of Conduct: enhance and protect the standing of the profession, promote the eradication of unethical business practices, maintain integrity in all business relationships, enhance proficiency and stature of the profession and ensure full compliance with law and regulations.
Example Essay:
The Chartered Institute of Procurement & Supply (CIPS) Code of Conduct is a comprehensive set of principles and standards that guide the ethical conduct of procurement and supply professionals. Adhering to this code is crucial for maintaining integrity, transparency, and responsible behaviour within the procurement profession. Here's an overview of the CIPS Code of Conduct along with examples of how organizations can ensure compliance with these standards:
1 - Enhance and protect the standing of the profession.
This means don't bring the profession into disrepute by your actions, don't accept gifts or offers of hospitality and to be aware that behaviour outside work reflects one's reputation as a professional. An organisation can implement training programs to educate procurement professionals about the importance of maintaining high standards of professionalism and integrity in their interactions with suppliers and stakeholders.
2 - Promote the eradication of unethical business practices.
This means fostering awareness of human rights, fraud and corruption issues in business relationships, responsibly managing business relationships if unethical practices come to light, undertaking due diligence (in respect to forced labour, fraud, corruption) and continually develop one's own personal knowledge of ethical issues. Promoting the eradication of unethical business practices requires a comprehensive and proactive approach from organizations. This involves having a strong CSR policy, having whistleblowing protection and reporting mechanisms, and conducting due diligence on the supply chain.
3 - Maintain integrity in all business relationships.
An organisation can show compliance with this by; rejecting improper business practices, never using authority for personal gain, declaring conflicts of interest, giving accurate information, not breaching confidentiality, striving for genuine, fair and transparent competition and being truthful about skills and experience. An example of this is for an organisation to sever ties with unethical businesses. One notable example of a retailer terminating a relationship with a supplier due to ethical reasons is the case of H&M and its decision to cut ties with a Chinese yarn producer in Xinjiang province. H&M, a global fashion retailer, announced in early 2021 that it would no longer source cotton from Xinjiang due to concerns over forced labour and human rights abuses associated with cotton production in the region.
4 - Enhance proficiency and stature of the profession.
Activities which would demonstrate compliance with this includes: Continual development of knowledge and skills, fostering the highest standards of competence in staff members at the organisation and optimising the responsible use of resources. For procurement staff, this could involve becoming MCIPS qualified, and even once qualified, completing routine CPD (Continued Professional Development) to ensure their knowledge and skills remain updated and relevant. They should also strive to share their knowledge with the wider organisation.
5 - Ensure full compliance with law and regulations.
An organisation can demonstrate compliance with the standard by proving they: follow the law in all countries they do business in, fulfilling all contractual obligations and following the CIPS guidance on professional practice. Compliance can include aspects of fiduciary responsibility such as paying the correct level of tax and filing returns on time, as well as compliance to legislation such as the Health and Safety at Work Act 1974 and the Equalities Act 2000.
In conclusion, the CIPS Code of Conduct is a voluntary standard for organisations to follow but it sets a high standard for the industry. By following the CIPS Code of Conduct organisations can enhance their reputation and levels of trust among stakeholders, as well as being reassured that following these clear ethical guidelines contribute to a positive workplace culture, boosting employee morale and commitment by fostering a sense of shared values.
Tutor Notes:
- Under the previous syllabus CIPS asked this question a lot. If you memorise one thing from the study guide I'd recommend it be this. Even if it doesn't come up as a stand-alone question, you can work it into more general essays about ethics- so it is useful to know.
- For a top score, try to give deep examples. So where you have said 'responsibly managing business relationships' you could explain what this means in practice- by ensuring fair contract terms are put in place, holding suppliers to account when they do something wrong and not exploiting smaller suppliers. Where you have said 'complete Due Diligence' you could mention that this would be completed before awarding a contract to a supplier and would involve looking at a supplier's history and supply chain to ensure that they have not been involved in any crimes (fraud etc) or unethical behaviour (such as polluting the environment). The more in depth you go, the more you show the examiner your understanding, and the higher you'll score.
- p. 137 or here: Cips Code of Conduct | CIPS Note the study guide talks on p. 132 about the CIPS Code of Ethics, which is slightly different. The Code of Conduct is the main one to learn.
NEW QUESTION # 36
Explain, with examples, the advantages of a Procurement Department using electronic systems (25 marks)
Answer:
Explanation:
See the solution in Explanation part below
Explanation:
- Mention of some of the following benefits with at least one example provided against each; cost savings, time savings, more efficient, higher levels of transparency, easier to access historical records to inform upon decision making, mitigates risks such as fraudulent spending, easier to track spend against budgets, ensures compliance with regulations, provides 'real-time' information, paperless communications (so more environmentally friendly), assists in Supply Chain Management and integration with supply partners.
- I'd suggest 5 is a good amount to aim for
Example Essay
Procurement stands to gain numerous benefits from the adoption of electronic systems. These electronic tools and systems bring efficiency, accuracy, transparency, and cost-effectiveness to the procurement process. Here are several compelling reasons why procurement should leverage electronic systems:
Cost savings - the use of electronic tools saves organisations money. Although there is an initial cost outlay, over time the systems will save the organisation money. For example the use of e-procurement tools can save money by accessing a wider pool of suppliers. For example, when using an e-sourcing portal, a tender may reach a larger number of suppliers- this makes the tender more competitive thus driving down prices. Compared to traditional methods such as phoning suppliers for prices, the use of electronic portals encourages suppliers to 'sharpen their pencils' and provide the best prices in order to win work. Money is also saved as communication is digital (so there is no costs for paper and postage).
Time savings - electronic tools automate a lot of processes which saves time. An example of this is e-requisitioning tools where orders can be placed automatically by a piece of technology when quantities of a material reach a certain level. For example, in a cake manufacturing organisation they may use an MRP system which calculates how many eggs are required per day. The machine knows that when the company only have 50 eggs left, a new order needs to be issued to the supplier. The MRP system (e-requisitioning system) therefore saves time as the Procurement department doesn't have to manually pick up the phone to place the order with the supplier- it is done automatically.
Access to higher levels of information - e-Procurement gives you centralised access to all your dat a. You can access the system to look at historical purchases with ease compared to having to dig through folders and filing cabinets. For example, an electronic PO system will hold details of all historical POs, this means if someone has a question about a PO that was raised 4 months ago, finding the information is much easier and quicker. Some systems may also be able to provide analytical data such as changes to spend over time, or which suppliers a buyer spends the most money with. This higher level of information can help inform upon future decision making. For example, if the organisation wishes to consolidate its supplier base it would look through historical data provided by the electronic system to find out which suppliers are used the least and remove these from the 'pre-approved supplier list'. This level of data might not be available in manual systems.
Better budget tracking - using electronic systems allows for real-time information to be collected which allows Procurement Managers to see where spend is compared to forecasts and budgets. An example of this is in the use of Pre-Payment Cards - rather than giving staff members petty cash to make transactions and having to chase this up and collect receipts and change, a pre-payment card usually comes with an online portal where a manager can see what has been purchased and the remaining budget on that card for the month. A manager may be able to see for example that a member of staff has spend £300 of their allotted £500 monthly allowance.
Higher levels of transparency and control - using E-procurement tools allows an organisation to track who is ordering what. For example, an e-requisitioning tool may allow Procurement Assistants to make purchases up to £500 but set an automatic escalation if they try to buy something of higher value. This allows for Management to have greater levels of visibility and more control over spending. Another example of transparency and control is in the use of e-sourcing tools to run a competitive tender exercise. All communication between the buyer and suppliers is tracked on the system and award letters can be sent via the system too. This reduces the risk of information being lost.
Environmental benefits- the use of e-procurement tools means that there is less paperwork involved. For example, rather than creating a physical PO which needs to be signed by a manager, an electronic system can allow a manager to sign-off the purchase by clicking a button. This means there is no requirement for the document to be printed. This saves paper and thus has a positive on the environment. Using electronic systems may help an organisation achieve their environmental targets.
In conclusion there are numerous benefits for procurement to adopt e-procurement tools. Depending on the sector and requirements of each individualised company, some advantages may be more pertinent than others, but it is undeniable that technology is helping to shape the industry into a value adding function of organisations.
Tutor Notes
- With an essay like this you could use subheadings and number the advantages if you like. It's a good idea to do one advantage per paragraph and using formatting really helps the examiner to read your essay.
- study guide p.108
NEW QUESTION # 37
Mo is the new Head of Procurement at Manufacturer X. Manufacturer X is a small organisation which creates bespoke robots for clients. Their supply chain is complex, sourcing many components from various suppliers.
Mo has joined the company at a pivotal time of growth. The company wishes to expand the procurement department and formalise its policies. Discuss 5 areas that Mo should consider when drafting the department's policies and manuals (25 points).
Answer:
Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question
- Remember as you're preparing an essay plan that this is a case study question, meaning everything has to relate back to Mo and Manufacturer X. So for the 5 areas- think about how this would be applicable for a robotics manufacturer. CIPS don't expect you to knowanything about robotics so if you talk about KPIs for suppliers- just make them up- as long as they sound right-ish that's all that matters.
- Areas you could talk about include: competition, ethics, KPIs, quality, supplier appraisal, supplier evaluation, sustainability, transparency Example Essay Mo, stepping into the role of Head of Procurement at Manufacturer X during a pivotal period of growth, faces the task of expanding the department and formalizing its policies. In this intricate landscape of a small organization creating bespoke robots, five crucial areas demand Mo's careful consideration in the drafting of departmental policies and manuals: competition, ethics, quality, supplier evaluation, and sustainability.
Firstly, competition. As Manufacturer X navigates growth, Mo must establish transparent guidelines for competitive bidding processes. It is imperative to ensure fairness in supplier selection and implement strategies for cost competitiveness without compromising quality. Encouraging innovation and collaboration with suppliers becomes a strategic approach to gain a competitive edge in the market. Mo should be careful that his policies do not favour any suppliers over others and that consideration is given to allowing SMEs to bid for work.
Secondly, Ethics. Mo needs to develop an explicit code of ethics guiding procurement professionals in their interactions. This should emphasize honesty, integrity, and fair treatment. Additionally, establishing due diligence procedures to ensure suppliers adhere to ethical business practices, especially concerning labour and environmental standards is important. Moreover, whistleblower protection mechanisms should be put in place to encourage the reporting of ethical concerns without fear of reprisal.
Thirdly, Quality considerations. Given the bespoke nature of the robotics industry and the necessity of maintaining high standards for customer satisfaction, Mo must define and communicate stringent quality requirements to suppliers, emphasizing adherence to specifications and standards. The establishment of robust inspection and testing procedures at various stages of the supply chain is crucial, ensuring consistent component quality. Developing contingency plans and protocols for addressing quality issues promptly, including collaboration with suppliers for continuous improvement, should be integrated.
With the organization's growth, a systematic approach to supplier evaluation becomes paramount. Mo needs to develop a comprehensive evaluation framework, including criteria such as financial stability, reliability, and past performance. Implementing a supplier scorecard system is essential for tracking and assessing supplier performance over time. Moreover, fostering strategic relationships with key suppliers to promote collaboration, innovation, and long-term partnerships becomes a strategic imperative.
Lastly, Mo should consider sustainability, in particular environmental awareness and the promotion of sustainable practices into the supply chain for long-term viability. Developing sustainability criteria for supplier selection, considering factors such as environmental impact, social responsibility, and ethical sourcing, is imperative. Encouraging suppliers to adopt environmentally friendly practices and certifications, such as ISO14001 or Fair Trade, becomes crucial. The integration of sustainability goals into procurement key performance indicators (KPIs) is essential for tracking progress and demonstrating the organization's commitment to corporate responsibility.
In conclusion, Mo's strategic focus on competition, ethics, quality, supplier evaluation, and sustainability is pivotal in laying the foundation for a procurement department that not only supports Manufacturer X's growth, but also aligns with its values and industry standards.This approach positions the organization for success in the dynamic landscape of bespoke robot manufacturing.
Tutor Notes
- This question is taken from P. 146 - note the question is on policies not strategy. These are slightly different concepts, but they do overlap. Policies are black and white- we do this and we don't do that. Strategies are about what the company wants to achieve. They're future orientated, where as a policy is about what we do now. So a policy may include sustainability, but strategy may talk about reducing pollution.
- CIPS could also ask you to talk about procurement strategies such as achieving cost reductions, environmental issues etc. These are also on p.146
NEW QUESTION # 38
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