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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Use specifications in procurement and supply | 20-25% | - Advantages and limitations of specification types
|
| Topic 2: Devise a business case for requirements sourced externally | 20-25% | - Estimate costs and prices for procurement activities
|
| Topic 3: Legal and regulatory considerations | 10-15% | - Legislation affecting requirements definition
|
| Topic 4: Stakeholder management in defining needs | 15-20% | - Align needs with organisational objectives
|
| Topic 5: Market management in procurement and supply | 20-25% | - Analyse market structures and competition
|
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NEW QUESTION # 33
A company has installed a new piece of capital equipment but needs to arrange a maintenance contract for three years. The company wants to know as accurately as possible what this price will be for the full contract. What would be an appropriate type of pricing mechanism to use when asking suppliers to quote prices?
Answer: C
Explanation:
Detailed Explanation:
A fixed price with adjustment for inflation provides cost predictability while accounting for potential increases due to inflation. This strikes a balance between fixed costs and market realities. Reference: CIPS Level 4, Pricing Strategies.
NEW QUESTION # 34
Why should procurement professionals develop business case before seeking approval to purchase capital equipment?
Answer: D
Explanation:
A business case is developed during the early stages of a project and outlines the why, what, how, and who necessary to decide if it is worthwhile continuing a project. One of the first things you need to know when starting a new project are the benefits of the proposed business change and how to communicate those benefits to the business.
Preparing the business case involves an assessment of:
- Business problem or opportunity
- Benefits
- Risk
- Costs including investment appraisal
- Technical solutions
- Timescale
- Impact on operations
- Organizational capability to deliver the project outcomes
These project issues are an important part of the business case. They express the problems with the current situation and demonstrate the benefits of the new business vision. Making business case with multiple options and choices also prompts the procurement and senior management to consider alternatives. As a result, the organisation may opt out the best option.
The business case brings together the benefits, disadvantages, costs, and risks of the current situa-tion and future vision so that executive management can decide if the project should go ahead.
Reference:
- CIPS study guide page 19-21
- How to Write a Business Case - Template & Examples | Adobe Workfront
LO 1, AC 1.1
NEW QUESTION # 35
Which of the following indicates types of waste that procurement department concentrates on when adopting Lean methods?
Answer: C
Explanation:
Copious amounts of waste can occur in the workplace, particularly in a manufacturing process, but do you know what the eight most commons wastes are and how they impact your organization?
Taiichi Ohno, considered the father of Toyota Production System, created a lean manufacturing framework, which was based on the idea of preserving (or increasing) value with less work. Any-thing that doesn't increase value in the eye of the customer must be considered waste, or "Muda", and every effort should be made to eliminate that waste. The following 8 lean manufacturing wastes, mostly derived from the TPS, have a universal application to businesses today. The acro-nym for the eight wastes is DOWNTIME. Downtime stands for:
- Defects
- Overproduction
- Waiting
- Not utilizing talent
- Transportation
- Inventory excess
- Motion waste
- Excess processing
OWN-IT is the acronym for the process of collecting and analysing the data and information needed in any field SCAMPER is acronym for options addressing the underlying issues and achieving target VA/VE is value analysis and value engineering LO 3, AC 3.4
NEW QUESTION # 36
A procurement team is categorising their purchased items into four quadrants of Kraljic's supply chain portfolio matrix. They realise that there are some low-value items which come from very few suppliers in the market. The organisation is critically dependent on these suppliers. The team plans to reduce the dependence by finding alternative sources. Is this a right course of action?
Answer: B
Explanation:
According to Kraljic portfolio matrix, the low-value items with high supply risk are bottleneck items.
The purchasing strategy that is commonly recommended for these products is primarily based on acceptance of the dependence and reduction of the negative effects of the unfavourable position. An alternative strategy suggested by purchasing practitioners is to find other suppliers and move towards the non-critical quadrant.
- Accept dependence, reduce negative consequences: The main focus of this strategy is to assure supply, if necessary even at additional cost. Examples of this strategy are keeping extra stocks of the materials concerned or developing consigned stock agreements with suppliers. By performing a risk analysis firms can identify the most important bottleneck products and consider the implications. A possible action for dealing with unexpected bad dependence positions for certain products is to employ contingency planning.
- Reduce dependence and risk, find other solutions: This strategy is geared towards reducing the dependence on the supplier. The most common way to achieve this is to broaden the specifications of the product or to search for new suppliers.
The procurement team in the scenario has selected reducing dependency by finding alternatives. This is a right strategy for bottleneck item.
Reference:
- CIPS study guide page 82-84
- Purchasing strategies in the Kraljic matrix-A power and dependence perspective, Marjolein C.J. Caniels, Cees J. Gelderman LO 2, AC 2.1
NEW QUESTION # 37
A procurement team is categorising their purchased items into four quadrants of Kraljic's supply chain portfolio matrix. They realise that there are some low-value items which come from very few suppliers in the market. The organisation is critically dependent on these suppliers. The team plans to reduce the dependence by finding alternative sources. Is this a right course of action?
Answer: B
Explanation:
According to Kraljic portfolio matrix, the low-value items with high supply risk are bottleneck items.
The purchasing strategy that is commonly recommended for these products is primarily based on acceptance of the dependence and reduction of the negative effects of the unfavourable position. An alternative strategy suggested by purchasing practitioners is to find other suppliers and move towards the non-critical quadrant.
- Accept dependence, reduce negative consequences: The main focus of this strategy is to assure supply, if necessary even at additional cost. Examples of this strategy are keeping extra stocks of the materials concerned or developing consigned stock agreements with suppliers. By performing a risk analysis firms can identify the most important bottleneck products and consider the implications. A possible action for dealing with unexpected bad dependence positions for certain products is to employ contingency planning.
- Reduce dependence and risk, find other solutions: This strategy is geared towards reducing the dependence on the supplier. The most common way to achieve this is to broaden the specifications of the product or to search for new suppliers.
The procurement team in the scenario has selected reducing dependency by finding alternatives. This is a right strategy for bottleneck item.
Reference:
- CIPS study guide page 82-84
- Purchasing strategies in the Kraljic matrix-A power and dependence perspective, Marjolein C.J. Caniels, Cees J. Gelderman LO 2, AC 2.1
NEW QUESTION # 38
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