CIPS AT A SHOT

SAMPLE QUESTIONS AND ANSWER

SCOPE AND INFLUENCE OF
PROCUREMENT AND SUPPLY
LEVEL 4 DIPLOMA-CONSTRUCTIVE RESPONSES FOR NEW SYLLABUS

PEKENE T.N.
 QUESTION 1: Page 3: (1) - Apply

Explain the difference between procurement purchasing and supply

RESPONSE

PROCUREMENT is a strategic function of a business and it involves high level of skill. It

involves obtaining something tangible (goods) or intangible (services), whereas PURCHASING
is a function of procurement, it is the act of physically ordering and buying something. SUPPLY
quite different from procurement and purchasing, it is the infrastructure which ensures that
products or services get from the supplier to the customer, supply can be said to be another
function of procurement.

Note: Purchasing and supply are functions within the procurement cycle.

QUESTION 2: Page 5: (2) - Apply

Describe one example of each of the following costs within a leather shoe manufacturing organization.

i. Fixed cost
ii. Variable cost
iii. Direct cost
iv. Indirect cost.

RESPONSE

Name of organization: Fullpower Projects

Business: Leather shoe Manufacturer

FIXED COSTS: These costs do not change with the number of shoes produced by the
organization. The organization has to pay them, no matter how well or badly it is performing.
Examples are 1. Rent on factory 2. Salaries of Management Team or cost of Machineries
VARIABLE COST: These are costs that change with the output of the organization, they relate
to the number of shoes produced or sold, or the number of services supplied. Examples are 1.
Glue 2. Leather

DIRECT COST: These are costs that are directly involved in setting up and building the shoes.
Examples are; 1. Filing/Cutting Machines 2. Glue/Leather

INDIRECT COST: These costs are not directly associated with the production of a pair of shoe,
they are over heads. For example; 1. Rent of the factory 2, Salaries of support staff

QUESTION 3: Page 6: (3) Check

Which of the cost from the list below are tangible and which are intangible?

1. Capital Purchase
2. Insurance
3. Marketing
4. Raw materials
5. Research and development
6. Salaries and/pension
7. Services
8. Sundry items
9. Training
10. Utilities
11. Vehicles/transport

RESPONSE

Tangible costs are the cost an organization incur acquiring items that can be physically touched
and or seen. Examples in the list above includes; 1) Capital Purchase 2) Raw materials 3) Sundry
items 4) Vehicles/transport 5) Utilities

Intangible costs are the cost an organization incurs acquiring something that cannot be
physically seen or touched. Examples in the list above include; 1) Insurance 2) Marketing 3)
Research and development 4) Salaries and/pension 5) Services 6) Training.
 QUESTION 4: Page 8: (4) Apply

Explain why the procurement development professionals should be consulted before an

organization spends money?

RESPONSE

The procurement development aim is to ensure value for money is achieved in the organization.
Procurement professionals may have existing relationship with suppliers who can supply what is
needed at a fair cost to the organization.

QUESTION 5 Page 11 (5b) – check

Think of some examples of Non-stock intangibles

RESPONSE

Non-stock intangible procurements are not stored within an organization and may be one-off
capital purchase. They are not listed in the organizational inventory.

Non-stock intangible procurement belongs to tertiary sector. Tertiary services are the commercial
services used to help run an organization. Examples of Non-stock intangible procurement
include the following: 1) Cleaning service 2) Telephone system 3) Internet contract 4)
Organizational insurance 5) Advertising campaign 6) Marketing

QUESTION 6: Page 12 (5c) Apply

Consider an organization with which you are familiar and describe a product or service provided
by each of the suppliers in the Kraljic Matrix. State whether the procurement is direct, indirect,
stock or non-stock.

RESPONSE

Direct procurement is the sourcing and supply of a product or services that is directly related to
specific end result, such as the raw material used to produce a product, for example, a shoe
maker buying leather to make a shoe.
An indirect procurement is the sourcing and supply of the goods and services that an
organization needs to continue functioning, but that doesn’t contribute to the bottom line, for
example marketing and repairing office equipment.

Stock procurement is the procuring of touchable/seeable items that the organization can hold in
its inventory.

Non-stock procurement is the procuring of services and capital purchases that cannot be listed
in the organization’s inventory.

Familiar organization: Fullpower LTD

Business: Corporate shoe making.

Leverage items Strategic items

1. Marketing (Indirect non-stock) 1. Leather- (Direct and stock)

2. Advertizing (direct and non-stock)
3. Filling marching and scissors/cutter
(Direct stock)

Routine items Bottle neck

1. Stationary (Direct and stock) 1. Glue (Direct and stock)

2. Nails/pins (Direct and stock) 2. Tread (Direct and stock)
3. Polish/paint (Direct and stock)

QUESTION 7: Page 13 (6) - Check

What should the procurement professional consider when sourcing a capital purchase?

RESPONSE

The procurement professional should know that the value of capital purchase depreciate/reduce
over time and assess how quickly the asset may depreciate and consider the cost/benefits to come
up with the most strategic value adding plan.
 QUESTION 8: Page 15: (7) check

What are the stages of the procurement cycle process?

RESPONSES

The CIPS procurement cycle is a comprehensive diagram which shows each stages relating to
the procurement process. The stages of the procurement cycle include:

Stage 1: Understanding the need and developing a high-level specification.

Stage 2: Market/commodity and option.
Stage 3: Develop strategic/plan
Stage 4: Pre-procurement, market test/market engagement
Stage 5: Development documentation
Stage 6: Supplier election to participate in ITT/RFQ negotiation
Stage 7: Issue ITT/RFQ

Stage 8: Bid/tender/quotation evaluation

Stage 9: Contract award and implementation

Stage 10: warehouse, logistic and receipt

Stage 11: Contract performance review

Stage 12: SRM and SIM and Development

Stage 13: Asset management and lesson learned.

QUESTION 9: Page 16 (8) - Apply

Discuss why it is important to include a very detailed specification in service procurement

contract.
 RESPONSE

Specification is a detailed description of what is required or what a buyer intend to acquire from
a supplier. It is important to include a very detailed specification in service contract, because
service procurement is intangible, it cannot be evaluated in the same way as tangible
procurement. With intangible procurement, services/samples cannot be analyzed to the
conformity. Therefore, the specification for sourcing service need to be very detailed to explain
exactly what is required.

QUESTION 10: Page 23: (10) – Apply

A procurement professional receives two quotations in response to her RFQ for 100 items.

Supplier 1 quotes and $2 per unit and state that this price is net and EXW.

Supplier 2 quotes and $2.50 per unit and state that the price is net and CPT.

What should the buyer do before placing an order and why?

RESPONSE

The buyer should find out the cost per unit of goods as if it is to arrange for collection and
delivery from the supplier (EXW) alone and Carriage Paid To (CPT) a named place separately
and compare the cost against the quotation of each of the suppliers (1&2) before placing order.
Reason being that without the cost break down the buyer will not be able to identify the most
economical quote. With this caparison the buyer can now make an informant decision.

NOTE: This question is technical. Some persons could be tempted to solve for the most viable
option and identify which supplier to contract. That is easier, because the figures are there.
But this is not what the question is talking about. The questioner what you to say ‘what should
the buyer do and why’. In your response just go ahead and tell what a professional
procurement officer would do and why.

QUESTION 11: Page 24: (11) – Apply

Describe why five rights of procurement and supply are important to the procurement
professional.
 RESPONSES

The five rights of procurement and supply are a keyway in which procurement professionals can
check that all areas are covered when buying goods and services. The five rights of procurement
and supply are; 1) The right quantity 2) The quality 3) The right time 4) The right place 5) The
right price.

QUESTION 12: Page 26: (12) - Apply

An organization wishes to procure a new printer for the office. A junior buyer in the procurement
department is asked to research new printer. The office manager tells him that she needs the
printer by early next week. The buyer presents the quotation from the supplier that he considers
to be the cheapest to the procurement department manager. The purchase cost is very
competitive but the manager notices that the buyer’s specification is vague. The supplier is in
Australia, while the buyer organization is located in South Africa.

What factors should the junior buyer have considered when analyzing the total cost of
acquisition of the printer?

RESPONSE

When analyzing the total cost of acquisition of the printer, the factors that junior buyers should
have considered are:

1. Purchased price of the printer

2. Carriage and insurance cost
3. Quality
4. The lead time.
QUESTION 13: Page 26 (14) – Apply

a) From the list of TCO below evaluate which elements are relevant to procuring a new
Lorry for a transport fleet.

b) Identify which costs are direct and which are indirect cost.

1. TCA 2) Tooling 3) Insurance 4) Operation 5) Maintenance 6) Trading 7) Storage 8)

Disposal
 RESPONSE

a) Total Cost of ownership (TCO) – Is the total cost the organization will incur by owning
the Lorry for a transport fleet throughout its useful life, for example; 1) Total Cost of
Acquisition - TCA 2) Tooling 3) Insurance 4) Operation 5) Maintenance 6) Disposal

b) Direct costs – These are costs that are directly involved in buying and running the Lorry
for transport fleet. Examples are; 1) TCA 2) Tooling 3) Operation 4) Insurance

Indirect cost - These are costs that are not directly associated with the buying and running
the Lorry for transport fleet. Examples are; 1) Insurance 2) Disposal.

QUESTION 14: Page 29: (16) – Apply

Write one qualitative KPI and one quantitative KPI to help a supplier achieve the right quality
and the right quality.

RESPONSE

Quantitative KPI to achieve the right quality and the right quantity

1. Reduce percentage of late delivery

2. Increase number of orders receiving with correct quantities.

Qualitative KPI to achieve the right quality and the right quantity

1. Achieve ISO accreditation

2. Reduce material wastage during manufacturing

QUESTION 15: Page 31: (17)

What is innovation?
 RESPONSE

It is a new concept or a new idea. For example; programming the Gas-cooker to switch itself off
just before the food starts burning. And if there is no one to switch it off. This innovation is for
safety geared towards reducing the percentage of fire outbreak recorded to be emanated from the
kitchen.

QUESTION 16 Page 35: (20) – Check

What sector does a procurement professional fit into?

RESPONSE

The procurement professional provides services for the buying organization, ensuring that there
is value for money in caring procurement activities. Therefore the procurement professional fits
into the tertiary sector in the industry.

QUESTION 17: Page 36: (21) – Check

Give two examples of an Organization within each sector.

RESPONSE

Primary sector: Is the industry sector that extracts raw materials. Example:

1. Shell Petroleum: Oil Driller 2. Sungai Farm: Agriculture (Fishing and livestock)

Secondary Sector: Is the industry sector that manufactures things. Example:

1. Dangote Noddles: Noddles Producer 2. First Aluminum: a manufacturer

Tertiary sector: Is the industry sector that provides services. Example:

1. Hallibutton – Oil and Gas servicing firm 2. Dexterouse – A Training provider

 QUESTION 18: Page 36: (22) – Apply

Explain which of the five elements within the supply chain model feature in both the upstream
and downstream stages and why.

RESPONSE

This is Basic Supply Chain model

Materials are
sent to the
manufacturer.

Manufacturer
process materials
Suppliers obtain Distributors
raw materials collect mat from
from producers manufacturer and
send to
Down Stream

customers
Upstream

Producer extract Customers

natural resources

The supply chain model is made up of the upstream and the downstream and they both comprises
five elements within the supply chain model which are;

1. Producers (Extracts natural resources) – upstream element

2. Suppliers (Obtain raw materials from suppliers) – upstream element

3. Manufacturers (Processes raw materials ) In between upstream and downstream

4. Distributor (Collect materials/goods from the manufacturers and delivers to the customer)
downstream element

5. Customer - downstream
Looking at the Basic Supply Chain Model, ‘Manufacturer’ features both in upstream and
downstream.

Reasons: the manufacturer receives raw materials from the upstream elements, process them into
finish goods and pass them onto the distributor which is a downstream element in the model.

QUESTION 19: Page 35: (24) – Check

Define procurement and supply

RESPONSE

Procurement is a strategic function that involves obtaining tangibles (goods) and intangibles
(services). It starts with the process of identifying needs and ends where the needs are
satisfactorily delivered to the user.

Supply is the infrastructure which ensures that product or services get from the supplier to the
customer.

QUESTIONS 20

Outline why supply chain management may be unattractive for some organizations.

RESPONSE

In order to be operationally feasible, there must be sufficient resources and appropriate systems
in place to develop and manage supply chain effectively.

The investment in integrated systems, supplier development, quality emphasis and cost.etc, may
not worth the profit and gains that could be generated for a given organization. This may be too
much burdens and ambiguity to handle with their kind of business model.

Increased collaboration and integration may expose the firm to risks.

Supply Chain Management as a radical strategic shift requires both internal support and supplier
willingness.

Network information sharing may expose the firm to loss of informational and intellectual assets
and distinctive competencies.

It's difficult to measure the effectiveness of or business case for SCM co-operation in meaningful
ways. All these might by reasons supply chain management might not be attractive to some
organization.
 QUESTION: 21 Page 40: (23) – Apply

Explain two differences between a supply chain and supply chain network.

RESPONSE

SUPPLY CHAIN encompasses all organization and activities associated with the flow and
transformation of goods from the raw materials stage, through to the end user, as well as the
associated information flow.

SUPPLY CHAIN network is an extension of a supply chain it involves links between various
organization involves in a supply chair. It includes managing the physical and information flows
among the organizations.

Difference between supply chain and supply chain network

1. There is only one consumer in the supply chain – the end user while in supply chain
network, organization are consumers
2. Supply chain starts with the producer which extracts natural resources while supply chain
networks starts with external supplier. 3. A supply chain focuses on an individual
organization while supply chain network includes various organizations and how they
interacts (physical and information flow among them).

QUESTION 22: Page 51: (25) Apply

Describe how an MRP or ERP system can help procurement

RESPONSE

An MRP or ERP system can help procurement in the following ways;

1. They can help with materials management: they can help schedule orders, monitor
inventory and manage production.
2. The MRP can work out order quantities based on minimum order quantities (MOQ) batch
quantities buffer stock and lead time.
3. The ERP can optimize the interaction between procurement and other departments in
their organization.
4. ERP can help with more effective and efficient procurement process and also reduce cost
for the organization.
 QUESTION 23: Page 52: (26) – Check

What is the difference between internal and external stakeholders?

RESPONSE

Stakeholder is any group or individual who can affect or is affected by the achievement of the
organization’s objective.

The difference between internal stakeholders and internal stakeholders is that internal
stakeholders are within the organization, such as owners, directors, managers and workers while
external stakeholders are outside the organization such as competitors, communities and the
government.

QUESTION 24: Page 52: (27) – Apply

Identify the stakeholders in an organization with which you are familiar

RESPONSE

Familiar organization: Project Consult organization

Business: Training and Consulting

Stakeholders register

1. Trainees - External
2. The owners - Internal
3. Stakeholders - External
4. Staffs - Internal
5. Shareholder –
6. Government – External

QUESTION 25: Page 54: (28) – Check

What does MRP stand for?

 RESPONSE

MRP stands for material requirements planning

QUESTION 26: Page 55: (29) – Check

What is logistics?

RESPONSE

Logistics is the process of planning, implementing and controlling procedures for the efficient
transportation and storage of goods from the point of origin to the point of consumption for the
purpose of conforming to customer requirement. In summary, logistics is the control of the flow
of goods or services between two points.

QUESTION 27: Page 55: (35) – Apply

Why does an organization need both internal and external stakeholders?

RESPONSE

Shareholders are very important to all organization, because they are integral to the success of
their day to day operations. Their input is often invaluable.

QUESTION 28: Page 58: (31) – check

What is the ISO accreditation for quality?

RESPONSE

The International Organizations Standard ISO accreditation for quality is ISO 9000. This
standard provides guidance and tools for companies and organizations who want to ensure that
their products and services consistently meet customer’s requirements, and that quality is
consistently improved.
 QUESTION 29: Page 61: (32)

Place stakeholders you identified earlier in the relevant quadrant of Mendelow’s matrix

RESPONSE

Keep satisfied(High power/Low interest)

1.Customers

Manage closely (High power/ high interest - Key Players)

1. Owners 2. Stakeholders Government

Minimum effort (Low power/Low interest)

1.Supplier’s of stationaries

keep informed (Low power/High interest)

1. Trainees 2. Staffs

QUESTION 30: Page 65: (33) – Check

What are the differences between performance and conformance specification?

RESPONSE

Performance specification is a description of the outputs or outcomes that are expected with the
detail design of the product or services left for the supplier to decide. It promotes innovation,
whereas Conformance specification details exactly what the product or service will consist, no
variance.

QUESTION 31 Page 66: (56) – Apply

An organization sells heavy duty padlocks to an established customer base. The organization has
manufacturing capabilities, a warehouse facility and skilled workers with years of experience
making padlocks.
Explain which of the goods or service listed below should be made and which should be bought,
giving reasons for your decision.

i. Best selling padlock sold to several core customers

ii. Worst selling padlock sold to spot customers
iii. Clearing contract
iv. Recruitment of temporary staff.

RESPONSE

1. Best selling padlocks sold to several core customers should be made not bought from an
external source. Reasons being this fact that it is core to the strategic operation of the
organization. This is how the organization can control its quality and increase its
competitive advantages and eventual increase its market share.

2. Worst selling padlocks sold to spot customers can be bought from an outside supplier.
These are leverage items and should not interfere in the organizations ability to focus on
the core business and increase its market share. But a kind of control should still be kept
in house.

3. Cleaning contract can be bought for its totally out of the core areas of the organization. It
is a routing activity so it can be sourced from multiple sources to add the best value for
money.

4. Recruitment of temporary staffs can be bought from an external supplier. Since its only
temporary so the organization can save the energy and other resources it might expend in
the recruitment of personnel it might not want to retain for a long time. When this is done,
the organization focuses on growing (training) its core staffs.

QUESTION 32: Page 70: (37) Check

Why might bids or quotations differ between suppliers even though all have received the same
documentation?

RESPONSE

The most common way to present quotation is to give the net price. This means the individual
suppliers may have varying quotes, depending on what form of delivery methods suppliers
intends to use in supplying the goods or services.
 QUESTION 33: Page 72: (38) – Check

Define Total Cost of Ownership

RESPONSE

Total cost of ownership (TCO) is the cost associated with entire life of a product an owner may
incur. It accounts for both the direct and indirect costs and it can be broken down into the
following element

– Total cost of acquisition

– Tooling
– Insurance
– Operation
– Maintenance
– Training
–Storage
– Disposal

QUESTION 34: Page 73: (39) Check

What is the purpose of KPI

RESPONSE

The purpose of Key Performance Indicator (KPI) is to be included in a supplier’s contracts by

the procurement professional or by the buying organization in order to to monitor the
performance of the supplier or the contract.

QUESTION 35: Page 74: (40) – Apply

Think of a product within an organization with which you are familiar and discussed what level
of supply chain management (SCM) is required and why.

QUESTION 36: Page 75: (41) – Check

Which element within the procurement and supply cycle is place between the pre-contract and
post contract award stage?

RESPONSE
The element within the procurement and supply cycle placed between pre-contract and post
contract is stage 9: contract award and implementation.

QUESTION 37: Page 77(42)-apply

Select five stages of the CIPS Procurement and Supply Cycle and explain their importance in
relation to a customers need.

RESPONSE

QUESTION 38: Page 78: (43) – check

Which aspects of the CIPS Procurement and Supply Cycle are included in the sourcing process

RESPONSES

The following are the stages of procurement cycle including in the sourcing plan:

1) Understanding the need and developing a high level specification.

2) Market commodity and option
3) Develop strategy/plan
4) Pre procurement, market test and market engagement
5) Develop documentation
6) Supplier selection participate in ITT/RFQ negotiation

Stages involved are stage 1-6.

QUESTION 39: Page 93: (52) – apply

Select three stages of the procurement cycle and explain how they add value to the sourcing
process.

RESPONSE

Stage 1: understanding the need and developing a high level specification

Value can be added by saving time, that is when quality standards are met and needs for re-
quotes due to lack of information are reduced. It saves time and cost, reduces errors.

Stage 2: market commodity and option

Value can be added by researching the best method – make or buy – achieves the lowest cost
(cost effective approach), plan budget and make the right decision.
 Stage 3: develop strategy/plan

It saves time and ensure conformance by identifying suppliers that fit with the organization
strategy. Value can be added when the right level of competition in the market is identified
with this another value can be added through the decision of whether ITT or RFQ is most
appropriate, Right approach (sourcing) and knowledge of the right relationship.

QUESTION 40: Page 91: (51) –check

How is added value achieved in procurement cycle?

Remind yourself of other sources of added value and define value for money

RESPONSE

Added value is achieved in procurement cycle when the products or services are set apart from
those of its competitors and it attracts consumer’s attention and encourages them to buy. In other
words is when more values other than ontime, and infull delivery (otif) are achieved

Other sources of added value includes

1 additional features 6 reduced input cost

2 brand 7 reputations

3 convenience 8 innovation

4 excellence of service 9 sustainability

5 market development

Value for money (VFM) is the most advantageous combination of price and quality that
makes the product or service fit for purpose and will achieve the buyer’s required outcome,
this need to be reviewed in terms of whole life costs.

QUESTION 41: Page 81: (49) - Apply

Explain three problems a buyer will face if they award a contract to a supplier they have not
evaluated.
 RESPONSE

1 Poor quality: The buyer may be made to battle with product that is not fit for purpose and
this may lead to rework which may mean an incurred cost of poor quality.

2 Fail delivery: The buyer may not get the product or service at when required and in full

3 Reputational damages: The buyer may lose customers loyalty. Reputational loss is very
difficult to regain and that’s why suppliers that fit into the organization strategic should be
contacted and evaluate before going on contract with them.

QUESTION 42: Page 57: (50) – check

What information is included in the ITT/RFQ documentation that a buyer sends to evaluate
and select suppliers.

RESPONSE

The information included in the ITT/RFQ that a buyer sends to evaluate and select suppliers
are as follows:

1description and Specification

2 Quantities

3 Delivery Details

4 Service Level Agreement (SLA)

5 Terms and Conditions

QUESTION 43: Page 85 : (46) – check

What takes place during Stage 7-9 of the procurement cycle?

RESPONE

Stages 7-9 of the CIPS Procurement and Supply Cycle relates to the supplier. This is where
the buyer issue ITT/RFQ to short listed suppliers receivers bid tender quotations evaluate
them considering the total cost of ownership and contracts are awarded and implemented
 QUESTION 44: Page 85: (48) – check

What is ‘supply chain’ and which parties are involved within it?

RESPONSE

Supply Chain is the connection of individuals, organizations and activities associated with
the flow and transportation of goods from the raw material stage through to the end user as
well as the associated information flows.

The parties involved in a supply chain are as follows:

*Producers

*Suppliers

*Manufacturer

*Distributor

*Consumer (End User)

QUESTION 45: Page 84: (45) – check

Name four areas of a suppliers performance that are monitored by KPI

RESPONSE

Areas of suppliers performance that are monitored by KPI are;

1 Right Quality

2 Timescale

3 Quantity

4 Place of delivery as enshrined in the contract.

QUESTION 46: Page 82 : (44) – apply

Explain why is it important to understand the laws of the country in which a buyer is carrying
out procurement activity
 RESPONSE

It is important to understand the legislations, regulations and good practices of the country in
which a buyer is carrying out procurement activities in other to avoid the risk of unknown
implied terms. Some countries have similar processes and standards while others have very
complex, potentially confusing implied terms. Many countries are attempting to simplify
international trade but the procurement professionals should always be vigilant in order to
protect a buying organization from losing out on a purchase or from conducting itself in an
unacceptable manner.

QUESTION 47: Page 78: (43) – check

Which aspects of the procurement cycle are included in the sourcing process?

RESPONSE

Stages 1-6 of the procurement cycle are included in the sourcing process. The stages are as
follows;

1) Understanding the need and developing high level specification

2) Market/commodity and option
3) Develop strategy and plan
4) Pre procurement market test and market engagement
5) Develop documentation
6) Supplier selection to participate in ITT/RFQ negotiation.

QUESTION 48: Pg 95: (53) – Apply

Describe two advantages and two disadvantages of using e-requisition system

RESPONSE

E- requisition is the first part of the electronic process within the CIPS procurement cycle that
are commonly carried out electronically. This is triggered when an internal customer is informed
of a need. For example, an individual notifies their manager that they have used the last
component and they need more to complete an order. Once the individual know that an item is
required, they can raise an internal e-requisition.
Two (2) advantages of the e-requisition are;

1. It reduces the amount of time an individual is taking away from their core activities. 2. It
reduces risk. It has less chance of electronic document lost then paper-based.

Two (2) disadvantages of e-requisition are;

1. It is a large investment to install an e-system. 2. Reliant on technology

QUESTION 49: Page 98: (54) – Apply

Discuss why you think e-negotiation might be problematic in negotiation for a strategic product
or service.

RESPONSE

E-negotiation can be an exchange of e-mails between a buyer and a supplier discussing terms
until an agreement is made. The use of electronic in negotiation can be problematic in way that it
takes longer time for parties to reach an agreement. E-mails can often be misinterpreted and this
can be detrimental if a message is misconstrued by one party.

QUESTION 50: Page 101: (55) – Apply

Select one area of E-procurement and justify how it will reduce cost for an organization.

RESPONSE

E-procurement promotes efficiency within the functions; it can reduce the cost of running
procurement department, since it is the use of technology instead of marital process to run the
CIPS procurement cycle.

E- Negotiation is one area of the E- procurement cycle that cost can be justifiably be reduced in
an organization in the following ways:

 E- Negotiation uses existing facilities, (internet, e-mails, websites, and personnel) for
negotiation activities.
 It takes away the cost of courier for the distribution of information.
 It diminishes the concept of geographical co-location. Therefore it serves the organization
travel expense, accommodation cost and other related expenses.
 QUESTION 51: Page 107: (56) – Apply

Describe how an EDI system could improve the procurement process.

RESPONSE

An electronic data interchange (EDI) is a new technology being incorporated into e-procurement
that electronically exchange documents in an agreed format between organizations. It renews the
need for paper and people and allows computer system to communicate with another
organization that was EDI have no requirement for post and e-mail.

EDI system can improve the procurement process by quickening transaction, since it brings real
time information exchange to the procurement process. EDI improves on the accuracy of the
procurement process by first eliminating impact of humans and it errors. By allowing computer
to communicate with another there will be fewer wastes in the process, letting individuals to
focus on core activities. The procurement process can be run with fewer staffs. Bringing real
time to information exchange, it is obvious that time will drastically be reduced.

QUESTION 52: Page 112: (57) – Apply

Describe three problems which an organization could face if there are no structured processes
within their organization.

RESPONSE

It is important to have a structured process within an organization, not having a structured

processes can be detrimental to the organization in a way that it may have problems with
traceability if there is a dispute by a supplier or a potential supplier, the organization will have no
process to make reference to ascertain if processes are followed or not. Not having a structured
process, an organization cannot outline the right supplier to contract. If it probably engages those
it should avoid, the organization may suffer reputational loss among many. Also, not having a
structured process could jeopardize how buyers in the organization should conduct themselves
when representing the organization and the procurement profession.
 QUESTION 53: Page 117: (58) – Check

What is corporate governance?

RESPONSE

Corporate governance is the system of standard, procedures and policies by which an

organization is controlled to be effective, efficient and sustainable. It can be referred to as a
frame work that is created around the organization’s values and objectives.

QUESTION 54: Page 119: (59) – Apply

Explain why any potential conflict of interest should be disclosed.

RESPONSE

Conflict of interest occurs when someone within an organization has opposing loyalty or
multiple interests.

A potential conflict of interest need to be reported so it can be addressed to make sure that code
of ethics is not being breached.

QUESTION 55: Page 122: (60) – Apply

Explain how a code of ethics could support a buyer

RESPONSE

A code of ethics within a procurement function can support a buyer in many ways, these helps
the buyer to operate in an acceptable way and also encourage cohesiveness in the procurement
function whereby all team members work towards the same goal in the same way in accordance
with the code.

A code of ethics contributes towards an organization reputation when the code is strictly
observed by the procurement function. The organization will be regarded as among those that
has a strong value system. A procurement function with a code of ethics can show that it falls on
good practice, have considered diversity and encouraging the involvement of everyone.
 QUESTION 56: Page 125: (61) – Check

What information may be used to write policies and procedures?

RESPONSE

A policy is a document outlining how a business will conduct itself

A procedure is the way policies will be carried out.

Information which may be used to write policies and procedures include: organizational
objectives, legislation, regulation and standards.

QUESTION 57: Page 126: (62) – Apply

Explain two reasons why documented policies and procedures are needed within procurement.

RESPONSE

Good practice suggest that policies and procurement are document because, working to policies
and procedures can protect a procurement professional from being coerced, bribed or committing
fraud by educating them in what is acceptable and what is not. Also, documenting policies and
procedures help to keep procurement professionals efficient by outlining the best methods by
which they should conduct their objectives.

QUESTION 58: Page 130: (63) – Apply

Explain how procurement professionals can hold themselves accountable within their role.

RESPONSE

Accountability in the procurement function is about all members of the business working both
collectively and independently to achieve the objectives that have been defined through their
policies and subsequent procedure.

Procurement professional can hold themselves accountable by defining clear roles and promoting
team leadership and sense of ownership for team results. But will be beneficial if they report
when. They discover concerns and poor practices. They can hold themselves accountable when
making budget, tracking spends against the budget to report if there is any variance between the
planned and actual. There could be area of concern like supplier delivery information, product
quality, percentage of defects/reworks, new suppliers, price increase, cost reductions and change
in legislation, procurement professional is expected to report these to the function as they unfold
so it can be guided in making informed decision making.

QUESTION 59 Page 131: (64) Apply

Explain how the status of procurement and supply chain management has evolved and what has
contributed towards this.

RESPONSE

The status of procurement and supply chain management is constantly evolving and this is
integral to the success of the organization’s objective/business. The desire of organizations to
want to have an effective procurement function has contributed to this significantly.

The amount of profit a private sector organization makes, how effective and ethical to public
sector spend money gathered from tax payers and how third party organizations raises awareness
and provide help all depend on how securing products and services cost effectively and reduce
the cost associated with handling from procurement to dispatch where possible.

QUESTION 60: Page 132: (68) Check

Identify three purposes of policies and procedures.

RESPONSE

Three purpose of policies and procedures include

1. Ensure conformance
2. Ensure compliance
3. Protect from coercion, bribery or fraud

OTHERS
4. Organizational protection
5. Continuity of supply
6. Promote efficiency
7. Promote ethical behavior
8. Provide references
 9. Assist audit process
10. Aid with legal cases.

QUESTION 61: Page 134: (66) – Apply

Why do you think an expeditor or junior buyer can not conduct the tender a tender of $11,000.

RESPONSE

The value of the tender is above $10,000. An expeditor or junior buyer does not have
organizational authority to conduct a tender that its value is above $10,000.

In order to monitor spend, mitigate financial risk around maverick spend and maintain control of
organizations, responsibilities are allotted to individuals with certain level of authority.

QUESTION 62: Page 141: (67) – Apply

Explain in details, two advantages and two disadvantages of using procurement manuals.

RESPONSE

As procurement is recognized as a strategic business function, manuals are becoming more

important. Procurement manuals are created from organization’s procedures to enable buys to
undertake their roles in keeping with the organization strategy.

Advantages of procurement manual include providing guidance for buyers to deal with suppliers
in an ethical and sustainable manner that can add value to the organization; also it reduces risk
for the buying organization. When ethical steps for procurement activities are outlined for buyers
to take, it becomes almost impossible for the organization to be exposed to unwanted
happenstances.

Disadvantages: In as much it is most advantages for an organization to have a procurement

manual, there are other disadvantages having a procurement manual can create in the system.
The use of manual sometimes causes buyers to be complacent in a way that they stop being
creative and innovative, also things become monotonous and buyers lose their individuality.
People are most times motivated when they can trace results to their individual efforts.
 QUESTION 63: Page 145: (68) – Apply

Describe how an organization you are familiar with involves internal functions to aid the
sourcing processing.

RESPONSE

Fullpower Projects is an organization that specializes in project management trainings, it

involves internal functions to aid it sourcing processes in way that value was add in its sourcing
process.

It involves sales department, guiding procurement on training needs identifies and finance
department guiding procurement with set budget, payment terms and credit limits.

QUESTION 64: Page 149: (69) – Apply

Describe why you think it is important that procurement professionals are aware of the ILO’S
core conventions?

RESPONSE

Part of the International Labour Organization’s (ILO’S) work is to create core conventions that
outline good practice and protect the three parties (employers, employees and government)
within the organization. Representative from each parties work together with the objective of
creating core conventions. Once the core conventions are prepared, they are presented at the
ILO’S annual conference and if accepted they are adopted as an accepted and expected standard.

To help with responsible procurement, procurement professionals should be aware of the

convention, what they mean and how they can be implemented to avoid unethical procurement
which could be detrimental to the organization for which they are working.

QUESTION 65: Page 150: (70) – Check

What is economy of scale?

RESPONSE

Economy of scale is an organization strategy to buy items in bulk so to attract a discount from
the supplier. It is established that the more organization products an additional unit of any
product, the low the cost of producing a unit will be. This increase in quantity that relates to a
decrease in unity cost is called economy of scale.

QUESTION 66: Page 152: (71) – Apply

Compare the benefit of centralized and devolved procurement strategy.

RESPONSE

Centralized procurement is a strategy where by the vast majority of all the purchasing is done
from one team/department that controls procurement across organizations. Centralized
procurement strategy promotes economics of scale and reduces expenses and have more efficient
use of procurement skills and resources whereas devolve procurement strategy occurs where
various individuals/department within an organization are given their own responsibility for their
own procurement. Organization that uses the devolve procurement strategy enjoys some benefits
like direct communication with suppliers, fast delivery, local suppliers supported and they work
with fewer procedure as compared with centralized procurement and they have specialist
knowledge.

QUESTION 67: Page 156: (72) – Check

What are the common functions that can be structured as shared services?

RESPONSE

Shared structure are a form of centralize structure often used in hybrid structures. Share service
occurs when an organization centralize its support function. The common function that can be
structured as shared services include;

1) Human Resources

2) ICT

3) Administrative

4) Finance

QUESTION 68: Page 158: (73) – Apply

Select one disadvantage of the lead buyer procedure strategies and justify why it could cause
problems for an organization.

RESPONSE

Lead buyer structures occurs when one organizational department or individual takes the
responsibility for setting the framework or the purchasing of a specific products or services such
as ICT or stationary.

The downside of this structure is that products or services which may be fit for purpose for one
department may not be so for another if one department does not have procurement skills this
prices paid may not be competitive or the supplier selected not in keeping with the strategy
policies or procedure of the organization. There is an increased risk of unethical or unsustainable
supplier actions if the procurement is not handled correctly. This could lead to problems for an
organization such as poor media coverage or even legal persecution.

QUESTION 69: Page 160: (74) – Apply

Compare the benefits and developments of out sourcing the procurement function

RESPONSE

Some organization believes that outsourcing some or all of their procurement function enable
them to focus on the core activities while saving resources and maximizing Profits, also
advantages of outsourcing includes cost reduction, reduced overheads due to lower head count.
Whereas, the drawbacks of outsourcing the procurement function include lack of control, the
difficulty of managing the transition from internal to outsourced procurement and lack of
continuity in supplier relationships.

QUESTION 70: Page 160: (75) Check

What is hybrid structure?

RESPONSE

A hybrid structure is a combination of centralized and developed structures.

 QUESTION 71: Page 161: (76) Check

What are the four categories of stakeholders according to Mendelow’s stakeholder matrix?

RESPONSE

According to Mendelow’s stakeholder matrix, the four (4) categories of stakeholders include the
following

1. Minimum effort (low power – low internet)

2. Keep satisfied (high power – low internet)
3. Keep informed (low power – High internet)
4. Manage closely key player (High power – High internet)

QUESTION 72: Page 162: (77) – Check

What are the four supplier types identified in Kraljic matrix?

RESPONSE

The Kraljic matrix is a supplier positioning matrix according to their financial and their supply
impact. This matrix segment suppliers in four quadrants.

1. Routine
2. Leverage
3. Bottle neck
4. Strategic

QUESTION 73: Page 162: (78) – Apply

Justify the reasons for building support with suppliers of bottleneck products or services

RESPONSE

Suppliers of bottleneck product or services are suppliers of low financial impact and high supply
risk. A buyer building a raport with a bottleneck supplier is essential to the controlling of supply
of the buying organization. Building a raport with a supplier with a bottleneck product and
service may lead to a more cordial relationship that could make the supplier prefer the buyer
among many others and this can lead to special treatment like discounting, knowledge transfer
and constant supply.
 QUESTION 74: Page 164: (79) – Apply

What constitute value for money?

RESPONSE

The following constitute value for money;

1) Currency/exchange rates
2) Environmental factors
3) Freight cost
4) Maintenance
5) Packaging
6) Payment terms
7) Place
8) Product/services price
9) Quantity
10) Quantities inventory
11) Supplier reputation
12) Time
13) Warranty

QUESTION 75: Page 165: (80) – Check

What areas are included in total life costing?

RESPONSE

Total life costing takes into account the estimated costs that will be inclined during the lifespan
of the product, and the areas included are;

1) TCA 2) Tooling 3) Insurance 4) operation 5) Maintenance 6) Training 7) Storage 8)

Disposal

QUESTION 76: Page 166: (81) – Apply

Explain why public sector organization must have value for money outcome?
 RESPONSE

Within the public sector it is essential to achieve value for money as this sector is directly
founded by the tax payer money, failing to offer value for money can result to officials being
invested or loss of trust on the government.

QUESTION 77: Page 167: (2) – Check

What is procure to pay (P2P) system?

Apart from faster payments explain three other ways in which P2P has an impact on the sourcing
process.

RESPONSE

The P2P system is an electronic process designed to speed up all the sourcing stages, from the
initial identification of requirements, to the procurement/purchasing of the item, through the
receipt of the goods to the payment.

The impact of the P2P systems on the sourcing process includes the following;

1. Reduce errors
2. Reduce waste
3. Reduce cost
4. Faster payments
5. Continues improvement
6. Enhance relationship

P2P reduces waste in the sourcing process by enhancing purpose, process and people. It aid in
understanding what a customer wants and how they perceive value. It improves the process by
removing the non-value added activities from the system also it creates an environment that
enables people to achieve their maximum potential. By enhancing these three, waste is reduced.

P2P enhances relationship, a buyer maybe more inclined to work with the supplier whose
process provide an easier way of working. i.e if the buyer make a mail and it received and replied
by the supplier.

P2P create room for continuous improvement. As the systems are upgraded and new technology
is introduce into business, the sourcing process becomes better and more results oriented.

QUESTION 78: Page 167: (83) – Check

What is material requirement planning?

RESPONSE

Material requirement planning (MRP) is an electric system which can schedule orders, monitor
inventory and mange the production process. An MRP works based on the demand of the end
product or the product that the organization manufactures.

An MRP system has three main objectives;

1) Ensure that parts or materials needed for manufacturing of end products are available.
2) Establish when to place orders and schedule delivery
3) Keep inventory value as low as possible.

QUESTION 79: Page 172: (84) – Apply

Explain the benefits of using electronic inventory management systems.

RESPONSE

Electronic inventory management system provides accurate data by taking away the human error
from the systems. A task that would have taken more men to get done can be handled by the
system. Electronic inventory management system steps in which improve efficiency as compared
with manual, communication speeds up as they get to targeted recipient faster and at almost real
time. Errors can be traced to their sources and eliminated. Buyers and supplier personnel can
work from wherever they are within worlds. These are some organizations logistic burden.

QUESTION 80: Page 173: (85) – Check

What modules are available in relation to ERP system?

RESPONSE

Each of the departmental areas is referred to as ERP modules. Available modules in relation to
ERP system are as follows.

1. Supply chain management 2. Manufacturing 3. Human resources 4. Project

management 5. Finance/ Account. 6. Customer relationship management.
 QUESTION 81: Page: 175 (86) – Apply

Explain how an ERP system with a supply chain management module could benefit an
organization.

RESPONSE

The ERP system can help stream line process within the supply chain. ERP enables the internal
customers to raise requisitions and allow buyers to create and send purchase orders whilst
logging all the information in one central point. For procurement to see when goods have been
delivered, the BRP connect the warehouse module in links to the supply chain. Buyers can see
through the supply chain links when invoices are marked as paid. KPIs are logged in and are
used to track contract performance, price increase, or quality issue is visible. It makes supplier
relationship management easy. The element holds all the information of supplier and therefore
evaluation is made easy.

QUESTION 82: Page 179: (87) – Apply

Select three advantages of using IT-base communication

RESPONSE

The use of IT system like email within communication has made some significant differences in
the way procurement professionals interact with suppliers and customers. Advantages of using
IT-base communication includes; 1) Speeds up process 2) Aids traceability 3) Increase control.

Procurement professionals prefer the fastest way information can get to supplier and back to
them and the use of e-mail as taken care of that. Messages sent out through e-mail are easy to
trace and to the intended person on the other side. Buyers make sure only the intended address
are included and copied.

QUESTION 83: Page 182: (88) – Check

What is a sector?

RESPONSE
Sectors are a way of classifying organization in relation to the way they are funded, what their
objectives are and what products or services they are involved with. Within the economic
classification we have three sectors and these are;

1) Public sector 2) Private sector 3) Third sector.

QUESTION 84: Page 183: (89)

Describe the service provide by Public Sector
RESPONSE
Public sector is one of the three economic classifications. They are owned and controlled by the
government. There purpose is to provide the general public with services that are integral to their
wellbeing and life style. Public sector service includes;
1. Universal healthcare
2. Education
3. Military
4. Emergency services.

QUESTION 85: Page 186 (90)-apply

Explain why public sector organizations have to be accountable for their actions

RESPONSE
Public sector organizations are accountable to both the government and the general public
because they are funded with tax payers money, they must ensure they are leading examples in
meeting high ethical standards. The media scrutinize public sector organizations to help the
public understand how their money is being spent, and hold them accountable when standard
falls.

QUESTION 86: Page 190: (91)

Check what the main differences between the public, private and the third sector?

RESPONSE
They public sector organizations are owned and controlled and funded by the government with
tax payers funds, their purpose is to provide the general public with services that are integral to
their well being and lifestyle. Organization within this sector are structured to serve a public
need, rather than generate profit .Whereas the private sector Organization are owned and
funded by individual or enterprises. The people involved in the private sector organization has
one shared objectives – to make profit .Businesses in the private sector employ more people
across the world than the public sector. Their aim is to supply products and or services to
customers and consumers. The third sector organizations, often referred to as TSOs are not part
of the public or the private sector .they exist to support and promote social, environment or
cultural objectives. They do not aim to make profit. Any profits (surpluses) they make are used
to support their goals and that is why they often referred to as not-for-profit Organization.

QUESTION 87: Page 190 (92). – Apply

Explain which sector you think agriculture should be classified under and give reasons
RESPONSE
Agriculture should be classified under primary sector, reason being that agriculture involves the
first stage of farming and the extraction of raw materials.

QUESTION 88: Page 196: (93) – apply

Why do you think private sector regulation is less strict than public sector regulations?
RESPONSE
The private sector organizations are less strict than the public sector organizations, reasons; the
private sector organizations does not have a direct duty of care of the people and their
environment. Since they are not funded with tax payer’s money just like the public sector
organization. Their regulations are not as stringent as the public sector organization.

QUESTION 89: Page 215 (94) – check

What is the role of the third or not-for-profit sector?
RESPONSE
Not-for-profit or third sector organizations are not geared to achieve profits like private sector
organizations, or to save the tax payer’s money like public sector organizations. The purpose of a
TSO is to provide support for a cause.

QUESTION 90: Page 217: (95) – apply

Explain the difference in objectives between a charity and a buying group.
 RESPONSE
The objective of charity is different from that of a buying group. Charity raises awareness of
cause by aiming to bring issues to the forefront of people’s minds through media engagement or
marketing it attracts donations and funding, ensuring continuity of support by engaging
stakeholders, whereas buying groups aim to offer their members cost saving on a wide variety of
products. Members of buying groups are businesses. Individually they may have little power to
negotiate price collectively however they have purchasing power to negotiate and obtain
competitive prices. This discount is passed on to members of the buying group in form of trade
discount. By so doing they attract more members, provide support through advices on relevant
matters.

QUESTION 91: Page 219: (96) – apply

Explain the role of the Charity Commission

RESPONSE

The charity commission is an independent body that reports to the government. It ensures the
fairness and good conduct of all registered charities. This includes:

1) Protecting charities from abuse or mismanagement

2) Enabling trustees to run their charities effectively
3) Encouraging greater transparency and accountability
4) Operating as an efficient, expert regulator with sustainable funding

Note: Charities with a yearly income exceeding £5000 have to be registered. (in the United
Kingdom).