L2M1 Tutor Notes

CIPS Level 2 Certificate in Procurement and Supply Operations
Teaching Notes
Module title: Introducing procurement and Supply [L2M1]
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Leading global excellence in procurement and supply

Learning Outcome 1: Understand the role of procurement and supply within
organisations
These notes are designed to support teaching staff using the CIPS Teaching Resources PPT slides. Teaching
staff are advised to cross reference against the relevant module content and learner resources (e.g. study
guide). Supplementary resources are available on cips.org in the Student Zone, CIPS Knowledge and Supply
Management online journal (www.cips.org).
SLIDE TUTOR NOTES
1 Not applicable
2 Not applicable
3 Diagram shows main processes that take place within procurement and supply.
Ask students if they can suggest a definition for each of the key terms below before providing
the correct definition, and follow up by asking where each term fits in the diagram shown.
• Procurement ‐ the act of obtaining something, such as a product or service. It starts
with the identification of the need and runs through to the management and review
of the contract.
• Purchasing ‐ the process of acquiring goods and services, including payment of
invoices. It is part of the procurement process.
• Buying ‐ the act of placing orders to make a purchase.
• The supply chain ‐ comprises all the organisations and activities that are involved in
supplying a product or service to the end user.
• Materials management ‐ the part of the procurement process that makes sure
organisations have the materials they need to operate.
• Distribution ‐ the process of moving materials or products from one supply chain
participant to another.
• Logistics ‐ the control of the flow of goods or services between two points.
• Contract management ‐ includes monitoring supplier performance, quality and
prices.
Go on to discuss the types of procurements. Either ask students for definitions of the
following terms, or provide the definition and ask for suggested examples:
• Capital and revenue purchases ‐ things that are of value to a business, such as
machinery or buildings. They are assets to a business, and their value depreciates
over time.
• Products ‐ anything tangible that a buyer purchases. It can be anything from office
stationery, to components in a factory, to buildings.
• Services ‐ intangible. This means they are things that can’t be touched or seen, for
example cleaning, maintenance or energy contracts.
• Direct procurements ‐ directly attributable to the production of a specific item or
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SLIDE TUTOR NOTES
service, such as paper in the production of a book.

• Indirect procurements ‐ not directly attributable to the production of a specific item
or service. For example, the electricity used to light the factory where a book is
printed.
• Outsourcing ‐ the process of contracting an organisation outside of the business to
carry out a service.
• Insourcing – a task conducted within an organisation by its own workforce.
4 There are three sectors that all business activity fits into:
• Primary sector extracts raw materials from the Earth. Examples: mining coal, drilling
oil, extracting metal, farming crops and fishing.
• Secondary sector is manufacturing ‐ converting raw materials into finished products
or assemble products. Examples: converting oil into plastic, or farm crops into food
products; building a house or assembling a car.
• Tertiary sector is the service industry ‐ businesses that support the production and
distribution process. Examples: transport, storage, insurance and health care.
Provide some examples such as the ones below, and ask learners to identify which sector
each falls under:
• Police
• Producing chairs
• Flowers
• Cleaning
5 Class discussion: What are procurement and supply professionals responsible for?
Discuss with a partner to make a list of:
• All the different types of people they might need to interact with
• All the stages involved in obtaining supplies
• What they need to take into account when deciding on the best option
Procurement staff are responsible for spending an organisation’s money in the most cost‐
effective way.
People that procurement liaise with:
• Customers
• Suppliers
• Supplier relationship managers
• Stock control managers in warehousing or the goods‐in department
• Quality control
• Logistics
Influenced by Procurement and Supply Director and other stakeholders, including
colleagues, the bank, local community, etc.
Stages involved: refer back to slide 1
• responding to the needs of customers and fulfilling their needs
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SLIDE TUTOR NOTES
• connecting with, evaluating and selecting suppliers

• negotiating effective terms and conditions
• managing supplier relationships
• ensuring sustainability within the supply chain
• achieving good value for money
• keeping within budget by monitoring spends and taking any remedial action that is
required
What needs to be taken into account?: refer to the next two slides.
6 Introduce and discuss all the factors that need to be considered when evaluating value for money.
Why is it important for procurement personnel to consider all of the factors listed?
Aim to draw out that if just considering price, the cheapest option could be selected, but
might cost organisations more money in the long run, e.g., if freight costs aren’t included, or
if the supplier has poor treatment of workers, that would reflect badly on buying
organisations and could result in boycotts and lost revenue, etc.
7 Use the diagram to introduce the elements that should be covered within an organisation’s
CSR policy.
Why are all of these aspects important?
8 Talk through supply chain diagram:
• Raw materials extracted
• Suppliers supply materials and components to buying organisations. Suppliers can
have their own suppliers (more on next slide). All suppliers have customers.
• Manufacturer creates products by assembling components from various suppliers
• Distributor delivers products to retailer
• Retailer sells on the products to customer, through a store or online
• A customer ‐ individual or organisation that receives goods or services. They may
resell the goods or services to their own customers, so they are not necessarily the
end user
• A consumer ‐ individual or organisation who is the end user of the goods or services
that have been produced or supplied
Ask learners to categorise some companies according to where they fit in the supply chain.
You can use the ones suggested below or suggest others that may be better known in your
country.
Walmart, Kelloggs, British Gypsum, Eddie Stobart, Hyundai, Amazon
Class discussion: Why do we need supply chains? Prompt: Could one organisation perform all
the stages of a supply chain? What would be the advantages or disadvantages of doing this?
9 Use the diagram to explain Tiers in a Supply Chain.
OEM – Original equipment manufacturer.
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SLIDE TUTOR NOTES
A global supply chain includes purchases or uses goods or services from outside the country
in which the organisation operates.
Class discussion: Can you think of some advantages and disadvantages of sourcing from
overseas?
• Advantages: can mean lower unit prices, improved quality and availability and
promote international relationships.
• Disadvantages: can mean increased haulage or shipping costs, increased lead times,
and different customs, ethical practices and legislation to navigate.
10 Not applicable
11 Sasha is an experienced Supplier Relationship Manager.
She has just started a new job at a small company that manufacturers flat‐pack furniture.
Currently each team sources the supplies they need as and when they need them. There is
no dedicated procurement department. The company has plans to expand and has identified
that they need a procurement specialist.
On Sasha’s first day at the company she asks for information about their supply chain.
The CEO explains that there are no central records and that gathering this information will be
her first job.
Work in pairs or small groups to discuss the scenario and answer the questions.
5
Learning Outcome 2: Understand the organisational impact of procurement and
supply
SLIDE TUTOR NOTES
12 Not applicable
13 Not applicable
14 Profit ‐ the amount of money an organisation makes after all of their overheads have been
paid; the difference between the amount earned and the amount spent.
Ask students to give examples of overheads or other costs a business might have to
consider.
Profitability – an organisation’s ability to make a profit.
Work through the following examples with learners to illustrate the difference between
revenue (or turnover) and profitability.
Company A sells $500,000 worth of product in a year. They have spent $350,000. What
profit have they made in $? What is this as a percentage?
Company B sells $200,000 worth of product in a year. They have spent $100,000. What
profit have they made in $? What is this as a percentage?
Which company is more profitable?
Procurement aims to obtain the best value for money in order to reduce costs and
increase profitability.
15 Efficiency ‐ performing a task with the least amount of waste in the shortest time possible.
Procurement seeks to increase efficiency in order to drive up value for money for the
organisation.
Two tools used to scrutinise processes in order to increase efficiency:
• Kaizen 5S Framework – use the diagram on the left of the slide to introduce 5S
framework.
• Lean thinking: use the diagram on the right of the slide to introduce the seven types
of waste that the ‘Lean’ thinking concept seeks to reduce or eliminate.
Provide a scenario or case study for a goods‐based or a service‐based organisation, and
lead a class discussion to consider examples of the seven types of waste within the
organisation and how they might be reduced.
Methods to achieve cost savings:
• economies of scale
• fixed price contracts
• outsourcing
• value engineering, and
• value analysis
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SLIDE TUTOR NOTES
Ask learners to provide definitions and examples for any of the above terms they are
familiar with before providing additional information.
16 Procurement helps to create budgets and monitor the spend related to materials and
services.
Why do we need budgets?
Organisations have two types of budgets:
• CAPEX ‐ capital expenditure.
• OPEX ‐ operational expenditure.
Ask for, or give, examples of items that fall within CAPEX and OPEX budgets. Alternatively,
offer some examples and ask learners to categorise as CAPEX or OPEX.
The graph on the slide shows annual budget vs actual spend:
• Which department has overspent their budget?
• If this graph shows the status halfway through the year, which departments are on
track for their budget?
• Can you think of a reason why sales and marketing might not have spent much of
their budget yet? (e.g., key selling period not happened yet, or staff shortage has
resulted in less work being done, fewer campaigns, etc. What impact could the
latter have, e.g., reduced sales, etc.)
Budget variances:
• A positive variance means that the organisation has spent more than the budget
allowed.
• A negative variance means that the organisation has spent less than was
budgeted, so it has saved money. Discuss why this is not always a good thing:
missed opportunities – e.g., marketing might have saved money, but with that
money it could have run another campaign, which could have lead to sales, and
driven profitability.
A temporary variance will correct itself.
A permanent variance will not and will have a permanent effect on an organisation.
Procurement achieving good value for money contributes to organisations meeting their
target, and therefore to organisational success.
17 Procurement needs to consider whole life costs, also known as lifetime cost, or total cost
of ownership.
Use diagram to introduce and describe the factors that need to be considered when
calculating TCO:
• Total cost of acquisition (TCA)
• Tooling
• Insurance
• Operating
• Maintenance
• Training
• Storage
• Disposal
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SLIDE TUTOR NOTES
Outline difference between TCO includes TCA:

• total cost of acquisition ‐ the amount of money an organisation has to budget in
order to receive the product or service.
• total costs of ownership ‐ takes into account all the costs that will be incurred over
the lifetime of a material or service that is purchased.
18 Procurement departments aim to make the business as cost effective and efficient as
possible. Objectives include:
• getting the best value for money
• reducing input costs
• benchmarking to make sure that the price that is currently being paid is in line with
what the competition is paying
• promoting ethical and sustainable buying
• supplier management
• cross‐functional working
Pick one or more of the above points and lead discussion about how it contributes to
procurement objectives.
Procurement and supply functions can be structured as: centralised, devolved and lead
buying.
• Centralised procurement ‐ majority of purchasing is done by one
department/location. Often used by large organisations that have considerable
budget to manage.
• Devolved procurement ‐ individuals are each given responsibility for their own
procurement. It could be that each department manager has the role of managing
the budget and making the purchases required in their area.
• Lead buying ‐ one department takes responsibility for purchasing a specific
product or service, for example IT or stationery. Helps to achieve economies of
scale, but products or services that may be fit for purpose for one department may
not be so for another. Individual departments might not have the skills to achieve
competitive prices.
Ask learners to indicate by a show of hands what sort of structure the diagram on the slide
shows: centralised, devolved or lead‐buying?
Ask learners to give a reason to justify their answer.
19 The five rights of procurement and supply relate to buying goods or services:
• in the right quantity
• in the right quality
• at the right time
• from and to the right place
• at the right price
A deeper look at the five rights:
• Price – amount charged/paid for a product or service. Total cost includes any other
fees, e.g., shipping.
• Quality – lower quality usually equates to a lower price, and higher quality than
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SLIDE TUTOR NOTES
required usually equates to a higher price. Procurement needs to obtain the right
level of quality, without enhancing the quality or inflating the price.
• Time – placing orders and receiving goods on time. Expediters keep in regular
contact with suppliers to track orders and deal with any potential delays.
• Quantity – getting the balance between economies of scale, and ordering just in
time to avoid money being tied up in inventory.
• Place – consider the suppliers’ location and therefore shipping time and costs, and
ensuring delivery is received in the right place.
20 Use the diagram to discuss the elements that contribute towards value for money, also
known as cost‐effectiveness.
Value for money ‐ the value represented by the total cost of a purchase to an
organisation. It’s achieved by applying the five rights of procurement.
• Lower cost contributes to good value for money.
• Lower price does not always equate to lower cost, e.g., could be lower quality,
which could result in higher costs further down the line, e.g., if need replacing
more often, or if processes need to be changed as a result.
Value for money is made up of:

• efficiency – the resources required to gain a particular outcome
• economy – price paid for a product or service is in relation to quality
• effectiveness ‐ the impact of getting value for money; can be measured
quantitatively or qualitatively
21 Not applicable
22 Starter exercise: Anton’s decision

Anton works for a manufacturing company in Belgium. He has received three quotes for a
quantity of widgets from three different companies: one is based in France, one in
England and one in China.
1. The quotations each state the price for the ball bearings, but they do not include details
of any other costs.
Discuss with a partner to make a list of any other costs that Anton will need to consider.
2. Anton has been told the shop floor needs the widgets in 5 days’ time. What impact
might this have on the price he has to pay, and which supplier he selects on this occasion?
9
Learning Outcome 3: Know how products and services are received from suppliers
and delivered to customers
SLIDE TUTOR NOTES
23 Not applicable
24 Not applicable
25 Ask class for definitions and examples of products, and then services.
Product ‐ anything that could be offered to a market for attention, acquisition, use or
consumption and which could satisfy a need or want. It is tangible.
Service ‐ a set of activities carried out in order to fulfill a task. It is intangible.
Lead class discussion to draw out differences and similarities between the procurement of
products and services by selecting key stages from the procurement cycle and asking
targeted questions, e.g., how can you find the best supplier for a product? Is this the same
for a service? Do you need to write a specification for a service? Etc., to help class
understand that within procurement the processes are similar.
26 Make‐or‐buy decisions – the decision an organisation makes about whether to produce
goods themselves or source them from an external supplier.
Reasons for sourcing products from external suppliers:
• more expensive to produce products internally
• organisation does not have the required expertise
• considerable investment is needed to produce the products internally
• organisation expects to face demand fluctuations and does not have capacity
• products are not of strategic importance
• organisation prefers to concentrate internal resources on areas of special
competence
Discuss diagram: product is placed on the axes according to level of advantage of keeping
the making of the product internal, vs the risk associated with obtaining from a supplier.
The decision about whether to make or buy is then made based on where it sits on the
grid, e.g.,
• Products that sit in bottom‐left quadrant (low risk of outsourcing or buying, and
low advantage of making) would be sourced from a supplier
• Products that sit in top‐right quadrant (high risk of outsourcing or buying, and high
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SLIDE TUTOR NOTES
advantage of making) would be produced in‐house
28 As with the make‐or‐buy decision for products, organisations can outsource services to
suppliers or keep them in‐house.
Characteristics of outsourcing (as listed on the slide):
• In‐house performed activities are transferred to a third party
• Assets and knowledge are sent to an external party
• The parties have an extended and long‐term relationship
• Buyers and suppliers experience new costs and risk profiles
An organisation may choose to outsource a service because:
• others can do it better/have expertise
• it will enable the organisation to focus on core business
• it will reduce cost base
Ask learners to suggest examples of services that are commonly outsourced.
Examples include facilities – cleaning and security; catering; systems, technology and
equipment, etc.
29 Use first diagram on the slide to recap the elements in a supply chain.
For a supply chain to be successful, the right suppliers need to be selected and managed
effectively.
Procurement professionals are responsible for ensuring the continuation of supply from
their suppliers within the supply chain.
If one element in the supply chain fails to perform, the effect can be felt all the way to the
consumer.
Back‐up plans can help to keep the supply chain functioning.

Discuss scenarios that affect different parts of the chain, e.g.,
• What would customers do if their usual supermarket stops stocking a favourite
item of food, e.g., branded loaf of bread?
• What back‐up plan could a manufacturer have in case a supplier is unable to obtain
raw materials (contract other suppliers to assist should problems arise, or hold
extra stock), or their favoured distributor does not have capacity to deal with an
order?
30 Businesses exist to solve the needs of customers in the best possible way. Without
customers there is no need for businesses.
Customer roles:
• indicate demand for products or services
• suggest ideas for new products or services
• provide feedback for products or services to improve customer service
Organisations who listen to their customers are likely to be more successful than those
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SLIDE TUTOR NOTES
who don’t.
In a supply chain, everyone who is supplied by somebody else is a customer. Customers
therefore feature right through the supply chain. (use the diagram on the slide to illustrate
this)
Ask learners to discuss why businesses are so keen to get feedback from customers.
31 Supply chain managers (SCM) are responsible for making sure that customers throughout
the supply chain are satisfied to ensure the supply chain is effective.
SCMs assess:
• the quality of goods or services to make sure they are fit for purpose
• conformance to expected standards
• brand – to always get the same experience from the brand
• customer service; that is, the time taken to respond to queries as well as the
products received
• the price
• value for money
32 Not applicable
33 Khalid works in the procurement team of a large media organisation.
The organisation’s mission statement is; ‘Creating better topical entertainment every day’.
Khalid has been provided with a list of all of the products and services that the
organisation creates and offers. His manager has asked him to liaise with each of the
various departments to determine which ones could be outsourced.
Instruct learners to draw axes with ‘Strategic importance’ on the y‐axis, and ‘Risk of
outsourcing’ on the x‐axis. And label both axes with ‘low’ near the origin, and ‘high’ at the
other end.
Assign one function to each group and ask them to discuss and write down all of the
products and services that could be involved.
If they need a prompt: for entertainment news video clips, there will be the staff and the
specialist equipment and software they use, plus transport to get them to different
locations, hotel rooms for overnight stays, etc., as well as the procurement of all of those
elements.
The group should then discuss each element in turn, and decide how strategically
important it is to the company, and the level of risk associated with outsourcing it, and
plot it on their axes.
Which products or services should they outsource?
Products and services to discuss:
• Entertainment news video clips
• The company website
• Marketing materials
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SLIDE TUTOR NOTES
• Catering in the staff restaurant

• Facilities
• IT support for the entire company
Learning Outcome 4: Know the stages of the sourcing process

SLIDE TUTOR NOTES
33 Not applicable
34 Not applicable
35 Use the diagram on the slide to introduce the stages in the procurement cycle.
Use a local business as an example and revisit the stages in the procurement cycle in
relation to that organisation, e.g., local accountancy office needing a new supplier for
paper for the office printer (monthly deliveries, etc.), or deciding whether to create a new
service for a new group of customers they’ve identified.
Draw parallels between business procurement activities and ‘personal’ procurement, such
as shopping for a new pair of shoes to illustrate the similarities.
Note. The more detailed CIPS procurement cycle can be found at cips.org/knowledge.
36 Sourcing process starts with the identification of a need:
• tangible or intangible
• urgent or for the future
• generated by internal or external customers
• raised manually, electronically or by MRP system
Class discussion: What information should be included on a requisition? Make a list of all
suggestions, then discuss if they are correct.
Check the following have all been mentioned, or add to the list created by class discussion:
• Product/service description (what)
• Quantity required (how much)
• Date required (when)
• Delivery address (where)
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SLIDE TUTOR NOTES
• Why the need has been identified (why)

• And the requisition should be approved or signed off by person with authority
(approved)
Procurement is responsible for ensuring that all purchases are for genuine needs, as they
are ultimately responsible for budgets.
Specifications – produced for products and services.

Performance specification ‐ outlines what the product or service is to do or achieve.
Conformance specification ‐ details exactly what the product or service will be made up of.
Is the buyer responsible for producing the specification? Who else might they need to liaise
with?
Depending on the organisation and what it produces, accounts manager, consumer,
quality control worker, etc.
A buyer is responsible for verifying the specification: consulting with colleagues to gain
clarification on any areas of doubt.
Why is it so important that specifications are correct? What could happen if there are
errors? Let’s consider an example.
A timber merchant has asked a builder to build a new warehouse for them. The
specification supplied to the builder states that the warehouse should be 25m x 23m.
However, there was a typo in the specification: the intended measurements were 25m x
32m.
How could this affect the builder and the contract agreed? [draw out cost of materials,
time taken to build, and therefore cost of contract changing. Builder may have booked in
the original work, so there might be a delay before they can complete the larger task or he
will have to move other jobs around, etc.]
For manufacturing companies, incorrect specifications can lead to goods being received
that are not fit for purpose, which could result in downtime on the shop floor, and
ultimately an inability to supply to customers.
For service providers, incorrect or unclear specifications could result in misunderstandings,
for example, unless a security guard is given specific instructions about carrying out hourly
patrols and checking that all windows and doors are secure, he might consider that
monitoring CCTV screens is sufficient.
37 For new products or services, there might be several suppliers with the skill to deliver.
Requests for quotations (RFQs) sent out to selected suppliers to invite them into a bidding
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SLIDE TUTOR NOTES
process a specific requirement.

RFQ includes specification or samples so suppliers have all the information they need.
Suppliers send a quotation.
Receiving and assessing quotations: Procurement checks that quotations meet all the
criteria set out in the RFQ. Then assess or evaluate quotations. The price element of the
quotation should not be reviewed until the buyer is confident that the quotations are
compliant.
Carter’s ‘Ten Cs’ for evaluating suppliers (as listed on the slide)
(Explain each of the elements in turn)
• Competency
• Capacity
• Commitment
• Control
• Cash
• Cost
• Consistency
• Culture
• Clean
• Communications
Making contract award recommendations: Depending on the level of authority, some
buyers can award contracts directly to their suppliers, whereas others have to make a
recommendation to another individual who has the authority to make the final decision.
When recommending a supplier, a buyer will summarise the results of the evaluation
stage in a report to provide evidence for their recommendation.
Contract authorisation: After the appropriate contract type has been identified and the
contract has been drawn up, it needs to be authorised by somebody within each
organisation who has the appropriate level of authority and capacity.
38 Once a contract is agreed and signed, the buyer can place the order.
In some cases, a framework arrangement is drawn up when organisations want to work
together but they’re not in a position to finalise the details of the contract. A framework is
not a contract – it just explains the terms that will govern the contract when it is formed.
A call‐off order or blanket order is a purchase order which enables repeated orders over a
period of time. For example, an organisation that manufactures shoes could have a
blanket order with a supplier for shoe boxes that they call off when needed. They will have
a good idea of how many they’d need in a year.
The benefit of using a call‐off order is that it allows the supply of materials to be secured
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SLIDE TUTOR NOTES
over multiple delivery dates, meaning that the buying organisation does not have to hold
excess stock. It also reduces the amount of administration required to process multiple
purchase orders. The sales orders and invoice items are raised as they are needed until the
point at which the contract is fulfilled, the end of the order period is reached, or the
maximum order value is reached.
The downside to a blanket order for a buyer is that if their received forecast is not
accurate they could face financial penalties if all stock is not called off, or if they have to
accept the products they could end up with a high inventory.
39 KPIs – key performance indicators included in a supplier contract.
Buyers monitor supplier’s performance and delivery to ensure they are in line with KPIs:
• If a supplier meets their KPIs they are likely to keep the business and have a
contract renewed.
• If they do not meet the KPIs the contract could be terminated before the end date
or not renewed when it comes to an end.
Performance can encompass elements such as quality, quantity, price, place and delivery
– reflecting the five rights of procurement.
Take a look at the KPIs on the slide. Taking each one in turn, discuss whether it is a SMART
KPI. Either as a class or independently, ask learners to rewrite any that could be improved.
Is there anything that has not been covered within the KPIs that could be added in?
Buyers need to ensure that suppliers are paid on time. If suppliers do not receive money
from their customers, it could jeopardise their cashflow and they may decide to stop
sending goods or providing services until the outstanding debt is paid.
40 Expediting ‐ control mechanism to ensure that an order will arrive in the right quality and
packaging in accordance with the required standards and set timelines.
(as per the slide) Expeditors track and monitor the progress of an order from receipt of
order acknowledgements from suppliers, through to delivery, and resolve issues that may
result in delays.
Describe the different types of expediting:

• exception expediting
• routine status check
• advanced status check
Reviewing outcomes
A contract can be amended if both parties are in agreement, for example, to revise
quantities, KPIs, payment terms, length of contract, etc.
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SLIDE TUTOR NOTES
Often quarterly business reviews (QBRs) are held between suppliers and buyers.
Problems can be raised and resolved during these meetings, and feedback can be given
from both sides.
Issues should be addressed as soon as possible, and not ‘stored up’ for such meetings.
41 Recap: class discussion to identify all pre‐award and post‐award stages. If they’re not
given in order, ask for class consensus to order them correctly.
Don’t display the image on the slide until end of discussion.
Pre‐award stages of the sourcing process
• Identifying needs
• Producing specifications
• Requesting quotations
• Receiving quotations
• Assessing quotations
• Awarding the contract
• Authorising the contract
Post‐award stages of the sourcing process:

• Placing orders
• Expediting orders
• Monitoring performance and delivery
• Paying suppliers
• Reviewing outcomes and processes
Good contract management throughout the stages contributes towards a successful

relationship between the buying and the supplying organisation.
42 Not applicable
43 Afshaan is responsible for sourcing a housekeeping supplier for a hotel chain that has 14
hotels across the country.
Before moving on, check the learners are familiar with what ‘housekeeping’ is responsible
for.
1. What information would Afshaan need to find out in order to write the specification?
(prompts: location of each hotel, number of rooms at each location, frequency of service
(e.g., every day or every other day), details of the service, e.g., making up bed, cleaning
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SLIDE TUTOR NOTES
bathroom, hoovering room carpets, does the service include laundering linens? Does the
service include the communal areas or is another company responsible for that, etc.)
Afshaan used Carter’s 10 Cs to assess the suppliers and selected the best one.
2. Write some KPIs that Afshaan could include in the contract for the housekeeping
service. Tip: think about the five rights of procurement.
What other metrics could you include? (e.g., customer satisfaction levels, etc.)
Learning Outcome 5: Understand the need for effective and efficient administration
of purchases made with external suppliers
SLIDE TUTOR NOTES
44 Not applicable
45 Not applicable
46 Introduce the following key terms:

Administration
• Managing resources, including people and processes, and distributing relevant
information efficiently.
• Administrative roles include Receptionists, Data entry clerks, Expediters and
Personal assistants.
• Without efficient administration an organisation will not be cost effective.
• Within procurement, administrators can assist with tasks including placing orders,
arranging supplier reviews and monitoring KPIs.
Efficiency ‐ being able to perform a task competently with the least amount of waste and
in the shortest amount of time.
The 5S framework and applying Lean thinking can be used to improve efficiency.
Effectiveness ‐ the degree to which tasks are carried out and how associated problems are
solved.
Unlike efficiency, it is not usually measured with reference to costs.
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47 Use the diagram to introduce the various elements that make up a contract or agreement with a
supplier. Pay particular attention to the role of implied and express terms.
Contract
• legally binding
• exists in every commercial transaction
• tells the Procurement professionals and their suppliers: what should happen,
where and when; and what, when and how payment is required
For a simple contract or legal agreement to exist and be valid, there has to be:
• Intention: All parties must have the intention that their agreement can be
enforced by civil law, i.e. if something goes wrong, one party can take legal
action against the other. If either side is not willing to be exposed to this, a
contract cannot be made.
• Consideration: This is the bargain or exchange aspect of the contract. It is a
promise on one part for an act on another, e.g., consideration for the sale
of a car would be the amount offered.
• Agreement: Both sides have discussed what will be in the contract and
what they have agreed to do. If this has not occurred a contract cannot be
made. Agreement has two components:
• Offer: Offer to sell something at a quoted price
• Acceptance: Somebody takes up the offer
In addition, the signing parties have to have capacity – must be over the legally accepted
age of a particular country, not suffering from a mental disorder, and not in a state of
drunkenness or under the influence of drugs.
Activity:
With a partner, discuss some examples of when you have entered into a contract.
• In personal life: e.g. with a mobile phone provider or an electricity supplier, or
without realising, e.g., when making an online purchase.
• At work: employment contract. You may also have negotiated and raised contracts
in the course of your role.
For each example, identify the intention, consideration and agreement, offer and
acceptance.
Either share an example contract with learners or ask them to find an example themselves.
Ask learners to read through the terms and conditions and highlight key phrases.
How often have they just signed a contract without reading the terms and conditions?
What are the potential risks around signing a contract without reading as a buyer?
(exposing organisation to risk, not noticing if other party has changed terms and
19
SLIDE TUTOR NOTES
conditions, etc.)
48 A need or requirement can be identified by anyone internal to an organisation.

Once a need is identified, a requisition should be raised.
The requisition should state what and how much is required, and when and where it is to
be delivered.
Requisitions can be created manually, electronically, or by an MRP system.
A buyer will then review the requisition and liaise with colleagues to check the
requirements.
Manual requisitions usually require more investigation than electronic requisitions prior
to the order being placed.
Benefits of raising requisitions electronically:
• All fields must be complete before the requisition can be raised
• Only authorised personnel can raise a requisition
• They need to be approved by authorised personnel before they reach
procurement
Buyer should check the following:
• The customer has authority to identify the need
• The need is actually required – e.g. person who raised requisition might not be aware
that there is plenty of an item in inventory, or that item is being discontinued, etc.
• The requested date of the need is correct – what impact could this have on
procurement? E.g., if the item is not needed until later, then procurement could have more
options, or be able to access cheaper alternatives than if needed at short notice
• The amount stated on the requisition is correct
• The cost centre to be charged is identified
Hand out blank requisition forms that you’ve prepared.
Ask learners to add the following information into the requisition forms:
• Date raised: today’s date
• Item: handles for cupboard doors
• Product code: CHL493B
What information is missing?
As a buyer, how could you find out this information?
49 Use the diagram on the slide to introduce the tendering process in broad terms, then go
into detail for each stage, addressing all key terms included below.
Prepare
• Creation of requisitions and requirements
20
SLIDE TUTOR NOTES
• Specifications, key performance indicators (KPIs) and contract terms created.

Provide suppliers with information about what they need to supply, when and how.
Process
• Request for quotations ‐ used to explore the commercial offerings from current or
prospective suppliers within the marketplace.
• Invitation to tender ‐ sent to potential suppliers as an offer to them to supply
goods or services to an organisation. Commonly used for high‐value or long‐term
contracts, or where there are many available suppliers.
• Open tendering means any supplier is able to submit a response to the
tender document.
• Restrictive tendering requires suppliers to be selected and evaluated prior
to inviting them to submit a response.
• Pre‐qualification questionnaire (PQQ) ‐ asks for information on the supplier’s
financial history, compliance to regulations, quality procedures, and sustainability
and environmental policies to help buyer make an informed decision about who to
work with.
• Quotation – submitted by supplier in response to an RFQ.
• Tender – submitted by supplier in response to an invitation to tender.
Suppliers must meet the deadline in order to be considered.
All tenders should be opened at the same time.
Documents must contain all of the information requested on the RFQ or ITT clearly and
unambiguously so the buyer can assess which prices are the most competitive and, more
importantly, which suggests the best value for money.
Evaluate
The assessment of quotations and tenders from suppliers.
Buyer should check all details are as per specification, etc.
Use Carter’s 10 Cs to impartially assess the tender/quotations. Remember, no extra marks
are awarded for exceeding the specification.
Award
In some cases, the buyer can award contracts directly, in other cases they will need
approval from an authorised person, e.g., manager, etc., before awarding the contract.
50 Purchase orders – generated in response to a quotation.
Tender award documentation – generated in response to a tender. Once signed, difficult
to make amendments to contract.
Order acknowledgements ‐ document produced and sent by the supplier to the buyer to
confirm receipt of the purchase order.
Delivery notes ‐ documents produced and sent by the supplier which accompany their
delivery to the buying organisation.
Ask learners to identify the elements numbered on the visual on the slide.
21
SLIDE TUTOR NOTES
1. Supplying organisation
2. Buying organisation/customer/consumer
3. Date goods shipped
4. Buying organisation’s order number
5. Tracking details for the order
6. Details of the carrier/haulage organisation or vehicle reference
7. Date the goods were dispatched
8. Quantity
9. Identification
10. Part code
11. Description
51 Use the flow chart on the slide to outline the invoice approval process
• Invoice sent after goods have been dispatched or delivered.
• Sent electronically or by post.
• Check to ensure they match the purchase order and delivery notes.
• If everything matches then the invoice can be passed to the accounting
department for payment.
• If a variance is found, it needs to be investigated and resolved before the invoice is
paid.
Prepare an example purchase order, delivery note and invoice and include one or two
small variances between the documents. Hand out to learners and ask them to compare
the documents and decide whether they can be processed.
If there’s a variance, ask them to do a role play with one learner being the supplier and the
other being the buyer to discuss the variance, and how it arose, and reach a resolution.
52 Budgets, requisitions, orders and tenders need to be authorised by an appropriate person:
• verbally
• signature on paper copy
• via electronic approvals systems
What details does an authoriser need to check? All of them.
Why do these documents need to be authorised? To ensure that any expenditure is
necessary.
Different roles within procurement have different responsibilities, known as the

separation of duties.
• Buyers ‐ responsible for receiving the identification of a need, sourcing the product
22
SLIDE TUTOR NOTES
or service, selecting potential suppliers, sending tenders or RFQs and negotiating

contracts.
• Supplier Relationship Managers ‐ responsible for developing and maintaining
supplier relationships. They work closely with the strategic suppliers that they
have been allocated to ensure a mutually beneficial relationship.
• Quality control workers ‐ responsible for conducting checks on products coming
into the warehouse to make sure they are fit for purpose and as per the purchase
orders and specifications.
For tenders, which are often complex, several stakeholders should be involved in deciding
which supplier should be awarded the contract.
Contract recommendation ‐ panel agreement for which supplier should win the business,
with justification for why that supplier was selected.
Contract authorisation ‐ the signing or agreement of a contract by an individual with
authority.
In the public sector it is common for buyers to have the authority to place orders, send
out RFQs or award tenders up to a certain amount. Above this amount the buyers have to
get authority from people higher up the chain.
Thresholds exist within the public sector and dictate the maximum amount each contract
can cost. If a tender cost is expected to go above the threshold it must be published.
Efficient approval processes are important throughout the procurement process. If

approval is not granted efficiently, a need could go unmet. This could result in a
production organisation being unable to manufacture goods or a service organisation
being unable to deliver its contract.
53 Not applicable
54 Graham just started a job at a local council where there is a separation of duties.
He previously worked for a small company where he was solely responsible for making and
paying for all purchases.
On his first day, Graham’s manager, Ashley, explains to him what his duties are. However,
in his first few weeks, Ashley realises that Graham is not used to the formal approvals
process and has been authorising high‐value requisitions himself, which should be passed
to Ashley. He has also not been passing live contracts to the SRM team, he’s been trying to
manage them himself.
Ashley decides she needs to have a friendly chat with Graham to remind him what the
processes are and why they are in place.
23
SLIDE TUTOR NOTES
Work in pairs:
• Person A: explain to your partner (Graham) what each of the following roles are
responsible for: Buyers, Supplier Relationship Managers, Procurement and supply
director. Then explain why there is a separation of duties.
• Person B: explain to your partner why purchases over a certain amount need to be
authorised by someone else. Then explain the stages and elements that need to be
checked before an invoice can be paid.
Learning Outcome 6: Know the importance of ethics and responsible procurement in
organisations and supply chains
SLIDE TUTOR NOTES
55 Not applicable
56 Not applicable
57 CIPS Code of Conduct ‐ defines behaviours and actions that CIPS members must commit
to maintain as long as they are members of CIPS.
Members are expected to encourage their organisation to adopt an ethical purchasing
policy based on the principles of this code and to raise any matter of concern relating to
business ethics at an appropriate level.
The CIPS Code of Conduct has five key principles – provide or ask learners to supply
definitions of each of the terms/phrases:
• integrity
• professionalism
• high standards
• optimal use of resources
• compliance with legal and other obligations
All procurement professionals should to be familiar with, understand and apply the CIPS
Code of Conduct to ensure that their work meets with the Code’s guidelines.
58 Organisations’ codes of ethics usually cover:
• human rights
24
SLIDE TUTOR NOTES
• the environment
• bribery
• Fair Trade
• dealing with conflicts of interest
Within procurement, conflicts of interest that could present themselves include:
• being influenced by receiving gifts from a supplier or potential supplier
• being related to or close friends with a supplier
• receiving financial benefit for generating orders for a supplier
All potential or suspected conflicts of interest should be disclosed so appropriate action
can be taken.
Buyers should assess suppliers’ ethical conduct when evaluating them to ensure they
conform to the buying organisation’s code of ethics.
Let’s check your understanding of the key areas – identify what strand of ethics is being
described in the following scenarios, and decide if they could indicate a breach of ethics.
(Encourage class discussion where statements are vague, e.g., what further
information/investigation is required before a decision can be made?):
• As a thank you for your custom, a supplier sends a large box of chocolates and six
bottles of fine wine to your organisation.
• Follow up question: Would this be different if the gift were ten tickets to a
music concert? Or an offer of hospitality, e.g., taking the procurement team
out to lunch or dinner?
• A supplier uses recycled packaging, but they do not have a commitment to reduce
their carbon footprint.
• A supplier sources 10% of their supplies from Fair Trade.
• A supplier has employees working 12 hours a day in order to meet deadlines during
busy periods.
• A supplier’s ethical codes match the buying organisation’s ethical codes exactly.
Even down to the wording. (Explore whether they have been supplied with the
document and copied it? Further investigation could be required to discover if they
actually follow them)
What are some of the negative impacts could result from contracting a supplier that does
not meet the buying organisation’s ethical codes?
• Reputational damage
• Negative media coverage
• Loss of staff
• Loss of custom
25
SLIDE TUTOR NOTES
59 Organisations’ Corporate Social Responsibility (CSR) policies outline the policies that an
organisation wishes to follow. Use diagram on slide to talk through the different areas
covered. They cover:
• Economic responsibilities
• Legal obligations
• Ethical responsibilities
• Philanthropic aims
Note: most of the strands are ‘responsibilities’ that an organisation can determine for
themselves. However, the legal policies are obligations – the organisation can’t determine
them; they are set by bodies outside of the organisation, e.g., the country’s law, or
professional bodies, etc.
Lead class discussion to draw out why each of the levels of policies are important to an
organisation.
CSR policies do not just affect the organisation you work for. They outline the ways that
the organisation wishes to impact on the world, and as such, all organisations that your
organisation works with needs to adhere to the same policies.
When should a buyer review suppliers’ CSR policies?
• Prior to contracting
• Regularly throughout contract to ensure they remain in line
• Whenever buying organisation’s CSR policies are updated, need to check suppliers
meet updated policies, or give them time to make changes
What does a buyer need to check in relation to CSR policies?
• Check documents to see if supplier’s policies meet buying organisation’s standards
• Visit the supplier to see if policies are followed in practice
60 Organisations often have policies and procedures to ensure uniformity in the way things
are done, to promote transparency and fairness. Internal policies and procedures could
relate to:
• creating, sending and evaluating RFQs and Invitations to Tender (ITTs)
• supplier evaluations
• supplier relationship management
• contract management
• quality
External policies and procedures that are used within procurement include professional
standards such as CIPS, or industry‐specific standards, such as ISO standards that promote
quality in both manufacturing and service organisations.
It is good practice to be aware of any policies and procedures in the organisation you work
for that relate to any products or services being sourced.
Questions for class discussion:
26
SLIDE TUTOR NOTES
• What is the difference between a policy and a procedure?

• What would happen if we didn’t have policies and procedures?
• So… why do we need policies and procedures?
61 Corporate governance
• The procedures and policies by which an organisation is controlled.
• It’s a framework created around the organisation’s values and objectives.
• Corporate governance documentation includes an organisation’s code of ethics
and or their code of conduct.
• Aims to direct (provide guidance for) and control the actions of employees,
stakeholders, the Board of directors and managers.
• The policies contain the roles and expectations of people within the organisation
to ensure that people do not take advantage of the organisation in any unfair way
which would result in a personal or professional gain.
Use the diagram on the slide to introduce the principles of corporate governance, and how
all the elements relate to each other, checking understanding of each element.
62 Bonded and exploitative labour are forms of modern‐day slavery.
Bonded labour ‐ an individual or family member becomes indebted to an organisation and
has to work to pay off that debt. In many cases the debt is never cleared and the
individual, and their offspring, remains in a cycle of working for nothing indefinitely. It is
most common in brick making, cotton manufacturing, agriculture, fishing and domestic
work.
Exploitative labour is where employers use their employees to their own advantage and
treat them unfairly. This could be by paying people no wages or an unacceptable amount,
forcing people to work in unpleasant conditions, trafficking people to work in foreign
countries for little or no money, or using child labour. It is most common in agriculture,
construction, manufacturing and the sex industry.
It is the responsibility of the procurement function to conduct due diligence to make sure
bonded and exploitative labour is not happening anywhere in their supply chain.
How can you ensure that bonded and exploitative labour are not used in your supply
chain?
63 Not applicable
64 Kendra volunteers at a local charity shop. As well as selling donated items to raise money
for a local animal shelter, they also stock Fair Trade items such as candles and bars of
chocolate.
The manager of the store has asked Kendra to come up with some ideas for other items
they could sell in the shop.
27
SLIDE TUTOR NOTES
Kendra is very knowledgeable about Fair Trade products and suggests some other brands
she loves.
One of her friends is a salesperson at one of the brands she suggests.
1. Does this represent a conflict of interest?
2. Does Kendra need to inform her manager about her friendship with the
salesperson?
3. Do conflicts of interest matter in TSOs, or is it ok because they are benefiting

people rather than making a profit, as in the private sector?
28

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CIPS Level 2 Certificate in Procurement and Supply Operations

Leading global excellence in procurement and supply

SLIDE TUTOR NOTES

service, such as paper in the production of a book.

• connecting with, evaluating and selecting suppliers

9 Use the diagram to explain Tiers in a Supply Chain.

OEM – Original equipment manufacturer.

11 Sasha is an experienced Supplier Relationship Manager.

SLIDE TUTOR NOTES

Outline difference between TCO includes TCA:

Value for money is made up of:

22 Starter exercise: Anton’s decision

SLIDE TUTOR NOTES

advantage of making) would be produced in‐house

Back‐up plans can help to keep the supply chain functioning.

• Catering in the staff restaurant

Learning Outcome 4: Know the stages of the sourcing process

SLIDE TUTOR NOTES

• Why the need has been identified (why)

Specifications – produced for products and services.

process a specific requirement.

Describe the different types of expediting:

Post‐award stages of the sourcing process:

Good contract management throughout the stages contributes towards a successful

SLIDE TUTOR NOTES

46 Introduce the following key terms:

48 A need or requirement can be identified by anyone internal to an organisation.

• Specifications, key performance indicators (KPIs) and contract terms created.

Different roles within procurement have different responsibilities, known as the

or service, selecting potential suppliers, sending tenders or RFQs and negotiating

Efficient approval processes are important throughout the procurement process. If

SLIDE TUTOR NOTES

• What is the difference between a policy and a procedure?

One of her friends is a salesperson at one of the brands she suggests.

1. Does this represent a conflict of interest?

3. Do conflicts of interest matter in TSOs, or is it ok because they are benefiting

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