CIPS L4M1 QUESTIONS AND ANSWERS

1. Advantages of adopting a devolved procurement structure.

The Chartered Institute of Procurement and Supply (CIPS) devolved
procurement structure refers to a procurement framework that involves
decentralizing the procurement function across various departments or
regions within an organization. Here are some of the advantages of
adopting a CIPS devolved procurement structure:

Improved responsiveness: A devolved procurement structure enables

organizations to respond more quickly to the needs of individual
departments or regions. This can lead to faster decision-making, reduced
lead times, and improved customer satisfaction.

Greater accountability: By devolving procurement responsibilities to

various departments or regions, there is greater accountability for
procurement decisions and outcomes. This can help to promote a culture
of ownership and responsibility, and improve the overall effectiveness of
the procurement function.

Increased flexibility: A devolved procurement structure enables

individual departments or regions to make procurement decisions based
on their unique needs and circumstances. This can lead to greater
flexibility and agility, and enable organizations to adapt more quickly to
changing market conditions.

Improved stakeholder engagement: A devolved procurement

structure can help to promote greater stakeholder engagement and
collaboration across different departments or regions. This can lead to
improved communication, better alignment of procurement decisions with
organizational goals, and improved outcomes.

Enhanced knowledge sharing: By devolving procurement

responsibilities, there is greater opportunity for knowledge sharing and
collaboration across different departments or regions. This can lead to
improved best practice sharing, increased innovation, and improved
overall effectiveness of the procurement function.

In summary, adopting a CIPS devolved procurement structure can lead to

improved responsiveness, greater accountability, increased flexibility,
improved stakeholder engagement, and enhanced knowledge sharing, all
of which can contribute to the overall success of the procurement function
and the organization as a whole.

2. Describe four benefits delivered to an organization by an

outsourced procurement function.
Outsourcing procurement functions can deliver several benefits to an
organization. Here are four benefits of an outsourced procurement
function:

Reduced costs: Outsourcing procurement can help organizations to

reduce their costs by leveraging the expertise and resources of the
outsourcing provider. The provider
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can use their scale and expertise to negotiate better prices and terms with
suppliers, leading to cost savings for the organization.

Improved focus on core activities: By outsourcing procurement,

organizations can free up their internal resources to focus on their core
activities, such as product development, marketing, and sales. This can
lead to improved overall effectiveness and competitiveness.

Access to expertise and technology: Outsourcing procurement can

provide organizations with access to specialized expertise and technology
that they may not have in-house. This can lead to improved efficiency,
faster decision-making, and better overall procurement outcomes.

Reduced risk: Outsourcing procurement can help organizations to

manage their risk by transferring some of the risk associated with
procurement to the outsourcing provider. The provider can assume
responsibility for compliance, supplier management, and other
procurement-related risks, reducing the risk exposure for the organization.

In summary, outsourcing procurement functions can deliver benefits such

as reduced costs, improved focus on core activities, access to expertise
and technology, and reduced risk. However, organizations need to
carefully evaluate the outsourcing provider's capabilities and ensure that
the provider's goals and objectives are aligned with their own.

3. Discuss five ways in which the objective of profitability, in a

private sector organization might impact its procurement
activities

The objective of profitability in a private sector organization can have a

significant impact on its procurement activities. Here are five ways in
which profitability can impact procurement activities:

Cost reduction: Private sector organizations that prioritize profitability

may place a strong emphasis on cost reduction in their procurement
activities. This can involve negotiating lower prices with suppliers,
optimizing inventory levels, and streamlining procurement processes
to reduce overhead costs.

Supplier selection: Private sector organizations focused on profitability

may also be more selective in their choice of suppliers. They may
seek out suppliers who can provide high-quality goods and services
at competitive prices, and who are willing to work collaboratively to
reduce costs and improve efficiencies.

Contract management: Effective contract management can help private

sector organizations to achieve profitability objectives by ensuring that
suppliers are meeting
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their obligations and delivering goods and services in a timely and

cost-effective manner. This may involve setting clear performance
metrics, monitoring supplier performance, and taking corrective action
when necessary.

Innovation: Private sector organizations that prioritize profitability may

also seek out innovative suppliers who can provide new products or
services that can help the organization to differentiate itself in the market.
This may involve investing in research and development to identify
new opportunities and collaborating with suppliers to bring innovative
products to market.

Risk management: Profitability objectives can also impact procurement

activities by placing a greater emphasis on risk management. Private
sector organizations may need to assess and manage risks associated
with suppliers, such as supply chain disruptions, quality issues, and
compliance risks. This may involve implementing risk mitigation
strategies, such as dual sourcing or supplier diversification, and
monitoring supplier performance to ensure that risks are being
managed effectively.

In summary, profitability objectives can impact procurement activities in

several ways, including cost reduction, supplier selection, contract
management, innovation, and risk management. Private sector
organizations need to balance profitability objectives with other
considerations, such as quality, compliance, and ethical considerations, to
ensure that their procurement activities are aligned with their overall
business objectives.

4. Describe three disadvantages for an organization of operating

within a procurement consortium
5. Define the term ethics
Ethics refers to the principles and standards of conduct that govern the
behavior of procurement professionals. CIPS ethics define the expectations
and responsibilities of procurement professionals towards their
stakeholders, including suppliers, customers, employers, and society as a
whole. Ethics are fundamental to the procurement profession as they
ensure that procurement activities are conducted with integrity,
transparency, and fairness. CIPS has established a Code of Ethics and
Professional Standards that outlines the ethical behavior expected of
procurement professionals, including honesty, fairness, transparency, and
accountability. Adhering to these ethics is essential to maintaining the
trust of stakeholders and ensuring the integrity of procurement activities.
6.
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According to the Chartered Institute of Procurement and Supply (CIPS),

ethics refers to the principles, values, and standards of behavior that
govern the actions and decisions of individuals and organizations in the
procurement and supply chain profession. This includes the responsibility
to act with integrity, honesty, and transparency, to respect the dignity and
rights of all stakeholders, to avoid conflicts of interest, and to promote
sustainability and social responsibility. CIPS emphasizes that ethical
behavior is essential to building trust and confidence in the procurement
profession and to achieving sustainable and ethical outcomes for all
stakeholders involved.
CIPS (Chartered Institute of Procurement and Supply) is a professional
body for procurement and supply chain professionals that promotes
ethical conduct within the industry. Here are five examples of ethical and
unethical behaviors that procurement professionals should adhere to or
avoid:
Ethical: Transparency in Procurement
Procurement professionals should be transparent in their dealings and
provide all necessary information to stakeholders to make
informed decisions. They should maintain accurate records and ensure
that procurement processes are fair and equitable.
Unethical: Conflict of Interest
Procurement professionals should avoid conflicts of interest, where
personal interests or relationships may influence procurement decisions.
For example, awarding a contract to a supplier because of personal
relationships or receiving gifts or favors from suppliers.
Ethical: Fair Treatment of Suppliers
Procurement professionals should treat all suppliers fairly and
equally, regardless of their size, background or relationship with
the organization. They should provide suppliers with clear, consistent
and timely information, and ensure that their selection and evaluation
processes are transparent and fair.
Unethical: Supplier Discrimination
Procurement professionals should avoid any form of supplier
discrimination, where suppliers are treated unfairly due to their race,
gender, religion or other personal characteristics. For example, awarding a
contract to a supplier because of their personal characteristics rather than
their ability to deliver.
Ethical: Respect for Human Rights
Procurement professionals should respect human rights and ensure
that suppliers adhere to international labor standards. They should
conduct due diligence on suppliers to ensure that they do not engage in
practices such as forced labor, child labor, or human trafficking.
Unethical: Exploitation of Labor
Procurement professionals should avoid working with suppliers who exploit
labor, such as those who engage in forced labor, child labor, or human
trafficking. Procurement professionals should also avoid suppliers who
violate international labor standards and engage in poor working
conditions, inadequate pay or health and safety violations.
Ethical: Confidentiality and Data Protection
Procurement professionals should protect confidential information
and ensure that data is secure. They should adhere to data protection
laws and regulations, and not disclose sensitive information without the
appropriate authorization.
Unethical: Breach of Confidentiality
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Procurement professionals should avoid any breach of confidentiality, such

as disclosing confidential information to unauthorized parties. They should
also avoid using confidential information for personal gain, such as insider
trading or personal investments.
Ethical: Sustainability and Environmental Responsibility
Procurement professionals should promote sustainability and
environmental responsibility by ensuring that suppliers adhere to
environmental standards, minimize waste and reduce carbon
emissions. They should also encourage the use of sustainable materials
and energy-efficient practices.
Unethical: Environmental Damage
Procurement professionals should avoid working with suppliers who
engage in environmentally damaging practices, such as deforestation,
pollution or waste dumping. They should also avoid suppliers who violate
environmental standards or engage in unsustainable practices.

7. Discuss five examples of ethical and unethical behaviors in an

ethical code of conduct for procurement professionals
Ethical Behaviors:
Transparency: Procurement professionals should be transparent in
their dealings with suppliers and stakeholders, including disclosing any
conflicts of interest or potential conflicts of interest.
Fairness: Procurement professionals should ensure that the
procurement process is fair, open, and competitive, and that
suppliers are given equal opportunities to bid for contracts.
Honesty: Procurement professionals should be honest in their
dealings with suppliers, stakeholders, and colleagues, and should
not engage in any form of deception or misrepresentation.
Confidentiality: Procurement professionals should protect the
confidentiality of sensitive information, including supplier pricing
and proprietary information, and should not disclose such
information without proper authorization.
Professionalism: Procurement professionals should conduct
themselves in a professional manner, with integrity, competence,
and diligence, and should maintain a high standard of ethical
conduct in all their dealings.
Unethical Behaviors:
Conflict of interest: Procurement professionals should not engage in any
activity that could create a conflict of interest, such as accepting gifts or
favors from suppliers or having personal relationships with suppliers.
Bribery: Procurement professionals should not accept or offer bribes,
kickbacks, or other forms of unethical payment to influence procurement
decisions.
Discrimination: Procurement professionals should not engage in any
form of discrimination, including discrimination based on race, gender,
ethnicity, religion, or any other personal characteristic.
Insider trading: Procurement professionals should not use any inside
information to gain an unfair advantage in procurement decisions or to
benefit themselves or others.
Nepotism: Procurement professionals should not show favoritism towards
family members or friends in the procurement process and should ensure
that all suppliers are treated fairly and equally.

8. Discuss the difference between CIPS Hybrid, centralized and

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decentralized governance within the procurement function.

9. Explain FOUR advantages for an organization of adopting a

centralized procurement structure.
Increased efficiency: The CIPS centralized procurement structure
emphasizes standardization and automation of procurement processes,
which can lead to increased efficiency and reduced transaction
costs. By centralizing procurement functions, organizations can eliminate
duplication of effort and streamline purchasing activities.
Better risk management: The CIPS centralized procurement structure
includes a focus on risk management, helping organizations to identify
and mitigate risks associated with procurement activities. By
centralizing procurement functions, organizations can ensure that
procurement activities are conducted in a consistent and transparent
way, reducing the risk of fraud, errors, and compliance issues.
Improved supplier relationships: The CIPS centralized procurement
structure emphasizes the importance of building and maintaining strong
relationships with suppliers. By centralizing procurement functions,
organizations can better manage supplier relationships,
communicate more effectively with suppliers, and negotiate
better terms and pricing.
Enhanced strategic sourcing: The CIPS centralized procurement
structure includes a focus on strategic sourcing, helping organizations to
identify opportunities for cost savings and value creation. By
centralizing procurement functions, organizations can leverage their
purchasing power to negotiate better terms and pricing, identify and
manage supplier risks, and identify opportunities for innovation and
continuous improvement.
Better spend visibility: The CIPS centralized procurement structure
includes a focus on spend analysis, helping organizations to identify
areas where spending can be optimized and streamlined. By
centralizing procurement functions, organizations can gain greater
visibility into their spending patterns and identify opportunities to reduce
costs and improve efficiencies.
Improved compliance: The CIPS centralized procurement structure
includes a focus on compliance, helping organizations to ensure that
procurement activities are conducted in accordance with legal and
regulatory requirements. By centralizing procurement functions,
organizations can establish clear policies and procedures for procurement
activities, and ensure that these are followed consistently across the
organization.

10. Explain FOUR advantages for an organization of adopting

a decentralized procurement structure.
Faster decision-making: Decentralizing procurement allows for faster
decision- making as local managers can make purchasing decisions
without having to go through a central procurement department. This can
lead to quicker responses to changing market conditions and
customer needs.
Better alignment with local needs: Decentralized procurement
enables local managers to better understand the needs of their specific
departments or business units, and procure goods and services that are
tailored to their specific requirements. This can lead to better
alignment between procurement and business objectives.
Improved supplier relationships: Decentralized procurement can lead
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to improved supplier relationships as local managers can work directly

with suppliers to negotiate terms and conditions that are specific to their
needs. This can lead to better communication and collaboration with
suppliers, and more customized solutions that meet the needs of the
organization.
Increased innovation: Decentralized procurement can enable local
managers to identify and engage with innovative suppliers who may not
be part of the organization's centralized procurement network. This can
lead to access to new ideas, products, and services, and more
opportunities for innovation and value creation.
Greater flexibility: Decentralized procurement allows for greater
flexibility as local managers can adjust procurement activities based on
their specific needs and circumstances. This can lead to more agile and
responsive procurement practices that can adapt quickly to changing
business requirements.
Enhanced accountability: Decentralized procurement can improve
accountability as local managers are responsible for their own
procurement decisions and outcomes. This can lead to greater
ownership of procurement processes and a sense of responsibility for
achieving procurement objectives.

11. Describe the roles typically taken withing an organization by

the local procurement teams and central procurement teams.
In general, local procurement teams and central procurement teams play
different but complementary roles within an organization. Here is an
overview of their typical responsibilities:
Local Procurement Teams:
Manage local sourcing: Local procurement teams are responsible for
identifying and managing the procurement of goods and services required
by a specific location or business unit.
Build relationships with suppliers: Local procurement teams are often
the primary point of contact for suppliers, and are responsible for
building and maintaining relationships with local suppliers.
Ensure compliance with local regulations: Local procurement teams
must ensure that all procurement activities comply with local
regulations and laws, such as import/export regulations, tax laws, and
labor laws.
Support local operations: Local procurement teams work closely with
local operations teams to ensure that goods and services are delivered
on time and meet local needs.
Central Procurement Teams:
Develop procurement strategy: Central procurement teams are
responsible for developing and implementing the organization's
procurement strategy, including policies, procedures, and guidelines.
Manage global sourcing: Central procurement teams are responsible for
identifying and managing the procurement of goods and services required
by the entire organization, often through global sourcing initiatives.
Conduct supplier management: Central procurement teams oversee
supplier management activities, including supplier performance
evaluation, contract negotiation, and relationship management.
Ensure compliance with global regulations: Central procurement
teams must ensure that all procurement activities comply with global
regulations and laws, such as international trade laws, environmental
regulations, and labor standards.
Drive cost savings: Central procurement teams are responsible for
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driving cost savings through strategic sourcing, supplier consolidation, and

negotiation of favorable terms and conditions.

Both local and central procurement teams are essential to the success of
an organization's procurement function, and must work together to ensure
that goods and services are procured in a timely, cost-effective, and
ethical manner.

12. Explain five ways in which an IT based inventory

management system can help procurement function and the
supply chain
An IT-based inventory management system can be a powerful tool to help
procurement function and the supply chain in several ways. Here are five
examples:
Real-time Inventory Tracking
An IT-based inventory management system can provide real-time
tracking of inventory levels, which can help procurement professionals
to monitor inventory levels and make informed purchasing decisions. This
real-time data can also help suppliers to manage their inventory levels and
plan their production schedules more effectively.
Automated Reordering
An IT-based inventory management system can automate the
reordering process for goods, reducing the need for manual
intervention and minimizing the risk of errors. This automation can help to
ensure that procurement professionals always have the right amount of
stock on hand, avoiding stockouts or excess inventory.
Improved Forecasting
An IT-based inventory management system can use historical data and
analytics to provide better forecasting of inventory needs. This can
help procurement professionals to plan their purchases more
accurately, reduce waste, and optimize inventory levels.
Increased Efficiency and Productivity
An IT-based inventory management system can help to increase the
efficiency and productivity of procurement professionals by
reducing the time spent on manual processes such as data entry
and inventory tracking. This can free up time for strategic activities such
as supplier management, negotiations, and market research.
Enhanced Supply Chain Visibility
An IT-based inventory management system can provide enhanced
supply chain visibility, allowing procurement professionals to track
inventory levels and shipments across the supply chain. This can help to
identify potential disruptions and enable proactive management
of the supply chain to avoid delays or stockouts. Additionally, enhanced
supply chain visibility can help to build stronger relationships with
suppliers, which can lead to improved pricing and more favorable terms.

13. What are the advantages and disadvantages of CIPS hybrid

form of procurement The hybrid form of procurement is a strategy that
combines elements of both traditional and collaborative procurement
approaches? The Chartered Institute of Procurement and Supply (CIPS)
advocates for this approach, and there are several advantages and
disadvantages to using a hybrid form of procurement. Here are some of
them:
Advantages:
Increased Flexibility: The hybrid form of procurement allows
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organizations to be more flexible in their approach to procurement. This

means they can adapt to changing circumstances and requirements,
without having to abandon their existing processes.
Improved Collaboration: By combining the strengths of traditional and
collaborative procurement, the hybrid approach can help to improve
collaboration between procurement professionals and suppliers. This can
lead to better outcomes for both parties.
Better Risk Management: The hybrid form of procurement can help to
improve risk management by allowing organizations to use different
procurement approaches for different categories of spend. This means
that they can use collaborative procurement for high-risk areas, while
using traditional procurement for lower-risk areas.
Cost Savings: The hybrid form of procurement can help organizations to
achieve cost savings by allowing them to use the most appropriate
procurement approach for each category of spend. This means they can
avoid the cost of collaborative procurement in areas where it is not
necessary.
Disadvantages:
Complex Procurement Processes: The hybrid form of procurement can
result in more complex procurement processes, which can be difficult to
manage. This can lead to delays and inefficiencies if not managed
properly.
Difficult to Implement: Implementing a hybrid form of procurement can
be difficult, particularly if there is resistance from stakeholders who are
used to a traditional procurement approach.
Potential for Conflicts: The hybrid form of procurement can create
potential conflicts between procurement professionals and suppliers if
expectations are not clearly defined and managed.
Lack of Consistency: The hybrid form of procurement can result in a lack
of consistency across procurement processes, which can make it difficult
to measure performance and identify areas for improvement.

Overall, the hybrid form of procurement can be a useful strategy for

organizations, but it requires careful planning and management to ensure
that the benefits outweigh the disadvantages.

14. Explain the power and interest of FIVE different stakeholders

of a procurement function using Mendelow model

The Mendelow model is a useful tool to analyze stakeholders of a

procurement function based on their level of power and interest.
The model categorizes stakeholders into four quadrants: high power/high
interest, high power/low interest, low power/high interest, and low
power/low interest. Here is an explanation of the power and interest of five
different stakeholders of a procurement function using the Mendelow
model:
Top Management - High Power/High Interest: Top management is a
stakeholder with high power and high interest in the procurement
function. They have the authority to make strategic decisions, allocate
resources, and set goals for the procurement department. They are also
interested in the procurement function's performance and its contribution
to the overall business goals.
Maximum efforts shall be taken to work closely with these
stakeholders to meet/exceed their expectation as they are the
core stakeholders. You need their approval and support to
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conclude any procurement initiative.

Suppliers - Low Power/High Interest: Suppliers are a stakeholder with
low power but high interest in the procurement function. They rely on the
procurement department to purchase their products or services, and
therefore, they are interested in the procurement process, pricing, and
delivery times. They may also have an interest in building long-term
relationships with the procurement department to secure future business.
enough time and efforts shall be taken to keep them informed
about the current and future demands/needs and
policies/objectives. So they are intact and well prepared and the
right time.
End-users - High Power/Low Interest: End-users are a stakeholder with
high power but low interest in the procurement function. They have the
power to request specific products or services from the procurement
department, but they are less interested in the procurement process itself.
They may be more focused on using the products or services to meet their
specific needs.
Reasonable time and enough efforts shall be taken to keep them
satisfied about the current and future activities so, they are be a
supporter/sponsor to your initiative and doesn’t oppose any
change as result of your initiatives.
Legal and Compliance - High Power/High Interest: Legal and compliance
departments are stakeholders with high power and high interest in the
procurement function. They are responsible for ensuring that the
procurement process complies with legal and regulatory requirements.
They may also be interested in ensuring that procurement contracts are
properly executed and that the procurement process is transparent.
Maximum efforts shall be taken to work closely with these
stakeholders to meet/exceed their expectation as they are the
core stakeholders. You need their approval and support to
conclude any procurement initiative.
Finance - High Power/High Interest: Finance is a stakeholder with high
power and high interest in the procurement function. They are responsible
for budgeting and financial forecasting, and they may be interested in
ensuring that procurement processes are cost-effective and align with the
organization's financial goals. They may also be interested in tracking the
procurement department's performance and ensuring that procurement
costs are properly allocated.
Maximum efforts shall be taken to work closely with these
stakeholders to meet/exceed their expectation as they are the
core stakeholders. You need their approval and support to
conclude any procurement initiative.

In summary, the power and interest of stakeholders in the procurement

function can vary depending on their role and responsibilities. The
Mendelow model is a useful tool to help procurement professionals identify
the level of power and interest of stakeholders and develop strategies to
manage their expectations and needs. Always remember though a use full
tool still there are limitations to this model - It gives a snapshot in a time
or a particular project. Procurement professional need to regularly review
and update them self about the changes in the dynamics which may have
reciprocal impact on the positions of different stakeholder in different
quadrants and accordingly adjust your efforts and communication plan.
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15. Part (a) Explain, with examples, the characteristics of each of

the following purchasing categories: (i) Commodities (ii) Goods
for resale (iii) Maintenance, repair and operating (MRO) supplies.

(i)Commodities: Commodities are raw materials or basic goods that

are used in the production of other goods or services. They are typically
standardized and have a readily available market price. Examples of
commodities include agricultural products like wheat, corn, and soybeans,
as well as industrial materials like copper, aluminum, and steel. The
characteristics of commodities include:
Price volatility: Commodities prices can fluctuate due to factors such as
supply and demand, weather conditions, and geopolitical events.
Standardization: Commodities are often traded on commodity
exchanges and must meet certain standard specifications.
Perishability: Some commodities, such as agricultural products, have a
limited shelf life and need to be consumed or processed quickly.
Global demand: Commodities are often traded globally and demand can
be influenced by economic growth and geopolitical events in different
parts of the world.

(ii) Goods for resale: Goods for resale are products that are
purchased by businesses with the intention of reselling them to
consumers. Examples of goods for resale include clothing, electronics,
and household items. The characteristics of goods for resale include:
Seasonality: Some goods for resale, such as seasonal clothing or holiday
decorations, have a limited window of demand.
Branding: Many goods for resale are branded products, which means that
the quality, features, and reputation of the brand can be important factors
in the purchasing decision.
Product life cycle: Goods for resale can go through different stages of
the product life cycle, from introduction to growth, maturity, and decline.
Distribution: The distribution channels for goods for resale can vary
widely depending on the product and the target market.

(iii) Maintenance, repair and operating (MRO) supplies: MRO

supplies are items that are used in the maintenance, repair, and
operation of equipment, facilities, and infrastructure. Examples of
MRO supplies include tools, cleaning supplies, and safety equipment. The
characteristics of MRO supplies include:
Low unit cost: MRO supplies are often low-value items that are
purchased in large quantities.
Necessity: MRO supplies are essential for the ongoing maintenance
and operation of businesses and facilities.
Frequency of purchase: MRO supplies are often purchased on an
ongoing basis, sometimes through long-term contracts with suppliers.
Specificity: Some MRO supplies are highly specialized and may only be
available from specific suppliers or manufacturers.

In summary, each purchasing category has its own unique characteristics

that procurement professionals need to consider when sourcing and
managing suppliers. Understanding the characteristics of each category
can help businesses develop effective purchasing strategies and manage
risks associated with each category.

16. Outline FIVE circumstances where ‘buying for stock’ would

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be an appropriate procurement policy.

"Buying for stock" refers to the procurement policy of purchasing goods

or materials in advance, in order to maintain a stock of inventory that can
be used or sold as needed. Here are five circumstances were buying for
stock would be an appropriate procurement policy:

Anticipated increase in demand: If a business expects a surge in

demand for a particular product or material, buying for stock can help
ensure that there is sufficient inventory available to meet that demand
without delay.
Seasonal fluctuations: Some businesses experience seasonal
fluctuations in demand for their products or services. In these cases,
buying for stock in advance can help ensure that inventory levels are
maintained throughout the year, even during periods of low demand.
Production interruptions: Production interruptions can occur due to
unforeseen circumstances such as equipment breakdowns or supply chain
disruptions. Having a stock of inventory on hand can help ensure that
production can continue uninterrupted during these periods.
Price fluctuations: Prices for certain materials or goods can be subject to
sudden fluctuations due to factors such as changes in supply and demand
or geopolitical events. Buying for stock can help businesses lock in prices
at a favorable rate, rather than being subject to sudden price increases.
Supplier lead times: Some suppliers may have long lead times for
delivery of certain products or materials. In these cases, buying for stock
can help ensure that there is sufficient inventory available to meet
demand while waiting for new orders to arrive.

Where buying in bulk might lead to economies of scale and cost

savings, which outweigh the storage costs. In summary, buying for stock
can be an appropriate procurement policy in a variety of circumstances,
including those where demand is expected to increase, where there are
seasonal fluctuations in demand, where there is a risk of production
interruptions, where prices are subject to sudden fluctuations, or where
supplier lead times are long.

17. Difference between procurement and purchasing

Procurement and purchasing are related terms that are often used
interchangeably, but they actually have different meanings:
Procurement: Procurement refers to the entire process of acquiring
goods and services, from identifying the need for a product or service,
to sourcing and selecting suppliers, to negotiating contracts and
managing supplies/deliverables and supplier relationships.
Procurement is a strategic function that involves a range of activities,
including supplier evaluation and selection, contract negotiation, supplier
performance monitoring, and risk management.
Purchasing: Purchasing refers specifically to the process of ordering
and acquiring goods or services from suppliers. Purchasing is a
tactical function that involves activities such as issuing purchase
orders, tracking deliveries, and managing invoices and payments.
While purchasing is an important part of the overall procurement process,
it is only one component of a broader strategic approach to procurement.
In summary, procurement encompasses the entire process of acquiring
goods and services, while purchasing specifically refers to the tactical
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process of placing orders and managing the delivery and payment of

goods and services. Effective procurement involves strategic planning,
supplier evaluation and selection, and ongoing supplier management,
while purchasing focuses on the transactional aspects of buying goods and
services.

18. Outline FIVE ways in which improving the quality of products

can add value for an organization
Improving the quality of products can add value for an organization in
several ways, including:
Increased customer satisfaction: When products meet or exceed
customer expectations in terms of quality, it can lead to increased
customer satisfaction and loyalty. This can result in repeat business,
positive reviews, and word-of-mouth referrals.
Improved reputation: Delivering high-quality products can enhance an
organization's reputation and brand image. This can help to differentiate
the organization from its competitors and position it as a leader in its
industry.
Reduced costs: Improving product quality can lead to fewer defects,
lower scrap rates, and reduced rework, which can result in cost savings for
the organization. This can help to improve profitability and
competitiveness.
Increased efficiency: Higher quality products can lead to increased
efficiency in production processes, as there are fewer errors and delays.
This can result in improved productivity and faster time to market.
Regulatory compliance: Many industries have regulations and
standards that require products to meet certain quality criteria. By
improving product quality, organizations can ensure compliance with these
regulations and avoid costly penalties or legal issues.

In summary, improving the quality of products can add value for an

organization by increasing customer satisfaction and loyalty, enhancing
reputation, reducing costs, improving efficiency, and ensuring regulatory
compliance.

19. Differences between direct and indirect procurement

Direct procurement and indirect procurement are two different types of
procurement that organizations use to acquire the goods and services
they need to operate their businesses. Here are the key differences
between direct and indirect procurement:

Definition:
Direct procurement involves the acquisition of goods and services that
are directly related to a company's core business activities, such as
raw materials,
components, or finished products.
Indirect procurement involves the acquisition of goods and services that
are not directly related to a company's core business activities, such as
office supplies, marketing services, or travel and entertainment expenses.
Focus:
Direct procurement focuses on acquiring goods and services that are
essential to the production or delivery of a company's products or
services.
Indirect procurement focuses on acquiring goods and services that
CIPS L4M1 QUESTIONS AND ANSWERS

support the company's operations but are not directly involved in the
production or delivery of its core products or services.
Complexity:
Direct procurement is typically more complex than indirect
procurement, as it involves sourcing raw materials or components that
must meet strict quality and performance standards.
Indirect procurement is generally less complex, as it involves sourcing
goods and services that are more readily available and do not require as
much customization or technical expertise.
Supplier relationships:
Direct procurement often involves long-term relationships with key
suppliers who provide critical inputs to the company's operations.
Indirect procurement may involve a larger number of suppliers who
provide a wider range of goods and services, but who may not have the
same level of strategic importance to the company.
Impact on bottom line:
Direct procurement has a direct impact on the quality and cost of a
company's products or services, and therefore has a significant impact
on the company's bottom line.
Indirect procurement can also have an impact on the bottom line, but the
impact is generally less direct and may be more difficult to quantify.

20. The main focus for procurement and supply is that value can
be added either by cutting costs or by securing operational
efficiency. Describe FIVE methods through which value may be
achieved in procurement and supply using these approaches
There are several methods through which value can be achieved in
procurement and supply by cutting costs and securing operational
efficiency. Here are five examples:
a) Strategic sourcing: Strategic sourcing is a method for reducing costs
by analyzing and optimizing the procurement process. This involves
identifying the most cost-effective suppliers, negotiating favorable
contracts, and implementing processes to streamline the procurement
process. By doing so, organizations can reduce costs, improve
efficiency, and increase transparency in the procurement process.
b) Supplier relationship management: Building strong relationships
with suppliers can help organizations to achieve operational efficiency
by improving communication, reducing lead times, and minimizing
supply chain disruptions. This involves establishing collaborative
relationships with suppliers, sharing information, and working together
to identify opportunities for cost savings and process improvements.
c) E-procurement: E-procurement refers to the use of technology to
streamline the procurement process. This includes electronic
purchasing, invoicing, and payment systems, as well as tools for
supplier management and data analytics. By automating manual
processes and improving visibility into the procurement process,
organizations can reduce costs and improve efficiency.
d) Inventory management: Effective inventory management is a key
component of operational efficiency. This involves monitoring
inventory levels, forecasting demand, and implementing processes to
minimize excess inventory and reduce stockouts. By optimizing
inventory levels, organizations can reduce costs associated with
inventory holding, storage, and obsolescence.
e) Value engineering: Value engineering is a process for identifying
CIPS L4M1 QUESTIONS AND ANSWERS

opportunities to reduce costs without sacrificing quality or

performance. This involves analyzing product designs, materials,
and manufacturing processes to identify opportunities for cost
savings. By implementing value engineering techniques,
organizations can reduce costs while maintaining or improving product
quality and performance.

In summary, by implementing strategic sourcing, supplier relationship

management, e-procurement, inventory management, and value
engineering techniques, procurement and supply professionals can add
value to their organizations by reducing costs and improving operational
efficiency.

21. Explain, with examples, FIVE benefits of a supply chain

management(SCM) approach to procurement
or

22. Benefits of supply chain management(SCM) approach to procurement.

Supply chain management (SCM) is a holistic approach to managing the
flow of goods and services from the supplier to the end customer. SCM can
be used to optimize the procurement process, and there are several
benefits to taking a supply chain management approach to procurement.
Here are some of them:
a) Improved Visibility, Improved efficiency: SCM provides greater
visibility into the procurement process, allowing procurement
professionals to track the movement of goods and services from the
supplier to the end customer. This can help to identify bottlenecks and
inefficiencies in the process, and allow for timely intervention. For
example, if a company has visibility into the entire supply chain, it can
better manage inventory levels, reducing the risk of stockouts or
overstocking.
b) Increased Collaboration: SCM involves close collaboration between
suppliers, manufacturers, distributors, and customers. This can help to
improve communication, reduce lead times, and improve the quality of
goods and services.
c) Better Risk Management: SCM can help to improve risk
management by providing greater visibility into the supply chain. This
can help procurement professionals to identify potential risks and take
steps to mitigate them. For example, by diversifying suppliers or
having backup plans in place, companies can reduce the risk of
disruption to their supply chain.
d) Cost Savings: SCM can help to reduce costs by optimizing the
procurement process. This can be achieved through better demand
planning, reduced inventory holding costs, and better negotiation of
prices with suppliers. For example, by consolidating suppliers or
negotiating better prices, companies can reduce their procurement
costs.
e) Improved Customer Satisfaction: SCM can help to improve
customer satisfaction by ensuring that goods and services are
delivered on time, are of high quality, and meet customer
expectations. This can help to build customer loyalty and improve the
reputation of the organization.
f) Enhanced sustainability: By taking a supply chain management
approach, companies can identify areas where they can improve their
environmental and social impact. For example, by sourcing materials
CIPS L4M1 QUESTIONS AND ANSWERS

from sustainable sources or reducing waste in the supply chain,

companies can improve their sustainability credentials.
In summary, taking a supply chain management approach to procurement
can lead to improved visibility, increased collaboration, better risk
management, cost savings, and improved customer satisfaction. By
optimizing the procurement process, organizations can improve their
bottom line, enhance their reputation, and build stronger relationships
with their suppliers and customers.

23. Define the term 'stakeholder' in relation to an organization

In the context of an organization, a stakeholder refers to any individual,

group, or organization that has an interest or concern in the activities,
decisions, or outcomes of the organization. Any
individual/group/organization which can be affected or can affect
any activity/organization.
There are 3 categories of Stakeholders (Internal, Connected & External).
Stakeholders can be
internal: to the organization, such as employees, managers,
shareholders, and directors.
connected: such as customers, suppliers, banks or
external government regulators, local communities, and the wider
society.

Stakeholders are important to an organization because they can have a

significant impact on the organization's success or failure. For example,
customers can influence the organization's revenue and profitability,
while employees can affect the organization's productivity and
performance. Government regulators can affect the organization's
ability to operate in a particular jurisdiction, while local communities
can influence the organization's reputation and social license to operate.

Effective stakeholder management is crucial for an organization to

achieve its objectives and goals. Organizations need to identify and
engage with their stakeholders, understand their needs and
expectations, and manage their interests and concerns. This can
involve developing strategies, policies, and practices that address
stakeholder needs and concerns, as well as communicating and
collaborating with stakeholders to build trust and relationships. By
effectively managing stakeholders, organizations can enhance
their reputation, build their brand, and create value for all
stakeholders.

24. Describe the interests of TWO internal stakeholders of the

procurement function of an organization of your choice?
a) Board of Trustees: (high power/ high interest) As the governing body of
CIPS, the Board of Trustees has an interest in ensuring that the
procurement function is aligned with the strategic objectives of
the organization. They want to see that procurement activities are
carried out efficiently and effectively, with appropriate risk
management measures in place.
b) Procurement and Supply Chain Management Professionals: (low
power/ high interest) Procurement and supply chain management
professionals have an interest in the CIPS as it is central to their work.
They want to see that function is promoting best practices in
CIPS L4M1 QUESTIONS AND ANSWERS

procurement and supporting their professional development needs,

such as through training and certification programs.
c) Marketing and Communications Department: The marketing and
communications department of CIPS has an interest in the
procurement function as it affects the organization's brand reputation.
They want to ensure that procurement activities are conducted
ethically and transparently, and that the organization's messaging is
consistent with its values.
d) Finance Department: The finance department of CIPS has an
interest in the procurement function as it can impact the
organization's financial performance. They want to ensure that
procurement activities are cost-effective and aligned with the budget
and financial planning processes.
e) Human Resources Department: The human resources department
of CIPS has an interest in the procurement function as it can impact
the recruitment and retention of employees. They want to ensure
that procurement activities are conducted in accordance with relevant
employment laws and regulations and that suppliers are adhering
to appropriate labor standards.

25. Describe how the TWO internal stakeholders, identified

above , might contribute to procurement activities.
The 5 internal stakeholders of CIPS identified above can contribute to
procurement activities in various ways:
Board of Trustees: The Board of Trustees can contribute to procurement
activities by providing strategic direction and oversight to the
procurement function. They can help set the policies and procedures,
approve budgets, and monitor performance against organizational
objectives. They can also ensure that procurement activities are in
compliance with relevant laws and regulations.
Procurement and Supply Chain Management Professionals: CIPS
members who are procurement and supply chain management
professionals can contribute to procurement activities by sharing their
expertise and knowledge. They can provide insights into procurement
best practices, suggest improvements to procurement processes, and
help identify potential suppliers. They can also participate in
process of evaluations and contract negotiations.
Marketing and Communications Department: The marketing and
communications department can contribute to procurement activities by
ensuring that procurement activities are aligned with the
organization's messaging and brand reputation. They can help
develop procurement communications strategies, promote procurement
success stories, and ensure that procurement activities are conducted
ethically and transparently.
Finance Department: The finance department can contribute to
procurement activities by providing financial guidance and oversight. They
can help set procurement budgets, monitor procurement spend against
budget, and analyze procurement cost savings. They can also ensure that
procurement activities are conducted in accordance with relevant financial
regulations and controls.
Human Resources Department: The human resources department can
contribute to procurement activities by ensuring that procurement
activities are aligned with employment laws and regulations. They can
help develop procurement policies and procedures that are compliant with
relevant labor standards, ensure that suppliers are adhering to ethical
CIPS L4M1 QUESTIONS AND ANSWERS

labor practices, and monitor procurement activities for potential human

resources risks.

26. Explain five advantages for an organization of following a

CIPS structured sourcing process.
Implementing a structured sourcing process can provide an organization
with several benefits, including:
Best practices: The CIPS sourcing process is based on industry best
practices and standards, providing organizations with a framework for
ensuring that procurement activities are conducted in a consistent
and professional manner. This can help to reduce the risk of errors and
improve the overall quality of procurement activities.
Greater transparency: The CIPS sourcing process emphasizes
transparency and fairness in supplier selection and evaluation, ensuring
that all suppliers are treated equally and have the opportunity to compete
on a level playing field. This can help to build trust with all
stakeholders and reduce the risk of disputes or legal issues.
Improved supplier relationships: The CIPS sourcing process
emphasizes the importance of building and maintaining strong
relationships with suppliers. By following a structured process for
supplier selection, evaluation, and performance management,
organizations can build trust, communicate more effectively, and
establish long-term partnerships with their suppliers.
Risk management: The CIPS sourcing process includes risk management
as a key element, helping organizations to identify and mitigate risks
associated with procurement activities. By conducting due diligence
on suppliers, assessing their qualifications, and defining clear contract
terms, organizations can reduce the risk of disputes, supply chain
disruptions, and legal issues.
Continuous improvement: The CIPS sourcing process includes a focus
on continuous improvement, encouraging organizations to review and
refine their procurement processes over time. By collecting data on
supplier performance, monitoring procurement activities, and analyzing
trends, organizations can identify areas for improvement and make
adjustments to their processes to increase efficiency and effectiveness.

27. Explain the activities that could be undertaken by an

organization to identify and appraise potential suppliers as part
of a sourcing process
Explain the activities that could be undertaken by an organization to
identify and appraise potential suppliers as part of a CIPS sourcing process
To identify and appraise potential suppliers as part of a CIPS sourcing
process, an organization can undertake various activities, including:
Market Research: This involves gathering information on potential
suppliers and the market in which they operate. The organization can use
various sources such as trade publications, industry reports, and
online databases to identify potential suppliers.
Supplier Surveys: The organization can conduct surveys to gather
information about potential suppliers' capabilities, experience, financial
stability, and technical expertise. The surveys can be conducted through
online questionnaires, interviews, or site visits.
CIPS L4M1 QUESTIONS AND ANSWERS

Pre-Qualification Questionnaires (PQQs): PQQs can be used to assess

the suitability of potential suppliers for the requirement. The
questionnaires can cover various areas such as technical capability,
financial stability, experience, and quality management systems.
Supplier Audits: The organization can conduct audits to verify
potential suppliers' capabilities, compliance with regulations, and
quality management systems. The audits can be conducted by the
organization's procurement team or a third-party auditor.
Reference Checks: The organization can contact the potential suppliers'
references to obtain feedback on their past performance, quality of goods
or services provided, and adherence to delivery timelines.
Site Visits: Site visits can be conducted to assess the potential suppliers'
facilities, equipment, and processes. The visits can also provide an
opportunity to meet with the suppliers' management team and
employees.
Request for Information (RFI): An RFI can be issued to potential
suppliers to gather information about their capabilities, capacity, and
experience. The RFI can be used to identify the most suitable suppliers to
invite to the tendering process.
These activities will help the organization identify and appraise potential
suppliers based on their suitability, capability, and experience. The
organization can then use this information to select the most appropriate
suppliers to invite to the tendering process.

28. Discuss FIVE examples of ethical or unethical behavior that

could be addressed in an ethical code for procurement
professionals
The CIPS Code of Ethics and Professional Standards outlines the expected
ethical behavior of procurement professionals. Here are five examples of
ethical or unethical behavior that could be addressed in the CIPS ethical
code for procurement professionals:

Conflict of interest: A procurement professional should avoid any

conflict of interest that could compromise their ability to act
impartially and in the best interests of their organization. It would be
unethical for a procurement professional to use their position to award
contracts to companies in which they have a personal or financial interest.

Bribery and corruption: A procurement professional should not

accept bribes or other improper inducements that could influence
their decision-making. Similarly, they should not offer bribes or other
incentives to suppliers in exchange for favorable treatment. Such actions
would be considered unethical and could have serious legal consequences.

Confidentiality: A procurement professional should respect the

confidentiality of sensitive information related to procurement
activities, including supplier bids, contract terms, and pricing
information. Sharing confidential information with unauthorized parties
or using it for personal gain would be considered unethical.
CIPS L4M1 QUESTIONS AND ANSWERS

Fair competition: A procurement professional should ensure that all

suppliers are given equal opportunities to compete for contracts
and that the procurement process is transparent and fair. Giving
preferential treatment to certain suppliers or engaging in bid rigging would
be considered unethical.

Environmental and social responsibility: A procurement professional

should consider the environmental and social impacts of
procurement activities and make efforts to promote sustainability
and responsible sourcing. Ignoring environmental and social concerns
in the procurement process could be considered unethical and could harm
the reputation of the organization.

29. Explain FIVE factors that impact on purchasing activities in the retail
sector.
Consumer demand: The level of consumer demand for a particular
product can impact the purchasing decisions of retailers. If there is high
demand for a particular product, retailers may need to increase their stock
levels to meet customer demand.

Seasonal trends: Seasonal trends can also impact purchasing activities

in the retail sector. For example, during the summer months, retailers may
need to stock up on seasonal products such as swimwear, outdoor
furniture, and barbeques.

Competition: The level of competition in the retail sector can also impact
purchasing decisions. Retailers may need to be more competitive with
their pricing, promotions, and product offerings to remain competitive in
the market.

Economic conditions: The state of the economy can also impact

purchasing activities in the retail sector. During periods of economic
downturn, retailers may need to reduce their inventory levels and focus on
cost-saving measures to remain profitable.

Supplier relationships: The relationship between retailers and their

suppliers can also impact purchasing activities. Strong relationships with
suppliers can lead to better pricing, improved product quality, and more
reliable delivery times.

Technological advancements: Technological advancements in the retail

sector can also impact purchasing activities. For example, the use of
data analytics and artificial intelligence can help retailers to
forecast demand and make more informed purchasing decisions.
The adoption of e-commerce platforms can also impact the way retailers
source and purchase products.
CIPS L4M1 QUESTIONS AND ANSWERS

Explain FIVE differences between operational

expenditure and capital expenditure.

CAPEX OPEX
STRATEGIC TACTITCAL
ASSET purchased to last long period ROUTINE items to run the daily
of time e.g Tunnel Boring Machine operation e.g office rent for a
for Construction project, Airplane for construction company, workers
an airline salary, utility bills, Insurances etc…
ONE TIME SPEND COUNTINOUS SPEND
HIGH VALUE SPEND Low TO Medium,
LUMP SUM PERODIC
COMPLEX APPROVAL PROCESS LOW TO MID APPROVAL PROCESS

30. Describe the roles typically undertaken within an organization by:

(i) The local procurement teams
(ii) The central procurement team
(i) The local procurement teams typically handle the procurement
activities at the local level within an organization. Their roles may include:
a. Liaising with internal stakeholders to determine their
procurement requirements
b. Conducting market research to identify potential suppliers
c. Preparing and issuing RFQs/RFPs to suppliers
d. Evaluating supplier responses and making recommendations to
internal stakeholders
e. Negotiating contracts and pricing with suppliers
f. Managing supplier relationships and ensuring compliance with
contract terms and conditions
g. Resolving any procurement-related issues or disputes that may arise
h. Managing procurement-related data and documentation

(ii) The central procurement team typically handles procurement

activities at the organizational level. Their roles may include:
a. Developing procurement strategies and policies that align with
the organization's goals and objectives
b. Identifying and evaluating procurement risks and implementing risk
mitigation measures
c. Developing and maintaining relationships with key suppliers
d. Conducting market research and supplier evaluations to identify
potential cost savings opportunities
e. Developing and managing procurement-related metrics and
performance indicators
CIPS L4M1 QUESTIONS AND ANSWERS

f. Collaborating with internal stakeholders to ensure procurement

activities are aligned with their needs and requirements
g. Overseeing the implementation of procurement activities across
the organization
h. Providing training and guidance to local procurement teams on
procurement policies, procedures, and best practices.

31. Describe 4 possible hybrid structures for a procurement or supply

chain function.
i. Consortium structures
ii. Shared services
iii. Outsource
iv. Lead buyer structures
i. Consortium structures: A consortium structure involves multiple
organizations collaborating and pooling their resources to achieve a
common goal. In the context of procurement or supply chain, a consortium
could consist of several companies collaborating to negotiate better
pricing from suppliers or to share logistics and transportation costs.

ii.Shared services: A shared services model involves consolidating

certain back-office functions across different business units or
departments within an organization. For procurement or supply chain, this
might involve creating a central procurement team that is responsible for
purchasing goods and services for the entire organization, rather than
each department having its own procurement team.

iii. Outsource: Outsourcing involves contracting with a third-party

provider to perform certain functions or services on behalf of an
organization. In the context of procurement or supply chain, outsourcing
might involve engaging a logistics or freight forwarding company to
manage transportation and delivery of goods, or contracting with a vendor
to manage inventory and warehouse operations.

iv. Lead buyer structures: occur when one organizational

department, or individual takes the responsibility for setting the
framework or the purchasing of a specific product or service, such as ICT,
marketing etc.

32. Outline the potential impact of complex compliance

requirements on the achievement of positive outcomes in the
sourcing process

Complex compliance requirements can have several potential impacts

on the achievement of positive outcomes in the CIPS sourcing process.
Here are six potential impacts:
Delayed procurement process: Complex compliance requirements
can slow down the procurement process as sourcing teams need to
spend more time ensuring compliance with various regulations and
standards. This can delay the delivery of goods or services, which can
impact the overall success of the project.
Increased costs: Compliance requirements can also increase costs as
sourcing teams may need to hire additional resources or consultants
CIPS L4M1 QUESTIONS AND ANSWERS

to help navigate the complex regulatory landscape. Compliance

with regulations can also lead to additional fees or charges, which can add
to the overall cost of the project.
Limited supplier pool: Complex compliance requirements can also
limit the pool of potential suppliers as not all suppliers may be able
to meet the compliance standards. This can reduce competition and
limit the ability to achieve positive outcomes such as cost savings and
improved quality.
Increased risk: Compliance requirements can also increase risk as
sourcing teams may not have the necessary expertise or resources
to navigate the complex regulatory landscape. Failure to comply
with regulations can lead to legal and financial penalties, which can impact
the overall success of the project.
Negative impact on supplier relationships: Complex compliance
requirements can also have a negative impact on supplier relationships as
suppliers may perceive the compliance requirements as
burdensome or unfair. This can impact the ability to achieve positive
outcomes such as collaboration and innovation.
Inefficient use of resources: Compliance requirements can also lead to
inefficient use of resources as sourcing teams may need to spend more
time and effort ensuring compliance rather than focusing on other
aspects of the sourcing process such as identifying cost-saving
opportunities or improving quality. This can impact the overall success of
the project and limit the ability to achieve positive outcomes.
33. Describe FIVE ways in which contract management might
add value after the contract award stage of the sourcing process.
Contract management is a critical process that begins after the contract
has been awarded and involves overseeing the contract's performance,
ensuring that all parties involved in the contract comply with the terms
and conditions. Here are five ways in which contract management might
add value after the contract award stage of the sourcing process:

Performance Monitoring: One of the most crucial aspects of contract

management is monitoring the performance of the supplier to ensure
that they meet the contract's requirements. Effective contract
management helps identify issues before they escalate and allows for
timely corrective actions.

Risk Management: Contract management can help identify and

mitigate risks associated with the contract. By identifying potential
risks, contract managers can develop strategies to mitigate them,
ultimately reducing the likelihood of cost overruns, project delays, and
legal disputes.

Cost Savings: Effective contract management can help organizations

identify opportunities to reduce costs. Contract managers can
negotiate with suppliers to lower prices, streamline processes, and identify
areas where cost savings can be made.

Relationship Management: Good contract management involves

developing and maintaining strong relationships with suppliers. This
can result in improved collaboration, increased trust, and ultimately,
CIPS L4M1 QUESTIONS AND ANSWERS

better performance.

Contract Renewal: Contract management can help organizations

prepare for the contract renewal process. By monitoring the
supplier's performance, identifying potential areas for improvement, and
renegotiating terms and conditions, organizations can ensure that they are
getting the best value from their contracts.

Explain the term 'Enterprise Resource Planning

Enterprise Resource Planning (ERP) is a software system used by
organizations to manage and integrate their core business processes. An
ERP system typically includes modules for finance, human resources,
procurement, supply chain management, inventory management, and
customer relationship management. By integrating these processes, ERP
systems help organizations make data-driven decisions, improve
communication, and increase efficiency.

When used together, and ERP can have a powerful impact on an

organization. The CIP S methodology helps identify areas for improvement
in processes, while the ERP system provides the tools to implement
changes and monitor their effectiveness. This combination can lead to
increased efficiency, improved quality, reduced costs, and better decision-
making. Ultimately, the goal of CIP S and ERP is to create a culture of
continuous improvement and excellence within the organization.

34. Describe FOUR of the main functions of an IT based inventory

management system.
An IT-based inventory management system is a software application that
helps organizations manage their inventory levels and control the
flow of goods in and out of their warehouses or distribution centers. Here
are four of the main functions of an IT-based inventory management
system:
Inventory tracking/Traceability: An inventory management system
allows organizations to track the movement of goods in and out of
their warehouses. This includes monitoring inventory levels, tracking the
location of items, and recording transactions in real-time. By having a
clear picture of their inventory levels, organizations can make informed
decisions about when to reorder products, how much to order, and where
to allocate resources.
Forecasting and demand planning: An inventory management system
can help organizations forecast demand for their products, based on
historical sales data, seasonal trends, and other factors. This helps
organizations optimize their inventory levels, ensuring that they have
enough stock to meet customer demand, but not so much that they are
tying up valuable resources.
Order management: An inventory management system can help
organizations manage the entire order process, from receiving
orders to fulfilling them. This includes generating picking lists, packing
slips, and shipping labels, as well as managing returns and exchanges. By
automating these processes, organizations can improve accuracy, reduce
errors, and speed up order fulfillment times.
CIPS L4M1 QUESTIONS AND ANSWERS

Analytics and reporting: An inventory management system can provide

organizations with detailed analytics and reporting capabilities,
allowing them to analyze inventory data and identify trends and patterns.
This includes generating reports on inventory levels, sales data, and other
key performance indicators (KPIs). By analyzing this data, organizations
can make data-driven decisions about their inventory levels, ordering
patterns, and resource allocation.
Integration with other systems: An inventory management system
can be integrated with other systems, such as accounting software,
supply chain management systems, and customer relationship
management (CRM) software. This helps organizations streamline their
business processes and reduce the risk of errors or duplication of
effort.
Real-time updates and notifications: An inventory management
system can provide real-time updates and notifications, allowing
organizations to quickly respond to changes in inventory levels or
demand. This can help organizations improve their customer service and
reduce the risk of stockouts or overstocking.
35. Describe FIVE possible 'drivers' or influencing factors of
procurement activities in third sector organizations.
The third sector comprises organizations that operate for a social or
environmental purpose and are neither part of the government nor the
private sector. The procurement activities of third sector organizations are
influenced by several factors, including:
Mission and values: Third sector organizations are often mission-driven,
meaning that their procurement activities are guided by their mission
and values. For example, an environmental non-profit organization may
prioritize sourcing products and services that are eco-friendly and
sustainable.
Budget constraints: Third sector organizations often have limited
financial resources, which can impact their procurement activities.
These organizations must balance the need to source high-quality
products and services with the need to stay within budget constraints.
Stakeholder expectations: Third sector organizations must also
consider the expectations of their stakeholders, including donors,
beneficiaries, and the public. For example, an organization that relies
heavily on donations may need to ensure that its procurement activities
are transparent and demonstrate good value for money.
Regulatory requirements: Third sector organizations must comply with
various legal and regulatory requirements related to procurement. For
example, organizations that receive funding from government sources
may be required to follow specific procurement procedures.
Supply chain sustainability: Third sector organizations are increasingly
focused on ensuring that their supply chains are sustainable and
ethical. This includes considering factors such as environmental impact,
labor practices, and supplier diversity when making procurement
decisions.
In summary the procurement activities of third sector organizations are
influenced by a range of factors, including their mission and values,
CIPS L4M1 QUESTIONS AND ANSWERS

budget constraints, stakeholder expectations, regulatory requirements,

and supply chain sustainability. By understanding and addressing
these drivers, third sector organizations can optimize their procurement
processes and ensure that they are making ethical, responsible, and
sustainable procurement decisions.

36. Analyzing the supply market is one of the key pre-contract

stages in the sourcing process. Outline FIVE possible sources of
information for finding potential suppliers at this stage of the
sourcing process. (10 marks)
i. Industry directories and databases: Industry directories and
databases provide information on companies that operate in a particular
industry or sector. These resources may include contact details, product
or service offerings, and key personnel information.
ii. Online search engines: Procurement professionals can use online
search engines like Google or Bing to find potential suppliers. By
entering relevant keywords and search terms, they can identify
companies that offer the products or services they need.
iii. Trade associations and industry groups: Trade associations and
industry groups represent the interests of businesses within a particular
industry or sector. They may provide information on member
companies, industry trends and developments, and upcoming events or
conferences.
iv. Social media platforms: Social media platforms like LinkedIn, Twitter,
and Facebook can be useful for identifying potential suppliers.
Procurement professionals can search for companies or individuals
within their network who work in the relevant industry or sector, and
they may also be able to use social media to connect with suppliers
directly.
v. Supplier referrals: Referrals from colleagues, industry contacts, or
other suppliers can be a valuable source of information for finding
potential suppliers. Procurement professionals can ask for
recommendations and referrals from their network, or they may be able
to obtain referrals from existing suppliers or business partners.
vi. Networking with other procurement professionals
vii. Supplier database list
viii. Professional Institutions
37. Explain THREE reasons for using a clear specification when
defining needs as part of the sourcing process.
Facilitates effective communication: A clear specification provides a
common language and vocabulary for both the buyer and supplier to use,
which makes communication more effective. A detailed specification
can help the buyer to explain their needs and requirements
accurately, while also helping the supplier to understand the scope of the
project and the deliverables.
Helps to identify potential issues: A clear specification can help to
identify potential issues early in the sourcing process. If the specification is
unclear or ambiguous, this can lead to misunderstandings or
CIPS L4M1 QUESTIONS AND ANSWERS

miscommunications that can cause issues down the line. A clear

specification can help to identify potential issues and resolve them
before they become bigger problems.
Provides a basis for negotiation: A clear specification provides a basis
for negotiation between the buyer and the supplier. By setting out the
requirements in detail, the specification provides a framework for the
buyer and supplier to discuss and agree on the terms of the contract.
This can help to ensure that the final contract reflects the needs of the
buyer while also being acceptable to the supplier.
Reduces the risk of errors: A clear specification reduces the risk of
errors in the sourcing process. If the specification is unclear or
incomplete, this can lead to errors in the procurement process, such as
selecting the wrong supplier or purchasing the wrong product or service.
By providing a detailed specification, the buyer can reduce the risk of
these errors occurring.
Improves supplier performance: A clear specification can improve
supplier performance by providing clear guidelines and expectations.
If the specification is well- defined, the supplier can focus on meeting the
requirements, which can result in higher quality and better performance.
This can help to ensure that the project is completed on time and
to a high standard, which can benefit both the buyer and the supplier.
38. Describe five objectives of public sector organizations
Policy development and implementation: One of the primary
objectives of public sector organizations is making the policies and
ensuring the compliance in the industry/sector.

Licensing and Authorization: another key objective of public sector

organizations is issuing the necessary licenses to operate under the
approved framework of the regulator and issue authorization certificates
to undertake the specific tasks/jobs.

Regulation and compliance monitoring and enforcement – are often

responsible for enforcing laws and regulations that promote public health
and safety, protect the environment, and ensure fair competition in the
marketplace. This might involve setting and enforcing standards for
products and services, continuously monitor and audit that the regulations
are being followed and take the necessary corrective actions in response
to any non-compliance.

Service delivery: another primary objective of public sector

organizations is to provide high-quality services to citizens. This might
include services such as healthcare, education, social services, public
transportation, and public safety.
Consumer protection and advisory: Public sector organizations also
have a responsibility to promote the Consumer protection- protecting the
rights of all parties specifically the consumers This might involve providing
the necessary knowledge/knowhow to the consumers about their rights.
Public Welfare: Public sector organizations also have a responsibility to
promote public welfare, this might involve providing financial support to
those in need, investing in infrastructure and public goods, and promoting
economic development and job creation.
CIPS L4M1 QUESTIONS AND ANSWERS

Market oversight and competition regulation- keeping up-to-date

market oversight ensuring healthy competition, this may involve
responding to any STEEPLED factor impact to the industry/sector
Fiscal responsibility: Public sector organizations also have a
responsibility to manage their budgets and resources effectively. This
might involve implementing cost-saving measures, optimizing
procurement processes to achieve cost savings, and ensuring that public
funds are used efficiently and transparently.
Public engagement and participation: Public sector organizations are
accountable to the citizens they serve, and as such, they have a
responsibility to engage with the public and to promote transparency and
accountability. This might involve soliciting feedback from citizens,
providing access to information and data, and fostering dialogue and
collaboration with stakeholders.
39. Explain FOUR ways in which regulation might impact on
public sector procurement
Compliance: Public sector organizations are subject to a range of
legal and regulatory requirements that govern procurement
processes. This might include regulations related to competition,
transparency, conflict of interest, and equal opportunities. Procurement
professionals must ensure that they comply with all relevant
regulations and can demonstrate their compliance throughout the
procurement process.
Contracting: Regulations can impact the way public sector organizations
engage with suppliers and manage contracts. For example, regulations
might specify the terms and conditions that must be included in
contracts, how contracts are awarded, and how suppliers are evaluated.
Procurement professionals must ensure that they follow all relevant
regulations when engaging with suppliers and managing contracts.
Social and environmental considerations: Public sector organizations
are increasingly expected to consider social and environmental
factors when making procurement decisions. This might include
considering the social and environmental impact of suppliers' operations,
promoting sustainability and reducing carbon footprint, and supporting
small and diverse businesses. Regulations might specify the requirements
and standards that suppliers must meet in these areas, and procurement
professionals must ensure that they comply with these regulations
when making procurement decisions.
Accountability and transparency: Regulations can impact the level of
accountability and transparency that public sector organizations are
expected to demonstrate in their procurement activities. This might
include regulations related to the publication of procurement data, the use
of open and competitive procurement processes, and the provision of
information to stakeholders. Procurement professionals must ensure
that they comply with these regulations and can demonstrate the
integrity and transparency of their procurement activities.
CIPS L4M1 QUESTIONS AND ANSWERS

40. Outline, using examples, FIVE elements of the total cost of

ownership of capital equipment. (10 marks)
Total cost of ownership (TCO) is a comprehensive approach to assessing
the cost of owning and operating capital equipment over its entire
lifecycle, including the purchase, operation, maintenance, and disposal of
the equipment. Here are five elements of the total cost of ownership of
capital equipment:

a) Pre-acquisition costs, such as research and tendering

b) Acquisition costs, such as the purchase price, the cost of finance if borrowing is necessary,
delivery and installation
c) Operating costs, for example labor and materials
d) Maintenance costs, such as replacement parts and servicing
e) Downtime costs, such as lost production
f) End of life costs, such as decommissioning and disposal

Acquisition costs: This includes the purchase price of the equipment, as

well as any associated fees, taxes, and delivery costs. For example, when
purchasing a new piece of manufacturing equipment, the acquisition costs
might include the purchase price, shipping costs, and installation
fees.
Operating costs: This includes the ongoing costs of operating and
maintaining the equipment over its useful life. This might include costs
such as energy consumption, repair and maintenance, and supplies
and spare parts. For example, the operating costs of a fleet of delivery
vehicles might include fuel costs, maintenance and repair expenses, and
insurance premiums.
Downtime costs: This includes the costs associated with any downtime
or lost productivity resulting from equipment breakdowns,
repairs, or maintenance. This might include costs such as lost sales,
missed deadlines, and decreased efficiency. For example, the
downtime costs of a printing press might include lost revenue due to
missed print deadlines, as well as the cost of repairs and replacement
parts.
Disposal costs: This includes the costs associated with disposing of the
equipment at the end of its useful life. This might include costs such as
recycling, refurbishment, or disposal fees. For example, the disposal
costs of a fleet of old vehicles might include the cost of scrapping or
recycling the vehicles, as well as any associated environmental fees.
Opportunity costs: This includes the potential benefits or opportunities
that are foregone as a result of investing in the capital equipment. This
might include the cost of alternative investments or the cost of lost
productivity or innovation. For example, the opportunity costs of investing
in outdated manufacturing equipment might include the loss of
competitive advantage due to decreased efficiency and productivity.
41. It is widely believed that it is important to attempt to reduce
costs and add value throughout the supply chain. Explain THREE
innovative strategies that might achieve such goals.
OR
CIPS L4M1 QUESTIONS AND ANSWERS

42. The main focus for procurement and supply is that value can
be added either by cutting costs or by securing operational
efficiency. Describe 6 methods through which value may be
achieved in procurement and supply using these approaches

I believe reducing cost and adding value shall be a paramount goal of

every procurement and supply chain professional. In my understanding to
respond to any business need for all procurement and supply chain
professional baseline thinking shall be “how to add the value and where to
reduce the cost?” Here are five innovative strategies that can help reduce
costs and add value throughout the supply chain:

Total cost of ownership (TCO)/ value chain mapping: TCO is a cost

analysis method that takes into account all of the costs associated
with owning and using a product or service over its entire life cycle. It
includes not just the purchase price but also factors such as maintenance,
repair, and disposal costs. By analyzing the TCO of different suppliers and
products, procurement professionals can identify the most cost-effective
options.
Strategic sourcing: This method involves a structured process of
analyzing the supply market and identifying opportunities to
reduce costs and improve value. The process involves developing a
sourcing strategy, identifying potential suppliers, negotiating contracts,
and managing supplier relationships to ensure ongoing value delivery.
Value engineering: This technique involves a collaborative process that
aims to improve the value of products, services, or processes by
examining their functions and identifying opportunities for cost savings or
improved performance. Value engineering can help identify ways to
reduce costs, improve quality, and increase efficiency in the supply
chain.
Circular supply chain management: Circular supply chain
management is a strategy that aims to reduce waste and environmental
impact while adding value. This strategy involves designing products
and processes that minimize waste and maximize reuse, recycling,
and refurbishment. For example, a company can design products
with reusable components or implement closed-loop supply chains that
enable the reuse of materials.
Supplier innovation programs: Supplier innovation programs involve
working closely with suppliers to identify and implement
innovative solutions that reduce costs and add value. This strategy can
involve sharing knowledge and expertise, conducting joint research and
development, and providing incentives for supplier innovation. For
example, a company can work with suppliers to develop new materials or
processes that reduce costs and improve quality.
Digital supply chain management: Digital supply chain management
involves the use of advanced technologies such as artificial
intelligence, the Internet of Things, and blockchain to improve visibility,
efficiency, and decision-making throughout the supply chain. By
leveraging these technologies, companies can optimize processes, reduce
waste, and improve quality. For example, a company can use real-time
data from IoT sensors to optimize routes, reduce fuel consumption, and
improve delivery times.
Lean supply chain management: Lean supply chain management is a
strategy that aims to eliminate waste and increase efficiency
CIPS L4M1 QUESTIONS AND ANSWERS

throughout the supply chain. By reducing waste and improving efficiency,

organizations can lower costs and improve the quality of their products
and services. This strategy involves streamlining processes, improving
quality control, and reducing lead times. For example, a company can
implement lean principles to reduce setup times, improve production flow,
and eliminate defects.
Collaborative supply chain management: Collaborative supply chain
management involves building strong relationships with suppliers and
customers and working together to improve efficiency, reduce
costs, and increase value. By working collaboratively with suppliers and
customers, organizations can gain greater visibility into their supply chain,
reduce waste, and improve quality. For example, a retailer can collaborate
with its suppliers to reduce lead times and improve forecasting accuracy,
which can help reduce inventory costs and improve customer satisfaction.
Overall, these innovative strategies can help organizations reduce costs
and add value throughout their supply chain, ultimately leading to
improved profitability and customer satisfaction.
43. Explain 5 advantages for an organization of following a
structured sourcing process.
Following a structured sourcing process offers several advantages for an
organization. Here are five advantages based on the CIPS sourcing
process:
Improved supplier selection: A structured sourcing process involves
developing clear criteria for selecting suppliers, which helps ensure that
the organization chooses the most appropriate supplier for its needs. This
can lead to better quality products or services, improved delivery times,
and reduced costs.
Increased transparency: A structured sourcing process provides clear
guidelines for decision-making and creates a transparent and auditable
record of the sourcing process. This can help to build trust with
stakeholders and demonstrate compliance with regulatory requirements.
Reduced risk: A structured sourcing process includes steps to assess and
mitigate risk, which can help to reduce the potential for contract disputes,
supply chain disruptions, and other issues that could negatively impact the
organization.
Improved cost control: A structured sourcing process can help to
identify cost-saving opportunities and reduce procurement costs through
competitive bidding and negotiation. This can help to improve the
organization's bottom line and provide a competitive advantage.
Enhanced stakeholder engagement: A structured sourcing process
involves engaging with stakeholders throughout the process, including
identifying their needs, communicating with them regularly, and involving
them in decision-making. This can help to build positive relationships with
stakeholders and create a sense of ownership and buy-in for the sourcing
process outcomes.

44. Compare FIVE characteristics of manufacturing sector

organizations with those of retail sector organizations. (25 marks)
Sure, here are ten characteristics that differentiate manufacturing sector
CIPS L4M1 QUESTIONS AND ANSWERS

organizations from retail sector organizations:

Primary activity: The primary activity of manufacturing sector
organizations is the production of tangible goods, while retail sector
organizations are focused on the sale of these goods to end
consumers.
Focus process: Manufacturing organizations typically have to focus a
more complex and capital-intensive production process involving
raw materials, machines, and production lines, while retail organizations
focus on the marketing, merchandising, and distribution of
finished products.
Inventory management: Manufacturing organizations typically have
higher inventory levels and longer inventory turnover cycles, since
they produce goods in batches and have to manage raw materials, work-
in-progress, and finished goods inventory. Retail organizations, on the
other hand, typically have lower inventory levels and faster
inventory turnover cycles, since they aim to keep inventory levels low
and focus on selling products as quickly as possible.
Supply chain management: Manufacturing organizations typically have
more complex and extended supply chains, involving multiple tiers of
suppliers and intermediaries, and require extensive coordination and
planning. Retail organizations typically have shorter and simpler supply
chains, involving direct relationships with suppliers and
distributors, and focus on efficient logistics and distribution.
Product customization: Manufacturing organizations often have the
ability to customize their products based on customer needs and
specifications, while retail organizations typically sell standardized
products.
Workforce skills: Manufacturing organizations require specialized
skills related to production processes, such as machine operation,
quality control, and logistics. Retail organizations, on the other hand,
require skills related to customer service, sales, and marketing.
Capital investment: Manufacturing organizations typically require
significant capital investment in equipment, facilities, and raw
materials, while retail organizations require less capital investment in
these areas.
Seasonal demand: manufacturing organizations have more consistent
demand throughout the year whereas retail organizations often
experience seasonal fluctuations in demand, especially in the
context of holiday shopping.
Profit margins: Manufacturing organizations typically have higher
profit margins due to economies of scale and the ability to command
higher prices for customized products, while retail organizations typically
have lower profit margins due to intense competition and the need to
keep prices low.
Globalization: Manufacturing organizations often have global supply
chains and international markets, while retail organizations typically have
more localized operations and focus on serving local or regional
customers.
CIPS L4M1 QUESTIONS AND ANSWERS

45. Explain the importance of each of the 'five rights of

procurement', outlining the added value each might achieve for
the procuring organization. (20 marks)
The five rights of procurement are a set of principles that guide the
procurement process and help ensure that goods and services are
acquired at the right price, quality, quantity, time, and from the right
source. Each of these rights is important for the procuring organization, as
they can provide added value in terms of cost savings, improved quality,
timely delivery, and better relationships with suppliers. Here is a more
detailed explanation of the importance of each of the five rights:
Right price: The right price refers to the cost of goods or services, which
should be competitive and offer value for money. Procuring goods or
services at the right price can help the organization save money and
improve its bottom line. This can also help the organization negotiate
better prices with suppliers and build stronger relationships.
CIPS L4M1 QUESTIONS AND ANSWERS

Right quality: The right quality refers to the level of quality that the
procuring organization requires for its goods or services. Procuring goods
or services of the right quality can help the organization achieve better
performance, reduce costs, and improve customer satisfaction. This can
also help the organization build a reputation for quality and reliability.
Right quantity: The right quantity refers to the amount of goods or
services that the procuring organization needs to acquire. Procuring the
right quantity can help the organization avoid overstocking or
understocking, reduce waste, and improve efficiency. This can also help
the organization plan for future demand and avoid disruptions in the
supply chain.
Right time: The right time refers to the timeframe in which goods or
services need to be acquired and delivered. Procuring goods or services at
the right time can help the organization meet deadlines, avoid delays, and
improve productivity. This can also help the organization respond quickly
to changes in demand and stay ahead of competitors.
Right place: The right place refers to the destination/origin from which
goods or services are acquired or delivered. Procuring goods or services
from the right place as well as delivered to the right place, can help the
organization ensure reliability, quality, and consistency. This can also help
the organization build better relationships with suppliers, reduce supply
chain risk, and improve overall performance.
In summary, each of the five rights of procurement is essential for the
procuring organization to achieve cost savings, improved quality, timely
delivery, and better relationships with suppliers. By following these
principles, the organization can optimize its procurement process and
achieve greater success in its operations.
46. Explain the activities that could be undertaken by an
organization to identify and appraise potential suppliers as part
of a sourcing process. (
Organizations rely on suppliers to provide the goods and services they
need to operate effectively. The process of identifying and appraising
potential suppliers is a critical aspect of sourcing, as it helps the
organization select the best suppliers to meet their needs. Here are some
activities that an organization could undertake to identify and appraise
potential suppliers:
Conduct market research: The organization should conduct market
research to identify potential suppliers in the market. This could include
searching online directories, industry associations, and trade publications,
as well as attending trade shows and networking events.
Develop selection criteria: The organization should develop a set of
selection criteria that reflects the organization's needs and requirements.
This could include factors such as price, quality, delivery time, payment
terms, and the supplier's track record.
Send out requests for information (RFI): The organization could send
out RFIs to potential suppliers to gather information about their
capabilities, experience, and
CIPS L4M1 QUESTIONS AND ANSWERS

references. This could include asking for information about their products
or services, their financial stability, and their quality control processes.
Conduct supplier audits: The organization could conduct supplier audits
to assess the supplier's ability to meet the organization's requirements.
This could include a site visit to assess the supplier's facilities and
equipment, as well as interviews with key personnel.
Analyze supplier proposals: The organization should analyze the
proposals received from potential suppliers to determine which one best
meets their needs. This could include a comparison of price, quality,
delivery time, and other factors.
Conduct negotiations: Once a preferred supplier has been identified,
the organization could conduct negotiations to finalize the terms of the
agreement. This could include negotiating price, delivery schedules,
payment terms, and other contractual terms.
Monitor supplier performance: After a supplier has been selected, the
organization should monitor their performance to ensure they are meeting
the organization's requirements. This could include regular performance
reviews, quality checks, and audits.
By undertaking these activities, the organization can identify and appraise
potential suppliers effectively, and select the supplier that best meets
their needs. This can help the organization achieve better quality, cost
savings, and improved supplier relationships.

47. Explain THREE activities that take place post contract award
Post-contract award activities refer to the activities that take place after a
contract has been awarded to a supplier. These activities are critical to
ensuring that the supplier meets the terms of the contract and that the
procuring organization receives the goods or services it needs. Here are
seven activities that take place post-contract award:
Contract management: Contract management involves the ongoing
management of the contract, including monitoring supplier performance,
ensuring that the supplier meets the terms of the contract, and resolving
any issues that arise. This involves establishing a communication process
with the supplier, tracking the supplier's performance against key
performance indicators (KPIs), and managing any changes to the contract
scope or terms.
Quality control: Quality control involves ensuring that the goods or
services delivered by the supplier meet the required quality standards.
This involves establishing quality control processes, monitoring the
supplier's quality performance, and resolving any quality issues that arise.
This may include conducting quality inspections, audits, and testing to
ensure that the goods or services meet the required specifications.
CIPS L4M1 QUESTIONS AND ANSWERS

Performance review: Performance review involves reviewing the

supplier's performance against the contract terms and KPIs to ensure that
they are meeting the organization's needs. This involves evaluating the
supplier's performance against agreed-upon metrics, analyzing
performance trends, and identifying areas for improvement. This may
involve conducting regular performance reviews, providing feedback to
the supplier, and identifying opportunities for continuous improvement.
Risk management: Risk management involves identifying and mitigating
risks associated with the contract and the supplier. This involves assessing
the risks associated with the supplier, the goods or services, and the
contract, and developing a risk management plan to mitigate those risks.
This may involve developing contingency plans, monitoring the supplier's
financial stability, and ensuring compliance with relevant laws and
regulations.
Payment processing: Payment processing involves managing the
payment process for the goods or services received from the supplier. This
involves verifying that the goods or services delivered meet the contract
requirements, processing invoices, and managing payments to the
supplier. This may involve reconciling invoices with purchase orders and
contracts, managing payment schedules, and ensuring compliance with
payment terms.
Dispute resolution: Dispute resolution involves resolving any disputes or
conflicts that arise between the procuring organization and the supplier.
This may involve mediation or arbitration, negotiating a settlement, or
taking legal action. This involves identifying the root cause of the dispute,
developing a resolution plan, and implementing a solution that meets the
needs of both parties.
Contract closeout: Contract closeout involves finalizing the contract at
the end of the term or when the goods or services have been delivered.
This involves verifying that all deliverables have been received and
accepted, reconciling final invoices and payments, and closing out the
contract. This may involve conducting a final performance review,
conducting an audit of the supplier's performance, and documenting the
final results and lessons learned.
In summary, post-contract award activities are critical to ensuring that the
procuring organization receives the goods or services it needs from the
supplier. Contract management, quality control, performance review, risk
management, payment processing, dispute resolution, and contract
closeout are key activities that take place post-contract award to ensure
that the supplier meets the terms of the contract and that the organization
receives the expected benefits from the contract.
48. Explain THREE advantages to an organization when
adopting a devolved procurement structure
A devolved procurement structure is a procurement management
approach in which the procurement function is decentralized to different
departments or business units within an organization. This approach
is designed to distribute procurement
CIPS L4M1 QUESTIONS AND ANSWERS

responsibilities across the organization and enable departments to

manage their own procurement needs, while still ensuring compliance with
procurement policies and procedures. Here are seven advantages to an
organization when adopting a devolved procurement structure:
Increased efficiency: Devolving procurement responsibilities to different
departments can improve efficiency by reducing the workload on the
centralized procurement team. With a devolved procurement structure,
departments are able to manage their own procurement needs, which can
free up procurement staff to focus on strategic procurement initiatives and
supplier relationship management.
Improved accountability: Devolved procurement structures can
promote accountability by empowering departments to take
ownership of their own procurement decisions. When departments are
responsible for their own procurement, they are more likely to take the
procurement process seriously and ensure that they are making
informed decisions that align with the organization's overall
procurement strategy.
Better alignment with business needs: Devolved procurement
structures enable departments to have greater control over their own
procurement needs, which can help to ensure that procurement decisions
are aligned with business objectives and requirements. This can lead
to better supplier selection and better outcomes for the organization.
Increased flexibility: Devolving procurement responsibilities can
increase flexibility by allowing departments to customize their
procurement approach to meet their specific needs. Departments are
able to tailor procurement processes to suit their own
requirements, which can help to reduce bureaucracy and streamline
procurement activities.
Improved supplier relationships: Devolved procurement structures can
improve supplier relationships by enabling departments to develop their
own relationships with suppliers. This can help to foster closer supplier
relationships and improve supplier performance, as departments are
more likely to be invested in the success of their supplier relationships.
Reduced procurement costs: Devolving procurement responsibilities
can help to reduce procurement costs by allowing departments to manage
their own procurement needs. This can help to reduce the workload on
the centralized procurement team, which can lead to cost savings for
the organization.
Increased innovation: Devolved procurement structures can encourage
innovation by giving departments more autonomy over their procurement
decisions. This can help to foster a culture of innovation and
creativity, as departments are able to experiment with new
procurement approaches and solutions that may not have been
possible under a more centralized procurement structure.
In summary, adopting a devolved procurement structure can offer a range
of advantages to an organization, including increased efficiency, improved
accountability, better alignment with business needs, increased flexibility,
improved supplier relationships, reduced procurement costs, and
increased innovation. However, a devolved procurement structure also
requires careful planning and management to ensure that it is
CIPS L4M1 QUESTIONS AND ANSWERS

implemented effectively and that procurement policies and procedures are

followed.

49. Describe FOUR benefits delivered to an organization by an

outsourced procurement function
An outsourced procurement function is a procurement management
approach in which an external procurement service provider
manages all or part of an organization's procurement activities.
Here are six benefits delivered to an organization by an outsourced
procurement function:
Expertise and experience: An outsourced procurement function can
bring expertise and experience in procurement to the organization. The
procurement service provider can offer a team of experienced
procurement professionals who have a deep understanding of
procurement best practices, market trends, and supplier relationships.
Cost savings: Outsourcing procurement can help to reduce procurement
costs by leveraging the procurement service provider's purchasing power
and expertise to negotiate better supplier contracts, reduce supplier risk,
and optimize procurement processes. This can help to drive down costs
across the organization.
Increased efficiency: An outsourced procurement function can help to
increase procurement efficiency by streamlining procurement processes
and reducing administrative burdens. This can free up internal resources
to focus on core business activities, while still ensuring that procurement
is managed effectively.
Risk management: An outsourced procurement function can help to
mitigate procurement risks by providing specialized risk management
expertise, tools, and processes. This can help to reduce the risk of supplier
default, product quality issues, and compliance failures.
Scalability and flexibility: An outsourced procurement function can
offer scalability and flexibility to the organization by providing
procurement services that can be tailored to meet the organization's
specific needs. This can help the organization to adapt to changing market
conditions, business needs, and growth opportunities.
Strategic value: Outsourcing procurement can help to deliver strategic
value to the organization by enabling the procurement function to focus
on strategic activities such as supplier relationship management, supplier
innovation, and sustainability initiatives.
This can help to drive business growth, improve supplier performance, and
enhance the organization's reputation.

50. Outline the impact of THREE objectives in the 'not for

profit' sector on procurement and supply chain activities.
Cost Reduction:
Not-for-profit organizations often have limited budgets and must
operate with a high degree of efficiency. In this regard, cost
reduction is a key objective for such organizations, as it allows them to
allocate more resources towards their social goals. This objective can have
CIPS L4M1 QUESTIONS AND ANSWERS

a significant impact on procurement and supply chain activities as it may

require organizations to seek out low-cost suppliers, negotiate favorable
terms, and explore alternative sourcing options. Furthermore, it may
require organizations to reduce waste and optimize their supply chain
processes to minimize costs.
Social Responsibility: Not-for-profit organizations are often motivated
by a desire to make a positive impact on society. As a result, social
responsibility is an important objective for such organizations, and it can
have a significant impact on their procurement and supply chain activities.
Organizations may prioritize ethical sourcing practices, such as purchasing
goods and services from suppliers that have fair labor practices, use
sustainable materials, or have environmentally friendly production
processes. Such practices can improve the organization's image, increase
public trust, and align with their mission.
Quality Assurance: Not-for-profit organizations must ensure that the
products and services they provide meet high quality standards.
This is important for maintaining the trust of donors, volunteers, and the
general public. Quality assurance can impact procurement and supply
chain activities in several ways. It may require organizations to work with
suppliers that have a proven track record of producing high-quality
products or services, or to develop internal quality control procedures to
ensure that goods and services meet their standards. Furthermore,
organizations may have to engage in continuous improvement processes
to ensure that their suppliers maintain high levels of quality over time.
Ethical Sourcing: Not-for-profit organizations often prioritize ethical
sourcing practices, such as purchasing from suppliers with fair labor
practices, using sustainable materials, or supporting local
communities. Ethical sourcing can impact procurement and supply chain
activities by requiring organizations to vet suppliers, establish ethical
standards, and track supplier compliance.
Innovation: Not-for-profit organizations may seek to innovate in their
procurement and supply chain activities to improve efficiency, reduce
costs, or enhance social impact. Innovation can impact procurement
and supply chain activities by requiring organizations to explore new
technologies, pilot new programs, and adapt to changing market
conditions.
51. Explain FIVE differences between
operational expenditure and capital
expenditure.
Here are five differences between operational expenditure (OPEX) and
capital expenditure (CAPEX):
Nature of expenses: OPEX refers to expenses related to the day-to-day
operations of a business, such as salaries, utilities, and office supplies.
CAPEX, on the other hand, refers to expenses related to acquiring or
upgrading long-term assets, such as machinery, equipment, or property.
Timing of expenses: OPEX expenses are incurred regularly and
frequently throughout the year, while CAPEX expenses are typically less
frequent and more significant, often occurring in larger, one-time
transactions.
Accounting treatment: OPEX expenses are typically recorded as
CIPS L4M1 QUESTIONS AND ANSWERS

operating expenses in the income statement and are fully deductible in

the year they are incurred. CAPEX expenses, however, are usually
recorded as assets on the balance sheet and are depreciated over their
useful life, reducing the expense recognized in each period.
Impact on financial statements: OPEX expenses have an immediate
impact on the profitability of a business and are reflected in the net
income on the income statement. CAPEX expenses, however, do not have
an immediate impact on profitability but rather impact the balance sheet
by increasing the value of assets.
Relationship to revenue: OPEX is typically linked to revenue, as it is
necessary to support the ongoing operations of the organization. CAPEX,
on the other hand, is typically linked to future revenue potential, as the
investment in assets is expected to generate returns over time.
Approval process: OPEX expenses are usually approved by the
department manager or the budget holder, whereas CAPEX expenses
require approval from senior management or the board of directors. This is
because CAPEX expenses are typically larger and have a longer-term
impact on the organization's financial health.
Strategic importance: OPEX expenses are typically viewed as necessary
for the day- to-day operations of a business, while CAPEX expenses are
often seen as investments in the long-term growth and success of the
business. As such, CAPEX decisions are
CIPS L4M1 QUESTIONS AND ANSWERS

usually subject to more rigorous analysis and scrutiny than OPEX

decisions, as they can have a significant impact on the organization's
future financial performance.Long term Short term

52. Outline THREE ways in which supplier selection may add

value in the sourcing process.
Supplier selection is a critical part of the sourcing process that can add
value to a business in various ways. Here are seven ways in which supplier
selection may add value:
Cost Savings:
Effective supplier selection can lead to cost savings through negotiation of
better pricing, delivery terms, and payment terms. By selecting a supplier
that offers competitive pricing, a business can reduce its overall sourcing
costs and increase profitability.
Improved Quality:
Selecting a supplier with a strong quality track record can improve the
quality of goods or services procured. This can help to reduce defects,
improve customer satisfaction, and reduce the need for costly rework or
returns.
Faster Delivery:
Choosing a supplier with shorter lead times and reliable delivery
performance can help to improve supply chain efficiency, reduce inventory
costs, and increase customer satisfaction.
Increased Innovation:
CIPS L4M1 QUESTIONS AND ANSWERS

Working with innovative suppliers can bring new products, technologies,

and ideas to a business, helping it to stay ahead of the competition and
improve its offering.
Improved Risk Management:
Supplier selection can help to manage risks associated with supply chain
disruptions, quality issues, and compliance concerns. By selecting
suppliers with strong risk management practices, a business can reduce
its exposure to potential risks.
Increased Sustainability:
Selecting suppliers that operate sustainably can help a business to
improve its own sustainability credentials. This can help to attract
environmentally-conscious customers, reduce waste, and lower costs
associated with environmental impacts.
Improved Relationships:
Effective supplier selection can lead to improved relationships with
suppliers, based on mutual trust, respect, and communication. This can
help to build long-term partnerships that bring benefits to both parties,
such as preferential pricing, increased collaboration, and shared
innovation.
In conclusion, supplier selection plays a critical role in the sourcing
process and can add value to a business in various ways, including cost
savings, improved quality, faster delivery, increased innovation, improved
risk management, increased sustainability, and improved relationships.

Describe FOUR uses of electronic systems in the sourcing process.

Electronic systems have become increasingly important in the sourcing
process, helping to streamline procurement activities, improve visibility,
and enhance collaboration with suppliers. Here are five uses of electronic
systems in the sourcing process:
e-Sourcing:

e-Sourcing refers to the use of electronic systems to manage the sourcing

process, including supplier identification, request for information (RFI),
request for proposal (RFP), and request for quotation (RFQ). e-Sourcing
platforms help to automate the bidding process, increase transparency,
and reduce cycle times.
e-Procurement:
e-Procurement refers to the use of electronic systems to automate
procurement processes, including purchase requisition, purchase order,
and invoice processing. e- Procurement systems help to reduce manual
errors, improve order accuracy, and increase efficiency by automating the
procurement process from end-to-end.
Supplier Relationship Management:
Supplier Relationship Management (SRM) refers to the use of electronic
systems to manage supplier relationships and monitor supplier
performance. SRM systems help
CIPS L4M1 QUESTIONS AND ANSWERS

to track supplier performance, automate supplier scorecards, and improve

supplier collaboration by providing a platform for communication and
feedback.
Contract Management:
Contract Management refers to the use of electronic systems to manage
contracts, including contract authoring, negotiation, and approval.
Contract Management systems help to streamline the contract process,
reduce contract cycle times, and increase visibility into contract
performance and compliance.
Spend Analysis:
Spend Analysis refers to the use of electronic systems to analyze spend
data, including purchase history, supplier performance, and procurement
trends. Spend Analysis systems help to identify opportunities for cost
savings, monitor compliance, and provide insights for procurement
decision-making.
Contract Management:
Contract Management refers to the use of electronic systems to manage
contracts, including contract authoring, negotiation, and approval.
Contract Management systems help to streamline the contract process,
reduce contract cycle times, and increase visibility into contract
performance and compliance.
In conclusion, electronic systems play a critical role in the sourcing
process, providing numerous benefits including automation, increased
efficiency, improved collaboration, enhanced visibility, and cost savings.
By utilizing electronic systems, businesses can improve their procurement
processes and gain a competitive advantage in the marketplace.
53. Explain FIVE ways in which IT based inventory management
systems can be used by the procurement and supply chain
function.
IT-based inventory management systems offer numerous benefits for
procurement and supply chain management. Here are six ways in which
they can be used:
Accurate inventory tracking: Inventory management systems enable
procurement and supply chain managers to track inventory levels in real-
time, providing accurate data on stock levels, locations, and movements.
This helps to ensure that inventory levels are sufficient to meet demand,
and that stock is not over- or under-stocked.
Improved demand forecasting: By analyzing inventory data,
procurement and supply chain managers can use inventory management
systems to forecast demand more accurately. This enables them to plan
for inventory replenishment in advance, reducing the risk of stockouts and
ensuring that inventory levels remain optimized.

Better supplier management: Inventory management systems can also

be used to manage supplier relationships more effectively. By analyzing
supplier performance
CIPS L4M1 QUESTIONS AND ANSWERS

data, procurement and supply chain managers can identify areas for
improvement and negotiate better pricing and terms with suppliers.
Streamlined procurement processes: IT-based inventory management
systems can automate many of the manual tasks associated with
procurement, such as purchase order creation, supplier communications,
and inventory tracking. This reduces the time and resources required for
these tasks, allowing procurement and supply chain managers to focus on
more strategic activities.
Improved order accuracy: With IT-based inventory management
systems, procurement and supply chain managers can ensure that orders
are accurate and complete. This reduces the risk of errors and ensures
that the right products are delivered to the right location at the right time.
Reduced costs: Finally, IT-based inventory management systems can
help to reduce costs associated with inventory management. By
optimizing inventory levels, improving demand forecasting, and
streamlining procurement processes, procurement and supply chain
managers can reduce inventory carrying costs, minimize stockouts, and
negotiate better pricing and terms with suppliers.
It helps Manage stock level.
Overall, IT-based inventory management systems offer many benefits for
procurement and supply chain management, including improved accuracy,
increased efficiency, and reduced costs. They are an essential tool for
modern procurement and supply chain professionals.
54. Define the term 'Conflict of Interest' and explain why
governance in this area is particularly important for procurement.
A conflict of interest refers to a situation in which a person or organization
is involved in multiple interests, one of which could potentially
compromise the individual's or organization's judgment or ability to act
impartially. It can occur when someone's personal, professional, or
financial interests compete with the interests of the organization they
represent, or when they have a relationship with another party that could
influence their decision-making.
In procurement, conflicts of interest can be particularly problematic as
they can lead to bias, unethical behavior, and ultimately damage the
reputation of the organization. Procurement professionals are responsible
for making decisions that are in the best interests of the organization, and
any personal or outside interests that may influence these decisions must
be disclosed and managed appropriately.
Governance in this area is critical because it helps to ensure that conflicts
of interest are identified, disclosed, and managed effectively. Procurement
policies and procedures should include guidelines for identifying and
managing conflicts of interest, such as requiring staff to disclose any
potential conflicts and prohibiting staff from accepting gifts or favors from
suppliers.
CIPS L4M1 QUESTIONS AND ANSWERS

Effective governance in this area can help to build trust with suppliers,
stakeholders, and the broader community by demonstrating that the
procurement process is fair, transparent, and ethical. It also helps to
minimize the risk of legal or reputational damage, as well as ensuring that
the organization achieves value for money and meets its obligations under
relevant laws and regulations.
In summary, governance around conflicts of interest is particularly
important for procurement because it helps to ensure that procurement
decisions are made impartially, with the best interests of the organization
in mind. It also helps to build trust with suppliers and stakeholders,
minimize risks, and ensure compliance with relevant laws and regulations.
55. Compare a private sector organization with a public sector
organization in the following THREE areas:
(i)Legal and regulatory environments
(ii) Organizational objectives
(iii) Importance of corporate social responsibility

(i)Legal and regulatory environments: Private sector organizations

are subject to a range of legal and regulatory environments that are
typically more focused on protecting the interests of shareholders and
investors. These may include laws related to intellectual property,
competition, employment, and taxation. Public sector organizations, on
the other hand, are subject to a different set of legal and regulatory
environments that are designed to ensure transparency, accountability,
and fairness in the use of public funds. This may include laws related to
public procurement, budgeting, and reporting.
(ii) Organisational objectives: Private sector organizations are typically
driven by profit and growth objectives, with a focus on maximizing
shareholder value. They may prioritize short-term gains over long-term
sustainability and may be more likely to take risks in pursuit of financial
returns. Public sector organizations, by contrast, are focused on delivering
public goods and services to citizens. Their objectives are often aligned
with broader social, economic, and environmental goals, such as reducing
poverty, promoting public health, and protecting the environment. They
may be more risk- averse and focused on long-term sustainability rather
than short-term gains.
(iii) Importance of corporate social responsibility: Private sector
organizations are increasingly recognizing the importance of corporate
social responsibility (CSR), which refers to the idea that businesses have a
responsibility to consider the social, environmental, and economic impacts
of their operations. This can include initiatives related to sustainability,
ethical business practices, and community engagement. Public sector
organizations also have a responsibility to consider their social and
environmental impacts, but this is typically integrated into their core
mission rather than viewed as a separate initiative. Public sector
organizations may also have more
CIPS L4M1 QUESTIONS AND ANSWERS

formal mechanisms for engaging with stakeholders and ensuring

transparency and accountability in their operations.
56. Describe FIVE ways in which the charitable status of a third
sector organization impacts on its procurement function.
The charitable status of a third sector organization can have several
impacts on its procurement function, as explained by the Chartered
Institute of Procurement and Supply (CIPS). Here are five ways:
Compliance with regulations: Charitable organizations must comply
with specific regulations governing their operations and activities. This
includes complying with procurement regulations, such as public
procurement rules or grant funding requirements. Procurement
professionals in charitable organizations must ensure that their
procurement processes and decisions are compliant with these
regulations.
Ethical considerations: Charitable organizations have a responsibility to
act ethically and in the best interests of their beneficiaries. Procurement
professionals in charitable organizations must consider ethical factors
when making procurement decisions, such as the environmental impact of
products and services, fair labor practices, and the impact on local
communities.
Funding sources: Charitable organizations rely on funding from a variety
of sources, including government grants, private donations, and corporate
sponsorships. Procurement professionals in charitable organizations must
consider the requirements and restrictions associated with these funding
sources when making procurement decisions, such as compliance with
specific reporting or auditing requirements.
Value for money: Charitable organizations must ensure that they obtain
value for money from their procurement activities, given the limited
resources available to them. Procurement professionals in charitable
organizations must consider factors such as the total cost of ownership,
the lifecycle of assets, and the availability of alternative solutions when
making procurement decisions.
Collaboration: Charitable organizations may work with other
organizations or stakeholders to deliver their services or programs.
Procurement professionals in charitable organizations must collaborate
with these partners to ensure that their procurement activities align with
the goals and objectives of the partnership, and that they deliver the
required outcomes for the beneficiaries. This may involve joint
procurement activities, shared contracts, or other forms of collaboration.
57. Outline FIVE ways in which improving the quality of products
can add value for an organization.
Improving the quality of products can add value for an organization in a
number of ways. Here are five examples:
CIPS L4M1 QUESTIONS AND ANSWERS

Enhanced reputation and brand image: When an organization is

known for producing high-quality products, it can enhance its reputation
and brand image. Customers are more likely to trust and respect a brand
that consistently delivers high- quality products, which can lead to
increased sales and brand loyalty.
Increased customer satisfaction: High-quality products are more likely
to meet or exceed customer expectations, which can lead to increased
customer satisfaction. Satisfied customers are more likely to become
repeat customers and to recommend the brand to others, which can help
to increase sales and brand awareness.
Improved efficiency and productivity: Producing high-quality products
can lead to improved efficiency and productivity in the manufacturing
process. This is because high-quality products are less likely to be
defective or require rework, which can save time and resources. Improved
efficiency and productivity can help to reduce costs and increase
profitability.
Competitive advantage: Producing high-quality products can provide an
organization with a competitive advantage in the marketplace. When an
organization is known for producing high-quality products, it can
differentiate itself from competitors and attract customers who are willing
to pay a premium for quality.
Reduced risk and liability: High-quality products are less likely to fail or
cause harm to customers, which can help to reduce the organization's risk
and liability. This is particularly important in industries such as healthcare
and aerospace, where product failure can have serious consequences.
Producing high-quality products can help to ensure that the organization is
meeting safety and quality standards, which can reduce the risk of legal
action or reputational damage.
58. Outline FIVE stages of the sourcing process.
Identification of Need: In this stage, the organization identifies a need
for goods, services, or works. This could arise from a variety of sources,
such as new projects, changes in business requirements, or replacement
of existing assets. The need is defined in terms of the required quantity,
quality, and delivery timeframe.
Creating contract terms: The second stage involves creating the terms
and conditions of the contract based on the identified need and
negotiations with the supplier. This may involve legal review of the terms
and conditions to ensure compliance with relevant laws and regulations.
Supplier Selection: In this stage, the organization selects the preferred
supplier or suppliers based on a range of criteria, such as price, quality,
delivery, sustainability, and ethical considerations. This may involve
issuing a tender, conducting negotiations, or selecting from pre-approved
supplier lists.
Contracting: In this stage, the organization negotiates and finalizes the
terms and conditions of the contract with the selected supplier. This
includes defining the scope
CIPS L4M1 QUESTIONS AND ANSWERS

of work, specifying the pricing and payment terms, and setting the
performance standards and reporting requirements.
Contract Management: In this stage, the organization manages the
ongoing relationship with the supplier to ensure that the contracted goods,
services, or works are delivered as per the agreed terms and conditions.
This involves monitoring performance, managing risks and issues,
resolving disputes, and ensuring compliance with relevant regulations and
policies. The contract may be reviewed and updated periodically to reflect
changing requirements or circumstances.
59. Describe THREE benefits for an organization of following a
structured sourcing process.
Increased cost savings: A structured sourcing process can help an
organization to achieve significant cost savings by ensuring that the best
value-for-money option is selected. By following a structured approach,
the organization can identify cost-saving opportunities, negotiate better
prices and terms with suppliers, and reduce the risk of overpaying for
goods or services.
Improved supplier relationships: A structured sourcing process can
help an organization to build and maintain better relationships with
suppliers. By engaging with suppliers in a transparent and professional
manner, the organization can establish trust and collaboration, negotiate
better contracts, and improve supplier performance.
Better risk management: A structured sourcing process can help an
organization to better manage supplier risks. By conducting due diligence
on suppliers, assessing supplier capabilities and performance, and
monitoring supplier compliance, the organization can reduce the risk of
supply chain disruptions, reputational damage, and legal liabilities.
Increased efficiency: A structured sourcing process can improve the
efficiency of purchasing processes by providing a clear framework for
decision-making, reducing the time and resources required to manage
purchasing activities, and ensuring that procurement procedures are
standardized and consistent across the organization.
Improved compliance: A structured sourcing process can help an
organization to ensure compliance with relevant laws, regulations, and
ethical standards. By following a consistent and transparent approach, the
organization can reduce the risk of legal and reputational damage, and
demonstrate its commitment to ethical and sustainable procurement
practices.
Enhanced governance: A structured sourcing process can help to
improve governance by providing greater transparency, accountability,
and control over purchasing activities. By establishing clear policies and
procedures, implementing effective monitoring and reporting mechanisms,
and ensuring that purchasing activities are aligned with organizational
objectives, the organization can demonstrate good governance and
provide value for money.
CIPS L4M1 QUESTIONS AND ANSWERS

Explain FOUR advantages for an organization of adopting a

centralized procurement structure.
Increased cost savings: A centralized procurement structure can help
an organization to achieve significant cost savings through economies of
scale and standardization. By consolidating purchasing activities across
the organization, a centralized procurement function can negotiate better
prices, terms and conditions, and reduce duplicate or unnecessary
purchases.
Improved supplier relationships: A centralized procurement function
can help to build and maintain better relationships with suppliers. By
consolidating purchasing activities and reducing the number of suppliers,
the organization can develop long- term relationships with key suppliers,
negotiate better contracts, and improve supplier performance.
Better risk management: A centralized procurement function can help
an organization to better manage supplier risks. By implementing robust
procurement processes, conducting due diligence on suppliers, and
monitoring supplier performance, the organization can reduce the risk of
supply chain disruptions, reputational damage, and legal liabilities.
Increased efficiency: A centralized procurement function can improve
the efficiency of purchasing processes by standardizing procurement
procedures, implementing automation and e-procurement tools, and
reducing the time and resources required to manage purchasing activities.
This can free up resources for more strategic activities and improve
overall organizational performance.
Improved compliance: A centralized procurement function can help an
organization to ensure compliance with relevant laws, regulations, and
ethical standards. By implementing consistent procurement processes and
procedures, and monitoring supplier compliance, the organization can
reduce the risk of legal and reputational damage.
Enhanced governance: A centralized procurement function can help to
improve governance by providing greater transparency, accountability,
and control over purchasing activities. By establishing clear policies and
procedures, and implementing effective monitoring and reporting
mechanisms, the organization can ensure that purchasing activities are
aligned with organizational objectives and provide value for money.
60. Explain TWO ways in which 'procurement' differs from 'purchasing'.
CIPS defines procurement as a broader term that encompasses the entire
process of acquiring goods, services, and works, from identifying the need
to contract management. Purchasing, on the other hand, refers specifically
to the transactional aspect of acquiring goods or services.
CIPS L4M1 QUESTIONS AND ANSWERS

Scope: Procurement has a broader scope than purchasing. It includes

activities such as developing procurement strategies, managing supplier
relationships, and conducting market research. Purchasing, on the other
hand, focuses primarily on the transactional aspect of procuring goods and
services.

Objectives: The objectives of procurement and purchasing differ.

Procurement focuses on achieving value for money by identifying the best
suppliers, negotiating favorable contracts, and managing supplier
performance. Purchasing focuses primarily on acquiring goods and
services at the lowest possible cost.

Relationship management: Procurement involves managing supplier

relationships over the long-term, whereas purchasing is a one-off
transactional activity. Procurement professionals work to build
relationships with suppliers and collaborate with them to achieve mutual
benefits. Purchasing professionals focus primarily on negotiating the best
price for a one-time purchase.

Strategy: Procurement requires a strategic approach, whereas

purchasing is more tactical. Procurement professionals work to develop
procurement strategies that align with organizational objectives and
manage the procurement process from start to finish. Purchasing
professionals focus on the execution of specific purchase orders.

Complexity: Procurement is typically more complex than purchasing.

Procurement professionals must navigate a range of complex factors,
including supplier relationships, legal requirements, and ethical
considerations. Purchasing, on the other hand, involves the relatively
simple task of buying goods or services at the best possible price.

61. Explain, with examples, the differences between direct and

indirect procurement Direct and indirect procurement are two different
types of procurement that an organization can undertake. CIPS defines
indirect procurement as the procurement of goods, services, and works
that are not directly involved in the production process. Direct
procurement, on the other hand, involves the procurement of goods,
services, and works that are directly used in the production process.

Goods and services: Direct procurement involves the purchase of goods

and services that are directly used in the production process. Examples of
goods that are directly procured include raw materials, components, and
finished goods. Examples of services that are directly procured include
logistics, transport, and maintenance. Indirect procurement involves the
purchase of goods and services that are not directly involved in the
production process, such as office supplies, IT services, and marketing
services.

Suppliers: Direct procurement typically involves fewer suppliers, as the

goods and services are typically specialized and sourced from a limited
number of suppliers.
CIPS L4M1 QUESTIONS AND ANSWERS

Indirect procurement involves a larger number of suppliers, as the goods

and services are more generic and can be sourced from a larger pool of
suppliers.

Contracting: Direct procurement typically involves longer-term contracts,

as the goods and services are critical to the production process and
require stability. Indirect procurement typically involves shorter-term
contracts, as the goods and services are less critical and can be more
easily substituted.

Procurement process: Direct procurement typically involves a more

complex procurement process, as the goods and services require a higher
level of specification and quality assurance. Indirect procurement typically
involves a simpler procurement process, as the goods and services are
more generic and require less specification.

Cost structure: Direct procurement typically represents a larger

proportion of the organization's cost structure, as the goods and services
are directly involved in the production process. Indirect procurement
typically represents a smaller proportion of the organization's cost
structure, but can still be significant in terms of overall spend.

62. Explain, in procurement terms, THREE distinctive features of services.

Intangibility: Services are intangible, which means they cannot be seen,

touched, or stored like physical goods. This can make it difficult to define
and measure the quality of services, and it requires a different approach
to procurement than procuring physical goods.

Customization: Services are often highly customized to meet the specific

needs of the customer. This customization can make it difficult to specify
and procure services. Procurement professionals need to work closely with
stakeholders to understand their needs and develop specifications that
accurately reflect those needs.

Heterogeneity: Services are often variable in quality and performance

due to their intangible nature and the involvement of people in the
delivery process. This means that quality assurance and supplier
management are critical in service procurement to ensure that suppliers
are able to consistently deliver the required level of service.

Perishability: Services are often perishable, which means they cannot be

stored or inventoried. This means that service procurement requires a
more just-in-time approach than procuring physical goods, and it requires
careful planning and scheduling to ensure that services are available when
needed.

Inseparability: Services are often inseparable from the person providing

them, which means that the quality of the service is dependent on the
skills, knowledge, and experience of the service provider. This means that
selecting the right service provider is critical to successful service
procurement.
CIPS L4M1 QUESTIONS AND ANSWERS

Supplier relationships: Services are often provided by a small number

of specialized suppliers who have significant expertise in a particular area.
This means that building strong supplier relationships is critical to
successful service procurement. Procurement professionals need to work
closely with suppliers to understand their capabilities and build strong
relationships based on trust, communication, and collaboration.
Additionally, services often involve ongoing relationships with suppliers, so
managing those relationships over the long-term is critical to achieving
success.

63. Analyze the supply market is one of the key pre-contract

stages in the sourcing process based on CIPS

Analyzing the supply market is one of the key pre-contract stages in the
sourcing process based on CIPS. This stage involves researching and
understanding the market in which the organization operates, identifying
potential suppliers, and assessing their capabilities, strengths, and
weaknesses.

There are several steps involved in analyzing the supply market, including:

Identifying the supply market: This involves understanding the key

players in the market and identifying potential suppliers that could provide
the required goods or services.

Understanding the market dynamics: This involves analyzing the

current market conditions, including trends, demand, and supply, as well
as factors that could impact the market, such as economic, political, and
social factors.

Assessing supplier capabilities: This involves evaluating potential

suppliers' capabilities and assessing their strengths and weaknesses. This
includes evaluating factors such as the supplier's financial stability,
experience, quality management systems, and environmental and social
sustainability.

Conducting a competitive analysis: This involves comparing potential

suppliers' offerings and assessing their relative strengths and weaknesses.
This includes evaluating factors such as price, quality, delivery times, and
after-sales support.

Developing a supplier shortlist: Based on the analysis conducted in

the previous steps, a shortlist of potential suppliers is developed.

Engaging with suppliers: This involves contacting potential suppliers,

sharing the organization's requirements, and requesting information and
proposals from them.

By analyzing the supply market, procurement professionals can identify

potential suppliers that are best suited to the organization's
requirements and negotiate
CIPS L4M1 QUESTIONS AND ANSWERS

favorable terms and conditions. This stage also provides valuable insights
into the market, which can be used to develop effective procurement
strategies that deliver value for money and support the organization's
goals and objectives.

64. Analyzing the supply market is one of the key pre-contract

stages in the sourcing process. Outline FIVE possible sources of
information for finding potential suppliers at this stage of the
sourcing process.
When analyzing the supply market as part of the pre-contract stage of the
sourcing process, there are several potential sources of information that
procurement professionals can use to identify potential suppliers. Here are
five possible sources:

Trade associations and industry groups: These organizations often

have directories or databases of member companies that can be a
valuable source of information for finding potential suppliers. Additionally,
they may offer industry-specific information and insights that can inform
the market analysis.

Supplier databases: There are several commercial supplier databases

available that can provide information on potential suppliers. These
databases often include details such as company size, location,
capabilities, and certifications, and may provide ratings and reviews from
other customers.

Government procurement databases: Depending on the industry and

location, there may be government procurement databases that list
qualified suppliers that have been pre-approved to do business with the
government. These databases can provide a useful starting point for
finding potential suppliers that meet certain criteria.

Online search engines: A simple online search can yield a wealth of

information on potential suppliers. This can include company websites,
customer reviews, and news articles. Additionally, social media platforms
can be used to gather information on potential suppliers, including their
reputation and customer satisfaction.

Industry events and conferences: Attending industry events and

conferences can provide valuable networking opportunities and insights
into the latest trends and developments in the industry. These events can
also be a good way to meet potential suppliers and learn more about their
capabilities and offerings.

65. Explain 5 reasons for using a clear specification when

defining needs as part of the sourcing process based on CIPS.
Using a clear specification when defining needs as part of the sourcing
process is essential for several reasons. Here are five:

Ensures consistency: A clear specification ensures consistency in the

procurement process. When requirements are clearly defined, it ensures
that suppliers are quoting
CIPS L4M1 QUESTIONS AND ANSWERS

for the same products or services. This makes it easier to compare quotes
and select the supplier that best meets the organization's needs.

Helps to control costs: A clear specification helps to control costs by

providing suppliers with a clear understanding of what is required. This
can reduce the likelihood of over-specification or under-specification,
which can lead to unnecessary costs or rework.

Facilitates competition: A clear specification facilitates competition by

making it easier for multiple suppliers to provide quotes for the same
products or services. This creates a competitive environment, which can
drive down costs and improve quality.

Reduces the risk of disputes: A clear specification reduces the risk of

disputes between the organization and the supplier. When requirements
are clearly defined, there is less room for interpretation, and both parties
are clear on what is expected. This can help to prevent misunderstandings
and disputes that could delay the project or result in additional costs.

Improves supplier performance: A clear specification can help to

improve supplier performance by providing suppliers with a clear
understanding of what is required. This can help to ensure that suppliers
deliver products or services that meet the organization's needs, which can
lead to improved performance and customer satisfaction. Additionally, a
clear specification can help to ensure that suppliers understand the quality
standards that are expected, which can help to improve the quality of the
products or services provided.

66. A procurement consortium is a group of separate

organizations that combine together for the purpose of procuring
goods and services. Describe 5 disadvantages, for an
organization, of operating within a procurement consortium.
Loss of control: When an organization operates within a procurement
consortium, it has less control over the procurement process. Decisions
regarding the selection of suppliers and the terms of the contracts are
often made collectively by the consortium, which means that an
organization may have to compromise on its specific requirements.

Limited supplier choice: Procurement consortiums often have pre-

approved suppliers or contracts, which can limit an organization's choice
of suppliers. This can result in an organization being unable to select the
supplier that best meets its specific needs.

Reduced bargaining power: In a procurement consortium, an

organization may have less bargaining power than it would if it were
operating alone. This is because the consortium is negotiating on behalf of
multiple organizations, which means that suppliers may not be as willing
to offer competitive pricing.
CIPS L4M1 QUESTIONS AND ANSWERS

Sharing of sensitive information: In order to operate within a procurement

consortium, an organization may have to share sensitive information, such
as its procurement requirements or budgets, with other members of the
consortium. This can be a concern for organizations that are not
comfortable sharing this type of information.

Additional costs: There may be additional costs associated with

operating within a procurement consortium. These could include
membership fees, administrative costs, or costs associated with complying
with the consortium's procurement policies and procedures. These costs
may offset any potential savings that could be achieved through the
collective buying power of the consortium.

67. Describe TWO advantages for an organisation in having

an outsourced procurement function. (10 marks)

An outsourced procurement function can offer several advantages for an

organization. Here are five:

Expertise: Outsourcing the procurement function can provide an

organization with access to procurement experts who have in-depth
knowledge of the market and can help the organization to obtain better
value for money. The outsourcing company may have specialist skills and
tools that can help an organization to achieve savings that it would not be
able to achieve on its own.

Cost savings: An outsourced procurement function can provide cost

savings for an organization. This is because the outsourcing company can
leverage its buying power and negotiate better deals with suppliers on
behalf of the organization. The outsourcing company can also provide the
organization with more efficient processes, which can result in lower
procurement costs.

Focus: Outsourcing the procurement function can allow an organization to

focus on its core business activities. By entrusting the procurement
function to an external provider, the organization can free up its internal
resources to focus on its core competencies.

Flexibility: An outsourced procurement function can offer an organization

greater flexibility. This is because the outsourcing company can quickly
adapt to changing market conditions and adjust the procurement strategy
accordingly. The outsourcing company can also provide the organization
with access to a wider range of suppliers and can help the organization to
enter new markets.

Reduced risk: Outsourcing the procurement function can help to reduce

the risk for an organization. This is because the outsourcing company is
responsible for ensuring that the procurement processes are compliant
with relevant laws and regulations. The
CIPS L4M1 QUESTIONS AND ANSWERS

outsourcing company can also provide the organization with risk

management strategies, which can help to mitigate the impact of any
unforeseen events that may occur during the procurement process.

68. Explain the differences between a private sector company

and a public sector organization in the following areas:
(i) Ownership and control
(ii) Sources of finance.

(i)Ownership and control:

The primary difference between private sector companies and public
sector organizations is the ownership and control. Private sector
companies are owned and controlled by individuals or groups of
individuals who have invested in the company. In contrast, public sector
organizations are owned and controlled by the government or the state.

Private sector companies are established for the purpose of generating

profit for their owners or shareholders. The control of the company is
vested in the hands of the shareholders who elect a board of directors to
manage the company on their behalf. The board of directors is responsible
for making strategic decisions for the company and for ensuring that the
company is run in the best interests of the shareholders.

Public sector organizations, on the other hand, are established for the
purpose of providing public goods and services to the citizens of the
country. The control of the organization is vested in the government,
which appoints a board of directors or a management team to oversee the
operations of the organization. The board of directors or management
team is responsible for ensuring that the organization operates efficiently
and effectively in the public interest.

(ii) Sources of finance:

Private sector companies raise finance from private sources such as
investors, banks, and financial institutions. The primary objective of
private sector companies is to generate profits for their shareholders, and
therefore, they are more likely to seek financing that offers the best
returns on investment.

Public sector organizations, on the other hand, rely on public financing

to support their operations. The primary objective of public sector
organizations is to provide services to the public, and therefore, they are
more likely to seek financing that is socially responsible and offers a lower
cost of borrowing. Public sector organizations can raise finance through
government grants, tax revenues, and borrowing from public financial
institutions.

In summary, private sector companies are owned and controlled by

private individuals or groups who seek to generate profits for their
investors, while public sector
CIPS L4M1 QUESTIONS AND ANSWERS

organizations are owned and controlled by the government and seek to

provide public goods and services to the citizens of the country. Private
sector companies raise finance from private sources, while public sector
organizations rely on public financing to support their operations.

69. Describe FIVE issues that may affect procurement in the

agricultural sector Seasonality: Procurement in the agricultural
sector may be influenced by the availability of crops or livestock,
which can vary according to seasonal cycles. Procurement managers
need to carefully plan and forecast their needs, taking into account the
timing and availability of agricultural products.

Weather conditions: Weather conditions can have a significant impact

on agricultural production, affecting the quality and quantity of crops and
livestock. Procurement managers need to be aware of weather patterns
and trends, and take appropriate steps to mitigate the risks associated
with adverse weather conditions.

Sustainability: Agriculture is often subject to scrutiny in terms of its

environmental impact, and sustainability considerations can play an
important role in procurement decisions. Procurement managers may
need to consider factors such as the use of pesticides and fertilizers, water
usage, and animal welfare when making sourcing decisions.

Quality control: Agricultural products can be subject to strict quality

control requirements, both in terms of food safety and product quality.
Procurement managers need to work closely with suppliers to ensure that
the products they are sourcing meet the necessary standards and
regulations.

Supply chain complexity: The agricultural supply chain can be complex,

involving multiple suppliers and intermediaries. Procurement managers
need to be able to manage this complexity effectively, ensuring that they
have visibility and control over their supply chain and that they are able to
effectively manage risk and mitigate potential disruptions.

70. Outline FIVE circumstances where 'buying for stock' would be

an appropriate procurement policy

Forecasted demand: If an organisation has reliable forecasts for the

demand of a particular item, it may be appropriate to buy in bulk and hold
stock to ensure availability when required. For example, a retailer may
choose to buy a large quantity of a popular product to ensure it is always
in stock.

Seasonal products: Some products are only available during certain

times of the year. In such cases, buying for stock may be the only way to
ensure availability outside of
CIPS L4M1 QUESTIONS AND ANSWERS

the season. For example, a garden centre may buy large quantities of
Christmas trees to sell during the holiday season.

Price fluctuations: If the price of a particular product is expected to rise

in the future, buying for stock at the current lower price may be a cost-
effective strategy. This is particularly relevant for commodity products
that are subject to price volatility.

Long lead times: If a product has a long lead time, buying for stock may
be the only way to ensure timely availability. For example, if a
manufacturer requires a specific component for its production process and
the lead time for delivery is several months, buying for stock may be
necessary to ensure production continuity.

Supplier instability: If there are concerns about supplier stability or

reliability, buying for stock may be a way to mitigate the risks associated
with supply chain disruptions. By holding stock, the organisation can
ensure continuity of supply even if the supplier experiences difficulties.

71. Outline THREE functions which could be included in a

Purchase to Pay (P2P) system.
A Purchase to Pay (P2P) system is a process that encompasses the entire
procurement process, from requisitioning to payment. The following are
five functions that could be included in a P2P system based on the CIPS:

Requisitioning: This function involves the creation of purchase

requisitions by authorised users within an organisation. These users can
create purchase requisitions for the goods and services they require,
specifying the quantity, price, and delivery date.

Sourcing and procurement: Once the requisitions are approved, the

P2P system can identify potential suppliers and issue requests for
quotation (RFQs) or requests for proposal (RFPs). The system can evaluate
the responses and select the best supplier based on criteria such as cost,
quality, and delivery.

Purchase order processing: The P2P system can generate purchase

orders based on the approved requisitions and supplier selection. The
purchase orders can be automatically sent to the chosen supplier, and the
system can track their delivery status.

Invoice processing: Once the goods or services are received, the

supplier will submit an invoice for payment. The P2P system can
automatically match the invoice to the corresponding purchase order and
receipt, validate the pricing, and route the invoice for approval.

Payment processing: After the invoice is approved, the P2P system can
initiate the payment process. The system can generate payment
instructions to the organisation's
CIPS L4M1 QUESTIONS AND ANSWERS

finance department or directly to the supplier's bank account, ensuring

that the payment is made on time and accurately reflects the agreed
terms. The P2P system can also generate reports to track spending,
monitor supplier performance, and identify areas for cost-saving
opportunities.

72. Explain FOUR potential disadvantages of using electronic

systems in the sourcing process
Technical failures: Electronic systems can be susceptible to technical
failures such as server crashes or software bugs that can disrupt the
sourcing process and cause delays.

Security risks: Electronic systems are vulnerable to security breaches

such as hacking or cyber-attacks. These risks can expose sensitive
information, such as financial data or intellectual property, to unauthorized
access and misuse.

Lack of personal touch: Electronic systems may lack the personal touch
that comes with face-to-face interactions. This can lead to
misunderstandings or miscommunications between buyers and suppliers,
which can negatively impact the sourcing process.

Complexity: Electronic systems can be complex and difficult to use,

especially for those who are not tech-savvy. This can result in errors or
inefficiencies that can delay the sourcing process.

Cost: Implementing and maintaining electronic systems can be

expensive. There may be costs associated with purchasing or licensing the
software, as well as ongoing costs for maintenance, upgrades, and
support.

Resistance to change: Some stakeholders, such as employees or

suppliers, may be resistant to using electronic systems, particularly if they
are used to traditional manual processes. This resistance can create
delays or even sabotage the implementation of the system, leading to
disruptions in the sourcing process.

73. Explain the impact of regulation on a third sector

organization’s procurement function.
Regulation can have a significant impact on a third sector organization's
procurement function. Here are six potential impacts:

Compliance: Regulations can impose requirements that must be followed

during the procurement process. Failure to comply with these regulations
can result in legal and financial penalties. Therefore, third sector
organizations must ensure that their procurement function is in
compliance with relevant regulations.
CIPS L4M1 QUESTIONS AND ANSWERS

Time and Cost: Complying with regulations can increase the time and
cost of procurement. For example, certain regulations may require
additional documentation or steps in the procurement process, which can
add time and cost.

Limited Supplier Pool: Some regulations can restrict the number of

suppliers that can be used in procurement. This can limit the competition
and result in higher prices or lower quality products/services.

Reputation: Failing to comply with regulations can damage the

reputation of a third sector organization. For example, if an organization is
found to have engaged in unethical procurement practices, it can
negatively impact its reputation with stakeholders, including donors and
beneficiaries.

Transparency: Regulations can promote transparency in procurement,

which can be beneficial for third sector organizations. By following
regulations that require disclosure of procurement information,
organizations can demonstrate their commitment to accountability and
transparency.

Fairness: Regulations can promote fairness in procurement by requiring

organizations to use objective and transparent criteria when evaluating
suppliers. This can help ensure that the procurement process is fair to all
suppliers and that the organization selects the supplier that best meets its
needs.

74. Explain FIVE key areas of guidance for procurement

professionals within the CIPS Code of Conduct

The CIPS Code of Conduct provides guidance for procurement

professionals on ethical and professional behavior. The key areas of
guidance within the code of conduct are:

Integrity: Procurement professionals are expected to act with honesty,

fairness, and transparency in all dealings. They must avoid conflicts of
interest and ensure that all decisions are based on objective criteria.

Confidentiality: Procurement professionals must protect confidential

information and ensure that it is not disclosed to unauthorized persons.
They must also maintain the confidentiality of supplier information.

Professionalism: Procurement professionals are expected to maintain

high standards of professionalism and competence in their work. They
must keep up-to-date with developments in procurement and supply chain
management and seek to improve their knowledge and skills.

Respect for people and the environment: Procurement professionals

must respect the rights and dignity of individuals and ensure that their
actions do not harm the
CIPS L4M1 QUESTIONS AND ANSWERS

environment. They must also ensure that suppliers comply with ethical
and environmental standards.

Legal compliance: Procurement professionals must comply with all

relevant laws and regulations, including those relating to procurement,
competition, and data protection. They must also ensure that suppliers
comply with relevant laws and regulations.

Overall, the CIPS Code of Conduct provides a framework for ethical and
professional behavior for procurement professionals, ensuring that they
act with integrity, maintain confidentiality, act professionally, respect
people and the environment, and comply with relevant laws and
regulations.

75. Discuss 6 ways in which the objective of profitability in

a private sector organization might impact on its procurement
activities.

The objective of profitability in a private sector organization can

significantly impact its procurement activities in several ways, some of
which are as follows:

Cost Reduction: Profitability is achieved by keeping costs low while

increasing revenues. Procurement activities can be leveraged to achieve
cost savings in the purchase of goods and services, resulting in lower
expenses and increased profitability. This could involve negotiating lower
prices with suppliers, seeking alternative suppliers with better pricing, or
reducing waste and inefficiencies in the procurement process.

Supplier Relationships: Procurement activities can have a significant

impact on supplier relationships. Maintaining positive relationships with
suppliers can result in improved pricing, timely deliveries, and high-quality
goods and services. Private sector organizations may consider
implementing supplier relationship management (SRM) programs to
establish and maintain positive relationships with suppliers.

Supply Chain Risk Management: Private sector organizations may face

supply chain risks such as supply disruptions, quality issues, or
reputational damage. Procurement activities can be used to mitigate these
risks by selecting suppliers with strong risk management practices,
establishing contingency plans, and monitoring suppliers for compliance
with regulatory and ethical standards.

Innovation: Procurement activities can be used to identify and source

innovative products and services that can help private sector
organizations differentiate themselves from their competitors and achieve
higher profitability. Procurement professionals can work with suppliers to
develop new products or services that meet the organization's unique
needs or address gaps in the market.

Total Cost of Ownership (TCO): Procurement activities can help private

sector organizations evaluate the total cost of ownership of goods and
services beyond just
CIPS L4M1 QUESTIONS AND ANSWERS

the initial purchase price. This includes the costs associated with
maintenance, repair, disposal, and other factors that impact the total cost
of ownership over the product or service's lifecycle. By considering TCO in
procurement decision-making, organizations can make more informed
purchasing decisions that result in long-term cost savings and increased
profitability.

Ethical and Sustainability Considerations: Private sector

organizations may need to consider ethical and sustainability factors in
their procurement activities to avoid reputational damage and legal
implications. This could involve conducting due diligence on suppliers to
ensure they meet ethical and environmental standards, sourcing
sustainable products, or implementing responsible procurement policies.
These considerations can impact the cost of goods and services, but can
also enhance the organization's reputation and profitability in the long
term.

76. Explain the activities that could be undertaken by an

organization to identify and appraise potential suppliers as part
of a sourcing process.

To identify and appraise potential suppliers as part of a sourcing process,

an organization can undertake the following activities based on CIPS:

Market research: The organization can conduct market research to

identify potential suppliers that can meet its needs. This can be done
through online research, trade shows, industry publications, and
networking with other organizations.

Pre-qualification: The organization can ask potential suppliers to

complete a pre- qualification questionnaire to assess their capabilities,
experience, and financial stability. This can help to filter out unsuitable
suppliers and ensure that the organization only considers suppliers that
meet its requirements.
CIPS L4M1 QUESTIONS AND ANSWERS

Supplier audits: The organization can conduct supplier audits to assess

the quality and reliability of potential suppliers. This can involve site visits
to assess the supplier's facilities, equipment, processes, and quality
control systems.

Reference checks: The organization can contact the references provided

by potential suppliers to verify their claims and assess their performance.
This can include checking the supplier's track record, customer
satisfaction, and compliance with regulations.

Negotiation: The organization can negotiate with potential suppliers to

obtain the best possible terms and conditions. This can involve negotiating
on price, delivery times, payment terms, and other factors that affect the
overall value of the deal.

Contract management: The organization can establish a contract

management process to ensure that the supplier delivers as agreed and
that any issues are resolved in a timely manner. This can involve
monitoring supplier performance, conducting regular reviews, and taking
appropriate action when necessary.

77. Explain THREE activities that take place post contract award.

After contract award, there are several activities that take place in the
post-contract stage of procurement. Here are five of them based on CIPS:

Contract management: This involves ensuring that the terms of the

contract are being met by the supplier. The procurement team needs to
monitor the supplier's performance, resolve any issues that may arise, and
ensure that the supplier is meeting the agreed-upon quality, delivery, and
cost requirements.

Performance monitoring: This involves keeping track of the supplier's

performance against the key performance indicators (KPIs) that were
established during the contract negotiation process. This can include
measuring the supplier's delivery performance, quality, and
responsiveness, and reporting this information back to the relevant
stakeholders.

Relationship management: Building a good relationship with the

supplier is crucial in the post-contract stage. It can involve setting up
regular meetings with the supplier, conducting site visits, and other forms
of engagement that help to build a strong working relationship.

Risk management: It's important to keep an eye on potential risks that

could affect the supply chain, such as supplier insolvency or changes in
market conditions. Procurement professionals need to have a contingency
plan in place to mitigate any risks that may arise.
CIPS L4M1 QUESTIONS AND ANSWERS

Continuous improvement: Even after the contract has been awarded,

there is still room for improvement. Procurement professionals should
conduct regular reviews of the contract to identify areas where
improvements can be made. This can involve looking for opportunities to
streamline processes, reduce costs, or improve quality, among other
things.

78. Identify FIVE potential barriers to achieving good

procurement governance.

Lack of awareness or understanding: One of the most significant

barriers to achieving good procurement governance is a lack of
awareness or understanding of the importance of procurement
governance. This may be due to a lack of training or education among
procurement professionals or senior management.

Poor communication: Communication breakdowns can occur between

different departments or levels of the organization, leading to a lack of
coordination and understanding of procurement governance policies and
procedures.

Resistance to change: Some staff members may be resistant to change,

particularly if new procurement policies and procedures require additional
effort or change existing processes.

Insufficient resources: A lack of resources, including budget, staff, and

technology, can hinder an organization's ability to implement and
maintain effective procurement governance practices.

Inadequate monitoring and evaluation: Monitoring and evaluation are

essential components of effective procurement governance. However, if
an organization does not have adequate systems in place to monitor and
evaluate procurement processes, it may be difficult to identify and
address issues.

Corruption and unethical behavior: Corruption and unethical behavior

can undermine the effectiveness of procurement governance policies and
procedures. Without appropriate checks and balances, there is a risk of
fraud, favoritism, or other illegal or unethical practices.

79. Explain what is meant by the term 'devolved procurement' in

relation to procurement structures.
'Devolved procurement' refers to a procurement structure in which
procurement responsibility is decentralized, and individual departments or
units within an organization are given the autonomy to conduct their own
procurement activities. In this structure, procurement decisions are made
at a local level rather than being centralized at the organizational level.

Devolved procurement structures allow for greater flexibility and

responsiveness in procurement activities, as decision-making is closer to
the end-users of the goods or services being procured. However, it can
also lead to fragmentation, lack of standardization, and reduced leverage
in negotiating with suppliers. Effective coordination, communication, and
CIPS L4M1 QUESTIONS AND ANSWERS

oversight mechanisms must be put in place to ensure that devolved

procurement activities align with organizational goals and best practices.
CIPS L4M1 QUESTIONS AND ANSWERS

80. Outline FIVE disadvantages to an organization of a

devolved procurement function

Lack of control: Devolving procurement can lead to a loss of central

control over purchasing activities, which can result in inconsistent
procurement practices across the organization. This can make it difficult to
maintain a cohesive procurement strategy and can create opportunities
for non-compliance and inefficiencies.

Duplication of effort: Devolving procurement can lead to multiple

departments or units within an organization independently procuring the
same goods or services, which can result in duplicate effort and
unnecessary costs. It can also create inconsistencies in supplier selection
and contract terms.

Reduced bargaining power: When procurement responsibilities are

devolved, suppliers may have more bargaining power because they can
leverage their relationships with individual departments or units. This can
result in higher prices, less favorable contract terms, and reduced overall
value for the organization.

Lack of expertise: Departments or units that are responsible for

procurement may not have the same level of expertise as a centralized
procurement function. This can result in poor supplier selection,
inadequate contract terms, and missed opportunities to achieve cost
savings or other benefits.

Inefficiencies: Devolving procurement can lead to inefficiencies in the

procurement process, such as delays in decision-making, fragmented
information, and a lack of coordination between departments or units. This
can result in increased costs, missed opportunities, and reduced overall
effectiveness of the procurement function.

81. Identify FIVE stages of a generic sourcing process

(procurement process), outlining the activity at each of these
stages.

82. Describe FIVE ways in which following a structured

sourcing (procurement) process can add value to an organisation.

Following a structured sourcing process can add value to an organisation

in various ways, including:

Improved Supplier Selection: By following a structured sourcing

process, an organisation can ensure that it selects the most appropriate
supplier for the goods or services it requires. This can lead to better
quality products, more reliable delivery, and improved customer
satisfaction.
CIPS L4M1 QUESTIONS AND ANSWERS

Reduced Costs: A structured sourcing process can help identify

opportunities to reduce costs through supplier consolidation, negotiation
of better prices and payment terms, and reduction in unnecessary
expenses.

Risk Management: A structured sourcing process can help identify and

mitigate risks associated with the procurement process, such as supply
chain disruption, quality issues, and financial instability of suppliers.

Improved Contract Terms: A structured sourcing process can help to

negotiate better contract terms that are more favorable to the
organisation, reducing risk and increasing value.

Increased Efficiency: Following a structured sourcing process can help to

streamline the procurement process, reducing the time and resources
required to complete procurement activities. This can improve efficiency
and reduce administrative costs.

83. Explain the interests of FIVE connected or external

stakeholders that a procurement function might need to consider.
Customers: Customers are a critical stakeholder group, as they are the
end-users of the products or services procured by the organization. A
procurement function needs to ensure that the needs and expectations of
customers are met by procuring high- quality products or services at a
reasonable cost.

Suppliers: Suppliers are a key stakeholder group, as they are the

providers of the products or services being procured. A procurement
function needs to ensure that suppliers are treated fairly and that the
procurement process is transparent, efficient, and effective.

Shareholders: Shareholders are a critical stakeholder group, as they own

the organization and are interested in its financial performance. A
procurement function needs to ensure that the procurement process is
cost-effective and that procurement decisions are aligned with the
organization's overall strategy.

Employees: Employees are a key stakeholder group, as they may be

involved in the procurement process or may be affected by procurement
decisions. A procurement function needs to ensure that the procurement
process is fair and transparent and that employees are treated ethically
and with respect.

Regulators: Regulators are an important external stakeholder group, as

they may have legal or regulatory authority over the procurement
function. A procurement function needs to ensure that it complies with all
relevant laws, regulations, and standards, and that it maintains
appropriate records and documentation to demonstrate compliance.
CIPS L4M1 QUESTIONS AND ANSWERS

84. Describe FIVE sequential stages of a typical tendering process

The typical tendering process involves several sequential stages that are
designed to ensure a fair and transparent procurement process. These
stages are:

a) Define business needs and develop specification: The first stage

involves identifying the need for the procurement of goods or services.
This could be due to the expiry of a contract, a new requirement, or a
change in business strategy. Being able to understand and define the
business need is critical to ensuing the satisfaction.

b) Market analysis and make or buy decision: Once the need is

identified, the next stage involves conducting market research to
identify potential suppliers who can meet the requirements (or to
research the best means to meet the needs). This involves
reviewing the market gathering information on the products or services
required, economic situation, currency fluctuations, supply and
demand, the supplier landscape, and potential risks.

At this stage must also consider “will making or buying be the most
cost-effective solution – can use required control vs capacity
matric/analysis tool”

c) Develop the strategy and plan: at this stage develop a strategy or

plan. This involves which type of suppliers to approach? evaluating the
suppliers competition, whether an ITT or RFQ be mor suitable to fulfill
this need- it may depend on the specific need or compliance
requirement of sector (public sector more stringent/ private sector
more flexible).

d) Pre procurement market testing: once the need has been

understood, market has been reviewed, strategy decided upon, the
next stage is to conduct market tests – considering macroeconomic
factors (STEEPLED) to establish how best to develop the specification?
Whether the time is right to act upon? Product life cycle (seek
feedback from stakeholder to identify where a product is in the it’s life-
cycle)/seasonal trends may also be considered, to ensure the correct
quantity is source.

e) Develop documentation and detailed specification: the next

stage is to develop and prepare the relevant documentations to send
out to potential suppliers, documents may include
• Description and specification (conformance/performance),
design details
• Quantity
• Deliver details
• Service level agreement (SLAs/KPIs)
• T&Cs
• Responsibility matrix
f) Supplier selection to participate in tender: this can be considered
an optional step depending on the decision about ITT or RFQ.
Procurement professional may undertake site visits, consider
PQQs/RFIs. will include the requirements, evaluation criteria (Carter’s
10Cs a useful tool), terms and conditions, and any other relevant
CIPS L4M1 QUESTIONS AND ANSWERS

information to shortlist the supplier to be invited to bid or submit the

proposal.
g) Issue tender documetns (ITT/RFQ): The ITT stage involves issuing
a formal invitation to the shortlisted suppliers to submit a detailed
proposal. The ITT will include the requirements, evaluation criteria,
terms and conditions, and any other relevant information. RFQ is a less
formal process usually for routine items.

h) Bid and tender Evaluation and validation: The evaluation stage

involves reviewing the proposals received from the suppliers against
the evaluation criteria set out in the ITT. The evaluation may involve a
combination of qualitative and quantitative analysis, site visits,
interviews, and reference checks. Where as RFQ is a less formal
process and decision are made faster.

i) Contract Award and implementation : The final stage involves

awarding the contract to the successful supplier(s) and notifying the
unsuccessful suppliers of the outcome. The award stage involves
negotiating the contract terms and conditions, and agreeing on a
timeline for delivery of the goods or services.

85. Explain how a purchaser in the public sector complies with

the regulatory requirement for: (i)competitive supply (ii)
accountability

(i) Competitive supply: In the public sector, competitive supply is

ensured by following a transparent tendering process. The
purchaser must advertise the requirement to the potential
suppliers through a public procurement portal or other means. This
will ensure that all interested suppliers have an equal opportunity to bid
for the contract. The purchaser should also ensure that the evaluation
process is fair, transparent and objective, and that all bidders are
assessed against the same criteria. The selection of the successful bidder
should be based on the most economically advantageous tender or the
lowest price, as specified in the tender documents.

(ii) Accountability: Public sector purchasers must comply with

regulations that ensure transparency, accountability and ethical
behavior. They must demonstrate that they have obtained value for
money and acted in the best interests of the taxpayer. Purchasers
must follow a clear procurement process that documents all steps taken,
including tendering, supplier selection, contract award, and monitoring
and review of supplier performance. They should also maintain a clear
audit trail that can be examined by external auditors. Additionally, public
sector purchasers are accountable to the public, and must therefore
ensure that they are transparent and responsive to public scrutiny.

86. Outline why supply chain management (SCM) may be

unattractive for some organizations
Supply chain management (SCM) is a strategic approach to managing the
flow of goods, services, and information from suppliers to customers.
Although SCM offers many benefits, it may be unattractive for some
organizations due to the following reasons:
CIPS L4M1 QUESTIONS AND ANSWERS

High costs: Implementing an effective supply chain management system

requires a significant investment in technology, infrastructure, and staff.
This can be a significant burden for organizations with limited resources.

Complexity: Managing a supply chain involves dealing with multiple

stakeholders, including suppliers, distributors, and customers. This
complexity can be a challenge for organizations that lack the necessary
expertise and resources.

Dependency on suppliers: Organizations that rely on a few suppliers for

critical inputs or services may be vulnerable to supply chain disruptions,
such as natural disasters, political instability, or changes in regulations.

Resistance to change: Implementing a supply chain management

system may require significant changes in organizational culture,
processes, and workflows. This can be a challenge for organizations that
are resistant to change.

Legal and regulatory requirements: Organizations may need to

comply with various legal and regulatory requirements, such as labor laws,
environmental regulations, and import/export regulations, which can
increase the complexity and cost of managing a supply chain.

87. Describe FIVE ways in which the charitable status of a third

sector organization impacts on its procurement function based on
CIPS

The charitable status of a third sector organization can have several

impacts on its procurement function, including:

Regulatory requirements: As a charitable organization, there may be

specific regulations and legal requirements that the organization needs to
adhere to. These regulations can impact the procurement function by
requiring transparency in procurement processes and ensuring that the
organization obtains the best value for money.

Limited resources: Many third sector organizations operate with limited

financial and personnel resources. This can make it challenging to develop
and implement robust procurement processes and to ensure that
procurement activities are aligned with the organization's overall mission
and objectives.

Ethical considerations: Charitable organizations may need to consider

ethical considerations when making procurement decisions. For example,
they may need to ensure that suppliers adhere to certain environmental
or ethical standards or avoid working with suppliers who have poor ethical
records.

Public perception: Charitable organizations operate in the public eye,

and their actions can have a significant impact on public perception and
donor support. Procurement decisions that are seen as unethical or
wasteful can damage the organization's reputation and impact its ability to
attract donations and support.

Donor requirements: Many charitable organizations rely on funding

CIPS L4M1 QUESTIONS AND ANSWERS

from donors to support their activities. Donors may have specific

requirements around how their funding is used, including requirements for
procurement processes and supplier selection. Charitable organizations
may need to ensure that their procurement practices align with donor
requirements to maintain funding and support.

88. Key areas for the procurement professionals for the CIPs code of
conduct
The CIPS (Chartered Institute of Procurement and Supply) Code of Conduct
outlines the key areas that procurement professionals should focus on to
maintain ethical and professional conduct. Here are the key areas:
Professionalism and Integrity
Procurement professionals should act with integrity, honesty, and
impartiality in all dealings, and comply with relevant laws and regulations.
They should avoid conflicts of interest and ensure that their decisions are
based on objective criteria.
Respect for People and the Environment
Procurement professionals should respect human rights and ensure that
suppliers adhere to international labor standards. They should also
promote sustainability and environmental responsibility by encouraging
the use of sustainable materials and energy-efficient practices.
Transparency and Fairness
Procurement professionals should be transparent in their dealings and
provide all necessary information to stakeholders to make informed
decisions. They should maintain accurate records and ensure that
procurement processes are fair and equitable.
Governance and Risk Management
Procurement professionals should have robust governance structures and
risk management practices in place to ensure that procurement decisions
are made in accordance with best practices and minimize the risk of fraud
or corruption.

Procurement professionals should engage in continuous professional

development to stay up to date with the latest industry trends and best
practices. They should also seek to improve their knowledge and skills to
enhance their ability to deliver value to their organizations. By focusing on
these key areas, procurement professionals can maintain high ethical and
professional standards, build trust with stakeholders, and contribute to the
success of their organizations.