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CIPS Scope and Influence of Procurement and Supply Sample Questions (Q37-Q42):

NEW QUESTION # 37
Bob is a procurement manager at ABC Ltd. He has been asked to ensure all future purchases achieve
'value for money' for the organisation. What is meant by 'value for money'? (5 points). Describe 4 techniques that Bob could use to achieve this (20 points)

Answer:

Explanation:
See the solution in Explanation part below.
Explanation:
1) A definition of Value for Money: ensuring a purchase is cost effective. This may be that the purchase achieves the 5 Rights of Procurement or that the purchase achieves the 4Es: Economy, Efficiency, Effectiveness and Equity. - this is only worth 5 points, so don't spend too long on this
2) 4 techniques Bob can use to achieve VFM: this is the bulk of your essay. Each of the 4 will be worth 5 points, so remember to give a thorough Explanation: and example. Pick 4 from the list below: complete a value analysis to eliminate non-essential features, minimise variety/ consolidate demand, avoid over specification, pro-active sourcing, whole life costing methodologies, eliminate / reduce inventory, use electronic systems, international sourcing, sustainability / environmental policies, currency/ exchange rate considerations, negotiating good payment terms, packaging, warrantees.
Example Essay:
"Value for money" (VFM) is a concept that refers to obtaining the best possible return on investment or benefits relative to the cost incurred. It involves assessing whether the goods, services, or activities provided offer an optimal balance between their cost and the quality, benefits, or outcomes they deliver.
Value for money is not solely about choosing the cheapest option; instead, it considers the overall efficiency, effectiveness, and long-term value derived from an expenditure. For Bob, the Procurement Manager at ABC Ltd there are four key ways that he can achieve this for all future purchases.
Value Engineering
This is looking at the components of a product and evaluating the value of each component individually. You can then eliminate any components that do not add value to the end product. To do this Bob would choose a product to review and determine whether any parts of this can be omitted (thus saving the company money) or could be replaced by components that are of a higher quality at the same price (thus providing added value to the customer). For example, Bob could complete a Value Engineering exercise on the new mobile phone prototype ABC plan to release next year. His findings may discover a way to provide a higher quality camera at no additional cost or that some components don't add value and can be eliminated.
Consolidate demand
Bob can achieve value for money by consolidating demand at ABC ltd. This would mean rather than each individual person/ department ordering what they want when they need it, Bob creates a centralised process for ordering items in bulk for the departments to share. For example, if each department require stationary to be ordered, Bob can consolidate this demand and create one big order each quarter. This will likely result in cost savings for ABC as suppliers often offer discounts for large orders. Moreover, consolidating demand will allow for saving in time (one person does the task once, rather than lots of people doing the same task and duplicating work).
International sourcing
Bob may find there is value for money in changing suppliers and looking at international sourcing.
Often other countries outside of the UK can offer the same products at a lower cost. An example of this is manufactured goods from China. By looking at international supply chains, Bob may be able to make cost-savings for ABC. He should be sure that when using this technique there is no compromise on quality.
Whole Life Costing methodology
This is a technique Bob can use for procuring capital expenditure items for ABC. This involves looking at the costs of the item throughout its lifecycle and not just the initial purchase price. For example, if Bob needs to buy a new delivery truck he should consider not only the price of the truck, but also the costs of insurance for the truck, how expensive it is to buy replacement parts such as tyres and the cost of disposing of the truck once it reaches the end of its life. By considering these factors Bob will ensure that he buys the truck that represents the best value for money long term.
In conclusion Bob should ensure he uses these four techniques for all items he and his team procures in the future. This will ensure ABC Ltd are always achieving value for money, and thus remain competitive in the marketplace.
Tutor Notes
- This case study is really short, and the ones you'll receive in the exam are often longer and give you more guidance on what they're expecting you to write. With case study questions, you have to make your entire answer about Bob. So don't bring in examples from your own experience, rather, focus on giving examples for Bob.
- A good rule of thumb for case study questions is make sure you reference the case study once per paragraph.
- Value for Money is a really broad topic and you can pretty much argue anything that procurement does is helping to achieve value for money. There's a large table of stuff that's considered VFM on p.38 but that table isn't exhaustive. So feel free to come up with your own ideas for this type of essay.
Some additional tidbits of information on VFM:
- The 'academic' definition of Value for Money is 'the optimum combination of whole life cost and the quality necessary to meet the customer's requirement'
- Value for Money is an important strategic objective for most organisations but particularly in the public sector. This is because the public sector is financed by public money (taxes), so they must demonstrate that the organisation is using this money wisely. This might be an interesting fact to put into an essay on VFM.
- Value can often be hard to quantify, particularly in the service industry. E.g. in customer service it can be difficult to quantify the value of having knowledgeable and polite employees delivering the service.

NEW QUESTION # 38
In the supplier selection part of the Procurement Cycle, what criteria can a Procurement Manager use to ensure they award to the best supplier? (25 points)

Answer:

Explanation:
See the solution in Explanation part below.
Explanation:
How to approach this question:
- This is quite an open question and there are many different things you could mention. One way to approach it would be to use Carter's 10 Cs- discuss a couple of these. OR just give a couple of criteria in different paragraphs. Some ideas include: Supplier financial status, Reputation / References, Quality, Availability, CSR Policies / Ethics / Environmental considerations, Accreditations, Added Value. This list is not exhaustive.
- If you're going for Carter's 10 Cs you could name a couple of these: competency, consistency, capability, control, cost, cash, clean, communication, culture, commitment
- I don't think either approach is better or worse. Choose the criteria you know the most about and write about those.
- The question doesn't tell you how many criteria to name, so you have to make a judgement call here. I would aim for 5-6. But if you can only remember 4 that's fine. The main thing they're looking for is that you explain for each one 1) what it is 2) how procurement can check 3) why procurement would look at that criteria 4) an example. If you do too many you risk not going into enough detail on each. It's a balance. 5 is always a good number to aim for if the question doesn't state.
Example Essay
In the procurement cycle, the supplier selection phase is a critical juncture that demands consideration.
Procurement Managers shoulder the responsibility of identifying and awarding contracts to suppliers who not only meet immediate needs, but contribute to the long-term success of the organization. This essay explores various criteria a Procurement Manager can employ to ensure the selection of the best supplier: financial stability, reputation, quality, availability, CSR policies, and added value.
Financial stability is a foundational criterion in supplier selection. Assessing a supplier's financial status involves a multifaceted evaluation, with liquidity and gearing ratio taking center stage. The acid test, comparing short-term assets to liabilities, offers insights into a supplier's ability to settle debts promptly, with a ratio exceeding 1 indicating financial health. Meanwhile, the gearing ratio, reflecting the proportion of capital funded by loans,aids in gauging financial risk, with a ratio below 50% considered low-risk. Relying on published Profit and Loss statements and income statements, along with financial credit checks from platforms like Dun and Bradstreet, empowers Procurement Managers to make informed decisions. This financial scrutiny is imperative to avoid entering contracts with suppliers facing imminent financial struggles, safeguarding against potential disruptions to the supply chain.
Reputation and references are another pivotal criterion. Seeking references from previous contracts allows Procurement Managers to gauge a supplier's track record in successfully delivering on similar commitments.
Independent reviews and informal market inquiries supplement this information, providing a holistic understanding of a supplier's performance. However, caution is advised in overreliance on past performance, as variables like personnel changes or contract scale differences may impact outcomes. Recognizing that past shortcomings may have been addressed internally further emphasizes the need for a balanced approach to reference evaluation.
Thirdly, Quality. Beyond the product itself, considerations extend to the supplier's technological capabilities, manufacturing processes, and relevant accreditations such as ISO 9001. Physical visits to supplier sites may be warranted, especially for products like raw materials where samples can be requested. Adhering to recognized safety standards and assessing factors like fire retardancy ensures that the quality of manufactured goods aligns with established benchmarks.
Next, Availability is another important criteria to consider. Procurement Managers must evaluate a supplier's capacity and capability to meet specific requirements. Inquiries about existing contracts and flexibility in response to demand fluctuations provide insights into a supplier's commitment and responsiveness. Assessing the supplier's workload and the significance of the buyer in their client portfolio helps determine the level of attention and service the buyer can expect. A buyer may wish to avoid working for a supplier who is already stretched very thinly with other contracts.
Corporate Social Responsibility (CSR) policies and ethical considerations have gained prominence in supplier selection. Beyond legal compliance, Procurement Managers may scrutinize a supplier's history for convictions or negative press related to corruption, bribery, or fraud. The presence of a Modern Slavery Policy and Environmental Policy, along with relevant accreditations like ISO14001 or Fair Trade certification, attests to a supplier's commitment to ethical and sustainable practices. Procurement would likely seek to appoint a supplier who's CSR vision aligns with their own company's.
Lastly, added value is an important criteria to consider. This is particularly so for Public Sector Organizations governed by the Social Value Act. In addition to meeting contractual requirements, suppliers may offer knowledge sharing, training, improved processes, or contribute to social value by employing local community members or providing apprenticeships. This criterion aligns procurement decisions with broader organizational goals, enhancing the overall impact of supplier relationships and benefitting the local community.
In conclusion, a careful combination of financial scrutiny, reputation assessment, quality evaluation, availability considerations, CSR policies, and added value analysis forms the bedrock of effective supplier selection in the procurement cycle. Procurement Managers, armed with a holistic understanding of these criteria, should seek not only to fulfil immediate needs, but also consider the long-term impact of supplier appointments.
Tutor Notes
- A 'good' scoring answer (50-70%) will explain the criteria well and give examples. If you're looking for a distinction level answer (70% +) you could also mention advantages, disadvantages and risks associated with each of the criteria. For example, when looking at references and reputation it's important to know that a supplier would only ever provide a good reference to you, they would never tell you of a contract that failed.
Another example is that financial data may be skewed- a supplier may have a low score if they are just starting up or have recently remortgaged a property. It's therefore important to get a commentary as well as the figures / scores.
- You could also mention that criteria could be weighted e.g. more importance given to quality than financial status and also consider how easy or difficult it would be to get the information e.g. a supplier may say they have lots of availability to deliver the service you require, but they may just be saying this to win business.
How do you know for sure?
- Social Value Act isn't in this syllabus. If you work in Public Sector procurement it's something you'll be very familiar with. If you don't or you're outside of the UK do not worry about this. I've just included it to show how you can bring in your own knowledge to questions like this. You could think of particular criteria that's important to your industry and write about that. The Social Value Act: What is it, and why is it important? (samtaler.co.uk)
- Study guide p.77

NEW QUESTION # 39
Describe the main stages of the CIPS Procurement and Supply Cycle (25 points)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
How to respond to this question:
- Include as many of the stages as you can, but it's not vital to remember them all. You should aim to remember at least 8 of the 13 steps.
- The steps are; Define Business Need, Market Analysis + Make vs Buy, Develop Strategy and Plan, Pre-Procurement Market Testing, Develop Documents and Specification, Supplier Selection, Issue Tender, Bid Evaluation, Contract Award and Implementation, Warehouse Logistics, Contract performance and Improvement, Supplier Relationship Management and Asset Management Essay Plan:
Introduction - Explain what the CIPS Procurement and Supply Cycle is- a tool to be used by procurement professionals which tracks a procurement exercise from inception to close. It's helpful as it ensures procurement exercises are done correctly and steps are completed in the right order.
- Describe (briefly) what happens at each stage of the cycle, giving examples. You should put each stage into a separate paragraph. It's also a good idea to name the stages in chronological order. Some ideas of things you could mention include:
1) Define Business Need and Develop Specification - Identify what the need is, what type of purchase, put together a business case and outline the requirements
2) Market Analysis and Make vs Buy Decision - analyse the market using market segmentation (e.g. by buyer, product, geography etc) or use Porter's 5 Forces (buyer and supplier power, threat of new entrants, threat of substitutions, supplier rivalry). Looks at if what you want to procure is actually available.
3) Develop Strategy / Plan - you could use a STEEPLE and SWOT analysis. Consider if this is the right time to procure. Create timelines and budgets.
4) Pre-Procurement Market Testing - consider stakeholder engagement, supplier engagement, new / upcoming legislation, currency fluctuations, market, competitor actions. Is this the best time to procure? Will it be successful?
5) Develop Documentation / Creation of Contract terms- firm up the requirements and create the formal documents for the tender exercise. This may be a RFQ or ITT. Define the offer. Include KPIs.
6) Supplier Selection - May not be required for rebuys but an important step for new buys. May use a list of pre-approved suppliers or this may be going out to the open market. You can shortlist suppliers by sending out a pre-qualification questionnaire.
7) Issue Tender - Electronically, consider whether to use an open vs closed procurement exercise
8) Bid / Tender Evaluation - Very flexible for companies in the private sector but there are guiding principles for doing this for public procurement; transparency, equal treatment, proportionality. Often considers both price and quality.
9) Contract Award and Implementation- Organisations may have different processes for different values (e.g.
large purchases may need senior management approval, but under £500 just needs a manager's signature).
May require post-award negotiation. Contract is drafted and signed.
10) Warehouse Logistics and receipt - includes POs and Invoices. Battle of the Forms. Goods Inwards = receiving and inspecting goods- may use quality control.
11) Contract performance review - ensuring contract obligations are fulfilled includes P2P procedures, database management, budgeting / costs monitoring, reporting and dispute resolution.
12) Supplier Management - will depend on the relationship but includes; contact / meetings with the supplier, motivating / incentivising the supplier, working with them on performance issues, ensuring KPIs are met.
13) Asset Management / End of Life- considers TCO, ongoing maintenance and costs, insurance and warrantees and disposal of the item once it has reached the end of its life.
Conclusion - The CIPS Procurement Cycle is cycle rather than process as it is a continuous loop and needs constantly emerge. It never ends. New buys are more likely to follow all the stages of the cycle, rebuys may skip steps Tutor Notes:
- Often steps 11 and 12 are confused or merged together but they are different. It's possible to have great contract management and a poor supplier relationship i.e. the contract is working effectively and the supplier is delivering in line with the contract BUT the relationship may be fraught with tension and the buyer and supplier don't like each other.
- To get a high score I would include examples of all of the stages, but remember you only have 45 minutes to answer the question, so balance detail with timing so you don't overwrite
- The procurement cycle is on p. 70 or you can download it here: Procurement Supply Cycle | CIPS

NEW QUESTION # 40
Explain FIVE ways conflicts of interest could be managed by effective corporate governance. (25 marks)

Answer:

Explanation:
See the solution in Explanation part below.
Explanation:
Five Ways to Manage Conflicts of Interest Through Effective Corporate Governance Conflicts of interest arise when an individual or entity has competing personal and professional interests that could compromise their judgment or decision-making in business transactions. Effectivecorporate governanceensures that such conflicts are identified, managed, and mitigated to uphold transparency, integrity, and accountability within an organization. Below are five ways corporate governance can help manage conflicts of interest:
1. Establishing Clear Policies and Codes of Conduct
* Organizations should implementformal policiesthat outline what constitutes a conflict of interest and how employees and stakeholders should handle such situations.
* Effectiveness:
* Provides clear guidelines on ethical behavior.
* Ensures employees disclose conflicts before engaging in business transactions.
* Sets disciplinary actions for non-compliance.
2. Mandatory Disclosure of Interests
* Employees, board members, and executives should berequired to declare financial, personal, or business intereststhat may conflict with their duties.
* Effectiveness:
* Enhances transparency in procurement and business dealings.
* Prevents individuals from unduly influencing decisions for personal gain.
* Enables proactive identification of potential conflicts before they escalate.
3. Implementing Independent Oversight and Decision-Making Structures
* Establishing independent committees such asaudit, risk, and procurement committeesto oversee critical decision-making.
* Effectiveness:
* Ensures decisions are made objectively, reducing the risk of favoritism or unethical influence.
* Promotes accountability by having multiple parties involved in key transactions.
* Prevents a concentration of power in one individual or department.
4. Whistleblowing Mechanisms and Ethical Reporting Channels
* Organizations should provideanonymous reporting mechanismsfor employees to report unethical behavior or conflicts of interest.
* Effectiveness:
* Encourages a culture of transparency and ethical behavior.
* Protects whistleblowers from retaliation.
* Allows management to address conflicts before they result in financial or reputational damage.
5. Regular Audits and Compliance Monitoring
* Conducting periodicinternal and external auditsto detect and investigate potential conflicts of interest.
* Effectiveness:
* Helps identify patterns of unethical behavior.
* Ensures continuous improvement in governance practices.
* Reinforces a compliance-driven corporate culture.
Conclusion
By implementing these governance strategies, organizations can effectivelymanage conflicts of interest, reduce risks associated with unethical practices, and ensure decisions are made in the best interest of stakeholders. Effective corporate governance fosters trust, accountability, and long-term business sustainability.

NEW QUESTION # 41
Industry Sectors can be classified as Primary, Secondary and Tertiary. What is meant by an 'industry sector'?
Describe the main characteristics of and types of business you will find in these. (25 marks)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question
- The first question can be a simple introduction with a bit of extra detail. The main 'meat' to your essay is going to be explaining the three sectors, their characteristics and example businesses.
- Aim for three well explained characteristics as a minimum
Example essay
An industry sector refers to a broad category or grouping of businesses and economic activities that share similar characteristics and functions in the production and distribution of goods and services. These sectors are often classified into three main categories: Primary, Secondary, and Tertiary. Here are the main characteristics and types of businesses you will find in each of these industry sectors:
1.Primary Sector:
*Characteristics: The primary sector involves activities related to the extraction and production of raw materials and natural resources directly from the environment. This sector relies on nature and weather patterns: businesses in the primary sector are highly dependent on natural factors such as climate, weather, soil quality, and geographic location. These factors can significantly impact the productivity and profitability of primary sector activities. Extreme weather such as floods can severely impact this sector. Moreover there is a seasonality to this sector and many activities in the primary sector require a significant amount of manual labour, particularly in agriculture, fishing, and forestry. However, modern technology has also been integrated into some primary sector activities to increase efficiency.
*Types of Businesses: a. Agriculture: This includes farming, crop cultivation, livestock raising, and forestry. b.
Mining and Extraction. c. Fishing and Aquaculture: Forestry and Logging: Includes the harvesting of timber and related activities.
2.Secondary Sector:
*Characteristic: The secondary sector focuses on the transformation of raw materials and intermediate goods into finished products. The main characteristic of the sector is that it requires high levels of machinery and industrial techniques. There is a reliance on technology. Secondly, the secondary sector adds significant value to the products compared to their raw material form. This value addition is achieved through processing, assembly, and quality control processes. The third main characteristic is standardisation: Manufacturing processes often involve standardization of components and processes to ensure consistency and quality in the final products. Standardization helps in economies of scale.
*Types of Businesses: a. Manufacturing: This sector includes factories and plants that produce tangible goods such as automobiles, electronics, textiles, and machinery. b. Construction: Involves the building and construction of structures like buildings, bridges, and infrastructure. c. Utilities: Companies providing essential services like electricity, gas, and water supply fall into this category.
3.Tertiary Sector:
*Characteristic: The tertiary sector is also known as the service sector and involves businesses that offer various services to consumers and other businesses. The main defining characteristic of this sector is Intangibility: Services are intangible and cannot be touched or held. They are often experienced directly by consumers through interactions with service providers or through the use of technology. Secondly, High Human Involvement: The tertiary sector relies heavily on a skilled and often highly educated workforce to deliver services effectively. This can include professionals such as doctors, lawyers, teachers, and customer service representatives. Lastly, Customization: Many services are customized to meet the specific needs and preferences of individual clients or customers. This personalization is a key characteristic of the tertiary sector.
For example Legal Advice will always be different depending on the specific needs of the client.
*Types of Businesses: a. Retail and Wholesale: Businesses engaged in the sale of goods to consumers or to other businesses. b. Healthcare and Education: This includes hospitals, clinics, schools, colleges, and universities. c. Financial Services: Banks, insurance companies, and investment firms are part of this sector. d.
Hospitality and Tourism: Hotels, restaurants, travel agencies, and entertainment venues fall into this category.
e. Professional Services: Legal, accounting, consulting, and IT services are part of the tertiary sector.
These industry sectors represent the different stages of economic activity, with the primary sector providing raw materials, the secondary sector processing and manufacturinggoods, and the tertiary sector offering services and distribution. Together, these sectors form the backbone of an economy, contributing to its growth and development Tutor Notes
- I've gone overboard on naming the types of organisation in the different sectors. You don't have to remember all of these. 3 examples is sufficient to get good marks. I've just named them all so you can see what could be considered a right answer.
- Some people are talking about Quaternary and Quinary Sectors. CIPS is not one of those people, so don't worry if you come across those terms in any further reading. But FYI
1.
*Quaternary Sector: This sector involves knowledge-based activities, including research and development, information technology, and data analysis.
*Quinary Sector: The quinary sector comprises high-level decision-making and leadership roles in areas such as government, academia, healthcare, and top-level corporate management.
- LO 4.1 p.196

NEW QUESTION # 42
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