Answered) CIPS L4M1 Scope and
Influence of Procurement and Supply
2024
What is Procurement?
Procurement is a STRATEGIC function of a business obtains something Tangible as goods or Intangible as
services. Include Purchasing Inventory, Logistics, Supply, Waste Management Quality, Cost, Added Value
What is Purchasing?
Is the ACT of physically ordering and buying something.
What is Supply?
Is the INFRASTRUCTURE which ensures that products and services get from supplier to the customer.
What is inventory?
the stock of goods, materials or products
What is a stock?
Asset available in the warehouse
What is asset?
Value of everything an organization owns
Fixed cost
Costs do not change (Salaries, Insurance, Rent)
Variable Cost
Costs do change as they are linked to the business (Raw Material, Extra hours)
Directly Cost (Direct Procurement)
Cost associated with the Job or production (Raw material, Man Power)
Indirectly Cost (Indirect Procurement)
Not associated with the Job (Clean Liquid, Stationary, Mobile phones contracts, MRO - Maintenance
repairs and Operations.
Primary Sector of the Economy
The part of the economy that draws raw materials from the natural environment (Cotton, Oil, Silver,
Wheat)
,Secondary sector of the Economy
The part of the economy that transforms raw materials into manufactured goods (Light Bulbs, Nuts and
Bolts, Metal housing, Plastic fittings)
Finished goods
Units of products that have been completed but not yet sold to customers (Shoes, Beds, Clothes,
Jewellery)
Stock Procurement Includes
Can be stored and inventory Raw Material, Components and Finished Goods.
Non-Stock Procurement Includes
Are not stored and not listed in the Organization inventory (Cleaning Services, Internet Contract,
Insurances, Advertising Campaigns)
Explain why the procurement department should be consulted before an organization spends money.
Procurement can influence the majority of the costs within an organization:
1.- Evaluating potential suppliers
2.- Involved in preparing specifications
3.- Review Quality standards
4.- Assess ethical requirements
5.- Compare buy or lease options
6.- Investigate transport
7.- Review packing options.
8.- Research total life cost
9.- Calculate currency differences
10.- Benchmark prices
11.- Ensure assets are fit for a propose
Total life Cost (TLC)
The total amount a product will cost an organization.
Mentioned some examples of NON-STOCK INTANGIBLE procurements.
Insurance, Marketing, Salaries/Pensions, Cleaning, IT and Catering Services, Staff Development,
Electricity, Gas, Rent or Mortage.
Mentioned some examples of STOCK TANGIBLE procurements.
Components, Stationary, Uniforms
Mentioned some examples of CAPITAL NON-STOCK TANGIBLE procurements.
Machinery, Buildings, Lands, Vehicles
CapEx (Capital Expenditure)
,The cost associated to assets of an Organization (The value of a Capital Purchases reduce overtime, the
amount of the asset depreciated)
OPEX (Operating Expenditure)
Cost Associated with the running of an Organization, such as electricity, labour, transport, rent, the raw
material (Day to day running of the business)
What is a budget?
Financial plan for a set period on how much can spend money.
Depreciation
The reduction overtime in the value of an asset held by the company.
What should a procurement professional consider when sourcing a capital purchase?
The TCL - Total Cost of Life, Depreciation.
Procurement Process
A cross-functional business process that originates when a company needs to acquire goods or services
from external sources, and it concludes when the company receives and pays for them.
What are the stages of the procurement cycle process?
1.-Understand the need
2.- Market/commodity
3.- Develop a strategy
4.- Pre procure
5.- Develop Documentation
6.- Supplier Selection
7.- ITT/RFQ
8.- BID/TENDER
9.- Contract Award
10.- Warehouse Logistics
11.- Contract Performance
12.- SRM & SC Management
13.- Asset Management
List the Pre-award process (Sourcing) in Procurement Cycle
From 1 to 8
1.-Understand the need
2.- Market/commodity
3.- Develop a strategy
4.- Pre procure
5.- Develop Documentation
6.- Supplier Selection
, 7.- ITT/RFQ
8.- BID/TENDER
Mention the award process (Contract/ PO) in Procurement Cycle
9.- Contract Award
List the Post-award process (Contract Management) in Procurement Cycle
10.- Warehouse Logistics
11.- Contract Performance
12.- SRM & SC Management
13.- Asset Management
Product specification
Describes the technical criteria
Typical Specification Outlines
Description, Drawing, Color, Materials, Quantity, Packing, Quality.
Performance Specifications
Simple to prepare. Open up the supplier market and promote innovation and competition by letting
suppliers offer the solution to the required need.
Conformance Specifications
Usually difficult to prepare. Ensure that the product/service is exactly as required and that there is not
variance. (Recipes, Chemical formulas, engineering drawings)
Why should a service specification contain as many details as possible?
To ensure that the standard of quality demand is met.
Rights of Procurement
1.- Right Quantity
2.- Right Quality
3.- Right Time
4.- Right Place
5.- Right Price
Define why the Five rights of procurement and supply are important to the procurement professional.
1.- Quantity: if is wrong Warehouse Could be overstocked and Production could be stop.
2.- Quality: Essential of getting value of money.
3.- Time: If products are not received, serious consequences for the production.
Influence of Procurement and Supply
2024
What is Procurement?
Procurement is a STRATEGIC function of a business obtains something Tangible as goods or Intangible as
services. Include Purchasing Inventory, Logistics, Supply, Waste Management Quality, Cost, Added Value
What is Purchasing?
Is the ACT of physically ordering and buying something.
What is Supply?
Is the INFRASTRUCTURE which ensures that products and services get from supplier to the customer.
What is inventory?
the stock of goods, materials or products
What is a stock?
Asset available in the warehouse
What is asset?
Value of everything an organization owns
Fixed cost
Costs do not change (Salaries, Insurance, Rent)
Variable Cost
Costs do change as they are linked to the business (Raw Material, Extra hours)
Directly Cost (Direct Procurement)
Cost associated with the Job or production (Raw material, Man Power)
Indirectly Cost (Indirect Procurement)
Not associated with the Job (Clean Liquid, Stationary, Mobile phones contracts, MRO - Maintenance
repairs and Operations.
Primary Sector of the Economy
The part of the economy that draws raw materials from the natural environment (Cotton, Oil, Silver,
Wheat)
,Secondary sector of the Economy
The part of the economy that transforms raw materials into manufactured goods (Light Bulbs, Nuts and
Bolts, Metal housing, Plastic fittings)
Finished goods
Units of products that have been completed but not yet sold to customers (Shoes, Beds, Clothes,
Jewellery)
Stock Procurement Includes
Can be stored and inventory Raw Material, Components and Finished Goods.
Non-Stock Procurement Includes
Are not stored and not listed in the Organization inventory (Cleaning Services, Internet Contract,
Insurances, Advertising Campaigns)
Explain why the procurement department should be consulted before an organization spends money.
Procurement can influence the majority of the costs within an organization:
1.- Evaluating potential suppliers
2.- Involved in preparing specifications
3.- Review Quality standards
4.- Assess ethical requirements
5.- Compare buy or lease options
6.- Investigate transport
7.- Review packing options.
8.- Research total life cost
9.- Calculate currency differences
10.- Benchmark prices
11.- Ensure assets are fit for a propose
Total life Cost (TLC)
The total amount a product will cost an organization.
Mentioned some examples of NON-STOCK INTANGIBLE procurements.
Insurance, Marketing, Salaries/Pensions, Cleaning, IT and Catering Services, Staff Development,
Electricity, Gas, Rent or Mortage.
Mentioned some examples of STOCK TANGIBLE procurements.
Components, Stationary, Uniforms
Mentioned some examples of CAPITAL NON-STOCK TANGIBLE procurements.
Machinery, Buildings, Lands, Vehicles
CapEx (Capital Expenditure)
,The cost associated to assets of an Organization (The value of a Capital Purchases reduce overtime, the
amount of the asset depreciated)
OPEX (Operating Expenditure)
Cost Associated with the running of an Organization, such as electricity, labour, transport, rent, the raw
material (Day to day running of the business)
What is a budget?
Financial plan for a set period on how much can spend money.
Depreciation
The reduction overtime in the value of an asset held by the company.
What should a procurement professional consider when sourcing a capital purchase?
The TCL - Total Cost of Life, Depreciation.
Procurement Process
A cross-functional business process that originates when a company needs to acquire goods or services
from external sources, and it concludes when the company receives and pays for them.
What are the stages of the procurement cycle process?
1.-Understand the need
2.- Market/commodity
3.- Develop a strategy
4.- Pre procure
5.- Develop Documentation
6.- Supplier Selection
7.- ITT/RFQ
8.- BID/TENDER
9.- Contract Award
10.- Warehouse Logistics
11.- Contract Performance
12.- SRM & SC Management
13.- Asset Management
List the Pre-award process (Sourcing) in Procurement Cycle
From 1 to 8
1.-Understand the need
2.- Market/commodity
3.- Develop a strategy
4.- Pre procure
5.- Develop Documentation
6.- Supplier Selection
, 7.- ITT/RFQ
8.- BID/TENDER
Mention the award process (Contract/ PO) in Procurement Cycle
9.- Contract Award
List the Post-award process (Contract Management) in Procurement Cycle
10.- Warehouse Logistics
11.- Contract Performance
12.- SRM & SC Management
13.- Asset Management
Product specification
Describes the technical criteria
Typical Specification Outlines
Description, Drawing, Color, Materials, Quantity, Packing, Quality.
Performance Specifications
Simple to prepare. Open up the supplier market and promote innovation and competition by letting
suppliers offer the solution to the required need.
Conformance Specifications
Usually difficult to prepare. Ensure that the product/service is exactly as required and that there is not
variance. (Recipes, Chemical formulas, engineering drawings)
Why should a service specification contain as many details as possible?
To ensure that the standard of quality demand is met.
Rights of Procurement
1.- Right Quantity
2.- Right Quality
3.- Right Time
4.- Right Place
5.- Right Price
Define why the Five rights of procurement and supply are important to the procurement professional.
1.- Quantity: if is wrong Warehouse Could be overstocked and Production could be stop.
2.- Quality: Essential of getting value of money.
3.- Time: If products are not received, serious consequences for the production.
