1
Q
What is something tangible?
A
Goods
2
Q
What is something intangible?
A
Services
3
Q
When does the procurement process begin, and when is it complete?
A
It begins by identifying a need and is complete once the goods or services that meet that needs are delivered
4
Q
What kind of business function is procurement?
A
Strategic - involves a high level of skill
5
Q
What 8 elements are included in the procurement business function?
A
Added value
Cost
Inventory
Logistics
Purchasing
Quality
Supply
Waste management
6
Q
What does strategic mean in a business function context?
A
High level planning, including setting direction and long-term goals
7
Q
What process are purchasing and supply functions within?
A
The procurement process
8
Q
What is purchasing?
A
The act of physically ordering and buying something
9
Q
What is supply?
A
The infrastructure that ensures the products or services get from the supplier to the customer
10
Q
What processes fit within purchasing?
A
Ordering and expediting
11
Q
What process fits within supply?
A
Delivery
12
Q
What is expediting?
A
The processes involved in the progress of an order to ensure stock is received as quickly as possible
13
Q
What is the primary sector?
A
Industry sector that extracts raw materials
14
Q
What is the secondary sector?
A
Industry sector that manufactures things - raw materials converted into finished products
15
Q
Define a supply chain
A
A channel of goods distribution, which starts with the supplier of raw materials or components, moves through an operational process to the distributor and retailer, and finally to the consumer
16
Q
What does a supply chain involve?
A
A network of individuals, organisations, technology, activities and resources to ensure goods or services flow along the chain
17
Q
What does a typical supply chain look like?
A
Producers (raw materials) > suppliers > manufacturers > distributors > retailers > end users (customers)
18
Q
Example of primary sector
A
Mining for coal or metals
Drilling for oil
Agriculture
Forestry
Fishing
19
Q
Example of secondary sector
A
Oil refined into diesel
Raw materials built into a house
20
Q
Tertiary sector
A
Industry sector that provides services
21
Q
Example of tertiary sector
A
Insurance
Education
Healthcare
22
Q
What end goal is common to every sector?
A
To produce or supply something to a consumer
23
Q
What is the upstream stage of the supply chain?
A
The supply flow of raw materials, components, parts etc needed for production
24
Q
What is the downstream stage of the supply chain?
A
The supply chain that the organisation feeds into, from product to end user
25
What two stages do supply chains consist of?
Upstream and downstream
26
Why is supply chain management necessary?
To ensure a supply chain works effectively
Procurement involvement is needed to ensure all aspects of the chain are performing correctly
27
What are the aims of SCM?
To reduce costs, improve value and reduce risk
28
How does SCM give the supplying organisation a competitive advantage?
By adding value throughout the process, and achieving it in the most effective, efficient and ethical way
29
What process involves managing customer relationships?
SCM
30
What areas of the supply chain does value come from?
Price
Delivery
Storage
Ethics
Environment
Sustainability
Communication
Quality
31
Define a supply chain network
Evolution of the basic supply chain which defines the more complex structure, involving a higher level of interdependence and connectivity. Allows a 2-way exchange of information and materials to successfully meet customer demands between more organisations upstream and downstream
32
What is a SCN an extension of?
A supply chain
33
What 5 areas are supply chain networks usually designed around?
External suppliers
Manufacturers
Distribution/wholesale centres
Logistics
Consumer demand
34
What type of flows can exist within SCNs?
Physical or information
35
What are physical flows within SCNs?
Include the movement and storage of materials and end products
Goods flow one way only
36
What are the information flows within SCNs?
Organisational strategies and how they're communicated, control processes within the network and the standards to which the chain should work
Info flows two ways
37
What is the difference between supply chain management and procurement?
Procurement is about obtaining products and services in response to a need
Supply chain refers to the infrastructure involved in physically getting the products and services delivered
Fundamental difference = procurement ends when the product is delivered, checked and paid for; SCM continues until the end product reaches the consumer
38
Which 6 tasks does procurement include?
Preparing specifications
Monitoring quality
Sourcing
Buying
Stock control
Disposal of waste
39
What is supply chain tiering?
The structured ordering and organisation of suppliers so that organisations downstream work with fewer suppliers upstream
40
What does a lower tier number mean for a supplier?
The lower the number, the closer to the buyer
41
What are drivers for the use of supply chain tiering?
Globalisation and localisation - many organisations now buying in services/components previously produced in-house
42
What are the benefits of supply chain tiering?
Allows for the concentrated development of a smaller number of suppliers
Enables buying org to leverage improved supplier relationships
More time and resources can be allocated to SRM
43
What are the disadvantages of supply chain tiering?
Buyers more susceptible to risk factors (compliance, ethics, sustainability) from suppliers outside of tier 1 as they have less visibiliy and control
44
How can risk factors from higher tiers be mitigated?
By looking beyond tier 1 suppliers when reviewing and mapping supply chains
45
Original equipment manufacturer
Producer of own-branded parts or equipment, sold to other manufacturers for production and retail
46
What are the benefits of supply chain mapping?
Gives a representation of supply chain activities, locations, resources and suppliers in a clear, convenient and easy to understand format
Supply chain redesign can then be more easily visualised
Assists with combatting modern day slavery and unethical practices
47
Definition of logistics
The control of the flow of goods or services between two points
Making sure people or things are where they need to be at the right time
48
What are internal logistics?
Processes that are related to turning the raw material into the desired end product
49
Examples of internal logistics
Extraction/production
Warehousing/storage
Manufacturing
50
Examples of external logistics processes
Distribution
Transport
Retail
51
What areas of logistics need to be managed to keep the process running effectively?
Demand planning
Fleet management
Warehousing and storage
Order fulfilment
Inventory management
52
What is demand planning?
Knowing what is required and when
53
What is fleet management?
The solutions an organisation uses to physically transport goods from one place to another
54
What do good warehouse designs include?
Clear labelling or barcoding to ensure products can be found seamlessly
55
What is materials management?
The flow of materials to, from and inside manufacturing/production units
56
What components does materials planning cover?
Planning, handling, storage, inspection and issuing of raw materials, components and finished goods
57
What are the laws around waste management designed to protect and preserve?
Human health and wellbeing
The environment
58
Battery Directive
Regulation of the manufacturing, accumulation and disposal of batteries
59
Landfill directive
regulation to reduce negative effects on the environment caused by waste put into landfill
60
Hazardous waste regulations
Regulation to restrict the movement and storage of hazardous waste
61
WEEE Directive
Regulation which sets targets for the recovery and recycling of electrical goods
62
What is the waste management hierarchy?
Reduce amount produced > Reuse waste > Recover waste > send to landfill
63
What are the benefits of effective waste management?
Compliance with regulations
Positive impact on people, planet and resoruces
Enhanced brand reputation
Cost savings
64
What is closed loop recycling?
Where recycled waste can be reprocessed or repurposed indefinitely to make new products, or returned to the environment as biodegradable waste
65
What kind of products does closed loop recycling refer to?
Ones that can be converted into new products without losing their properties during the recycling process; and which don't other materials to be added to create new products
66
Examples of items suitable for closed-loop recycling
Aluminium
Glass
Some type of plastics
67
What is open loop recycling?
Where products go through the recycling process but need to be mixed with new materials to become a new product
68
What is downcycling?
When recycled products have lower functionality and quality than the original, so can't be recycled again
(often in open loop recycling)
69
What are the benefits of closed loop recycling?
Preserves natural resources
Frees up landfill space
Minimises environmental effect
Contributes to supply chain sustainability
70
What is added value?
Takes into account all the costs that contribute towards making the product or service
71
What are the five rights of procurement?
Quantity
Quality
Time
Place
Price
72
What does the Right Quantity involve? (5 rights)
Ensuring the most cost-effective amount of a product or service is procured
73
What could happen if the quantity procured is wrong? (5 rights)
Production could stop
Consumers needs unfulfilled
Warehouses overstocked
Price organisation pays is too high
74
Define stakeholder
An individual/organisation with interest or an influence in, or who will be affected by, the decisions and/or actions of a project, produce, service or venture
75
What is economies of scale?
Ordering in larger volumes to reduce the price
76
What does the Right Quality involve? (5 rights)
A product or service meeting the needs and expectations of customers
Not always necessary for quality to be high - must always be fit for purpose
77
How can the standard of quality required be defined? (5 rights)
Stating quality standards
Producing a product spec
78
What is the most common set of quality standards?
ISO 9000
(International Organisation for Standardisation)
Not specific to any industry or org size
79
What is the only global standard recognised worldwide?
ISO 9001
80
What are the sections of a product specification?
Description
Drawing
Colour
Materials
Quantity
Packaging
Quality
81
What are the two types of specification?
Conformance and performance
82
What is a conformance specification?
Details exactly what the product or service will consist of
83
What is a performance specification?
Outlines what the product or service is to do or achieve
Covers its output requirements, tolerances and any functions to perform
84
Advantages and disadvantages of a performance specification
Can be short
Quick/simple to prepare
Cheap
Allows suppliers to innovate
Allows supplier competition
85
Advantages and disadvantages of a conformance specification
Long document
Long/difficult to prepare
Expensive
Doesn't allow supplier innovation
Limits supplier competition
86
Why is it important to state the quality required?
Otherwise goods supplied may be unfit for purpose or not meet requirements - cost to rectify
87
What does the Right Time involve? (5 rights)
Orders place and delivered on time for continuity of supply, at optimum price
88
What factors influence the Right Time? (5 rights)
Market trends, availability, competitor activity, customer demand, lead-times, consumption rates
89
What are the consequences if the Right Time is not met?
Stockouts
Additional costs (replacement goods)
Deliveries arriving at wrong times (overtime/penalties)
Relationships
Risk exposure
90
What does the Right Place involve? (5 rights)
Goods or services have to be delivered to the right place
91
What could failure to meet the right place result in?
Stockouts
Dissatisfied customers
Additional costs for redirection
92
What does the Right Price involve? (5 rights)
Must be fair and reasonable
93
How can procurement influence price?
Sourcing
Spend aggregation
Obtaining price comparisons
Negotiation
94
What is sourcing?
The process of ensuring the needs of organisation are satisfied by using suitable suppliers
95
What comparisons need to be included for price comparison?
Currency
Net or gross price
Negotiation
Incoterms
96
Net price
Excludes taxes
97
Gross price
Includes taxes
98
Incoterms
Commercial terms published by International Chamber of Commerce
Covers allocation of costs and transfer of risks between buyer and seller
99
EXW
Ex Works
Named place of collection - on cost
100
FCA
Free Carrier
Seller delivers goods to chosen destination
101
CPT
Carriage Paid To
Goods delivered with cost absorbed in product price
Buyer responsible for insuring, unloading, import charges
102
CIP
Carriage and Insurance Paid To
Seller is responsible for cost of carriage, incl insurance and export charges
Buyer responsible for import charges
103
DAP
Delivered at place
Seller arranges carriage, delivering, unloading
Risk transfers after unloading
Buyer responsible for import charges
104
DDP
Delivered Duty Paid
Seller responsible for carriage, delivery, import, taxes and duties
Risk transfers when goods are ready for unloading
105
Why are the five rights importance?
A key way for procurement professionals to check all areas are covered when buying goods or services
106
Whole-life costing
Estimate used to help buyers determine end-to-end cost (also TCO, LCC)
107
Life-cycle costs
Relates to all costs of acquisition, owning and running asset (but not including disposal)
CIPS L4M1
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