CIPS L4M1 Scope and Influence of Procurement and Supply Exam Practice Test

Essay Plan:

Definition of Stakeholder- someone who has a ‘stake’ or interest in the company. A person or organisation who influences and can be influenced by the company.

Categories of stakeholders:

1) Internal Stakeholders- these people work inside the company e.g. employees, managers etc

2) Connected- these people work with the company e.g. suppliers, mortgage lenders

3) External Stakeholders – these people are outside of the company e.g. the government, professional bodies, the local community.

Example Essay:

A stakeholder is an individual, group, or entity that has a vested interest or concern in the activities, decisions, or outcomes of an organization or project. Stakeholders are those who can be affected by or can affect the organization, and they play a crucial role in influencing its success, sustainability, and reputation. Understanding and managing stakeholder relationships is a fundamental aspect of effective organizational governance and decision-making and there are several different types of stakeholders.

Firstly, internal stakeholders are those individuals or groups directly connected to the daily operations and management of the organization. Internal stakeholders are key to success and are arguably more vested in the company succeeding. They may depend on the company for their income / livelihood. Anyone who contributes to the company's internal functions can be considered an internal stakeholder for example:

This category includes

1) Employees: With a direct influence on the organization's success, employees are critical internal stakeholders. Their engagement, satisfaction, and productivity impact the overall performance.

2) Management and Executives: The leadership team has a significant influence on the organization's strategic direction and decision-making. Their decisions can shape the company's future.

Secondly, connected stakeholders are those individuals or groups whose interests are tied to the organization but may not be directly involved in its day-to-day operations. Connected stakeholders work alongside the organisation and often have a contractual relationship with the organisation. For example, banks, mortgage lenders, and suppliers. These stakeholders have an interest in the business succeeding, but not as much as internal stakeholders. It is important to keep these stakeholders satisfied as the organisation does depend on them to some extent. For example, it is important that the organisation has a good relationship with their bank / mortgage provider/ supplier as failing to pay what they owe may result in the stakeholders taking legal action against the organisation.

This category includes:

1) Shareholders/Investors: Holding financial stakes in the organization, shareholders seek a return on their investment and have a vested interest in the company's financial performance.

2) Suppliers and Partners: External entities providing goods, services, or collaboration. Their relationship with the organization impacts the quality and efficiency of its operations.

Lastly external stakeholders are entities outside the organization that can influence or be influenced by its actions. This category includes anyone who is affected by the company but who does not contribute to internal operations. They have less power to influence decisions than internal and connected stakeholders. External stakeholders include the government, professional bodies, pressure groups and the local community. They have quite diverse objectives and have varying ability to influence the organisation. For example, the government may be able to influence the organisation by passing legislation that regulates the industry but they do not have the power to get involved in the day-to-day affairs of the company. Pressure groups may have varying degrees of success in influencing the organisation depending on the subject matter. This category includes:

1) Customers: With a direct impact on the organization's revenue, customers are vital external stakeholders. Their satisfaction and loyalty are crucial for the company's success.

2) Government and Regulatory Bodies: External entities overseeing industry regulations. Compliance with these regulations is crucial for the organization's reputation and legal standing.

In conclusion, stakeholders are diverse entities with a vested interest in an organization's activities. The three categories—internal, connected and external —encompass various groups that significantly influence and are influenced by the organization. Recognizing and addressing the needs and concerns of stakeholders are vital for sustainable and responsible business practices.

Tutor Notes

- The above essay is pretty short and to the point and would pass. If you want to beef out the essay you can include some of the following information for a higher score:

- Stakeholders can be harmed by, or benefit from the organisation (can affect and be affected by the organisation). For example a stakeholder can be harmed if the organisation becomes involved in illegal or immoral practices- e.g. the local community can suffer if the organisation begins to pollute the local rivers. The local community can also benefit from the organisation through increased employment levels.

- CSR argues organisations should respect the rights of stakeholder groups

- Stakeholders are important because they may have direct or indirect influence on decisions

- The public sector has a wider and more complex range of stakeholders as they’re managed on behalf of society as a whole. They’re more likely to take a rage of stakeholder views into account when making decisions. However, these stakeholders are less powerful – i.e. they can’t threaten market sanctions, to withdraw funding, or to quit the business etc.

- The essay doesn’t specifically ask you to Map Stakeholders, but you could throw in a cheeky mention of Mendelow’s Stakeholder Matrix, perhaps in the conclusion. Don’t spend time describing it though- you won’t get more than 1 point for mentioning it. You’d be better off spending your time giving lots and lots of examples of different types of stakeholders.

- Study guide p. 58

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

How to approach this question:

- Define stakeholder mapping – completing an analysis of the stakeholders of an organisation and dividing them into categories depending on certain characteristics. This is often represented visually on a graph or matrix.

- Describe a Stakeholder mapping tool – the most common tool is Mendelow’s Stakeholder Matrix so I would recommend using this one. It is explained in detail in the study guide. However, the question is open so you could choose to describe another tool such as Edgar’s Stakeholder Position Analysis if you so wished. You wouldn’t be wrong choosing this, but honestly, I’d just go for Mendelow. You can’t go wrong with Mendelow. Because the Matrix has 4 sections you can imagine you’d get 5 points for the definition of stakeholder mapping, and 5 points for each of the quadrants of the matrix.

Essay Plan:

Introduction - The reason why stakeholder mapping is important is because interests and expectations of stakeholder groups will be different and possibly conflicting. Mapping this allows an organisation to see the variety and decide on an appropriate management style for each stakeholder group.

Paragraph 1 - Mendelow’s Power / Interest Matrix maps stakeholders based on their influencing power and the strength of their motivation to use that power. It uses a 2x2 grid and defines power as high or low and interest and high or low. It then provides four strategies for managing the stakeholders based on which quadrant of the grid the stakeholder falls into. These 4 categories are:

Paragraph 2 - Keep satisfied – high power but low interest. If the stakeholder becomes dissatisfied or concerned their interest may peak. Examples include regulatory bodies, shareholders, senior management. The best approach is to keep them up to date so they are informed of what is going on, but do not burden them with information they do not need.

Paragraph 3 - Manage Closely – AKA Key players – includes major customers, key suppliers, partners, senior management. These stakeholders need to know everything that is going on and approve of what is going on. The recommended strategy is early involvement and participation, and integrating their goals with yours. This group requires regular communication and meetings. You should take their opinions on board.

Paragraph 4- Monitor – minimum effort required – this is the low priority group as they have low power and low interest. Includes small volume suppliers and other organisational functions with no direct interest in your activities. This group does not need to receive regular communication.

Paragraph 5 - Keep informed - high interest, but low power. If they’re not kept in the loop and understand the need for decisions, they may lobby together to protect their interest if they feel threatened. Employee groups, suppliers and community groups may be in this category. This group should receive regular communication.

Conclusion - Mendelow created the matrix in 1991 and it is still used today. It is a popular management tool due to its simplicity. It’s important to notes that stakeholders can move through the matrix- it isn’t stagnant. For example, at the beginning of a project a manager in another department may be classed as ‘low priority’ because they are seen to have no interest and no power in the project. However, as the project progresses the manager may become interested. They will then transfer into the keep informed category. Therefore, the matrix should be redone regularly throughout the lifetime of a project to capture any movements. The matrix should also be redone for each individual project – it cannot be assumed that a stakeholder who had interest in one project would be interested in another.

Tutor Notes

- The above essay plan is basically the entire essay, I got carried away. The only thing you’d need to add into that is an example of a stakeholder for each of the sections! (e.g. the CEO is high power, but low interest stakeholder for the procurement department. He/ She doesn’t care about the day to day operations but should be kept informed of any big news). For your examples you could use your own place of work.

- At level 4 you don’t have to analyse the model, you just have to be able to memorise it and repeat it. Mendelow comes up again at Level 5 and 6 in a bit more detail. If you want to score super bonus points you could mention in your conclusion that the main disadvantage of Mendelow’s Matrix is that it doesn’t take into consideration the stakeholder’s position on the project – whether they’re for it or against it. Therefore, it doesn’t provide the full picture or provide much help on how to manage stakeholders. E.g. two stakeholders might both be in ‘manage closely’ section, but one is for the project and the other against – they’d need to be handled very differently!

- Study guide p. 65

How to approach this question:

- Your response will need 5 definitions. For 25 points that means 5 points per section so think about the level of detail you’ll need to include. It would be 5 points for electronic system (i.e. your introduction and conclusion), and then do a paragraph on each of the technologies. In the description you could talk about why it’s used and the advantages, and give some examples if you know any.

- Definition of electronic system – a system which uses some form of technology and automates a procurement process than would otherwise have been completed manually.

- E-Requisitioning – a way of ordering goods or services. Includes the use of integrated ordering systems such as: ERP/ ERP II / MRP / MRP II

- E-Catalogue- an electronic display of what goods can be ordered. A simple example of this may be a supplier displaying the goods they offer on their website and the prices to purchase the goods.

- E-Sourcing – this involves the early stages of the tender process- using an electronic portal to find a supplier and / or conduct a tender exercise.

- E-Payment – the P2P part of the cycle (procure to pay) – may involve electronic POs and Invoices, BACS, CHAPS and SWIFT payment systems, and the use of Purchasing Cards

Example essay:

Electronic systems, commonly refered to as E-procurement, is the business-to-business or business-to-consumer purchase of goods or services, typically using the Internet or other information/ networking systems such as ERP systems. It has developed in the past 20 years as technology has improved and replaces time-consuming manual processes and is now considered the ‘norm’. Electronic systems and e-procurement can be used throughout the entire supply chain- not just between a single buyer and supplier. Examples of electronic systems including the following:

E-requisitioning

This is often used in manufacturing organisations to order raw materials. An electronic ‘bill of materials’ is created and stock levels are automatically updated. As materials get used and a pre-determined level is reached, this triggers a new order which is placed via an e-requisitioning system such as MRP. It is a technological version of the traditional kan-ban (2 bin) system. E-requisition tools are often cloud-based. It helps buyers simplify the buying process, track orders and provides higher levels of visibility on spend. The main disadvantage to this technology is that it requires technology interfacing between the buyer and suppler, which may be expensive.

E-catalogues

This is a digital or online version of a catalogue- a document that details what you can buy and at what price. There are two main types – buy side catalogues and sell side catalogues. A buy-side catalogue is an internal system used by a buyer which hosts a list of pre-approved suppliers from whom purchases can be made. It may include details of commonly bought items and the prices. The use of this reduces maverick spending and ensures consistency in purchases (e.g. whenever lightbulbs need to be ordered, the same lightbulbs are ordered so the office lighting is consistent). A sell-side catalogue is provided by a supplier and details what they offer- it often includes prices, any discounts for bulk buying and may also let buyers know of availability (e.g. the website may say only two items remaining). This may be as simple as a price list on their website, available for anyone to view.

E-sourcing

This is a tool that helps a buyer find the most suitable supplier. Examples include e-tendering websites where a buyer can host a competition to find a supplier. E-auctions are also a type of e-sourcing tool. The tool (often a website) hosts all of the tendering documents and allows for buyers and suppliers to communicate during the tender process (for example if there are any clarifications needed on the specification). Using this tool allows for transparency and equal treatment, but also saves time in completing the tender exercise. PQQs can be automated and some e-sourcing tools include the use of Artificial Intelligence which can ‘read’ tender submissions and automatically exclude suppliers who do not fulfil the required criteria.

E-payment technologies

These are methods to pay for goods and services that replace the need for cash and cheques. Examples include online bank transfers, electronic Purchase Orders and Invoices and the use of Pre-Payment cards. These act like credit cards for employees to use when they need to buy supplies. For example, if you have a maintenance team that frequently need to purchase low-value items like screws and paint, you could issue the team with a Pre-Payment card with a certain limit (e.g. £500/ month) so they can buy what they need. The company will then automatically be sent a monthly invoice for all of the purchases. This saves time from having to issue the maintenance team with petty cash for the purchases and allows for greater visibility over spend (e.g. how many screws are typically bought per year?). Another typical use is for staff travel.

In conclusion, procurement teams benefit significantly from leveraging electronic tools, including e-requisitioning, e-catalogues, e-sourcing, and e-payment technologies. The adoption of these electronic tools brings about various advantages that enhance efficiency, transparency, cost-effectiveness, and overall effectiveness in the procurement process. Moreover E-procurement tools has helped develop the procurement function into a professional and respected function and allows for a more pro-active rather than reactive approach to purchasing.

Tutor Notes:

- Fun Fact! In the public sector, it is mandated that electronic systems are used in procurement (Public Contract Regulations 2015) as this helps to achieve the objectives of transparency and equal treatment. Where manual systems are used, it is easy to manipulate the tender process. For example, a buyer could read some tender submissions before the deadline for submission and no one would know, but with an electronic system this is impossible as it locks evaluators out until the deadline has passed and all bidders have submitted their responses. (note PCR 2015 is being replaced in 2024- details are still TBC but the above fun fact will still remain in the new legislation- they’re definitely still going to make it compulsory).

- You could also mention the names of systems if you know any. For example, e-sourcing tools include MyTenders.com and Delta E-Sourcing. PO / Invoice systems include Sage, Xero and QuickBooks.

- The question doesn’t ask for advantages of using these technologies but you could mention this in your answer. Just be sure that this isn’t the focus of your response- the question asks specifically for you to DESCRIBE the systems so detailed Explanation: s and examples are where you will secure the most points.

- p.108

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.

How to approach this question

- Remember as you’re preparing an essay plan that this is a case study question, meaning everything has to relate back to Mo and Manufacturer X. So for the 5 areas- think about how this would be applicable for a robotics manufacturer. CIPS don’t expect you to knowanything about robotics so if you talk about KPIs for suppliers- just make them up- as long as they sound right-ish that’s all that matters.

- Areas you could talk about include: competition, ethics, KPIs, quality, supplier appraisal, supplier evaluation, sustainability, transparency

Example Essay

Mo, stepping into the role of Head of Procurement at Manufacturer X during a pivotal period of growth, faces the task of expanding the department and formalizing its policies. In this intricate landscape of a small organization creating bespoke robots, five crucial areas demand Mo's careful consideration in the drafting of departmental policies and manuals: competition, ethics, quality, supplier evaluation, and sustainability.

Firstly, competition. As Manufacturer X navigates growth, Mo must establish transparent guidelines for competitive bidding processes. It is imperative to ensure fairness in supplier selection and implement strategies for cost competitiveness without compromising quality. Encouraging innovation and collaboration with suppliers becomes a strategic approach to gain a competitive edge in the market. Mo should be careful that his policies do not favour any suppliers over others and that consideration is given to allowing SMEs to bid for work.

Secondly, Ethics. Mo needs to develop an explicit code of ethics guiding procurement professionals in their interactions. This should emphasize honesty, integrity, and fair treatment. Additionally, establishing due diligence procedures to ensure suppliers adhere to ethical business practices, especially concerning labour and environmental standards is important. Moreover, whistleblower protection mechanisms should be put in place to encourage the reporting of ethical concerns without fear of reprisal.

Thirdly, Quality considerations. Given the bespoke nature of the robotics industry and the necessity of maintaining high standards for customer satisfaction, Mo must define and communicate stringent quality requirements to suppliers, emphasizing adherence to specifications and standards. The establishment of robust inspection and testing procedures at various stages of the supply chain is crucial, ensuring consistent component quality. Developing contingency plans and protocols for addressing quality issues promptly, including collaboration with suppliers for continuous improvement, should be integrated.

With the organization's growth, a systematic approach to supplier evaluation becomes paramount. Mo needs to develop a comprehensive evaluation framework, including criteria such as financial stability, reliability, and past performance. Implementing a supplier scorecard system is essential for tracking and assessing supplier performance over time. Moreover, fostering strategic relationships with key suppliers to promote collaboration, innovation, and long-term partnerships becomes a strategic imperative.

Lastly, Mo should consider sustainability, in particular environmental awareness and the promotion of sustainable practices into the supply chain for long-term viability. Developing sustainability criteria for supplier selection, considering factors such as environmental impact, social responsibility, and ethical sourcing, is imperative. Encouraging suppliers to adopt environmentally friendly practices and certifications, such as ISO14001 or Fair Trade, becomes crucial. The integration of sustainability goals into procurement key performance indicators (KPIs) is essential for tracking progress and demonstrating the organization's commitment to corporate responsibility.

In conclusion, Mo's strategic focus on competition, ethics, quality, supplier evaluation, and sustainability is pivotal in laying the foundation for a procurement department that not only supports Manufacturer X's growth, but also aligns with its values and industry standards.This approach positions the organization for success in the dynamic landscape of bespoke robot manufacturing.

Tutor Notes

- This question is taken from P. 146 – note the question is on policies not strategy. These are slightly different concepts, but they do overlap. Policies are black and white- we do this and we don’t do that. Strategies are about what the company wants to achieve. They’re future orientated, where as a policy is about what we do now. So a policy may include sustainability, but strategy may talk about reducing pollution.

- CIPS could also ask you to talk about procurement strategies such as achieving cost reductions, environmental issues etc. These are also on p.146

How to approach this question:

- There are 3 terms and an advantage and disadvantage for each you need to talk about. So that’s 9 things. Out of 25 points you can see you’ll probably only get 1-2 points for each aspect of the question. That shows you the level of detail you need to include – not that much!

- In terms of structure feel free to use headings and bullet points for this one

Example Essay

Outsourced procurement, shared service units (SSUs), and consortium procurement are distinct approaches to managing procurement activities within organizations. Each method carries its own set of advantages and disadvantages, catering to different organizational needs and circumstances.

Outsourced Procurement: Outsourced procurement involves engaging a procurement consultant or an external organization to provide advice or handle the entire procurement process on behalf of the company. The advantages of outsourced procurement are that it frees up internal resources, allowing them to focus on other tasks. The expertise and skills brought by external consultants can also fill gaps in the organization's capabilities. Moreover, this approach is flexible, adapting well to irregular procurement needs. However, drawbacks include a potential loss of control, higher costs, the need for an additional management layer, and the risk of losing intellectual property (IP).

Shared Service Unit (SSU): A Shared Service Unit is an internal procurement support function within an organization that various divisions can access for assistance, resembling the outsourcing concept but within the organizational structure. The advantages of SSUs lie in potential cost savings, the ability to aggregate demand, and the establishment of common standards and processes across the company. The expertise utilized is internal, providing a sense of familiarity. The disadvantage is that measuring the success of an SSU can be challenging, and there is a risk of stifling innovation. The unit may also be perceived as remote from end users, and procurement processes might be slower due to serving multiple departments.

Consortium Procurement: Consortium procurement involves a collective effort where separate organizations join forces to purchase goods, thereby increasing their bargaining power. The advantages of this approach are in the aggregated demand, resulting in more economical purchases. Pooling knowledge and expertise within the consortium enhances the collective capabilities of its members, providing a sense of safety in numbers. However, disadvantages include a potential loss of individual organizational power, prolonged decision-making processes within the consortium, challenges in responding quickly to demands, and the potential hindrance to small and medium-sized enterprises (SMEs) competing if demand is aggregated.

In conclusion, organizations must carefully consider their specific needs, priorities, and the nature of their procurement requirements when choosing between outsourced procurement, SSUs, or consortium procurement. Each approach offers unique benefits and challenges, and the decision-making process should align with the organization's overall goals and strategies.

Tutor Notes:

- I’ve named lots of advantages and disadvantages for each of the models. 1-2 advantages and disadvantages of each is all you need to secure you the marks. Remember you only have 35 minutes to write this. A danger with this type of question is spending too long on one aspect of the question and running out of time to answer the rest of it.

- A good idea is to pace yourself and give yourself 10 minutes per term (outsourced, SSU and consortium) then 5 minutes at the end to review and edit your response.

- Some further details you may wish to include:

- Outsourced procurement – this is often used when the organisation doesn’t have the expertise to procure the item they need. This often happens for complex / technical procurements or highly regulated industries. An example may be a housing provider who runs a block of flats where the lift has just broken down and cannot be fixed. They need to procure a new lift but have no idea how to write a specification for this as they don’t have the technical knowledge of how lifts work. Hiring a consultant who is experienced in tendering for lifts, although expensive, may actually save money by reducing the risk of procuring the wrong thing.

- SSU – a Shared Service Unit acts as a support function for the organisation. This is described in Porter’s Value Chain- all other departments can call on the SSU when they require assistance. The SSU is responsible for managing its own costs, employs its own resources and may have contractual agreements with other divisions. The main aim of the SSU is to add value. SSUs are common in large organisations where the core activities don’t revolve around procurement (such as finance and service industries).

- Consortium – Consortium buying is encouraged in the public sector in order to maximise value for money. Consortiums can create their own Frameworks. There is a risk that large consortia can abuse their dominant market position.

- LO 3.3 p. 161

The knowledge to remember: 

A table with text on it Description automatically generated

Essay Plan :

Remember to include examples for each of the six categories of spend. This is specifically asked for in the question so it’s important to include as many examples as you can. To do this you could take an example organisation such as a cake manufacturer and explain which of their purchases would fall into each category and why.

Introduction – explain why procurement categorises spend

- Direct – these are items that are incorporated into the final goods (the cakes) so would include raw materials such as flour, eggs, sugar etc

- Indirect – these are items that the company needs, but don’t go into the end product. For example, cleaning products and MRO supplies for the machines

- Capital Expenditure- these are large one-off purchases, such as buying a new piece of equipment such as a giant oven to cook the cakes.

- Operational Expenditure – these are purchases that are required to ensure the business can function day-to-day. They may include PPE for the workers in the factory and cleaning equipment

- Stock items – these are items procured in advance and held in inventory until they are needed. In a cake manufacturing factory this could be PPE for staff such as hairnets and gloves. The organisation will buy these in bulk and keep them in a stock cupboard, using these as and when they are required

- Non- stock items - items that are not stored and used right away. An example would be eggs- these will need to be put directly into the cakes as they would go off if bought in advance.

Conclusion – the categories are not mutually exclusive – an item can be direct and operational, or indirect and stock. Different companies may use different systems to classify items of spend.

Example Introduction and Conclusion

Introduction

Procurement categorizes spend to efficiently manage resources and make strategic decisions. Three primary ways of categorizing procurement spend include distinguishing between direct and indirect spend, classifying expenditures as capital or operational, and categorizing items as stock or non-stock. These distinctions aid organizations in optimizing their procurement strategies for better resource allocation.

Conclusion:

In conclusion, categorizing procurement spend into direct vs. indirect, capital vs. operational, and stock vs. non-stock items is essential for strategic resource management. While these categories provide a structured framework, they are not mutually exclusive, as an item can fall into multiple categories. For example, an item may be both direct and operational or indirect and stock. The flexibility of these categories allows organizations to tailor their procurement strategies based on their specific needs, ensuring efficient resource allocation and effective supply chain management. Different companies may adopt varying categorization approaches depending on their industry, size, and operational requirements.

Tutor notes:

- Because you’ve got 6 categories of spend to talk about you’re only going to need 3-4 sentences for each. Providing you’ve said the category, explained what it is and given one example, you’ll absolutely fly through this type of question

- You could also mention that it is useful to use categories of spend as this helps with budgeting. Different categories may also have different processes to follow for procuring the item (this could form part of your introduction or conclusion).

- This subject is LO 1.3.2 it’s quite spread out in the text book but the main info is on p.49

- Note- different companies/ industries classify items of spend differently. Particularly packaging and salaries. Some say they’re direct costs and some say they’re indirect costs. Honestly, it’s a hotly debated subject and I don’t think there is a right or wrong. I’d just avoid those two examples if you can and stick to ones that aren’t as contentious like eggs and PPE.

Electronica Manufacturing

Jane Henderson has been brought in to set up and lead a new procurement department at Electronica Manufacturing. It manufactures

a range of electronic products, components and sub-assemblies for clients in the Information technology sector.

Jane has carried out an initial analysis of procurement practices and has discovered that the company has never focused on how

procurement tools and techniques can be used to reduce costs. She is also keen to improve procurement added value, increase quality

and increase end-user satisfaction.

Jane wishes to introduce a more robust approach to procurement and is considering implementing new processes and procedures in

the procurement of raw materials and sub-assemblies.

Using the CIPS Procurement Cycle to Influence Spend on Raw Materials, Deliver Cost Reductions, and Enable Value Benefits

Electronica Manufacturing has historically not focused on procurement’s role in cost reduction or added value. By implementing the CIPS Procurement Cycle, Jane Henderson can establish a structured and strategic procurement process to optimize spend on raw materials, achieve cost reductions, and generate other value benefits. Below is a detailed analysis of how each stage of the CIPS Procurement Cycle can support these goals:

1. Understanding Needs and Developing Specifications

How it Helps:

Jane must assess raw material requirements based on product designs, production needs, and customer expectations.

Avoiding over-specification ensures that materials are fit for purpose rather than unnecessarily costly.

Impact on Electronica Manufacturing:

Prevents unnecessary spending on premium materials that don’t add value.

Ensures cost-effective sourcing without compromising quality.

2. Market Analysis and Supplier Identification

How it Helps:

Conducting supplier market research helps identify competitive suppliers offering better pricing and quality.

Analyzing market trends (e.g., commodity price fluctuations) allows for timely purchasing to mitigate cost increases.

Impact on Electronica Manufacturing:

Reduces costs by sourcing from cost-effective and reliable suppliers.

Identifies potential new suppliers that offer better value and innovation.

3. Developing a Sourcing Strategy

How it Helps:

Jane can implement strategic sourcing, using techniques like long-term contracts, supplier partnerships, and competitive bidding.

A well-defined strategy ensures that procurement aligns with business goals.

Impact on Electronica Manufacturing:

Reduces supply chain risks by diversifying suppliers.

Maximizes cost savings through bulk purchasing and supplier negotiations.

4. Supplier Evaluation and Selection

How it Helps:

A structured evaluation process ensures selection based on cost, quality, reliability, and sustainability.

Supplier benchmarking and total cost analysis ensure best-value sourcing.

Impact on Electronica Manufacturing:

Reduces waste and costs by selecting suppliers that provide consistent quality.

Helps mitigate supply chain risks, ensuring reliable raw material availability.

5. Contract Management and Negotiation

How it Helps:

Jane can introduce structured contracts with cost-control mechanisms, such as fixed pricing, volume discounts, and service-level agreements (SLAs).

Contract negotiation can lock in competitive pricing and ensure supplier accountability.

Impact on Electronica Manufacturing:

Improves cost predictability and budget control.

Strengthens supplier relationships, leading to better terms and cost efficiencies.

6. Purchase Order Processing and Expediting

How it Helps:

Implementing an efficient purchase order (PO) system reduces administrative inefficiencies and speeds up raw material procurement.

Use of automated procurement systems (e.g., ERP systems) ensures cost-effective order processing.

Impact on Electronica Manufacturing:

Reduces administrative overheads and human errors.

Ensures faster lead times and better inventory control, reducing stock shortages and excess inventory costs.

7. Supplier Relationship Management (SRM)

How it Helps:

Establishing collaborative relationships with key suppliers can drive joint cost-saving initiatives.

Long-term supplier partnerships can lead to better pricing, innovation, and risk-sharing.

Impact on Electronica Manufacturing:

Reduces costs through supplier-led efficiency improvements.

Encourages supplier innovation, leading to better materials and higher-quality products.

8. Performance Review and Supplier Development

How it Helps:

Regular supplier performance reviews ensure that quality, cost, and delivery expectations are met.

Supplier development programs can help underperforming suppliers improve efficiency, reducing procurement risks.

Impact on Electronica Manufacturing:

Improves product quality and consistency, reducing defects and waste-related costs.

Enhances supplier accountability, leading to more cost-effective procurement.

9. Risk Management and Compliance

How it Helps:

Jane can introduce risk management strategies such as dual sourcing, inventory buffers, and price hedging to mitigate supply chain disruptions.

Ensuring compliance with ethical, legal, and sustainability standards reduces long-term operational risks.

Impact on Electronica Manufacturing:

Reduces financial and operational risks, improving business continuity.

Strengthens brand reputation by ensuring ethical sourcing.

10. Procurement and Supply Strategy Review

How it Helps:

Continuous evaluation of procurement strategies ensures alignment with changing market conditions and company goals.

Data-driven decision-making through spend analysis and procurement reporting allows for ongoing cost optimizations.

Impact on Electronica Manufacturing:

Enhances procurement efficiency and sustains cost reductions.

Ensures procurement remains a value-adding function rather than a cost center.

Conclusion

By applying the CIPS Procurement Cycle, Jane Henderson can transform Electronica Manufacturing’s procurement function from an ad-hoc, cost-inefficient process into a strategic, value-driven function. This structured approach will enable smarter spending on raw materials, continuous cost reductions, and broader business benefits, such as improved quality, efficiency, and stakeholder satisfaction.

Implementing procurement best practices will not only reduce costs but also drive long-term business sustainability and competitive advantage.

How to approach this question

- Description of the ‘third sector’ - the part of an economy comprising non-governmental and non-profit-making organisations including charities, voluntary and community groups, and cooperatives. These organisations reinvest surplus profits back into the enterprise to further their objectives. This is worth 10 points so should be a good 2-3 paragraphs, with examples.

- Main objectives – these could include engaging with stakeholders, social or environmental aims, education, providing a service to the community, stewardship role. There’s more points for this question so you should have more content here.

Example Essay

The 'Third Sector' refers to a segment of the economy distinct from the public (government) sector and the private (for-profit) sector. It encompasses a diverse range of non-governmental organizations (NGOs), charities, foundations, social enterprises, cooperatives, and other non-profit entities. These organizations are primarily driven by social, environmental, cultural, or community objectives rather than the pursuit of profit. They often operate based on values such as democracy, equality, and social justice. The Third Sector plays a crucial role in providing services, advocating for social causes, and filling gaps left by the public and private sectors.

The third sector is often called the ‘not-for profit’ sector. It’s distinguished from the private sector in that the main aim isn’t to make money for money's sake. The main aim is to generate money to reinvest back into the organisation so that the organisation can achieve the purpose it was set up for. Whereas the private sector may exist solely to make money, the third sector has a ‘higher aim’.

Organisations operate in a very narrow marketplace. They may be the only provider in that marketplace. For example the RNLI is the only operator of lifeboats and the only organisation that sets out to save lives at sea- there is no ‘competitor’.

3rd Sector Organisations have multiple sources of income; e.g. subscriptions or donations, or from donated goods that they then sell on (such as Oxfam shops), fundraising activities or selling merchandise. The sector also has a wide range of stakeholders.

The third sector is subject to same regulations as private and public companies but also has its own regulations imposed by the Charities Commission. This is a statutory regulation body which checks charities are run for public benefit and not private advantage, ensures charities are independent, and sets out to remedy serious mismanagement. They can audit, offer advice and investigate complaints. Therefore the sector is highly regulated.

Organisations in this sector have a huge range of objectives depending on why they were set up. These can be very specific, for example: charities such as Cancer Research (objective- find a cure for cancer), Museums (objective- educate the public), CIPS (objective - provide professional services to a particular industry), trade unions (objective- defend the rights of workers), pressure groups (objective- change laws and practices they morally disagree with).

However organisations in this sector do have overarching objectives in common.

1. Survival – Generating Enough Money to Continue Operations: Survival is a fundamental objective for Third Sector organizations. Unlike for-profit entities, these organizations do not aim to generate profits for shareholders but need sufficient funding to sustain their operations. This funding often comes from donations, grants, fundraising activities, and sometimes income from services provided. The challenge lies in balancing the mission with the need for financial stability, ensuring that the organization can continue to serve its community and pursue its goals over the long term. Financial sustainability is crucial, particularly in a sector where funding sources can be uncertain and competition for donations is high.

2. Creating Awareness of Their Cause: Raising awareness is vital for Third Sector organizations, as it helps to educate the public, garner support, attract volunteers, and drive fundraising efforts. Awareness campaigns are essential in highlighting the issues these organizations address, whether it's health, environmental conservation, social justice, or cultural preservation. Effective communication strategies, including the use of social media, public events, and collaborations, are employed to reach a wider audience. The more people know about a cause, the more likely they are to support it, either through donations, volunteering, or advocacy.

3. Compliance with Regulations and the Charities Commission: Compliance with legal and regulatory requirements is a critical objective. In many countries, including the UK, Third Sector organizations are regulated by bodies like the Charities Commission. These organizations must adhere to specific legal standards, including financial transparency, governance practices, and ethical guidelines. Compliance ensures credibility and trustworthiness, which are essential for maintaining public confidence and the continued support of donors and volunteers. It also ensures that the organization operates within the law, avoiding legal issues that could jeopardize its mission.

4. Providing a Service to the Community: The core of a Third Sector organization's mission is to provide services or benefits to the community. These organizations often address needs that are unmet by the private or public sectors, focusing on improving the quality of life for certain populations or addressing specific societal issues. This objective can take many forms, from offering direct services like healthcare and education to advocating for policy changes that benefit underserved communities. The impact of these services on the community can be profound, often bringing about significant social change.

5. Fulfilling a ‘Gap in the Market’: Many Third Sector organizations exist to fill gaps in services not provided by the public or private sectors. A classic example is the provision of air ambulance services in the UK. While the government provides comprehensive healthcare services, there's a gap in the rapid transportation of critically ill patients, which is filled bycharities operating air ambulances. These organizations identify specific needs that are not adequately addressed and work to meet them, often innovating in the process. By fulfilling these gaps, they play a crucial role in complementing existing services and enhancing the overall welfare of society.

In conclusion, Third Sector organizations operate with a unique set of objectives that distinguish them from other sectors. Their focus on survival, awareness-raising, compliance, community service, and filling market gaps is essential not only for their existence but also for the significant societal impact they make. These objectives align with the overarching mission of the Third Sector to contribute positively to society, addressing needs and issues often overlooked by other sectors.

Tutor Notes:

- A strong essay will use real life examples of organisations in the third sector and their objectives. I’ve mentioned a couple above such as Cancer Research UK: Our strategy to beat cancer | Cancer Research UK and North West Air Ambulance Charity: Home | North West Air Ambulance Charity (nwairambulance.org.uk) but pick charities you know well.

- LO 4.4. P.230

How to approach this question:

- The Sourcing Cycle is the first half of the CIPS Procurement Cycle and includes these steps:

1) Define Business Need

2) Market Analysis + Make vs Buy

3) Develop Strategy and Plan

4) Pre-Procurement Market Testing

5) Develop Documents and Specification

6) Supplier Selection

7) Issue Tender

8) Bid Evaluation

9) Contract Award and Implementation

Your response should detail 5 of these. It is a good idea to pick the ones you know most about and where there is more to write about. You won’t get any extra points for naming more than 5 so focus on getting as much detail down about 5, rather than explaining more of them.

Essay Plan

Introduction – explain what the sourcing cycle is – the stages of the procurement cycle before a contract is signed. It describes the steps an organisation will take to source/ procures goods or services.

Paragraph 1 – Define the business need

· How is the need identified? E.g. by end user, stores department, ERP system.

· Procurement should challenge this – is it really necessary? Suggest alternatives – this could be a key source of added value

· Put together business case / requisition / project initiation document

· What type of purchase? Straight rebuy, modified rebuy, new purchase

· Decide on what type of specification would be best - Conformance vs performance specification

· This stage may include early supplier involvement

Paragraph 2 – Market Analysis and Make vs Buy Decision

· Create an Analysis by segmenting the market by buyer, product, distribution channel, geography, customer market etc.

· Make vs Buy - use Carter’s Matrix to decide whether the organisation should make vs buy.

· Also consider outsourcing at this stage

Paragraph 3 – Documents and Specification

· Draft documents. These may include a RFQ or ITT, a specification and a proposed form of contract

· Specification may be conformance or performance based

· A contract sets out the roles, rights, responsibilities and obligations of the parties and shows intention to enter into ‘legal relations’

· This stage defines the ‘offer’ which becomes binding once other party accepts

· Documentation may also include proposed KPIs and SLAs

Paragraph 4 – Supplier Selection

· For a new purchase, supplier selection is very important - investigation should be proportionate to the value of the procurement. For rebuys or low-risk purchases you could use the same supplier or a list of pre-approved suppliers.

· You can locate potential suppliers by; catalogues, websites, trade registers, market exchanges and review sites, trade or industry press, fairs and conferences, networking and recommendations/ referrals.

· You can shortlist suppliers by sending out a pre-qualification questionnaire. This adds value by reducing wasted time / costs / risks to entering into a contract with the wrong supplier.

· Other criteria for supplier selection include using Carter’s 10 Cs (competency, consistency, capability, control, cost, cash, clean, communication, culture, commitment), thesupplier’s financial standing (e.g. liquidity and gearing), references and considering their CSR policy.

Paragraph 5 – Issue Tender

· Competitive bidding should only be done when there’s sufficient time and resources available, there’s sufficient suppliers in the marketplace, they’re keen to win business (ie that there’s appetite for competition) and there is a strong specification

· Best practice is to issue tenders electronically as it ensures equal treatment of suppliers and transparency

· Consider open vs closed procurement processes

· Use a cross-functional team – particularly when marking responses

Conclusion – you could mention here that different sourcing activities may require more or less effort at each of the stages e.g. procuring a new item may require more market analysis than a re-buy.

Tutor Notes:

- If you want to add in extra details, you could think about ways procurement can add value at each stage

- In the old syllabus, CIPS were a bit obsessed with Michael Porter. In the Market Analysis bit you could talk about using Porter’s 5 forces (buyer and supplier power, threat of new entrants, threat of substitutions, supplier rivalry) and Porter’s 3 generic strategies for competing (cost leadership, differentiation, niche segment). This has been removed from the study guide so it’s not essential to know this for this module, but if you’ve seen it before it’s a nice one to throw in.

- You could also mention that there are differences between the public and private sector procurement at the different stages. E.g. Public Sector requires open competitions for contracts of a certain value and must follow the rules set out in Public Contract Regulations – the private sector doesn’t have such strict regulations so there is much more flexibility in how tenders are completed. Also in the public sector, the evaluation criteria needs to be agreed beforehand and presented in the ITT- not the same for the private sector.

- Study guide p.71

Five Ways Procurement Activities Can Contribute to BrightAid’s Organisational Objectives

Procurement plays a critical role insupporting the operational efficiency and sustainabilityof a not-for-profit organization likeBrightAid. Given its reliance on donations and volunteers, a structured and strategic procurement approach can help maximize resources, reduce costs, and enhance the charity’s impact. Below are five key ways in which procurement can contribute toBrightAid’s organisational objectives.

1. Cost Reduction and Financial Efficiency

How Procurement Helps:

Implementing aformal procurement strategyensures that goods and services are sourced at the most cost-effective prices.

Joining abuying groupwith other charities can enhance BrightAid’spurchasing power, securing bulk discounts and reducing overhead costs.

Supplier negotiations and competitive tendering can helpmaximize value for moneyon every purchase.

Impact on BrightAid:

More funds can be allocated to coreaid and campaign activities.

Lower operational costs meangreater financial sustainabilityand improved service delivery.

2. Enhancing Transparency and Accountability

How Procurement Helps:

Implementingclear procurement policiesand procedures ensuresfair supplier selection, minimizing risks of fraud or inefficiencies.

Establishing aprocurement audit processensures compliance with ethical and legal standards.

Open and fair supplier engagement strengthensstakeholder trust(donors, volunteers, and partners).

Impact on BrightAid:

Increases donor confidence, encouragingrepeat and larger donations.

Ensures resources are used efficiently and ethically,enhancing the charity’s reputation.

3. Improving Supply Chain Reliability and Efficiency

How Procurement Helps:

Strategic supplier selection ensuresconsistent deliveryof essential goods and services.

Developinglong-term supplier relationshipscan reduce risks of supply disruptions.

Procurement can introducesupplier performance reviewsto ensure that services meet BrightAid’s needs effectively.

Impact on BrightAid:

Moreefficient aid distribution, ensuring beneficiaries receive timely support.

Reducedoperational disruptions, allowing volunteers and staff to focus on charitable work instead of supply issues.

4. Supporting Ethical and Sustainable Procurement

How Procurement Helps:

Ethical sourcing policies ensure that supplies (e.g., food, clothing, medical aid) come from responsible andsustainable sources.

Procurement can help BrightAid select suppliers that align withits mission and values(e.g., fair trade suppliers, environmentally friendly packaging).

Working with ethical suppliers enhancesCSR (Corporate Social Responsibility) partnerships, attracting more donors.

Impact on BrightAid:

Increasespublic trustand donor support, strengthening brand reputation.

Aligns procurement decisions with the charity’s coremission and sustainability goals.

5. Enhancing Operational Effectiveness and Stakeholder Engagement

How Procurement Helps:

A structured procurement process ensurestimely and cost-effectivedelivery of goods and services, reducing inefficiencies.

Procurement professionals canengage stakeholders(staff, volunteers, donors) to understand their needs and improve sourcing decisions.

Implementing procurementtechnology or e-procurement systemscan streamline purchasing and reduce administrative burdens.

Impact on BrightAid:

Staff and volunteers can focus more oncore charitable activitiesrather than administrative tasks.

Better stakeholder engagement ensures that procurementaligns with donor expectations, strengthening long-term relationships.

Conclusion

By implementing astructured and strategic procurement function, BrightAid can significantlyimprove its financial efficiency, supply chain reliability, and ethical standards, ultimately enhancing its ability todeliver aid effectivelyand attract continued donor support. With growing competition for donations, a well-managed procurement process ensurescost savings, improved transparency, and stakeholder trust, directly contributing to the charity’slong-term sustainability and success.

Bottom of Form

Top of Form

- Definition of ‘structured procurement process’ – when an organisation provides a sequence of actions / steps to take to get the outcome (the procurement of an item). This involves an organisation providing guidelines and instructions of how things should be done. Basically following a step-by-step process.

- Why this is important – Ensures all tasks that need to be done are done, maintains consistency, prevents conflict and suboptimal behaviour, improves efficiency, better managerial control, compliance (with laws and standards), assists with continuous improvement, may result in time/ cost savings, reduces risks such as fraudulent spending.

Example essay:

The first part of the question is worth 10 points, so you could include a few of the following points. It would also be good to include examples:

- Structured procurement involves creating rules on how procurement should be done

- This is in contrast to reactive / maverick spending

- May come about due to company policy, external regulations or through trying to achieve Competitive Advantage

- Examples include an organisation having set procedures for ordering items of different spend- e.g. Procurement Assistants can purchase items up to £500. Items between £500-£1000 require a manager’s approval and anything over £1000 requires a written Business Case in order to procure

- Structures Procurement Processes will usually also include the use of a designated e-procurement tool. E.g. an organisation may insist that all tenders use a certain online system and that invoices are sent via X system within 30 days.

The second part of the question is worth slightly more points, so spend more time on this. You could put each of the reasons why it is important in a separate paragraph. Also use examples where you can;

- Ensures all tasks that need to be done are done- having structured processes means having a step-by-step guide to how to procure. This means activities are well co-ordinated and there are no gaps, no duplications of effort and no conflicting efforts. It may involve assigning different people in the team different roles e.g. someone makes the requisition and someone else approves it. It also means that nothing is forgotten.

- Maintains consistency- having standardised processes means each procurement exercise follows the same process. This may include using a standard template for a requisition or ITT. Where there is consistency, this results in time being saved and less mistakes being made as everyone (including supply partners) is familiar with the processes.

- Prevents conflict and suboptimal behaviour- in organisations that use structured procurement processes everyone does the same. This means there is no conflict (e.g. one person doing things one way and another person does it differently and arguing which way is best). It also means no one can do procurement ‘wrong’ – there are written guides and procedures to follow. This is particularly helpful for new starters.

- Efficiency – time and money can be saved where there are standard procedures as people don’t have to plan each procurement activity individually. Structured Procurement Processes may also involve completing bulk orders and co-ordinating activity within the organisation which means less orders are placed over the year and efficiency savings can be made. For example, a factory may create an order of cleaning products once a quarter, compared to ordering products just as and when they are required. This will save time of the procurement department overall throughout the year and allows them to focus on other more value-adding tasks.

- Better managerial control – Managers have more oversight when using structured procurement. There are clear rules as to when managers need to be involved and provide sign-off. This visibility makes it easier for managers to make decisions and allows for early intervention where someone needs assistance. It will reduce maverick spending and fraudulent spending. For example, it is much harder to provide kick-backs to suppliers when there are clear processes and audit trails and managers have visibility over all processes.

- Compliance (with laws and standards) – particularly in the Public Sector there are rules and regulations regarding procurement practices. Using standardised processes allows organisations to demonstrate compliance with appropriate legislation. It also protects them from ‘challenge’. This is when a bidder who is unsuccessful challenges the decision to award a contract to someone else. Using a structured procurement process allows the organisation to demonstrate that they procured the item correctly and the challenge is unfounded.

Tutor Notes

- This topic isn’t as well explained in the new study guide as it used to be. It’s all pretty obvious stuff but the language is slightly different. The guide now talks about ‘compliance with processes’ and the benefits this brings. Which is exactly the same as why do you follow a structured process. This is on p. 114.

- If you’re feeling clever, you could mention the difference between Public and Private Sector- e.g. a private organisation may use standardised processes for efficiency and cost savings, whereas a public sector organisation may use it more for compliance purposes.