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CIPS L4M1 Exam Syllabus Topics:

Topic
Details

Topic 1

Procedures, strategies, manuals, and internal function involvement.

Topic 2

Understand and analyse the need for compliance: This section measures skills of compliance officers and sector-specific procurement managers in understanding different economic and industrial sectors such as

Topic 3

Understand and analyse the key steps when procuring goods or services: This section measures that skills of purchasing managers and procurement officers in identifying and evaluating stages in the sourcing process, planning, supplier selection, and contract management.

CIPS Scope and Influence of Procurement and Supply Sample Questions (Q29-Q34):

NEW QUESTION # 29
Explain, with examples, the three different ways one can categorise procurement spend: direct vs indirect, capital expenditure vs operational expenditure and stock vs non-stock items. (25 points)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
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.

NEW QUESTION # 30
What is an electronic system? Describe the following: e-requisitioning, e-catalogues, e-sourcing, e-payment technologies (25 marks)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
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 detailedExplanation:s and examples are where you will secure the most points.
- p.108

NEW QUESTION # 31
Sarah has recently been hired as the new Head of Procurement at Alpha Ltd, a manufacturer of small electronics such as hairdryers and alarm clocks. Alpha Ltd has a large factory based in Birmingham where many of the products are manufactured. One of the large pieces of machinery in the factory has recently broken and Sarah has been charged with replacing it as quickly as possible. Sarah is considering using the Whole Life Costing approach to this procurement. What is meant by Whole Life Costing? (5 points). Discuss
5 factors that Sarah should consider when buying new machinery (20 points).

Answer:

Explanation:
See the solution in Explanation part below.
Explanation:
How to approach this question
- I'd use clear headings with numbers for this one. It asks you for a definition and 5 factors. Number them.
Makes it easy for you to write and easy for the examiner to mark.
- Don't go over 5 - you won't get any extra points for this. So spend your time giving examples and explaining the 5 well, rather than naming more than 5.
Example Essay
As the new Head of Procurement at Alpha Ltd, Sarah faces the urgent task of replacing a critical piece of machinery in the company's Birmingham factory. Recognizing the complexity of the decision, Sarah contemplates utilizing the Whole Life Costing approach to ensure a comprehensive evaluation that goes beyond initial expenses. This essay explores the concept of Whole Life Costing and delves into five essential factors Sarah should consider when procuring new machinery.
Definition:
Whole Life Costing (WLC) is a procurement approach that considers the total cost associated with an asset throughout its entire lifecycle. Unlike traditional procurement methods that focus primarily on the initial purchase price, WLC evaluates all costs incurred from acquisition to disposal. This includes operational, maintenance, and disposal costs, providing a holistic perspective on the true financial impact of an asset over time.
Factors to Consider in Machinery Procurement
1) Initial Purchase Price:
While WLC looks beyond the initial cost, the purchase price remains a critical factor. Sarah should balance the upfront expense with the long-term costs to ensure the initial investment aligns with the overall financial strategy.
2) Operational Costs:
Sarah needs to analyze the ongoing operational costs associated with the new machinery. This includes energy consumption, routine maintenance, and potential repair expenses. Opting for energy-efficient and reliable equipment can contribute to substantial operational savings over the machine's lifespan, even though this may result in a higher up-front purchase price
3) Training and Integration:
The cost of training employees to operate and maintain the new machinery is a significant consideration.
Sarah should assess how easily the equipment integrates into existing workflows and whether additional training programs are required, impacting both immediate and long-term costs.
4) Downtime and Productivity:
Evaluating the potential downtime and its impact on productivity is crucial. Sarah should assess the reliability and historical performance of the machinery to gauge its potential contribution to sustained production levels and minimized disruptions, impacting the overall operational efficiency.
5) Technology Upgrades and Adaptability:
Sarah should consider the machinery's adaptability to technological advancements and potential upgrades.
Investing in equipment that allows for seamless integration with future technologies ensures that Alpha Ltd remains competitive and resilient in a rapidly evolving industry landscape.
In conclusion, adopting a Whole Life Costing approach empowers Sarah to make informed decisions that align with Alpha Ltd's strategic goals. By considering factors beyond the initial purchase price, such as operational costs, training, downtime, and technology adaptability, Sarah ensures that the replacement machinery not only meets immediate production needs but proves to be a cost-effective and efficient asset throughout its entire lifecycle. The WLC approach safeguards against unforeseen financial burdens, fostering sustainable and informed procurement practices in the dynamic manufacturing environment.
Tutor Notes
- Whole Life Costing is on p.28
- Total Life Cycle Costs, Total Cost of Ownership and Life Cycle Costs are all practically the same thing. The book says they're slightly different, but don't get yourself bogged down in trying to remember the differences.
Honestly, in the real world, people use this language interchangeably.
- Other factors you could have chosen to talk about include commissioning costs and disposal costs
- Don't worry if you feel CIPS breezed through this as a topic, they did. It's explained much better in L4M7.
You can read more about it here: Whole Life Costing - What is Whole Life Costing | CIPS and here Whole- Life Cost: What it Means, How it Works (investopedia.com)

NEW QUESTION # 32
Sarah is thinking of setting up a charity in the UK which will look after animals that have been abandoned.
What regulations and governing bodies should Sarah be aware of when setting up her charity? (25 Points)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question
- Your essay should mention at least one regulation and one governing body particular to the charity section and I would recommend these be the Charities Act 2011 and the Charities Commission.
- If you don't know a lot about the sector you can bring up more generalised regulations and governing bodies, such as financial conduct and the Equalities Act, but make sure it's relevant to Sarah. Her charity is a small, local one, so things like Modern Slavery Act will not be appropriate to talk about.
Example Essay
When setting up a charity in the UK, particularly one focused on animal welfare, there are several regulations and governing bodies that Sarah should be aware of. These ensure that the charity operates legally, ethically, and effectively.
A charity's purpose involves raising awareness and helping someone or something, in Sarah's case this will be local animals and potentially their owners. A charity has to satisfy two aspects: The benefit aspect and The public aspect. In the UK, both aspects are regulated by the Charities Act 2011.
To satisfy a benefit aspect, a charity must: have a purpose that must be beneficial to the community it works in
- this must be in a way that is identifiable and capable of beingproved by evidence. For Sarah this would be showing that her charity helps animals, potentially by taking them in off the street or removing them from dangerous homes and caring for them.
To satisfy a public aspect, a charity must benefit the public in general, or a sufficient section of the public. In Sarah's case the public benefit may be in removing stray dogs and cats from the streets where they can transport diseases and potentially attack people. Most charities strive to satisfy both aspects but in some cases this is not possible.
All charities are regulated. Because charities are funded by donations from the public, businesses and sometimes from government, their conduct is regulated closely. Key regulatory bodies that Sarah will have to engage with include:
1. Charity Commission for England and Wales:
As the primary regulator for charities in England and Wales, the Charity Commission oversees the registration and regulation of charities. Sarah's organization must meet the legal definition of a charity and apply for registration if its income is over £5,000 per year.
The Commission ensures compliance with the Charities Act, offering guidance on charity governance, financial management, and reporting.
2. HM Revenue and Customs (HMRC):
Charities can apply to HMRC for recognition as a charity for tax purposes. This status allows for tax reliefs and exemptions, including Gift Aid on donations.
HMRC ensures compliance with tax obligations and scrutinizes the use of charity funds.
3. Data Protection:
Under the General Data Protection Regulation (GDPR) and the Data Protection Act 2018, any charity handling personal data must ensure its protection and comply with data privacy laws.
4. Health and Safety Executive (HSE):
The HSE provides guidelines for workplace safety, which are important if the charity has employees or volunteers.
In conclusion there are many regulations and bodies that Sarah should be aware of when setting up her charity.
Sarah should consider seeking legal advice or consulting with charity advisory services to ensure full compliance with all relevant laws and regulations. Additionally, staying informed about changes in charity law and animal welfare legislation would be beneficial to the smooth operation of her charity.
Tutor Notes
- With case study questions you're not expected to know anything about the specific topic, in this case Animal Charities. If it happens to be something you know about, you can bring in some of your own knowledge, but this isn't a requirement to get a good score. You're not expected to know, for example about the Animal Welfare Act 2006, but if you happen to do so, it could be a nice little thing to add in. Just don't focus your essay on it. However you can make some sensible guesses on what Sarah will be doing, for example I talked about removing stray animals from the street.
- Charities comes up in LO 4.4 p.232
Bottom of Form
Top of Form

NEW QUESTION # 33
In the supplier selection part of the Procurement Cycle, what criteria can a Procurement Manager use to ensure they award to the best supplier? (25 points)

Answer:

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

NEW QUESTION # 34
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