CIPS L4M2 - Defining Business Needs

Explanation

The following are typical social criteria in procurement:

• Reducing unemployment

• Preventing the use of child labour

• Preventing discrimination on the grounds of race, religion, disability, sex or sexual orientation

• Encouraging good employment practice

• Reducing local unemployment

• Reducing social exclusion

• Promoting training opportunities for the young or disadvantaged

• Encouraging access to work for people with disabilities

Detailed Explanation:De-regulation removes barriers to entry, encouraging new suppliers to enter the market. Other factors, like high investment or stringent requirements, limit supplier participation. Reference: CIPS Level 4, Market Entry and Supply Chain Factors.

Detailed Explanation:Roles such as a data researcher and marketing consultant are directly tied to the provision of services, which are intangible and often knowledge-driven. Warehouse managers and logistics directors are more relevant to goods markets. Reference: CIPS Level 4, Services Procurement.

Explanation

When using conformance specification, the buying organisation is responsible for the performance of the purchase. If the product fails due to poorly designed specification, the buyer is wholly responsible for it. It cannot blame the supplier for the failure because they still provided 'fit for purpose' product.

'Time to produce specification is shortened': Conformance specification requires details on dimen-sion, materials, design, etc. With such requirements, time to produce a complete conformance specification is often longer than producing performance specification.

'Buyer cannot control the inputs': Conformance specification is a list of inputs from buyer, so buyer has control over the inputs that will make the product. It also means that buyer is responsible for any product failure.

'Buyer may face liquidity risks': Liquidity means that how quick a business turns its assets into cash. This is a financial term, it does not link directly with specification failure.

Explanation

Statement of Work (SoW) is the document that captures and defines all aspects of your project. You’ll note the activities, deliverables and the timetable for the project. It’s an extremely detailed document as it will lay the groundwork for the project plan.

Project Initial Document is an important document and should precede any specification writing project. It sets out the scope of the project and it is the team's mandate from senior management

Work instructions are also called work guides, Standard Operating Procedures (SOPs), job aids or user manuals, depending on the situation. In any case, the purpose of work instructions is to clearly explain how a particular work task is performed.

Framework agreements are arrangements between one or more buyers and one or more suppliers that provide the terms governing contracts to be established for a certain period of time, in particular with regard to price and, where necessary, the quantity envisaged.

Explanation

Quality function deployment (QFD) is a method to transform qualitative user demands into quantitative parameters, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process.

Kano model of excitement and basic quality (Kano et al, 1984; Berger et al, 1993; Matzler et al, 1996) brings a different perspective for the analysis of improvement opportunities in products and services because it takes in consideration the asymmetrical and non-linear relationship between performance and satisfaction. The Kano model classifies customers requirements in five categories: basic requirements, performance requirements, attractive requirements, indifferent requirements and reverse requirements.

Mendelow’s Matrix is a tool that may be used by an organisation to consider the attitude of their stakeholders at the start of a project or when they are setting out strategic objectives.

The Thomas Kilmann model identifies two dimensions when choosing a course of action in a con-flict situation, these are assertiveness and cooperativeness. Assertiveness is the degree to which you try to satisfy your own needs. Cooperativeness is the degree to which you try to satisfy the other person’s concerns.

Explanation

Despite of its importance, cost analysis is often a daunting task for procurement professionals. In order to analyse supplier's costs effectively, procurement may need the input from other depart-ments. Normally, technical (or engineering) department may help them to identify the direct costs of the product/service (how much material is required to make the product, or how many people are needed to perform the job, etc), while finance (or accounting) department may have ideas on the overheads of the supplier.

In this scenario, engineering department may provide insights on the components needed and the tasks to perform. Similarly, finance may know how much supplier pays for the overheads.

On the other hand, while commercial agency and suppliers are external stakeholders, Sales and marketing is unlikely to provide valuable information in this case.

Explanation

To improve production process and reduce supply risk, Datong should collaborate with suppliers early in procurement cycle. Collaborating with suppliers in this way is often referred as Early Supplier Involvement (ESI)

'Request for quotation from potential suppliers': Quotations should only be requested if the buyer know exactly what they need. In this scenario, Datong is not yet sure about the specifications of product's components, request for quotation is not a good idea.

'Mapping out business plan': A business plan, as defined by Entrepreneur, is a “written document describing the nature of the business, the sales and marketing strategy, and the financial back-ground, and containing a projected profit and loss statement.” A business plan is not appropriate with improving production process and reducing supply risk.

'Budget controlling': Budget controlling largely concerns with dealing with budget variances. Tighter budget alone cannot lead to improved processes and fewer risks.

LO 3, AC 3.1