CIPS L4M8 - Procurement and Supply in Practice

Retention of title (ROT) states when ownership transfers from supplier to buyer.

The retention of title terms also referred to as the Romalpa clause, which is related to a legal case from 1976 between Aluminum industries Vaassen BV and Romalpa Aluminum LTD

ILO stands for International Labour Organization- It is a United Nations agency whose mandate is to advance justice and promote decent work by setting international labor standard.

ETI is Ethical Trading Initiative: It is a leading alliance of companies, trade unions and NGOs that promote respect for workers right around the globe. Its vision is a world where all workers are free from exploitation and discrimination and enjoys condition of freedom, security and equity.

If a supplier is accredited or is a member of an association that promotes good ethical conduct, a statement to this effect is likely to be featured on its company documentation. This could be in a form of letters after the organization name or the authorized use of logo.

Accreditation information should be verified by procurement professionals either asking organiza-tion for certification to prove membership or accreditation or checking on a professional register.

Below are associated bodies that form some industries.

1. ISO 14001 – for quality management

2. CIPS – for procurement and Supply

3. Red Tractor – NGO Registered in the UK, promoting human right

4. Amnesty International – human right

5. Carbon Trust – For Carbon neutral status.

By using STEEPLE and SWOT analysis, the organization can reach out to the following strategic decision in how it will engage with its external environment, and utilize it strength to cover up for its weakness and achieve its strategic goals;

1) STEEPLE can aid an organization to come up with informed decision by understanding when is the right time to procure goods or services?

2) STEEPLE and SWOT analysis can uncover the quantity that could be most economical to ac-quire at the point in time.

3) When an organization want to decide on the currency that could be most favorable for the buy, it will analyze the countries involved and the strength of their currency and make its decisions on which currency that the supplier should be paid that will not make the organization to lose unnecessary money to exchange.

4) Should the product or services be made or bought?

5) Should the product or services be resourced?

6) Should the product or services be placed?

When evaluating offers, it is important to remember that the best price may not be the lowest. To ascertain that; the total cost of Acquisition TCA (the cost a buyer bears for placing orders and re-ceiving a product from a supplier) should be uncovered and compare against offers received. Things to consider that might make up the total cost of acquisition are;

1) logistics and handling costs

2) Cost of requisition

3) Rework

4) stock cost

5) Delay

6) Inspection

7) customer services

8) consumables

9) Training & support

Topics that are covered within ethics are;

1. Environmental factors

2. The triple bottom line: profit, people and planet

3. Adopting sustainable practice.

4. considering the social impact of organization’s behaviors

When organization has made the decision about which option is best for sourcing the asset, it can then begin to work on the whole life asset management strategy.

Whole life asset management is the process of evaluating the total price and all associated costs of a product to make an informed decision as to which option will provide the organization with the best value for money. This strategy is only under taken for large-value procurements because; 1) It takes considerable time (2) It involves many stakeholders and require numerous resources; If whole life asset management were conducted on every purchase it would not create value for the organization and that may tie up valuable resources.

Terms are the right and duties agreed which are then documented in a contract. Five types of con-tract terms that a procurement professional should create with a supplier when forming an agree-ment includes;

Price term is when the buying organization wants to protect its budged and spending, it include price terms in the contract, for the buyer to buy goods or services in response to a need they some-time enshrine a bespoke specification in the contract.

Payment Term is to specify when and how the buyer will pay the supplier. The buyer may include a payment term in the contract.

Warrantee is when the buyer requires a promise from the supplier that the product or service will meet the specified need in the contract.

Time is of the essence term is included in the contract to detail when a product or service should be delivered and explains the potential losses of business if time is not observed.

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Refer to the question column for response

Organizational culture is made up of behaviors, traits, values and beliefs and these differ signifi-cantly across the globe. Gestures that may be positive in one country can be highly offensive in another. This culture could mean; for example, individualistic/collectivistic, masculine/feminine, uncertainty avoidance, power distance, Time perspective, indulgence/restraint.

When negotiating and forming contracts within the extended supply chain, it is important that the culture of the suppliers is understood to be compatible with the buying organization or else their might be loss of reputation, time, money material and equipment.

Also, being not aware of what is an acceptable ethically behavior in global sourcing can cost a buying organization. In some countries, bribery and kickbacks are a standard part of doing business. If procurement professional is not aware of the fact that some countries methods of doing business involves or expect kickbacks, for example, this could be costly to the organization and cancel out any savings that had originally been seen.

Cost of poor quality and rework: if the product or service quality is poor the organization may not satisfy it customers and this can lead to a loss of reputation in the market. For example, a residential building construction company contracting a supplier that supply would require home owners to reinstall a new door within three months. The organization would spend more funds in carrying out rework.

More administrative cost in contract management: an organization will have to manage it sup-pliers and the contracts to ensure they are delivering what they were contracted to do. A poor con-tract management is a waste in the process of delivery that can lead to loss of money. Also, to cor-rect this would cost the organizations administrative cost.