Scribd
Upload
71 views

CIPS Level 4 Module 1 Expanded Notes

Uploaded by

faysal7
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
71 views

CIPS Level 4 Module 1 Expanded Notes

Uploaded by

faysal7
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

CIPS Level 4 Module 1: Scope and Influence of Procurement and Supply -

Expanded Notes

Module Overview
Module 1, 'Scope and Influence of Procurement and Supply,' provides a comprehensive
understanding of procurement's role within organizations and its impact on various
stakeholders. This module covers the procurement and supply cycle and emphasizes its
importance in adding value to organizations. The roles and responsibilities of procurement
professionals are outlined, along with the influence of procurement on organizational
success.

1. Understanding and Analyzing the Added Value of Procurement and Supply


Chain Management
This section focuses on defining key concepts, comparing procurement and SCM, identifying
sources of added value, understanding categories of spend, and recognizing stakeholders in
procurement.

Defining Key Terms


1. Procurement: The process of acquiring goods, services, or works from an external source,
often involving negotiation, sourcing, and strategic supplier management.
Example: A hospital’s procurement team sources critical supplies, like medical equipment
and medications, essential for operations.

2. Supply Chain: The network involved in producing and delivering a product or service,
including raw material suppliers, manufacturers, and end consumers.
Example: A food chain supply network could include farmers, distributors, processing
plants, and retailers.

3. Supply Chain Management (SCM): The management of materials, information, and


finances as they move from supplier to end customer, aiming for efficiency.
Example: A manufacturing company's SCM ensures raw materials arrive on time,
production is efficient, and final products are shipped promptly.

Comparing Procurement with SCM


Procurement focuses on sourcing and buying, whereas SCM covers the complete cycle of
delivering goods or services to end users. For example, a retail chain’s procurement team
sources products from suppliers, while SCM manages inventory, warehousing, and
distribution to stores.

Sources of Added Value in Procurement


1. Cost Savings: Achieving cost reductions through negotiation or bulk purchases.
2. Quality Improvements: Partnering with suppliers to maintain high standards and reduce
returns.
3. Innovation: Collaborating on new technology or processes.

Example: A manufacturer negotiating bulk discounts with suppliers improves profit


margins.

Categories of Spend
1. Direct Spend: Goods or services in the final product.
Example: Steel for automotive manufacturing.

2. Indirect Spend: Items supporting operations but not part of the final product.
Example: Office supplies.

3. Capital Expenditure: Long-term investments, such as machinery.


Example: A factory's new machinery.

4. Operational Expenditure: Regular costs required to run the business.


Example: Energy bills for production facilities.

2. Key Steps in Procuring Goods or Services (The CIPS Procurement Cycle)


The CIPS Procurement Cycle is a structured process essential for efficient purchasing. It
consists of these steps:

1. Identify Needs: Recognize specific requirements.


Example: A company realizes it needs new software.

2. Specify Requirements: Defining requirements in detail.


Example: A restaurant specifies the type and quality of ingredients.

3. Sourcing: Finding suitable suppliers.


Example: A tech company evaluates several software vendors.

4. Negotiation: Setting contract terms.


Example: A retailer negotiates bulk discounts for seasonal items.

5. Order Placement: Confirming orders and ensuring delivery.


Example: A brand ensures fabric orders for product launches.

6. Receipt and Payment: Verifying goods and processing payment.


Example: Inspecting a shipment before paying.

7. Contract Management: Managing supplier relationships.


Example: A healthcare provider annually reviews supplier performance.
3. Organizational Infrastructure That Shapes Procurement and Supply Chain
Functions
Examines the influence of corporate governance, organizational policies, procurement
structures, and IT systems.

Corporate Governance in Procurement


Corporate governance ensures accountability and transparency in procurement. It involves
managing conflicts of interest and ensuring accountability.
Example: Restricting staff from awarding contracts to family members.

Procurement Structure Types


1. Centralized Procurement: A single department oversees all purchasing.
Example: A multinational centralizes to secure bulk discounts.

2. Decentralized Procurement: Individual departments manage their own needs.


Example: Different university branches independently procure lab equipment.

IT Systems in Procurement
ERP systems streamline procurement, consolidating data and automating workflows.
Example: SAP Ariba enables digital management of orders and suppliers.

4. Compliance When Undertaking Procurement in Different Sectors


This covers sector-specific regulations, including public, private, and not-for-profit sectors.

Impact of Public, Private, and Not-for-Profit Sectors


1. Public Sector: Strict procurement rules ensure fairness.
Example: Open bidding for government contracts.

2. Private Sector: Flexibility to drive profitability and innovation.


Example: Cost-cutting strategies in tech companies.

3. Not-for-Profit Sector: Ethical sourcing aligned with donor expectations.


Example: An NGO using fair-trade suppliers for humanitarian projects.

Assessment Format
The Constructed Response (CR) Exam is a 3-hour essay-style exam. Practice structuring
responses and focus on real-world examples to illustrate theoretical concepts.

Study Resources and Preparation Tips


1. CIPS Study Guides: Provide structured content and case studies.
2. Online Courses: Platforms like Udemy offer video courses.

Example: 'CIPS L4M1' on Udemy with video content and quizzes for each topic.

You might also like