part

below.

Explanation:

How to approach the question

- There are 4 main components to this question that you will have to answer, so my advice is to first

write down subheadings for your essay so you don’t miss any out: definition of supply chain

management, drivers, advantages and disadvantages

- The question also brings up 2 concepts – supply chain management and tiered supply chains, it

would be good to include a definition of both of these.

- Because of the number of things you’ll have to write, you don’t need to go into lots of detail – one

paragraph per section will be enough.

Proposed Essay Structure

Intro – what is supply chain management and what is a tiered supply chain

P1 – drivers

P2 – advantages

P3 – disadvantages

Conclusion – supply chains are complex due to globalisation

Essay Ideas:

- Definition of supply chain management = Making something available in response to a buyer’s

requirements. The transformation of goods from raw material into an end product (input >

conversion > output)

- Drivers = Cost, Time/ Speed, Reliability, Responsiveness, Transparency, Globalisation

- Advantages = reduced costs by elimination of waste, improved responsiveness to customer

requirements, joint-ventures with supply partners leading to innovations, tech sharing, improved

communication leads to faster lead times for product development

- Disadvantages = needs considerable investment and internal support, closer relationships may be

risky (IP, loss of control), issues in fairly distributing gains and risks

(you don’t need to talk about all of these- pick 1 or 2 you feel you know the best and focus on that)

Example Essay

Supply Chain Management (SCM) is the arrangement of processes involved in the production and

distribution of goods / services - from the origin to the end consumer. In simple terms, it’s taking a

raw product and transforming it into an end product that a consumer would purchase. For example

taking a potato from a farmer, giving it to a manufacturer to make into chips and sending these to

retailers to be sold. SCM relies on close relationships between the parties in the supply chain and

adds value to the product at every stage. A Tiered Supply Chain is a specific configuration within SCM

that involves multiple levels of suppliers and sub-suppliers. A buyer will work with a small amount of

Tier 1 suppliers who will in turn work with their own suppliers. In a tiered system there can be many,

many layers of suppliers who all ultimately work towards creating the same product. This essay aims

to delve into the drivers, advantages, and disadvantages associated with implementing a complex

supply chain, such as the Tiered Supply Chain model.

The main drivers of using a tiered supply chain are often rooted in the pursuit of efficiency, cost-

effectiveness, and flexibility. By consolidating suppliers into distinct tiers, organizations can

streamline their management processes, reduce complexity, and enhance overall supply chain

performance. Additionally, tiered supply chains are often employed in response to the global nature

of modern business, accommodating the need to source materials and components from various

regions while maintaining a manageable and responsive supply network.

One of the advantages of a Tiered Supply Chain is the streamlined management of suppliers. In this

model, there are fewer direct suppliers to oversee, simplifying the coordination and communication

processes. This can lead to increased efficiency and responsiveness as organizations deal with a

smaller, more manageable pool of suppliers. The consolidation of suppliers in a tiered system may

also result in potential cost savings and improved collaboration with a select group of trusted

partners.

However, the complexity of a Tiered Supply Chain brings disadvantages. One significant drawback is

reduced visibility. As the supply chain extends across multiple tiers, organizations may struggle to

have a comprehensive view of the entire process. This lack of visibility can lead to challenges in

tracking and responding to potential disruptions. Moreover, ethical risks emerge when companies

have limited oversight over lower-tier suppliers, potentially exposing organizations to issues such as

labour exploitation, environmental concerns, or violations of ethical standards.

In conclusion, supply chain management has evolved into a complex discipline due to the forces of

globalization and consumer demands for speed and quality. The Tiered Supply Chain model, driven

by these factors, presents both advantages and disadvantages. While managing fewer suppliers can

enhance efficiency, the trade-off includes diminished visibility and increased ethical risks.

Organizations must carefully evaluate the specific needs of their operations and weigh the benefits

against the challenges when deciding whether to adopt a Tiered Supply Chain. In this intricate

landscape, the ability to balance complexity and efficiency becomes paramount for sustained success

in the global marketplace.

Tutor Notes

- Definition of supply chain management is from p.5

- Drivers, advantages and disadvantages p.9

- This topic used to be much more in depth in the old syllabus and has been drastically simplified in

the new study guide. The guide is actually quite light on this topic stating simply that “globalisation

and localisation are both drivers of using supply chain tiering”. If you don’t work in manufacturing, or

an industry that uses supply chain tiering, this concept may be a bit alien to you and I’d recommend

doing a little extra research. The best example of supply chain tiering is in car manufacturing- and

that would be a good example to use in an essay. Some additional links for research:

- Supplier Tiers: What's The Difference Between Tier 1, Tier 2, and Tier 3 | PLANERGY Software

- Sustainable Sourcing - Definition, Examples, Benefits & Best Practices (brightest.io)

- https://youtu.be/fs1rDgBQy1M

part

below.

Explanation:

- The question is asking you to explain the following:

- With this type of question you would be expected to discuss 3- 5 differences, giving examples.

Example Essay Structure

Introduction – explain what is meant by ‘procurement’ and ‘SCM’ – procurement is the traditional

way and is to do with purchasing goods, SCM is the new way which is a more multifaceted way of

securing goods and is the result of longer, more complex and more globalised supply chains.

Paragraph 1 – the objectives of each approach (5 Rights vs added value)

Paragraph 2 – the approach (reactive buying vs proactive ordering)

Paragraph 3 - the way of working (silo working vs cross-functional working)

Paragraph 4 – the relationships with suppliers (transactional vs collaborative)

Conclusion – There are many differences between the two approaches, and different companies may

favour one over the other depending on their specific circumstances. E.g. small organisations that

make low value and low risk purchases may take a traditional procurement approach and large multi-

national organisations may require a SRM approach due to the volume of suppliers and com-plexities

of the supply chains.

Example essay:

Procurement and Supply Chain Management (SCM) represent two distinct approaches to acquiring

goods, reflecting the evolution of purchasing practices. Procurement, the traditional method, in-

volves the straightforward purchase of goods. In contrast, SCM is a more intricate approach, born out

of longer, more complex, and globalized supply chains. This essay explores the main differences

between these two approaches, highlighting their objectives, methods, ways of working, and suppli-

er relationships.

In the traditional procurement approach, the focus is on achieving the "5 Rights" – getting the right

goods, in the right quantity, at the right quality, for the right price, and at the right time. This en-

sures efficiency in the purchasing process. On the other hand, SCM goes beyond these basic objec-

tives, aiming to add value to the entire supply chain. This might involve developing strategic rela-

tionships with suppliers, ensuring sustainability, and aligning with broader organizational goals. For

example, a company employing a traditional procurement approach might emphasize getting the

lowest price, while an SCM approach could involve working with suppliers to enhance product in-

novation or reduce environmental impact.

Secondly, the traditional procurement approach is often reactive, responding to immediate needs or

demands. Companies using this method typically make purchases as required, without a long-term

strategy. In contrast, SCM involves proactive ordering, anticipating future needs and trends. For

instance, a company employing SCM might engage in demand forecasting, allowing for better plan-

ning and inventory management. This proactive approach helps prevent stockouts, reduce costs, and

enhance overall supply chain efficiency.

Moreover, traditional procurement often involves silo working, where different departments operate

independently. The procurement team may not collaborate closely with other departments like pro-

duction or marketing. In SCM, there's an emphasis on cross-functional working, breaking down de-

partmental barriers for a more integrated approach. For example, an SCM team might work closely

with production to ensure materials are aligned with manufacturing schedules, fostering efficiency

and minimizing disruptions.

Lastly, in traditional procurement, the relationship with suppliers is transactional – focused solely on

the exchange of goods for money. Conversely, SCM promotes collaborative relationships, emphasiz-

ing long-term partnerships. A company using SCM might work closely with suppliers to improve

processes, share information, and jointly address challenges. For instance, an SCM approach might

involve collaborating with suppliers to implement just-in-time inventory systems, leading to cost

savings and improved responsiveness.

In conclusion, the differences between traditional procurement and SCM are substantial and nu-

anced. While a traditional procurement approach may suit smaller organizations with low-value and

low-risk purchases, larger multinational companies with complex supply chains often find SCM more

suitable. Understanding these differences allows companies to tailor their approach based on their

unique circumstances, emphasizing the importance of flexibility and strategic alignment with

organizational goals in the ever-evolving landscape of buying and supply chain management.

Tutor Notes

- This question is taken from learning outcome 1.1.1 (p2 onwards). The new study guide has drasti-

cally simplified the information on this topic compared to the old syllabus (the table above comes

from the old syllabus). This may be good news for students in that you don’t need to know as much,

but I do wonder if the study guide gives students enough ‘content’ to write an essay on the subject.

- If a question is to come up from LO 1.1 it would be likely be something like: definitions and dif-

ferences between procurement and SCM, difference between a supply chain and a supply network,

elements of SCM, or how to add value in the supply chain.

part

below.

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 being proved 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

Thank you for your visit.

part

below.

Explanation:

How to approach the question

- This question is worth 25 marks so you can imagine what the mark scheme will look like. There are

5 Rights so there will be 5 points for each Right. Naming the Right will be one point, then you have 4

points for a description and example. You should therefore aim to have 4-5 sentences per Right.

- I would recommend using headings for this type of essay- clearly putting your essay into 5 sections

for each right. This makes it easy for the examiner to mark.

Proposed Essay structure

- Introduction – what is meant by the 5 Rights

- Price

- Quality

- Quantity

- Time

- Place

- Conclusion – why it’s important, all rights are equally as important

Example Essay

Procurement revolves around achieving the delicate balance of acquiring goods and/ or services at

the right price, quality, quantity, time, and place. This essay explains why these "Five Rights of

Procurement" are important and explains how using this metric can help procurement to make smart

choices when they purchase goods or services.

Price:

Firstly, it is important that procurement do not simply seek to find the cheapest option. The First

Right is about finding the product/ service at an affordable price that doesn't compromise on quality.

Let's say a company is buying office furniture. They might go for a supplier that offers a good balance

between cost and quality, ensuring they get good value for their money. Considerations here may

include Total Cost of Ownership, the Price Iceberg, and Whole Life Costing. The company therefore

may seek to get the best price, but in relation to how long the furniture will last. A cheap chair that

will break after one year may not be the best price compared to another chair which will last 10

years.

Quality:

The second right, quality, looks at legal compliance and fitness for purpose. Quality adherence aligns

with specifications as well as legislation such as the UK Sale of Goods Act 1979. This helps ensure

that items meet their commonly intended purpose and maintains satisfactory condition. Buyers

deploy both reactive measures like Quality Control and proactive approaches like Quality Assurance

to uphold the stipulated quality. This commitment not only ensures legal compliance but also

underpins customer satisfaction, brand reputation, and ethical sourcing policies. An example of

quality is an organisation buying a washing machine that conforms to ISO standard 97.060 and has a

2-year warrantee.

Quantity:

The third right, quantity, is a strategic consideration about how much of an item to order. It is

connected to efficient inventory management. One tool that procurement can use to ensure they

order the right quantity of a product is Economic Order Quantity (EOQ) – this serves as a tool for

finding the equilibrium between stock-holding costs and avoiding stockouts. Market conditions,

supply chain dynamics (e.g. JIT / Lean manufacturing), and organizational policies collectively play a

pivotal role in determining the right quantity. For example a confectionary manufacturer will need to

order the right number of eggs to make cakes- they will need to consider how many eggs they will

need in order to make the cakes, but also take into consideration that they may not need them all at

once and that eggs can expire. The use of an MRP system is helpful when determining quantities of

products to order.

Time:

Time is about getting things when we need them. In the above example, an egg delivery timing for a

confectionary manufacturer will be pivotal to making the cakes on time. Other considerations about

time include changing market forces and customer demand. The use of forecasting is therefore

extremely useful; particularly if there are peaks in demand for a product, such as toys at Christmas.

Moreover, organizations need to avoid bottlenecks and production stoppages, so time (including lead

time and delivery time) is an important consideration when making orders.

Place:

Lastly, place is about getting things to the right location. Minimizing environmental impact, reducing

risks during transit, and optimizing warehousing practices contribute to achieving the right place.

This is particularly important for perishable items such as food, and for items which require specific

storage conditions such as chemicals. This involves good planning in terms of logistics, minimizing

any impact on the environment during transport and a consideration for safety.

In conclusion, the Five Rights of Procurement provide a structured framework for organizations to

optimize their sourcing practices. All rights are equally as important and it is the relationship

between the Rights which is key. While price, quality, quantity, time, and place form the foundation,

evolving models acknowledge additional elements like the Right Relationship with the Supplier.

Embracing these principles not only ensures operational efficiency but also promotes sustainability

and ethical conduct throughout the procurement process, contributing to long-term success in a

globalized and dynamic marketplace.

Tutor Notes

- The 5 Rights is a big topic in CIPS so do learn them off by heart. It’s p. 20 in the study guide.

- The conclusion mentions that additional ‘rights’ are starting to be introduced into the matrix, this is

true and isn’t mentioned in this study guide. I believe this starts to come up in Level 5. Just

something to be aware of- some people are now talking about other Rights such as finding the right

supplier and the right relationship. It’s good to know, but not essential for this essay. Neither is

knowing the ISO standard for washing machines – that’s certainly not in the book. You can sprinkle in

your own knowledge to essays like this, as it demonstrates you’re able to apply the theory to real life.

Why I remember the ISO for washing machines is a different story….

- You could also have mentioned the following topics;

o price – using the right currency and incoterm, aggregation of spend, negotiating prices

o quality – conformance and performance specs

o quantity – fulfilling retail orders, large order quantities leading to discount

o time – additional costs of a stockout, impact on relationships and reputation

o place – additional costs if delivery fails

- This is the type of question you can easily over-write. It’s a huge topic and you could easily spend

too long on it and not have enough time to answer other questions. So be careful with your timings.

You don’t need to mention everything above.

- Another way this type of question can come up is as a scenario. E.g. XYZ is a manufacturer of cakes

and needs to order eggs. Discuss how XYZ can ensure the 5 Rights of Procurement when ordering

Eggs.

part

below.

Explanation:

How to approach this

question:

- Definition of Inventory Management System – a system, usually a piece of digital software, that

helps an organisation manage their inventory. It oversees the process of ordering stock, receiving it,

storing it and converting it into finished goods. Used predominantly in manufacturing organisations.

MRP and ERP are types of IMS.

- MRP - Material Requirements Planning- this is a planning, scheduling, and inventory control system

used to manage manufacturing processes. Most MRP systems are software-based. The aim is to

automate and improve the efficiency of ordering and processing raw materials.

- ERP – Enterprise Resource Planning – this system uses MRP but also includes other operations such

as finance, so allows for budgeting and forecasting, and customer relations. ERP gives an

organisation a more holistic overview compared to MRP which just focuses on manufacturing.

- When they are used – predominantly in the manufacturing industry for the ordering of goods. Not

used for services. Used when there is a lot of maths involved in figuring out how much of something

to order and when e.g. a chocolate manufacturer who needs to produce 50,000 chocolate bars a day.

MRP / ERP helps the organisation know what to order, how much and when. It helps achieve the 5

Rights of Procurement.

- Advantages – the advantages of MRP and ERP are very similar and in most cases the same: more

accurate than manual processes, quicker response times, automated process frees up people to

complete more added value tasks, flexibility, has real time information to inform on decision making,

improved responsiveness to customers, improved supply chain management, reduction in costs.

- Disadvantages - expensive, complicated, can break down or be hacked (as they're digital systems),

only as good as the information put into them. training required to use.

Example Essay:

IMS

An Inventory Management System (IMS) is a software application or set of tools designed to oversee

and optimize the management of a company's inventory. The primary goal of an inventory

management system is to maintain an accurate record of stock levels, streamline the procurement

process, and ensure efficient order fulfilment. This system plays a crucial role in supporting

businesses by helping them avoid stockouts, reduce excess inventory, and enhance overall supply

chain efficiency.

Inventory Management Systems have the following functions: demand management (which assists

with forecasting, and helps the avoidance of overstocking), helps to control stock levels (by stating

minimum and maximum levels), replenishment of stock in line with policies, allows automatic

reordering when stock levels get low, tracks stock movements (e.g. around a warehouse), allows

communication with suppliers and end users, and helps increase safety by ensuring stock isn’t

damaged or deteriorating.

MRP

MRP stands for Material Requirements Planning, and it is a computer-based inventory management

and production planning system used by businesses to optimize the management of materials,

components, and finished products in the manufacturing process. MRP is a key component of

Enterprise Resource Planning (ERP) systems, focusing specifically on the planning and control of

materials and production resources.

MRP systems uses 3 main modules: 1. Master Production Schedule- information on customer orders,

forecast orders, customer requirements and stock orders 2. Bill of Materials – the recipe / breakdown

of components of the finished product and 3. Inventory Status File – tells you the current stock levels.

How MRP works- For example, a customer wants to order a new sof

a. 1. input the customer order into MRP 2. Check finished stock and if there’s a sofa, give the

customer that sofa. If there isn’t a sofa in stock, the MRP system will look at the Bill of Materials-

looking at individual materials needed to make the sofa and will order these, factoring in lead times

3. confirm to customer what the lead time is on getting their new sofa, based on delivery time of

materials and time to make it.

MRP is a simple system – it doesn’t take into account other business processes and can go wrong due

to inaccurate or outdated information.

Advantages of the MRP process include the assurance that materials and components will be

available when needed, minimised inventory levels, reduced customer lead times, optimised

inventory management, and improved overall customer satisfaction.

Disadvantages to the MRP process include a heavy reliance on input data accuracy (garbage in,

garbage out), the high cost to implement, and a lack of flexibility when it comes to the production

schedule.

ERP

This is business management software which is used to collect, store, manage, and interpret data

from many business activities. It uses MRP but also includes other operations such as finance, HR and

customer services. Therefore it’s more powerful than MRP. Where MRP can tell you how much of

something to order and what the lead times are, ERP can also consider how many staff are available

each day (by looking at holidays and sickness) and factor this into the manufacturing process. It can

also produce accurate financial data, manage customer and supplier relationships.

ERP facilitates information flow between all business functions and manages connections to outside

stakeholders. SAP and Oracle are examples of ERP systems. There is also ERP II – this extends the

system to include links with suppliers and supply chain stakeholders

One of the primary advantages of implementing an ERP system is the integration of information

across various departments. By providing a unified view of an organization's operations, an ERP

system ensures that different functions work with synchronized and consistent data, fostering

improved decision-making and collaboration.

Operational efficiency is another significant benefit of ERP systems. Through the automation of

routine tasks and streamlined processes, organizations can achieve greater efficiency, reduce manual

errors, and enhance overall productivity.

However, one of the primary disadvantages is the high initial implementation costs. Organizations

must invest in software licenses, training programs, and customization to align the ERP system with

their specific needs. The complexity of ERP systems and potential customization challenges can pose

difficulties, requiring expertise and resources for successful implementation.

Resistance to change among employees is a common hurdle when introducing ERP systems.

Employees may be hesitant to adopt new processes and technologies, leading to a slower transition

period and potential inefficiencies during the learning curve. Organizations also become dependent

on ERP vendors for updates, support, and maintenance, and switching vendors can be disruptive and

costly.

In conclusion, while MRP and ERP systems offer numerous advantages in terms of operational

efficiency, data integration, and strategic planning, organizations must carefully weigh these benefits

against the associated challenges. A well-planned and effectively implemented system can

contribute significantly to an organization's success, but the decision to adopt such a system should

be approached with a thorough understanding of both its advantages and potential drawbacks.

Tutor Notes

- This is a really hard topic if you don’t have a manufacturing background. The way I think about it is

this- imagine you’re Cadbury’s and you’re coming up to Easter. How much sugar do you need to buy

and when do you need to buy it in order to make all your Easter Eggs? Hard question right? Well MRP

/ ERP is the clever software that figures that all out for you. It will tell you how much sugar needs to

be bought on what day, in order for the delivery time to be right for manufacturing. It will consider

storage costs and how quickly Easter Eggs get made in the factory. It’s honestly so clever. Feel free to

use that example in your essay. Examples like that show the examiner you understand the topic.

- Although they’re fabulous systems, using MRP and ERP systems doesn’t guarantee success- at the

end of the day they’re just software- the key to success is in the accuracy of the data that’s inputted

into the systems and how the systems are used. That would make a strong conclusion.

- This is a good simple video that explains the topic: What is Materials Requirement Planning (MRP)?

(youtube.com) I also like watching How Its Made – a documentary series about factory life. You can

find it on BBC Iplayer. If you don’t have a manufacturing background it helps give context to some of

these dry subjects like MRP and Just-in-Time manufacturing.

- LO 3.4 p. 175

part

below.

Explanation:

What to include in the essay:

- Definition of added value: the economic enhancement given to products or services before offering

them to customers. Examples may include a product which has additional features at no additional

cost to the customer or the provision of an extended warrantee.

- Description of four of the following with examples and s: providing better customer service levels,

risk management, cost control and reduction, relationship management, reputation management,

innovation, use of technology, streamlining processes, improving specifications, increasing

sustainability, improving quality, ordering processes such as bulk ordering, inventory management,

improving the product from the customer’s perspective (e.g. packaging, exclusivity), sustainability,

convenience, market development.

Example essay:

Added value in procurement refers to the enhancement or improvement in the economic worth,

quality, or utility of products or services before they are offered to customers or end-users. In the

context of procurement, the goal is to go beyond simply obtaining goods or services at the lowest

cost. Instead, procurement aims to contribute additional value to the organization through various

means. This essay explores the concept of added value and outlines four ways the Procurement

Department can contribute to organizational improvement.

Improving Specifications

Procurement can add value firstly by ensuring all critical items are procured against a specification,

and secondly by improving and regularly updating those specifications. For example, the

procurement department might be responsible for procuring light-bulbs for an office. Having an

effective specification for this purchase (lightbulbs must meet X safety standard and Y environmental

standard) would result in less maverick buying for the organisation and the procurement of a better-

quality product. Furthermore, regularly updating specifications ensures that purchases are made

against current safety standards and regulations (e.g. the use of low-energy lightbulbs). If

procurement don’t update specifications, then there is a risk that items are bought that don’t meet

the correct standards. Added value in this regard could also therefore be considered the removal of

risks of procuring the wrong item.

Stream-lining Processes

Procurement can add value by stream-lining processes such as requisitions and POs. This reduces the

time it takes to procure an item, thus saving the company money. Another process that could be

streamlined is the re-ordering process of regularly bought items. This could be automated when the

stock levels reach a certain level. For example if an organisation requires its staff to wear PPE, an

automatic request could be made once there are only 50 face masks left.

Managing Supplier Relationships

Having strong, positive relationships with suppliers is a source of added value as it means suppliers

value you as a buyer and are therefore more likely to help in situations which are adversely affecting

business. For example, if a manufacturer puts an order in for 300 items with their supplier but then

realises that they have made an error in the amount, if there is a strong relationship, the supplier

may allow the buyer to amend the order after the fact. If there is a poor relationship, the supplier

may not be as flexible. The flexibility in the supply chain is therefore a source of added value.

Improving Quality / Innovation

This involves adding value from the customer’s perspective. E.g. a customer may choose to purchase

a phone that has a longer battery life than others. Procurement’s role in this may be in completing a

Value Engineering exercise or procuring higher quality components or materials at the same price in

order to achieve this additional feature.

In conclusion, the Procurement Department plays a crucial role in organizational success by adding

value through improved specifications, streamlined processes, strong supplier relationships, and a

focus on quality and innovation. These strategies contribute to enhanced efficiency, reduced risks,

and increased customer satisfaction, making procurement an essential function for organizational

excellence.

Tutor Notes

- The question asks specifically to name 4 ways of adding value. You therefore won’t get any

additional points if you talk about 5 or 6, even though it may be tempting. Instead, focus your

response on providing more information on the 4 you have chosen and bulking out your answer with

examples. This demonstrates to the examiner that you fully understand the topic AND that you can

apply the theory to real situations.

- You could use real-life examples from your own organisation/ experience or you could give a

hypothetical situation such as a cake manufacturer. You could talk through how the procurement

department at the cake manufacturer can add value by doing the four things in your essay: by

amending the specification so the cakes are more tasty, by streamlining the process for ordering

flour, by managing the relationship with the company that fixes the machines when they break

down, and by introducing innovation such as using an e-procurement system to source raw materials

and the benefits that these will bring to the organisation.

- Added value is part of the syllabus for Learning Outcome 1.2 starting from p.19 but I’m gonna be

honest, I think the new study guide is a bit crap on this part of the syllabus. The section starts talking

about the 5 rights of procurement and I think that makes things very confusing for students. The 5

rights and added value are linked subjects, but they’re not the same. Getting the rights right, CAN

lead to sources of added value, but added value is value that is IN ADDITION to what is expected. So,

when you have a question on added value, focus on stuff that’s listed under 1.1.4 ‘other sources of

added value’ on p.35 rather than talking about the 5 rights of procurement. My list at the top is more

exhaustive than the one in the study guide.

- If you’re looking to be really clever you can quote Michael Porter on ‘what is added value?’. Michael

Porter looks at this from a customer perspective - ‘added value’ refers to the addition of greater

value (either by reducing the cost to produce it, or by adding something that customers are willing to

pay more for). These could be; marketing / design, customer service, maintenance, delivery etc. This

comes up at Level 5 / 6.

part

below.

Explanation:

How to approach this question

- There are three questions within this question. The purpose could be your introduction, and then

take two big sections in the main body of your essay for the elements and how to evaluate it.

Example Essay

A Corporate Social Responsibility (CSR) policy serves as a formal commitment by a company to

conduct its business in a socially responsible and sustainable manner. The purpose of a CSR policy is

to outline the organization's dedication to ethical practices, environmental stewardship, and social

contributions. It reflects a company's commitment to going beyond mere profit generation and

actively engaging in initiatives that benefit society and the environment.

Elements of a CSR Policy:

1. Ethical Business Practices:

· Clearly articulated principles on fair business dealings, anti-corruption measures, and adherence to

ethical standards in all operations.

2. Environmental Sustainability:

· Commitments to minimize environmental impact through sustainable practices, energy efficiency,

waste reduction, and responsible sourcing of materials.

3. Social Responsibility:

· Efforts to contribute positively to the community, which may include support for education,

healthcare, poverty alleviation, or other social initiatives.

4. Labor Practices:

· Fair and ethical treatment of employees, including non-discrimination, fair wages, safe working

conditions, and respect for workers' rights.

5. Supply Chain Responsibility:

· A commitment to ensuring that suppliers and partners adhere to similar ethical and CSR standards,

promoting responsible practices throughout the entire supply chain.

6. Transparency and Accountability:

· Open disclosure of CSR initiatives, performance, and impacts, demonstrating a commitment to

transparency and being accountable for CSR goals.

7. Stakeholder Engagement:

· A pledge to engage with and consider the interests of various stakeholders, including employees,

customers, communities, and shareholders, in decision-making processes.

Evaluating a Supplier's CSR Policy:

Assessing a potential supplier's CSR policy involves a comprehensive examination of key factors to

ensure alignment with ethical and responsible business practices:

1. Policy Content:

· Review the content of the CSR policy to ensure it covers a broad spectrum of social, environmental,

and ethical aspects. A comprehensive policy reflects a commitment to holistic CSR practices.

2. Alignment with Industry Standards:

· Check if the CSR policy aligns with industry-specific standards and best practices. Adherence to

recognized standards, such as the Global Reporting Initiative (GRI) or ISO 26000, indicates a

commitment to global CSR norms.

3. Performance Metrics:

· Evaluate whether the supplier includes measurable performance metrics in their CSR policy. Clear

objectives and key performance indicators (KPIs) demonstrate a commitment to continual

improvement and accountability.

4. Stakeholder Engagement:

· Assess how the supplier engages with stakeholders. A robust CSR policy should involve stakeholders

in decision-making processes and demonstrate an understanding of their concerns.

5. Supply Chain Responsibility:

· Check if the supplier extends CSR principles to its supply chain. This involves ensuring that suppliers

and partners adhere to ethical, environmental, and social standards, contributing to a responsible

and sustainable supply chain.

6. Transparency and Reporting:

· Look for transparency in reporting. A supplier that openly communicates about its CSR initiatives,

achievements, and challenges indicates a commitment to accountability and transparency.

7. Continuous Improvement:

· Evaluate if the supplier emphasizes a commitment to continuous improvement in its CSR policy.

This indicates a dynamic approach to addressing emerging challenges and staying ahead of evolving

CSR expectations.

By thoroughly examining these aspects, a buyer can gain insights into a potential supplier's

commitment to corporate social responsibility and make informed decisions that align with their

own CSR objectives and values.

Tutor Notes

- Students often ask if they can use bullet points in their essays. Many tutors say no, but the answer is

actually more nuanced than that. I’ve purposefully written the above in bullet points to show you

how it can be done effectively. Bullet points are fine, providing you’re using full sentences and it

makes sense as a stylistic choice. It’s not a good option if you’re just going to list things without

context. Then it can be hard to follow. I’ve personally used bullet points in essays and done really

well. There’s no rule against it. You’ve just got to make sure you’re doing it ‘right’.

- CSR policies are only briefly mentioned in LO 2.4 but it does come up as quite a big topic in other

parts of the syllabus so is worth knowing. You could mention some examples of big companies and

what their stance on CSR is. A good one to look at is The Body Shop.

- The study guide

Carroll’s Pyramid – this would be great to include in your essay Carroll's

CSR Pyramid explained: Theory, Examples and Criticism (toolshero.com) p.112

part

below.

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 /

,

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 criteri

a. 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

part

below.

Explanation:

A basic response would include:

- What a Corporate Governance Framework is - the system of rules, practices and processes which

directs and controls a company. Corporate Governance refers to the way in which companies are

governed and to what purpose.

- Impact this has on policies and processes – means the procurement department follows regulatory

mechanisms (e.g. financial regulations, Codes of Practices), has a checks and balances system (such

as auditing), uses e-procurement technologies, vets staff and suppliers, has a clear segregation of

duties etc.

This is a very open question and there are so many correct answers. In fact, it’s quite hard to give a

wrong answer to this question – as long as your response explains a policy or process that a

procurement department can have that ensures they’re following Corporate Governance – that’s

right!

A good response may mention:

- Corporate governance is in essence a ‘toolkit’ that allows an organisation to effectively manage

itself, ensuring that it’s policies and procedures are compliant with legislation and are ethical. It also

ensures that the company meets its objectives.

- The impact Corporate Governance has on the procurement department will be in mandating the

ways in which goods and services are procured and in the general ways of working of the

procurement department.

- In your response you should mention 5 (ish) different ways Corporate Governance would impact on

how procurement do their job. Examples include:

- Ethical Conduct – corporate governance ensures that the company is operating in a legal and ethical

way. This influences the processes Procurement will do and the type of suppliers they will engage

with. This may also be in their approach to relationships and negotiations- seeking out collaborative

relationships with suppliers rather than looking to exploit them. For example, an organisation that

does not have a Corporate Governance structure may look to take advantage of suppliers and

achieve the lowest cost possible at the expense of the supply chain and local community. An

organisation that has strong Corporate Governance would work with suppliers, developing the

relationships and thinking long-term about the impact on the local community. The organisation may

therefore prioritise standards such as Fair Trade over price, and this would be reflected in the way

tenders are evaluated by the procurement department.

- Use of Checks and Balance system- Corporate Governance ensures strong financial controls are

implemented throughout the organisation. For the procurement department this may result in

purchases being made to strict budgets (rather than just spending whatever they want), and business

cases being written up and approved before the organisation spends a large amount of money on a

single item. Another impact may be in the use of audits. For example, peer reviewing tenders and

contract awards to ensue all members of the Procurement Team are following internal processes

correctly.

- Anti-fraud prevention mechanisms. An important area of Corporate Governance is ensuring the

organisation is free from fraud and corruption. This impacts on Procurement’s policies and processes

as it will mean scrutinising tenders and who is being awarded contracts. It may result in high levels of

Due Diligence being completed on suppliers before entering into contracts and providing a whistle-

blowing service for staff to report issues.

- Security measures- this will be to protect the organisation from risk. It may include the

procurement department vetting new staff by completing background checks. It may also involve the

segregation of procurement duties so that no individual has too much power. E.g. one person raises

the requisition and another person approves the purchase. Security may also be in ways of working

such as password protecting documentation and limiting access to confidential information.

- Use of a Purchasing Policy Manual – this provides operational guidance on procurement policies

and procedures to all staff members. It may detail things like who has permission to order what, who

the Delegated Purchasing Authority (DPA) is and the roles and responsibilities of the team.

An excellent response may also include

- Reasons why Corporate Governance Frameworks impact on procurement policies and practices.

This could include reasons of accountability, reputation and risk management, procurement’s links

with other departments.

- You could also look at what processes would look like with Corporate Governance compared to

without it (with CG = rule driven, autocratic but organisation is protected from risk. Without CG =

laissez-faire, everyone does whatever they like, very risky)

- You could also provide further examples, either real life or hypothetical. Investopedia has some

great information and examples you could use: Corporate Governance Definition: How It Works

(investopedia.com)

part

below.

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 detailed s and examples are where you will secure the most points.

- p.108