CIPS Exam Report for Learner Community:

Qualification: Diploma in procurement and supply

Unit: Contexts of procurement and supply
Exam series: November 2018

Each element of a question carries equal weighting unless otherwise stated.

Question 1 – Learning Outcome 1 Mark
The main focus for procurement and supply is that value can be added either by
cutting costs or by securing operational efficiency.

Describe FIVE methods through which value may be achieved in procurement 25 marks
and supply using these approaches.

Learning outcome addressed: 1.2

Command word explanation: Describe - Give a full account or a detailed representation of something.

Examples of good content/good approaches in answers:

A good answer would have identified and described five methods through which value might be added in
procurement and supply.

These might have included:

 The use of value analysis, to eliminate non-essential features ; this technique involves looking critically
at the elements that make up a product or service and investigating whether they are necessary
 Challenging user generated specifications, to minimise variety, stock proliferation and over-
specification, with costs being cut as a result
 Consolidating demand, by aggregating orders or forming a consortium, in order to lower costs
through bulk discounts or economies of scale
 Eliminating or reducing inventory, through systems such as JIT, to reduce the costs of holding stock
 International sourcing, to take advantage of low-cost country production, although this involves
higher risks and higher costs, in terms of transport and possible taxes
 Negotiating with suppliers to reduce the cost of inputs
 Working with supply chain partners to minimise waste, with the technique of lean supply.

Examples of content for merit/distinction grade answers:

Stronger answers would have provided a more detailed description of the five methods identified. For
example, if eliminating or reducing inventory had been identified as one of the methods, the answer might
have detailed some of the costs of holding inventory. Also, some candidates illustrated their answers by

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reference to good examples from their own organisation and how value is achieved there. These were
rewarded by a high mark.

Examples of poorer content/poorer approaches in answers:

A significant number of candidates attempted to answer the question by reference to the five rights of
purchasing. In such cases, marks were awarded only for valid points made. For example, if a candidate
identified one method as achieving the right quality, marks were awarded only if the candidate described how
this achieves value, through fewer re-works and returns to the supplier. The answers of some candidates
were very short, with little depth of detail and the mark awarded for these was low.

Concluding comment: Answers to this question were of a mixed standard. Some were of a high standard, with
candidates identifying five appropriate methods, with a detailed description of how each achieves value.
These were rewarded by a mark of a distinction or merit pass standard. Some candidates, however, who used
the five 'rights' of purchasing approach, did not achieve a mark of a pass standard, because there was little
description of how they achieve value.

Question 2 – Learning Outcome 2 Mark

(a) Outline THREE pre-contract award stages of the sourcing process. 9 marks

(b) Explain FOUR advantages for an organisation of following a structured 16 marks

sourcing process.

Learning outcome addressed: 2.1 & 2.4

Command word explanation:

Outline - Give the main features, facts or the general idea of something
Explain - Give reasons for, or account for something

Examples of good content/good approaches in answers:

A good answer to part (a) would have identified and outlined any three pre-contract award stages.
These might have included:
 Identification of the need, which may be via a requisition or Bill of Materials
 Description of the need through a specification, which might be performance or conformance
 Develop the contract terms, which set out what each of the two parties have agreed to do
 Source the market, identifying suppliers who might have the potential to supply the requirement
 Appraise suppliers, establishing whether they have the ability to fulfil the requirement
 Issue an invitation for bids, through a tender or quotation
 Analyse bids and select the most appropriate supplier on the basis of criteria set
 Award the contract and issue the relevant contract documentation.

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Answers to part (b) should have explained four appropriate advantages to an organisation of following a
structured sourcing process. These might have included:

 It ensures that all tasks that need to be performed have been performed and that there are no 'gaps',
or things that have been forgotten
 It ensures co-ordination of effort between the parties collaborating in the process and that there has
been no duplication of efforts
 It helps to promote consistency in the process and outcomes, as opposed to the uncertainty of doing
things ad hoc
 It prevents conflict and sub-optimal behaviour, where participants pursue their own interests and
objectives
 It supports good governance and managerial control by ensuring that adequate checks and controls
are in place
 It supports compliance with relevant laws, regulations and standards.

Examples of content for merit/distinction grade answers:

Stronger answers to both parts of the question would have included examples to illustrate points made,
particularly from the candidate's own workplace. In the case of part (b), they might again have referred to
their own organisation and described how a structured sourcing process brings advantages. Also in part (b), to
achieve a mark of a merit or distinction pass standard, a detailed description of the advantages was required.

Examples of poorer content/poorer approaches in answers:

Some answers to part (a) simply identified the stage, with no attempt to outline it. For example, such answers
stated identification of the need, definition of the need and develop contract terms. Some candidates
answered part (b) by describing the stages of a sourcing process, without addressing what the advantages of a
structured process are. A few candidates misunderstood the question and answered it in terms of
procurement structures, such as centralised, decentralised, SCAN and CLAN.

Concluding comment: Part (a) was the best answered question on the paper, with many candidates scoring
the maximum, or near maximum, mark. Answers to part (b) were of a mixed standard. Some were of a high
standard and were awarded a mark of a distinction or merit pass standard. Some lacked depth of detail,
although four advantages were correctly identified and these achieved a mark of a pass standard. The
answers which described the stages of the sourcing process were awarded few, if any, marks.

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Question 3 – Learning Outcome 3 Mark
a) Define the term 'Corporate Governance'. 5 marks

b) Explain FOUR reasons why it is important to maintain effective 20 marks

governance standards within the procurement function.

Learning outcome addressed: 3.1

Command word explanation:

Define: Explain the exact meaning of a word or phrase.
Explain: Give reasons, or account for something, so that it is clear and easy to understand.

Examples of good content/good approaches in answers:

Answers to part (a) should have provided a definition of the term 'Corporate Governance'. This might have
been the rules, policies, processes and organisational structures by which organisations are operated,
controlled and regulated, to ensure that they adhere to accepted ethical standards, good practice, laws and
regulations.

Answers to part (b) should have explained four reasons why it is important to maintain effective governance
standards within the procurement function. These might have included:

 Procurement professionals potentially control large sums of money and they are in a position of trust
within the organisation; they have a duty of care, which may be jeopardised by unethical conduct
 Procurement professionals are faced by the opportunity to commit financial fraud or to misuse
systems or information for personal gain
 The decisions of procurement professionals typically benefit some suppliers over others. This creates
an incentive for suppliers to try to influence decisions, through bribery
 Procurement professionals are in a 'stewardship' role, responsible for finance and assets, which are
owned by other people. Unethical conduct may be represented by the theft, loss or damage of assets,
belonging to the owners of the organisation
 The reputation of the profession and the employing organisation may be damaged by fraud or
unethical conduct and enhanced by ethical conduct. Ethical standards are therefore an important
element in managing reputational risk
 Supply chain relationships may be damaged by unethical conduct. Ethical practices are therefore an
important element in procurement professionals maintaining a good status with suppliers

Examples of content for merit/distinction grade answers:

Stronger answers to part (a) would have gone on to say that the principles of Corporate Governance, may be
defined internally by the constitution, or Articles of Association, of the organisation, or that they may be
defined by external forces. Examples of this include government policy, law and regulations, professional
bodies, such as CIPS, which develop ethical codes and best practice frameworks, or international bodies, such
as the Ethical Trade Initiative and the International Labour Organisation. The Cadbury Report may have been
referred to.

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Answers to part (b) would have explained each of the four reasons provided in more depth of detail and given
illustrative examples, from the candidate's own work place or from their previous experience. Such examples
might have included details of either ethical or unethical conduct, which the candidate had experienced.

Examples of poorer content/poorer approaches in answers:

Some answers to part (a) were very short and lacked depth of detail. They consisted of one or two short
sentences. A small minority of candidates did not understand the term Corporate Governance. Some
candidates were unable to provide the four reasons specified in the question, with only two or three
explained. In other cases, explanations were very brief, with only one or two short sentences being provided.
For a 20 mark question, more depth of detail was required.

Concluding comment: In general terms, answers to part (a) were mixed. A significant number of candidates
achieved a mark of a merit or distinction pass standard. There were, however, some candidates whose
answers were very short and which did not justify the award of a mark of a pass grade.
Answers to part (b) were of a mixed standard. There were some very good answers, with candidates being
able to explain four reasons why it is important to maintain effective governance standards within the
procurement function and provide examples to illustrate. Such answers were rewarded by a mark of a merit
or distinction pass standard. On the other hand, there were a significant number of answers that lacked the
necessary depth or breadth of detail, which did not receive a mark of a pass standard.

Question 4 – Learning Outcome 4 Mark

(a) Describe, with examples, FOUR ways in which a third sector organisation's
objectives may impact on its procurement activities. 16 marks

(b) Explain the impact of regulation on a third sector organisation's procurement 9 marks
function.

Learning outcome addressed: 4.4

Command word explanation:

Describe - Give a full account or a detailed representation of something.
Explain: Give reasons, or account for something, so that it is clear and easy to understand.

Examples of good content/good approaches in answers:

Answers to part (a) should have identified four objectives of the 'not for profit' sector and then outlined their
impact on procurement and supply chain activities.

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These might have included:

 Raising public awareness of their cause. The impact of this is that procurement must work with
suppliers, whose values are aligned to those of the procuring organisation. Also, the need to
manage reputation and reputational risk involves procurement in the way that money is spent
 To provide material aid and services to the public. This means that there are a wide range of
stakeholders, including staff, donors, volunteers, beneficiaries, the media and regulatory bodies.
The impact on procurement is that there must be transparency and audit trails to ensure that
spending and decision making are clear and visible
 To provide representation services to members, this is often on a subscription basis from
members. The impact on procurement is that limited funding is likely to be available, so that there
is an emphasis on cost control and value for money. There is also the need for transparency so
that members can see that their donations are being spent wisely
 Raising funds to carry out charitable and value driven activities. The impact of this is that the
procurement team might have to act as retail buyers if goods are resold to raise funds.
Procurement will therefore have to source goods of a quality, variety and distinctiveness that will
appeal to consumers
 Political lobbying and advocacy on behalf of a cause, issue or group. The impact on procurement
is that any purchases that might be seen to go against the cause should be avoided

Answers to part (b) should have described how regulation of third sector organisations might impact on the
procurement function.

These might have included:

 It will set out the need for cost-effective and efficient use of the organisation's resources
 Procurement is accountable to the members, trustees and the regulator
 There will be a need for transparent accounting
 Procurement must always act in alignment with the values and culture of the organisation
 If the organisation has a retail arm, procurement must try to source quality goods that appeal to
customers, but which can be sold at a reasonable price and generate a profit
 Procurement may face logistical challenges if there are overseas activities, such as aid work in disaster
areas
 There will be a need for probity in all financial transactions

Examples of content for merit/distinction grade answers:

Stronger answers to part (a) would have identified four objectives of the 'not for profit' sector and provided a
link as to how these impact on procurement and supply chain activities. Again, relevant examples to illustrate
would attract higher marks.

Stronger answers to part (b) would have illustrated points made with examples from recent high profile cases
reported in the media. For example, if the answer stated that procurement must always act in alignment with
the organisation's values and culture, the example of Oxfam, where items were sourced from suppliers using
child labour, could have been introduced.

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Examples of poorer content/poorer approaches in answers:
For part (a) of this question, a significant number of candidates identified appropriate objectives, but did not
go on to outline how they impact on procurement and supply chain activities. As a result, the marks awarded
were low, as only part of the question was answered.

A small number of candidates in part (a) confused the 'not for profit' sector with the public sector and
outlined public sector objectives. Such answers were awarded no marks, because the question had not been
answered. A minority of answers to part (b) mentioned types of regulation on third sector organisations, but
did not go on to describe the impact on procurement. A significant number of candidates were unaware of
the types of regulation of third sector organisation and as a result were awarded low marks.

Concluding comment: Answers to both parts of the question were generally of a low standard. Few
candidates achieved a distinction or merit pass grade and there were many answers that were awarded a fail
grade. This was mainly because candidates did not address the questions fully. Although answers identified
objectives in part (a), the impact of these objectives on procurement and supply chain activities was not
covered. In the case of part (b), marks were generally low, because candidates did not understand the
question.

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