Introducing Procurement and Supply
33%of exam
Five RightsProcurement CycleSourcing TypesSector Types
Procurement and Supply Operations
17%of exam
PO ProcessSpecificationsTenderingEthics
Stakeholder Relationships
17%of exam
Stakeholder MappingCommunicationConflictTeamwork
Systems Technology
17%of exam
P2P Systemse-ProcurementEDI MRP ERPData Records
Inventory, Logistics and Expediting
17%of exam
Inventory ControlStock TypesWarehousingIncoterms 2020
Quick Facts
- Exam
- CIPS L2
- Credential
- Cert. Procurement & Supply Ops
- Modules
- 5 (L2M1-L2M5)
- Pass mark
- 70% per module
- Format
- Objective response (MCQ)
- Level
- Entry / foundational
- Credits
- 18 (6+3+3+3+3)
- Delivery
- Computer-based test centre
Five Rights Mnemonic
Quality, Quantity, Time, Place, Price
Q: right specQ: right amountTime: right momentPlace/Price: right spot, cost
Purchasing vs Procurement
Purchasing
- Transactional
- Order placing
- Short-term focus
Procurement
- Strategic
- Whole cycle
- Value and risk focus
Narrow task vs whole function
Sourcing Route Picker
- Only one capable supplier→Sole sourcing
- Maximise volume discount→Single sourcing
- Reduce supply risk→Multiple sourcing
- Recurring similar needs→Framework agreement
- One-off low-value buy→Spot purchase
Five Rights of Procurement
- Right Quality
- Matches specification exactly
- Right Quantity
- Amount actually needed
- Right Time
- Delivered when required
- Right Place
- Correct delivery location
- Right Price
- Best total value
Procurement Cycle Order
Need -> Source -> Order -> Review
Need: raise requisitionSource: find suppliersOrder: issue POReview: evaluate performance
Sole Sourcing vs Single Sourcing
Sole sourcing
- Only supplier exists
- No alternative available
Single sourcing
- Chosen deliberately
- Alternatives do exist
No choice vs chosen
Procurement and Supply Cycle
- Define need
- Raise requisition
- Specification
- Describe requirement
- Sourcing
- Identify suppliers
- Tendering
- Invite competitive bids
- Contract award
- Select winning supplier
- Order & receipt
- PO issued, goods received
- Payment & review
- Invoice paid, performance reviewed
Sourcing and Organisation Types
- Sole sourcing
- Only one capable supplier
- Single sourcing
- Chosen one, alternatives exist
- Multiple sourcing
- Several suppliers, spread risk
- Public sector
- Government funded, taxpayer accountable
- Private sector
- Profit driven, shareholder owned
- Third sector
- Not-for-profit, mission driven
Conformance vs Performance Spec
Conformance
- Exact design
- Fixed dimensions
- Low flexibility
Performance
- Required outcome
- Supplier's method
- More innovation
What it is vs does
Specification Type Picker
- Simple, standard item→Conformance spec
- Outcome matters, not process→Performance spec
- Need exact drawings→Conformance spec
- Want supplier's expertise→Output spec
Procurement Process Steps
- Requisition
- Internal request raised
- Check contracts first
- Avoid duplicate sourcing
- Purchase order (PO)
- Formal buyer commitment
- Order acknowledgement
- Supplier confirms acceptance
- Goods received note
- Confirms delivery received
- Three-way match
- PO, GRN, invoice agree
Quality Control vs Assurance
Quality Control
- Detects defects
- After production
- Inspection based
Quality Assurance
- Prevents defects
- Throughout process
- System based
Detect vs prevent
Specification Types
- Conformance spec
- Exact design match
- Performance spec
- Defines required outcome
- Output spec
- Defines end result
- Standard fastener example
- Best fits conformance spec
Centralised vs Decentralised Procurement
Centralised
- One team buys
- Leverages total spend
- Slower local response
Decentralised
- Local teams buy
- Fast, tailored
- Less spend leverage
Control vs local speed
Tendering and Contract Terms
- Blanket/call-off order
- Regular deliveries, one contract
- Framework agreement
- Pre-approved supplier panel
- Fixed price contract
- No cost adjustment allowed
- Delegated authority
- Spend approval limits
- Scoring matrix
- Weighted tender evaluation
- Subcontracting
- Third party delivers scope
Procurement Ethics
- Code of conduct
- Sets ethical expectations
- Conflict of interest
- Personal gain risk
- Bribery
- Improper inducement offered
- Ethical sourcing
- Checks supply chain practices
Power-Interest Grid
Manage, Satisfy, Inform, Monitor
High/high: manage closelyHigh/low: keep satisfiedLow/high: keep informed
Stakeholder Response Picker
- High power, high interest→Manage closely
- High power, low interest→Keep satisfied
- Low power, high interest→Keep informed
- Low power, low interest→Monitor, minimum effort
Stakeholder Types and Mapping
- Internal stakeholder
- Inside the organisation
- External stakeholder
- Outside the organisation
- Power-interest matrix
- Maps stakeholder priority
- Manage closely
- High power, high interest
- Keep satisfied
- High power, low interest
- Keep informed
- Low power, high interest
Communication and Conflict
- Communication channel
- Route message travels
- Active listening
- Confirms understanding fully
- Conflict resolution
- Resolves disputes constructively
- Negotiating position
- Weak if sole supplier
- Market factors
- Supply and demand shape price
Teamwork Basics
- Cross-functional team
- Mixed department members
- Cohesive team
- Shared goals, trust
- Team induction
- Orients new member
- Team meeting
- Shares updates, priorities
P2P and e-Procurement Systems
- P2P system
- Requisition to payment flow
- e-Catalogue
- Online supplier product list
- e-Auction
- Suppliers bid down price
- Supplier portal
- Self-service supplier access
- e-Sourcing
- Digital supplier identification
- e-Tendering
- Digital bid submission
Systems and Data Terms
- EDI
- System-to-system data exchange
- MRP
- Plans material requirements
- ERP
- Integrates whole organisation systems
- Record-keeping
- Audit trail evidence
- Bill of materials (BOM)
- Lists component parts
Incoterms Risk Ladder
EXW least seller risk, DDP most seller risk
EXW: buyer risk maxFOB/CIF: mid-point transferDDP: seller risk max
EOQ vs Reorder Point
EOQ
- How much to order
- Balances order and holding cost
ROP
- When to order
- Triggers at stock level
How much vs when
Inventory Method Picker
- Prioritise by spend value→ABC analysis
- Automate reorder trigger→Reorder point
- Minimise total order cost→EOQ
- Cut waste and buffer→JIT
- Check stock, no shutdown→Cycle counting
Inventory Control Methods
- ABC analysis
- Ranks stock by value
- Reorder point (ROP)
- Triggers new order
- EOQ
- Minimises total order cost
- Cycle counting
- Rolling partial stock check
- JIT
- Minimal buffer stock held
- Vendor-managed inventory (VMI)
- Supplier controls stock levels
FOB vs CIF
FOB
- Seller loads vessel
- Buyer insures onward
CIF
- Seller loads vessel
- Seller insures to port
Buyer vs seller insures
Incoterm Picker
- Buyer wants max control→EXW
- Sea freight, seller loads→FOB
- Seller insures to destination→CIF
- Seller bears max cost/risk→DDP
- Any transport mode needed→FCA or CPT
Stock Types and Costs
- Safety stock
- Buffer against demand spikes
- Cycle stock
- Normal operating inventory
- Lead time
- Order to delivery gap
- Total cost of ownership
- Full lifetime cost
- Holding cost
- Cost of storing stock
Warehousing and Logistics
- FIFO
- Oldest stock ships first
- Cross-docking
- No long-term storage
- Kanban
- Visual pull replenishment signal
- Temperature-controlled storage
- Preserves perishable quality
- Expediting
- Chases late deliveries
Incoterms 2020 Basics
- EXW
- Buyer takes all risk
- FCA
- Seller delivers to carrier
- FOB
- Seller loads named vessel
- CIF
- Seller insures to destination
- DDP
- Seller delivers, duty paid
- CPT
- Seller pays carriage, buyer risk
Common Traps
Purchasing vs procurement scope
Purchasing = task ≠ Procurement = whole cycle
Conformance vs performance spec
Conformance = exact match ≠ Performance = outcome only
QC vs QA timing
QC = after ≠ QA = throughout
Sole vs single sourcing
Sole = no alternative ≠ Single = chosen supplier
JIT vs safety stock
JIT = minimal buffer ≠ Safety stock = protection buffer
EXW vs DDP risk
EXW = buyer risk ≠ DDP = seller risk
Centralised vs decentralised control
Centralised = one team ≠ Decentralised = local teams
Last Minute
- 1.Memorise the five rights first
- 2.Cycle: need to review
- 3.Conformance = exact match spec
- 4.Performance = outcome, not process
- 5.70% pass mark per module
- 6.Five OR exams, all required
- 7.Power-interest: manage, satisfy, inform, monitor
- 8.P2P: requisition through to payment
- 9.Three-way match: PO, GRN, invoice
- 10.ABC: A items get tightest control
- 11.JIT means minimal buffer stock
- 12.EXW buyer risk; DDP seller risk
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