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CIPS Scope and Influence of Procurement and Supply Sample Questions (Q17-Q22):

NEW QUESTION # 17
Industry Sectors can be classified as Primary, Secondary and Tertiary. What is meant by an 'industry sector'?
Describe the main characteristics of and types of business you will find in these. (25 marks)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question
- The first question can be a simple introduction with a bit of extra detail. The main 'meat' to your essay is going to be explaining the three sectors, their characteristics and example businesses.
- Aim for three well explained characteristics as a minimum
Example essay
An industry sector refers to a broad category or grouping of businesses and economic activities that share similar characteristics and functions in the production and distribution of goods and services. These sectors are often classified into three main categories: Primary, Secondary, and Tertiary. Here are the main characteristics and types of businesses you will find in each of these industry sectors:
1.Primary Sector:
*Characteristics: The primary sector involves activities related to the extraction and production of raw materials and natural resources directly from the environment. This sector relies on nature and weather patterns: businesses in the primary sector are highly dependent on natural factors such as climate, weather, soil quality, and geographic location. These factors can significantly impact the productivity and profitability of primary sector activities. Extreme weather such as floods can severely impact this sector. Moreover there is a seasonality to this sector and many activities in the primary sector require a significant amount of manual labour, particularly in agriculture, fishing, and forestry. However, modern technology has also been integrated into some primary sector activities to increase efficiency.
*Types of Businesses: a. Agriculture: This includes farming, crop cultivation, livestock raising, and forestry. b.
Mining and Extraction. c. Fishing and Aquaculture: Forestry and Logging: Includes the harvesting of timber and related activities.
2.Secondary Sector:
*Characteristic: The secondary sector focuses on the transformation of raw materials and intermediate goods into finished products. The main characteristic of the sector is that it requires high levels of machinery and industrial techniques. There is a reliance on technology. Secondly, the secondary sector adds significant value to the products compared to their raw material form. This value addition is achieved through processing, assembly, and quality control processes. The third main characteristic is standardisation: Manufacturing processes often involve standardization of components and processes to ensure consistency and quality in the final products. Standardization helps in economies of scale.
*Types of Businesses: a. Manufacturing: This sector includes factories and plants that produce tangible goods such as automobiles, electronics, textiles, and machinery. b. Construction: Involves the building and construction of structures like buildings, bridges, and infrastructure. c. Utilities: Companies providing essential services like electricity, gas, and water supply fall into this category.
3.Tertiary Sector:
*Characteristic: The tertiary sector is also known as the service sector and involves businesses that offer various services to consumers and other businesses. The main defining characteristic of this sector is Intangibility: Services are intangible and cannot be touched or held. They are often experienced directly by consumers through interactions with service providers or through the use of technology. Secondly, High Human Involvement: The tertiary sector relies heavily on a skilled and often highly educated workforce to deliver services effectively. This can include professionals such as doctors, lawyers, teachers, and customer service representatives. Lastly, Customization: Many services are customized to meet the specific needs and preferences of individual clients or customers. This personalization is a key characteristic of the tertiary sector.
For example Legal Advice will always be different depending on the specific needs of the client.
*Types of Businesses: a. Retail and Wholesale: Businesses engaged in the sale of goods to consumers or to other businesses. b. Healthcare and Education: This includes hospitals, clinics, schools, colleges, and universities. c. Financial Services: Banks, insurance companies, and investment firms are part of this sector. d.
Hospitality and Tourism: Hotels, restaurants, travel agencies, and entertainment venues fall into this category.
e. Professional Services: Legal, accounting, consulting, and IT services are part of the tertiary sector.
These industry sectors represent the different stages of economic activity, with the primary sector providing raw materials, the secondary sector processing and manufacturinggoods, and the tertiary sector offering services and distribution. Together, these sectors form the backbone of an economy, contributing to its growth and development Tutor Notes
- I've gone overboard on naming the types of organisation in the different sectors. You don't have to remember all of these. 3 examples is sufficient to get good marks. I've just named them all so you can see what could be considered a right answer.
- Some people are talking about Quaternary and Quinary Sectors. CIPS is not one of those people, so don't worry if you come across those terms in any further reading. But FYI
1.
*Quaternary Sector: This sector involves knowledge-based activities, including research and development, information technology, and data analysis.
*Quinary Sector: The quinary sector comprises high-level decision-making and leadership roles in areas such as government, academia, healthcare, and top-level corporate management.
- LO 4.1 p.196


NEW QUESTION # 18
Describe 3 stages of the sourcing cycle that occur in the post-contract award stage (25 marks)

Answer:

Explanation:
See the solution in Explanation part below.
Explanation:
How to approach the question
Your answer should provide details on 3 of the following:
- Contract Award and Implementation
- Warehouse Logistics
- Contract performance and Improvement
- Supplier Relationship Management
- Asset Management
Because the question is only asking for 3 stages, you're going to have to go much more into detail for each stage, giving lots of information about why each stage is important and examples. You could consider thinking of an example procurement you have done recently and explaining the stages for that. Or you could take a hypothetical procurement too. Either will get you the same marks. Pick the three that you can write the most about.
Essay Plan
Introduction - explain that sourcing of goods and the role of Procurement doesn't end once a contract is signed. There is ongoing management and processes which must be carried out to ensure success.
Paragraph 1 - Contract Performance and Improvement
This is about ensuring contract obligations are fulfilled. Contract administration includes P2P procedures, database management, budgeting / costs monitoring, reporting and dispute resolution
Procurement's role may be in managing contract performance through the use of SLAs and / or KPIs. This can be done via reporting, using a Supplier Scorecard and meeting regularly to discuss.
It's important KPIs are measured and that there are consequences for failing to meet them. An example of consequences could be using a Performance Improvement Plan.
Contract Management also includes updating the contract where required - e.g. issuing variations to contract and updating the change control log
Another important aspect of this is ensuring the costs remain within scope of the budget
Contract performance can be compared if you have several suppliers delivering the same goods- could use a Factor Rating Method.
Performance could be measured against several criteria such as on time deliveries, response time of supplier, number of complaints.
Paragraph 2 - Supplier Relationship Management
There is a difference between managing the contract and managing the supplier relationship. It's possible to have excellent contract performance and a terrible relationship. However, the two are generally linked- where there is a good relationship, the contract often performs well.
The supplier management approach depends on where the relationship falls on the relationship spectrum (e.
g. transactional or collaborative)
This involves; maintaining regular contact with the supplier, motivating the supplier, working collaboratively with them (e.g. on performance issues or resolving any disputes)
Incentivising the supplier leads to collaboration and mutual support
To assess or rank suppliers you could use a vendor rating method or supplier evaluation forms
Supplier relationship management may involve investing in the supplier- e.g. through training or technology sharing Paragraph 3 - Asset Management
Includes creating a post contract 'lessons-learned'
Assessments should be carried out to determine if business requirements have changed, whether the agreement is still required and fit for purpose, what can be learnt from the process and how improvements can be incorporated next time.
This is the final stage of the Procurement Cycle and takes us back to the start of cycle, which begins again when the item needs to be reprocured
Whole life costing should be considered at this stage: this is the total cost of ownership over the life of an asset. The concept is also known as life-cycle cost (LCC) or lifetime cost, and is commonly referred to as
"cradle to grave" or "womb to tomb" costs.
Generally used on large purchases such as machinery and vehicles. Full Asset Management may not necessary for direct cost items such as raw materials incorporated into final goods.
Considerations may include; costs of running the asset, how long it will perform, insurance, maintenance, opportunity costs, disposing of the asset.
Also consider environmental and social impacts of the procurement.
Conclusion - it is important that procurement are involved at every stage of the cycle, not just in the pre- award stages. Procurement can add value at every stage.
Tutor Notes
- Depending on the examples you choose to use, you could talk about how the type of item procured could impact on the different stages. For example, high risk purchases may require more contract management than low risk purchases, and capital expenditure items such as new machinery may require more attention to the Asset Management stage.
- You could also think about how procurement adds value at each of the stages.
- Study guide p. 79


NEW QUESTION # 19
It is important for an organisation to balance achieving Added Value and ensuring processes are compliant.
Explain the consequences of focusing on one area over the other and how an organisation can achieve both in its procurement activities (25 points).

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question.
- There's many aspects to this question - make sure you're answering them all:
- Explain what added value is and explain what 'ensuring processes are compliant' means (this could be your introduction) Added Value = achieving more for the same money. May be in producing an item cheaper, or by procuring additional features at no additional cost. Requires innovation and creativity. The focus is on the outcome. Compliant Processes - this is focusing on the process, rather than the outcome. Ensuring that purchases are made in line with internal and external rules/ procedures. This may be following Standard Operating Procedures, purchasing to strict budgets and the exclusive use of e-procurement tools.
- Explain the consequences of focusing on added value over compliance; can result in maverick spending, less visibility for management, may have additional risks if procuring items without following procedures - this may have legal and financial repercussions, Time-consuming, May lead to added expenses
- Consequences of focusing on compliance over added value; May foster a silo-mentality, Misses out on flexibility and agility, misses out on collaborative whole life costs reductions, Procurement function becomes rigid, inflexible and inwardly focused
- How both can be achieved; 1) Seek to add value only for certain purchases such as capital-expenditure items and not for others such as stationary.2) Ensure time is well-spent i.e. focus on added value for purchases where this can be most achieved, and focus on compliance where there is high risks. 3) Review processes regularly to ensure both goals are being achieved 4) Complete 'lessons learned' activities after big procurement activities to advise on future procurement activities- were both Added Value and Compliance achieved? How could this be improved next time?
- these three should form the main body of your essay. Above are many ideas you could explore, you won't have time to talk about all of them so pick a couple that resonate with you Conclusion - the balance is important Example Essay Added value refers to the extra worth or enhancement a company provides to a product, service, or process that goes beyond the intrinsic value inherent in the initial input. It represents the additional benefits or features that make a product or service more desirable to customers, often justifying a higher price or distinguishing it from competitors. Procurement often look to achieve added value in procurement activities but achieving this whilst remaining compliant (adhering to established laws, regulations, standards, and internal policies) can be tricky. Achieving a delicate equilibrium between pursuing added value and ensuring stringent compliance in procurement activities is pivotal. This essay explores the consequences of emphasizing one area over the other and outlines strategies for organizations to successfully navigate the dual goals of attaining added value and maintaining compliance.
Consequences of Focusing Solely on Added Value:
Prioritizing added value without due consideration for compliance can expose an organization to a myriad of risks. One notable consequence is the potential compromise of regulatory requirements and legal standards.
For instance, if a procurement team is solely driven by obtaining cost-effective solutions or innovative products, they may inadvertently overlook compliance with industry-specific regulations, leading to legal ramifications and reputational damage.
Moreover, an exclusive focus on added value may neglect crucial ethical considerations. An organization, in pursuit of cost savings or improved efficiency, might engage with suppliers that violate ethical standards or engage in unethical business practices such as modern day slavery. Such associations can tarnish the organization's reputation, eroding the trust of stakeholders and customers alike.
Consequences of Overemphasizing Compliance:
Conversely, a hyper-focus on compliance without adequate consideration for added value can result in missed opportunities and suboptimal outcomes. Strict adherence to procedural norms and regulations might lead to an overly bureaucratic procurement process, hindering innovation and stifling the organization's ability to adapt swiftly to market changes.
Furthermore, an excessive emphasis on compliance might limit engagement with suppliers, stifling creativity and potential breakthroughs. For instance, a procurement team rigidly adhering to compliance protocols might miss out on collaborating with smaller, innovative suppliers that could offer unique and value-added solutions.
Strategies for Achieving Both Added Value and Compliance:
To navigate the delicate balance between added value and compliance, organizations can adopt several strategic approaches. First and foremost, an organization should establish clear procurement policies and procedures that incorporate both compliance requirements and avenues for seeking added value. This ensures that all procurement activities align with regulatory standards while leaving room for innovation.
Effective supplier management plays a pivotal role in achieving this balance. By thoroughly vetting and categorizing suppliers based on their ability to deliver value and comply with regulations, organizations can strategically align their procurement activities. For example,suppliers that have a proven track record of compliance can be trusted with critical components, while those offering innovative solutions may be engaged for projects that prioritize added value.
Leveraging technology is another essential strategy. Implementing advanced procurement software that integrates compliance checks and offers analytics for value assessment can significantly enhance the efficiency of procurement processes. Automated systems can streamline due diligence, ensuring that suppliers meet compliance standards while providing insights into their potential to deliver added value.
Additionally, fostering a culture of collaboration within the procurement team and across organizational departments is crucial. Encouraging open communication enables different stakeholders to contribute insights on compliance and added value. Cross-functional collaboration ensures that procurement decisions align with broader organizational goals and values.
In conclusion, the strategic balancing act between achieving added value and ensuring compliance in procurement is indispensable for organizational success. By recognizing the consequences of favouring one area over the other and adopting a holistic approach, this safeguards against risks but also positions the organization for sustained growth and competitiveness in the ever-evolving business landscape.
Tutor Notes:
- Examples highlight that you understand the material you have studied and can apply it to real life scenarios.
You could take a certain industry or organisation and explain the consequences for them of focusing on one over the other. E.g. In the construction industry it is very important that organisations achieve compliance in their procurement activities. This includes ensuring there are robust contracts in place and that legislation such as CDM and Health and Safety is followed. When procuring a construction contract the danger of focusing on Added Value over compliance is that this may result in key legislation being forgotten which leads to legal proceedings against the buyer. For example, if the buyer procures a construction contract without fulfilling the responsibilities outlined in the CDM and H&S regulations, this can result in huge fines for the company and potential jail time for senior management.
- The risk of focusing on compliance over added value may be in missing out on alternative proposals. For example, if a buyer is procuring a construction project of a new hospital and they focus too much on compliance, they may not engage in Early Supplier Involvement or cross-functional working which may bring up alternative ideas such as different ways the hospital could be built. The alternative ideas may result in higher quality or cost savings which are missed by the buyer. This results in a more costly, or lower-quality hospital being built.
- Overall, what CIPS are testing you on here is that you understand that the procurement department should aim to achieve both - it's a balancing act between compliance and added value and this could be viewed as a pendulum- it's important not to swing too heavily in one direction. That's actually a really good metaphor - feel free to use that in your conclusion!
- study guide p. 114


NEW QUESTION # 20
Explain the main differences between the Public Sector and the Private Sector (25 marks)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
Bottom of Form
Top of Form
- This is an open question. You could really talk about anything. Here's some ideas of content:

Example Essay
The public and private sectors, while both essential to a nation's economy, operate under different paradigms, primarily due to their distinct drivers, stakeholders, regulations, procurement aims, and supplier relationships.
Drivers
The most fundamental difference lies in their drivers. Private sector organizations are primarily profit-driven; their existence hinges on their ability to generate profits. This profit influences their strategies, operations, and overall objectives. Conversely, public sector organizations are not driven by profit. Funded by taxpayer money, their primary objective is to deliver services effectively and efficiently to the public. Their success is measured not in financial terms, but in how well they meet the service levels required by the citizens who finance them through taxes.
Stakeholders
The range and influence of stakeholders in the two sectors also differ markedly. In the public sector, the stakeholder base is much broader, encompassing every member of society who interacts with or benefits from public services like healthcare, policing, and road maintenance. However, these stakeholders typically have less power to influence policy or practices. In contrast, stakeholders in the private sector, such as shareholders and customers, often have a more significant influence on company policies and practices. The private sector's narrower stakeholder base allows for more direct impact and influence from these groups.
Regulations
Regulations in the public sector are generally more stringent than in the private sector. Public sector entities, governed by regulations like PCR 2015, must demonstrate sound procurement practices and are accountable to society at large. This contrasts with the private sector, where companies have more latitude in choosing suppliers and are not obliged to justify their decisions publicly. The private sector faces fewer regulatory constraints, allowing for more flexibility in business decisions.
Procurement Aims
Procurement in the public sector is guided by the principles of efficiency, economy, and effectiveness, often summarized as the '3 Es'. The focus is on achieving value for money, considering both quality and price. In contrast, private sector procurement is more diverse in its aims, reflecting the organization's specific goals, which could range from profit maximization to innovation or sustainability. The private sector's procurement decisions are more closely aligned with the organization's unique values and objectives.
Supplier Relationships
Finally, the nature of supplier relationships differs significantly between the two sectors. The public sector is mandated to maintain a certain distance from its suppliers, ensuring equal treatment and open competition, as dictated by regulations like the PCR. This contrasts with the private sector, where companies are free to develop closer, more strategic relationships with preferred suppliers. The private sector can engage in practices like partnerships and Early Supplier Involvement, which are typically not permissible in the public sector due to the need for impartiality and fairness.
In summary, while both sectors aim to deliver services or products effectively, the public sector's focus on service delivery for the public good, stringent regulations, broad stakeholder base, and specific procurement principles, sets it apart from the private sector's profit-driven, flexible, and more narrowly focused approach.
Tutor Notes
- At Level 4 the questions are usually explain or describe, so don't worry too much about doing an in depth
'compare and contrast' style of answer. They don't expect that level of detail here. Simply saying Public Sector does X and Private Sector does Y is all you need.
- I have mentioned PCR 2015 - if you're taking this exam in 2025 you may need to update this reference with the new regulations.
- LO 4.3 p.220 / p. 226


NEW QUESTION # 21
Describe the CIPS Code of Conduct providing examples of how an organisation can ensure compliance with the standard (25 points)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question:
- This is the type of question you either know or you don't. You can't really guess it. So do memorise it.
There's not really a shortcut here.
- The CIPS Code of Conduct is an ethical standard and framework which is used profession-wise. The purpose is to standardise ethics across the profession.
- There are 5 aspects to the Code of Conduct: enhance and protect the standing of the profession, promote the eradication of unethical business practices, maintain integrity in all business relationships, enhance proficiency and stature of the profession and ensure full compliance with law and regulations.
Example Essay:
The Chartered Institute of Procurement & Supply (CIPS) Code of Conduct is a comprehensive set of principles and standards that guide the ethical conduct of procurement and supply professionals. Adhering to this code is crucial for maintaining integrity, transparency, and responsible behaviour within the procurement profession. Here's an overview of the CIPS Code of Conduct along with examples of how organizations can ensure compliance with these standards:
1 - Enhance and protect the standing of the profession.
This means don't bring the profession into disrepute by your actions, don't accept gifts or offers of hospitality and to be aware that behaviour outside work reflects one's reputation as a professional. An organisation can implement training programs to educate procurement professionals about the importance of maintaining high standards of professionalism and integrity in their interactions with suppliers and stakeholders.
2 - Promote the eradication of unethical business practices.
This means fostering awareness of human rights, fraud and corruption issues in business relationships, responsibly managing business relationships if unethical practices come to light, undertaking due diligence (in respect to forced labour, fraud, corruption) and continually develop one's own personal knowledge of ethical issues. Promoting the eradication of unethical business practices requires a comprehensive and proactive approach from organizations. This involves having a strong CSR policy, having whistleblowing protection and reporting mechanisms, and conducting due diligence on the supply chain.
3 - Maintain integrity in all business relationships.
An organisation can show compliance with this by; rejecting improper business practices, never using authority for personal gain, declaring conflicts of interest, giving accurate information, not breaching confidentiality, striving for genuine, fair and transparent competition and being truthful about skills and experience. An example of this is for an organisation to sever ties with unethical businesses. One notable example of a retailer terminating a relationship with a supplier due to ethical reasons is the case of H&M and its decision to cut ties with a Chinese yarn producer in Xinjiang province. H&M, a global fashion retailer, announced in early 2021 that it would no longer source cotton from Xinjiang due to concerns over forced labour and human rights abuses associated with cotton production in the region.
4 - Enhance proficiency and stature of the profession.
Activities which would demonstrate compliance with this includes: Continual development of knowledge and skills, fostering the highest standards of competence in staff members at the organisation and optimising the responsible use of resources. For procurement staff, this could involve becoming MCIPS qualified, and even once qualified, completing routine CPD (Continued Professional Development) to ensure their knowledge and skills remain updated and relevant. They should also strive to share their knowledge with the wider organisation.
5 - Ensure full compliance with law and regulations.
An organisation can demonstrate compliance with the standard by proving they: follow the law in all countries they do business in, fulfilling all contractual obligations and following the CIPS guidance on professional practice. Compliance can include aspects of fiduciary responsibility such as paying the correct level of tax and filing returns on time, as well as compliance to legislation such as the Health and Safety at Work Act 1974 and the Equalities Act 2000.
In conclusion, the CIPS Code of Conduct is a voluntary standard for organisations to follow but it sets a high standard for the industry. By following the CIPS Code of Conduct organisations can enhance their reputation and levels of trust among stakeholders, as well as being reassured that following these clear ethical guidelines contribute to a positive workplace culture, boosting employee morale and commitment by fostering a sense of shared values.
Tutor Notes:
- Under the previous syllabus CIPS asked this question a lot. If you memorise one thing from the study guide I'd recommend it be this. Even if it doesn't come up as a stand-alone question, you can work it into more general essays about ethics- so it is useful to know.
- For a top score, try to give deep examples. So where you have said 'responsibly managing business relationships' you could explain what this means in practice- by ensuring fair contract terms are put in place, holding suppliers to account when they do something wrong and not exploiting smaller suppliers. Where you have said 'complete Due Diligence' you could mention that this would be completed before awarding a contract to a supplier and would involve looking at a supplier's history and supply chain to ensure that they have not been involved in any crimes (fraud etc) or unethical behaviour (such as polluting the environment).
The more in depth you go, the more you show the examiner your understanding, and the higher you'll score.
- p. 137 or here: Cips Code of Conduct | CIPS Note the study guide talks on p. 132 about the CIPS Code of Ethics, which is slightly different. The Code of Conduct is the main one to learn.


NEW QUESTION # 22
......

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