L4M8 Procurement and Supply in Practice Questions and Answers

Condition performance monitoring is a surveillance system that is designed to get the maximum production uptime and availability out of an asset. And this can be achieved by timely monitoring and measuring of temperature, vibration, output, speed, noise, emissions and quality. With this, decision has to be made as to what, if any, action needs to be taken. The five approaches to condition performance monitoring are as follows:

1. Do nothing: Use like a commodity. This will bring worries later.

2. Reactive: Fix it when it breaks. This will run to failure.

3. Preventive: Scheduled maintenance.

4. Predictive: Fix it before it breaks. Predict faults.

5. Proactive: Continuous improvement defect elimination.

The most cost-effective approach is ‘Proactive’, because is the only approach that has continuous improvement in the process, people and policies to minimize downtime. Being proactive takes defect out of the system and continuously harness opportunity that will optimize the system

Once the need has been understood, defined, justified and authorized, the next stages are to analyze and test the market. Analyzing and testing the market includes looking at the following

1. STEEPLE analysis

2. SWOT analysis

3. Porter’s five forces

4. Level of suppliers competition

5. Supply and demand

6. Push and pull

7. Supplier segmentation

8. Product life cycle

9. Ansoff matrix

10. Early supplier involvement

11. Make or buy

12. Offshoring

1. Porter’s five forces: The use of porter’s five forces helps the procurement professional to understand the level of competition within the marketplace. Whether it is a monopoly, oligopoly, imperfect or perfect market. Knowing these will equip the organization to better negotiate a favorable price.

2. Supply and Demand: the procurement professional must also think about supply and demand as part of their market analysis when they receive a requisition. This economic factor has a significant effect on the prices charged and on the cost incurred.

3. Supplier segmentation: in this the procurement professional start to form an opinion of potential suppliers.. They can segment current suppliers into four categories, depending on their level of integration into an organization. This can help to inform the procurement professional of which type of supplier relationship that would be most appropriate.

•

Refer to the question column for response

Trying to measure how sustainable an organization was use to be challenging undertaking. However, during the 1990s, a concept brought up by American John Elkington change the way sustainability was measured. This framework is known as the triple bottom line (TBL) and measures sustainability in relation to organizational performance and investment against the 3Ps (1) Profits (2) People (3) Planet. For example;

Profit: A packaging manufacturer reinvesting its profits in State- of-the-art recycling machinery for it wasted cardboard.

People: A large privately owned call centre donate its end of life computers to a local youth clubs and social groups to help gain internet cases.

Planet: A driving instructors using only hybrid vehicles to teach her learners, thus to reducing Co2 emission.

Pre-qualification questionnaire (PQQ) is often standard forms that buyers send to potential suppli-ers. The purpose is to ensure that these potential suppliers could, if they win the contract, supply the product or service to the standard required. PQQ includes requesting details from the potential suppliers on the following information

1. Company Details

2. Environment policies

3. Trading history

4. Ethical policies

5. Financial information

6. Health and safety policies

7. Quality standards

8. References

9. Insurance.

Contract terms are the right and duties agreed between parties with which are then documented in contract. Terms can be either implied or expression.

Implied terms are always present in a contract and are set by national laws; like the sales of goods act, whereas express terms are negotiated and created, for example; time is of the essence. When the procurement professional is setting key performance indicators, where which the supplier’s performance will be monitored and managed, the KPI is expected to be SMART. The SMART is an acronym that is used to set KPI and specification. It means:

Specific

Measurable

Achievable

Relevant

Time bound

•

Refer to the question column for response

Hidden costs are costs that do not always present themselves at the onset of the project.

Logistics can provide a hidden cost within global sourcing. The movement of goods can generate risk within a localized supply chain, but the risk is greater within global sourcing. Within global sourcing there are usually many more aspects to the logistics operation, hidden cost associated with the logistics process includes,;1) delays that can be experienced after placing orders, 2) unclear and poor/incorrect communication that might affect the successes of the transaction, also 3) goods could be confiscated by customs for unseen reasons.

•

Refer to the question column for response

After all the due diligence is carried out, before awarding contract to the best supplier, sometimes procurement professionals find themselves in some problem solving situation; this might have been emanated from supplier facing a financial challenge or problems from external environment. Responding to this might require an amendment or an addendum, depending on the case in hand.

An amendment is for a physical change in the existing contract for example; if a contract contains a negotiated and agreed fixed price for the period of the contract but unexpected market forces such as an economic down turn or force majeure occur, the supplier may have to request an amendment order to continue to make a profit.

An addendum is when an additional document is added to the existing contract for example, If a contract have a schedule of rates and the market forces prices up, an addendum can be added to an existing contract with a revised schedule. Once accepted, the addendum becomes part of the con-tract. Addendum are physically used when the forecasted cost of a project rises and approval is needed to increase the contract spend.

•

Refer to the question column for response

Specification is a detailed description of what is required or needed. Due to certain reasons, needs sometimes increase in importance or lose their essence, therefore speci-fications need to adapt and develop to reflect the changing requirements of the con-sumer and also to comply with regulations and legislatures as this are amended.

Standard, regulations and legislation are continually evolving and new updated versions of existing guideline, as well as completely new initiatives one being released.

A code of ethics is a set of morals and principle set out by an organization to state what it deems to be acceptable conduct and behavior

An ethical code of practice is a continually changing and developing document with society changing and different suppliers coming to market, the document has to remain current

Suppliers should continually monitor their codes of ethics to ensure that;

1. They are looking after the interest of the supply chain

2. That potential customers can be reassured that they are conforming to the required regulation, e.g. ISO 14001.

Ethical code of conduct should be constantly monitored and updated in accordance with the changes organization faces. This include 1) Define (2) prevent (3) detect (4) reprove (5) evaluate.

A contract is written or verbal agreement, made between two or more parties that are legally en-forceable. For a contract to be legally binding it must include intention of parties entering into the contracts. All parties must have the capacity to contract or be contracted. They must be of a sound mind, there should be a promise (offer) for performance from the other party and an exchange (consideration) of one thing for another within an agreement for contract to be binding, there must be an acceptance of the offeror’s offer by the offeree.

There are many reasons contract can legally be terminated, including non-performance by one or both parties, a significant change in the requirement.

There are several reasons contract can legally be terminated, including non-performance by one or both parties; breach of material, failure to meet service level agreement, ethical breaches, a significant change in the requirement of either party caused by ethical change in the market, change in Demand, obsolescence, contract completion. The procurement professionals should get an exit strategy that should encourage a stress free disengagement should incase there are no profitable reason to continue with the contract.

When evaluating offers, it is important to remember that the best price may not be the lowest. To ascertain that; the total cost of Acquisition TCA (the cost a buyer bears for placing orders and re-ceiving a product from a supplier) should be uncovered and compare against offers received. Things to consider that might make up the total cost of acquisition are;

1) logistics and handling costs

2) Cost of requisition

3) Rework

4) stock cost

5) Delay

6) Inspection

7) customer services

8) consumables

9) Training & support

Factors that contribute towards value for clothe gum in a fashion firm;

1) How much money does the gum cost?

2) How much is the benefits of using the clothe gum?

3) Does customers prefer clothe gum at the bottom of their garment?

4) Is the clothe gum difficult to use?

5) Does the clothe gum beautifies the fabric when placed properly?

6) Does it give a better finishing?

7) Is it ethical to use?

8) Is it from a sustainable source?

9) is it environmental friendly?

10) Does using clothe gum suggest innovation in fashion?

A weighted score card is a tool with a systematic and a fair process for selecting supplier, based on predetermined criteria. This tool can help make the decision by presenting a fair display of how all suppliers did in the process. The values of these weights are based on their importance. The supplier with the highest score card is considered the most suitable to be awarded the contract.

In the table above, cost is considered more than all other criteria. Contract length is the lowest which is weighted 2

Base on the weighted score card as presented above, company B scored 78 while company A and company C scored 65 and 63 respectively.

Company A, having scored the highest (78) should be awarded the contract.

•

Refer to the question column for response

Organizations which display good behavior create a positive social impact. The com-munity in which they are based and to which they supply will benefit from the following.

1. High employment

2. Fair wages

3. low pollution

4. sustainable resources

5. Engagement and movement with local organization

Terms are the right and duties agreed which are then documented in a contract. Five types of con-tract terms that a procurement professional should create with a supplier when forming an agree-ment includes;

Price term is when the buying organization wants to protect its budged and spending, it include price terms in the contract, for the buyer to buy goods or services in response to a need they some-time enshrine a bespoke specification in the contract.

Payment Term is to specify when and how the buyer will pay the supplier. The buyer may include a payment term in the contract.

Warrantee is when the buyer requires a promise from the supplier that the product or service will meet the specified need in the contract.

Time is of the essence term is included in the contract to detail when a product or service should be delivered and explains the potential losses of business if time is not observed.

Pre-qualification questionnaire (PQQ) is often standard forms that buyers send to po-tential suppliers. The purpose is to ensure that these potential suppliers could, if they win the contract, supply the product or service to the standard required. PQQ includes requesting details from the potential suppliers on the following information

1. Company Details

2. Environment policies

3. Trading history

4. Ethical policies

5. Financial information

6. Health and safety policies

7. Quality standards

8. References

9. Insurance.

The social impact of an organization is formed by various behaviors. If an organization; behavior is poor this will create social impact which is likely to be reflected in the business performance. Organizations which display poor behavior face outcomes such as the following.

1. Reduce brand loyalty

2. Difficulty in recruiting

3. Negative media coverage

4. Reduced sales/profit

5. reputation damage

Stakeholders are individuals or organizations who are directly affected by a decision for example, community, shareholders, employees, suppliers, distributors, customers etc. stakeholders can be internal (employers, staffs), connected (such as suppliers, shareholders, financers and customers) external (Government, pressure groups, and community).

The matrix that helps define how to manage stakeholders is mendelow’s stakeholders manage-ment matrix. This matrix is based on the theory that the level of management stakeholders require depends on the level of their power and interest within the project or organization

The matrix groups stakeholders in to four quadrants according to their power and interest and ad-vice how to manage them.

1) Low power – Low interest (minimum effort)

2) Low power – High interest (keep inform)

3) High power – Low interest (keep satisfied)

4) High power – high interest (manage closely)

Stakeholders are individuals or organizations who are directly affected by a decision for example, community, shareholders, employees, suppliers, distributors, customers etc. stakeholders can be internal (employers, staffs), connected (such as suppliers, shareholders, financers and customers) external (Government, pressure groups, and community).

The matrix that helps define how to manage stakeholders is mendelow’s stakeholders manage-ment matrix. This matrix is based on the theory that the level of management stakeholders require depends on the level of their power and interest within the project or organization

The matrix groups stakeholders in to four quadrants according to their power and interest and ad-vice how to manage them.

1) Low power – Low interest (minimum effort)

2) Low power – High interest (keep inform)

3) High power – Low interest (keep satisfied)

4) High power – high interest (manage closely)

•

Refer to the question column for response

RESPONSE

A purchase requisition should contain the following information

1) Date of the requisition

2) Description of what is required

3) Supplier if known

4) The quantity

5) when the need is required

6) why the need is required

7) who identified the need

8) who approved the need

9) if it’s a re-buy

Whole life asset management is the process of evaluating the total price and all associated costs of a product to make an informed decision as to which option will provide the organization with the best value for money option: To achieve this the organization works at the following eight elements.

1. Identify need/objectives/risk: The first stage of the whole life asset management is the same as the first stage in the CIPS procurement and supply cycle: identify the need prior to any asset being procured; the need could be competition in the marketplace, raised/reduced demands or financial concern. Once this need has been identified, the objectives of the new assets need to be set, and this may include being more energy efficient, reducing cost or saving money.

Risk also needs to be explored. When investing in a new asset there are factors to be considered that may or may not be advantageous to the investment. These include; downtime, lost sale/revenue or associated cost.

2. Procurement: Procurement professional would have to source and arrange supply of the asset.

3. Construction: ones the supply has being arranged, then the designing and the manufacturing of the asset begins.

4. Commissioning

5. Deterioration/maintenance

6. Condition performance monitoring

7. Decommissioning

8. Renewal/replacement

•

Refer to the question column for response

Tangible costs are the cost an organization incur acquiring items that can be physically touched and or seen. Examples includes; 1) Capital Purchase 2) Raw materials 3) Sundry items 4) Vehi-cles/transport 5) Utilities

Intangible costs are the cost an organization incurs acquiring something that cannot be physically seen or touched. Examples include; 1) Insurance 2) Marketing 3) Research and development 4) Salaries and/pension 5) Services 6) Training.

Direct costs – These are costs that an organization incurs acquiring product and services directly attributable/traceable to its production, for example, the cost of labour and materials directly uses to produce the goods/services which the organization sells. In the case of buying and running a Lorry for transport fleet, this would be 1) total cost of acquiring the lorry,) Tooling 3) Operation.

Indirect cost - These are costs that are not directly associated to production, for example, materials and services not used in production, labour/ staff cost not directly attributed to production, such as management, sales and marking, ICT support, rents. In the case of buying and running a Lorry for transport fleet. Examples are; 1) Insurance 2) Disposal.

•

Go back to the question column and study the Questions and response

Stakeholder are individuals or organizations that can be affected directly or indirectly by any project or decision. For successful procurement activities to take place, stakeholders must be identified, engaged and managed. Not all stakeholders require the same level of engagement and management. To appropriately manage identified stakeholders, the Mendelow management matrix has categorized stakeholders in four quadrants, according to how low or high their power and interest in the project could be. The four categories are:

1) Minimum effort (low power-Low interest)

2) Keep satisfied (high power-Low interest)

3) Keep informed (Low power – high interest)

4) Manage closely (High power- High interest)

Disposal of an asset is the final stage in the decommissioning process of a fixed asset.

When a fixed asset reaches the end of its useful or cost effective life time within an organization, the decision is made as to whether it should be removed from the premises or disposed off.

If the asset is truly at the end of its life, no longer fit for purpose, not cost effective to repair and is not able to be exchanged, then disposal is the only option; there are two options for disposal;

1) Take the asset to land fill site

2) Taking the asset to a recycling plant.

Key performance indicator (KPI) is another method of monitoring how a supplier is delivering on a contract.

When creating KPIs to manage suppliers and their contracts the areas monitored should be related to the organization’s overall strategy that is where organization’s success will be measured.

ILO stands for International Labour Organization- It is a United Nations agency whose mandate is to advance justice and promote decent work by setting international labor standard.

ETI is Ethical Trading Initiative: It is a leading alliance of companies, trade unions and NGOs that promote respect for workers right around the globe. Its vision is a world where all workers are free from exploitation and discrimination and enjoys condition of freedom, security and equity.

The procurement cycle is the heart of purchasing, sourcing and supplying and should be followed in day-to-day practice in the industry. The procurement cycle has thirteen stages. Contract award is stage 9, and the stages after the contract award are;

Stage 10: ware house, logistic and receipt

Stage 11: Contract performance review and continuous improvement

Stage 12: SRM/SCM and contract management

Stage 13: Asset management, lessons learned, end of life.

The purpose of the tendering process is to invite potential suppliers to bid to supply a product or service to the buying organization. Then buying organization select suitable suppliers, award con-tract and manage. The process is selected mostly when the need is a large or complex project or the law mandates it or it is in the company’s policies to do so. The stages of the tendering process includes;

Stage 1: decide which style of tender to use. There are four types of tendering used within pro-curement and this include; 1) open 2) Restricted 3) Negotiated 4) Competitive Dialogue

Stage 2: Prepare invitation to tender (ITT): this stage is to prepare the document that will be made available to potential supplier. It should contain everything potential bidders will need to know to fully understand the need and to prepare and send a suitable RESPONSE it may likely in-clude; open letter, company details, overview of a project, evaluation criteria, submission date and so on.

Stage 3: send ITT: With fairness, transparency and equality, buyer will provide the documents to all potential suppliers at the same time and also provide exactly the same information/documents to all suppliers. If after receiving the ITT and some suppliers seek clarifications on anything in the documentation, buyers must give same response to identical questions to keep the process transparent and fair. Also, the response to each query to all bidders in the process.

Failure to this may result in bidders who feel disadvantaged or discriminated in any form to submit a legal challenge. Supplier submitting a Legal challenge may cause delay in the process and eventually increase administrative cost for the buyer.

Stage 4: Buying organization receives responses to the Invitation to tender from suppliers (bids). Suppliers must adhere to the bid submission dead line included in the invitation to tender document. Any bid that arrives after the deadline must be left out of the process, or else this may result to other suppliers legally challenging the process.

Stage 5: Evaluate bid. The buying organization can now evaluate the bids based on the criteria in the ITT document. It is always thorough that cross-functional team evaluates the bids to guarantee complete fairness and ensure that the chosen bid is fit for purpose. In evaluating the bids, the cross-functional team will consider the bids in the following areas; supplier organization, ethics, price, sustainability, quality, payment, disposal, service level, location, warranty and risk.

Stage 6: Award contract and give feedback hence the buying organization wards the contract to the winning supplier. This can take place by a formal communication like a letter or an e-mail.

Stage 7: Contract management. Contracts must be evaluated against the criteria in the invitation to tender.

The reasons why these stages must be followed includes;

1. Knowing the right TYPE of tender to use, reduces administration cost, for example, deciding to do restricted tendering to reduce the interest that are going to be sent in have already cut down on administrative cost.

2. The supplier can know what exactly the buyer’s intentions are by developing description and the required specification.

3. To ensure that objectives of resorting to use the tendering style and the tendering process is achieved

4. To ensure that the organization generates added value by going through the stages.

5. To ensure that there are none unethical issues like fraud, bribes etc are not part of the system.

6. To ensure that the tendering process becomes transparent to all suppliers. These stages must be followed for transparency and fairness. Just like in stage 3: buyer send out the ITT to potential suppliers at the same time and providing them same information. Failure to this and bidders who feel disadvantaged or discriminated in any form may submit a legal challenge. Supplier submitting a Legal challenge may cause delay in the process and eventually increase administrative cost for the buyer.

•

Refer to the question column for response

When organization has made the decision about which option is best for sourcing the asset, it can then begin to work on the whole life asset management strategy.

Whole life asset management is the process of evaluating the total price and all associated costs of a product to make an informed decision as to which option will provide the organization with the best value for money. This strategy is only under taken for large-value procurements because; 1) It takes considerable time (2) It involves many stakeholders and require numerous resources; If whole life asset management were conducted on every purchase it would not create value for the organization and that may tie up valuable resources.

Carters outsource matrix is a useful tool that procurement professionals uses to decide which products or services has a high or low contribution to the organization operation performance and its strategic importance. The matrix segments products/services into four quadrants. These are Eliminate, outsource, strategic alliance and retain.

According to Carters outsource matrix, all product/services that has a high strategic importance should not be outsourced. They should rather be retained in house or carefully chose suitable sup-pliers and go into strategic alliance.

•

Refer to the question column for response

Supply chain involves a network of individuals, organizations, technology activities and resources to make sure goods or services flow along the chain. If one point fails, every part further along the chain fails.

Fullpower projects (a flour manufacturer) supply chain begins with producers (raw materials, wheat farmers), suppliers, manufactures, distributors, retailers and end users (customer).

Fullpower projects supply chain falls within the primary sector (producers of wheat), the secondary sector include the manufacturing (those that converts the wheat the suppliers brings into flour) and tertiary sector (the distributor those that takes the wheat to the end users).

•

Refer to the question column for response

A new buy is the purchase of goods and services by an organization or an individual for its first time. For example a transport organization for the very first time contracting the purchase of a Lorry out to an external supplier. In situations like this, it is advisable to start the procurement cycle from the very first stage. Which is understanding the need and developing high level specification.

Modified re-buy is the purchase of goods or services that an organization has bought before there was a need but with changes to the specification or supplier or quantity or quality. In carrying out modified re-buy, procurement professional should start from the very first stage of the procurement cycle to justify the added need and follow through. Not in all cases that buyer would have to start from understanding the need. In a situation where the changes required is a change of supplier, the organization will start from its preferred suppliers list and contract the next ranking supplier as the case may be.

After a need in an organization has been identified/understood, defined, justified and authorized, the next stages are to understand how commodity prices are reacting, which suppliers are available and their strength. The make or buy decision can be reached with knowledge from this; the procurement professional can consider the organization external environment, strength, weakness opportunity and threat to develop strategy/plan of how to achieve the procurement.

‘STEEPLE’ is an effective way to evaluate the external environment. It helps buyers to assess factors that could affect the need in hand and helps them to develop the plan accordingly. ‘STEEPLE’ is an acronym which stands for,

Social, Technology, Economic, Environment, Political, Legal, Ethical

‘SWOT’ helps the organization to analyze its strength and within the organization and the oppor-tunity and threats outside the organization.

‘SWOT’ is an acronym which stands for, strength, weakness, opportunity and threats.

Working cross-functionally is the involvement of all departments involved in an organization to contribute knowledge, skills and innovation towards adding value of achieving the organization’s strategic goal. All functions may include; procurement, maintenance, marketing, finance, human resources working together in procurement activity to come up with the best strategy or selecting the supplier that best suit the organization.

When working cross functionally, members of the organization gives support by believing in the end goal, assist during difficult time, help troubleshoot any issue, providing the required resources and sharing information.

•

Refer to the question column for response

Carter’s 10cs is a detailed mechanism that procurement professional uses to evaluate potential supplier. What the procurement professional should consider in supplier are the following 10 things.

1) Competency 2) capacity 3) Cost 4) Cash 5) Clean 6) Consistency 7) Control 8) Culture 9) Com-mitment 10) Communication.

When evaluating potential suppliers, procurement professionals can carry out benchmarking. Benchmarking is the process of comparing a function, a process performance with another which is best in-class.

Other factors, apart from price that can be considered to find the total cost of acquisition include the product or service quality, lead time, supplier culture, its environmental awareness and sustainability.

Case study:

Tetsuya Tada, Chief engineer of the Toyata Supra Sports car has revealed how the process of benchmarking contributed to the car’s design.

Tada has worked by comparing the Supra to other cars. For example, it has been intentionally designed with a shorter wheelbase, than the Toyata 86 to make it more suitable for track racing. Furthermore, Tada has benchmarked the Supra against competition by suggesting that drivers will find the car’s performance comparable with that of Posche’s Cayman sports car.

Tada’s knowledge of the features belonging to different sports cars in his industry shows how benchmarking can be used by companies to successfully differentiate their products and remain competitive through awareness of their competitor’s activities.

Quality is fitness for purpose. It is important that quality is investigated by procurement professionals before forming relationship with potential supplies.

If quality is not investigated before selecting supplier the organization might stand the risk of facing the following disadvantages;

Reputational Damages

Cost of Rework

Cost of Downtime

Cost of Material

Cost of being stocked with the wrong supplier

Cost of being stocked in a project that may not come to an end at the forecasted time.

How buyer can choose a supplier with a good quality culture is first by defining the quality of the product or services to be carried out .Having knowledge of the product or service quality, supplies can rightly select and evaluated supplier with total quality management (TQM) in their system, ISO 9001 accreditation. TQM includes everyone in the organization with knowledge on the required quality; there would be little or no rejection/reworks. Thus is an added value to the organization.

After all the due diligence is carried out, before awarding contract to the best supplier, sometimes procurement professionals find themselves in some problem solving situation; this might have been emanated from supplier facing a financial challenge or problems from external environment. Responding to this might require an amendment or an addendum, depending on the case in hand.

An amendment is for a physical change in the existing contract for example; if a contract contains a negotiated and agreed fixed price for the period of the contract but unexpected market forces such as an economic down turn or force majeure occur, the supplier may have to request an amendment order to continue to make a profit.

An addendum is when an additional document is added to the existing contract for example, If a contract have a schedule of rates and the market forces prices up, an addendum can be added to an existing contract with a revised schedule. Once accepted, the addendum becomes part of the con-tract. Addendum are physically used when the forecasted cost of a project rises and approval is needed to increase the contract spend.

Terms are the right and duties agreed which are then documented in a contract. Five types of con-tract terms that a procurement professional should create with a supplier when forming an agree-ment includes;

Price term is when the buying organization wants to protect its budged and spending, it include price terms in the contract, for the buyer to buy goods or services in response to a need they some-time enshrine a bespoke specification in the contract.

Payment Term is to specify when and how the buyer will pay the supplier. The buyer may include a payment term in the contract.

Warrantee is when the buyer requires a promise from the supplier that the product or service will meet the specified need in the contract.

Time is of the essence term is included in the contract to detail when a product or service should be delivered and explains the potential losses of business if time is not observed.

•

Refer to the question column for response

A sector is an area of an industry, e.g., private, public or third sector.

A public sector is a sector of the economy that is owned, finance and run by the government. This sector is financed with tax payer’s money. And therefore owe the general public an ethical explanation towards all investment and decision.

Once the supplier that is awarded the contract has accepted, the buyer can tell the unsuccessful bidders. This usually happens through email or letter. The public sector is more likely to give feedback to unsuccessful bidders and also have to respond to any stakeholders that request information on why a supplier is not successful.

The reputation of all the organizations within a supply chain is linked. A Company’s reputation is an intangible asset that can contribute to the failure of an organization if damaged. Factors that could damage organizational reputation within the supply chain are;

1. Quality: if the product or service quality is poor the organization may not satisfy it customers and this can lead to a loss of reputation in the market. For example, a residential building construction company contracting a supplier that would do a bad job which in three months may require home owners to reinstall new doors.

2. Sustainability: if the organization is not replenishing that which it is extracting, it will some day run out of business or probably loss loyal customers. For example a drilling company that spills hydrocarbon as it drills.

3. Fit for purpose: if an organization produce a product or carry out services that are not fit for purpose, it may run at loss for there will be so much rejection and rework. This can lead to customers switching to another organization which product or services are fit for their purpose.

4. Contract management: an organization will have to manage its suppliers and the contracts to ensure they are delivering what they were contracted to do. A poor contract management is a waste in the process of delivery that can lead to reputational loss.

•

Refer to the question column for response

When the procurement professional is setting key performance indicator (KPI) where which the supplier performance will be monitored and managed. The KPI is expected to be SMART. SMART is an acronym that is used to set KPI and specification.

S - specific ,

M - measurable,

A - achievable,

R - relevant, and

T - timebound.

It would be rare to find a supplier who does not emit any form of pollution. However, part of ethical and responsible sourcing is to make effort to reduce impact of population on the planets. Pollution can be factory emission, Noise, smell, Transportation De-velopment, waste disposal. Transportation is a major cause of pollution. The carbon dioxide emitted from vehicles contributes greatly to air contamination. Yet it is better to use sea freight rather than air because it has a smaller impact on the environment.

Information gathered in relation to social impact for an organization is both qualitative and quantitative.

Fullpower consult is a project/procurement training company that has gotten a measure of its social impact.

The qualitative measure of the organization is its stakeholders perception. Stakeholders knows that fullpower will do all it can to always give the best value for money.

Fullpower has the policies to give 10% of its profit share back to the community, by sponsoring free trainings for both professionals and vocational.

Addition

Qualitative and quantitative measures of social impact

Qualitative

Stakeholder perception

Reputation

Good Ethical practice

Benefit to the economy

Quantitative

20% Reduction in emission

Amount of funding donated

Amount of train courses delivered

Percentage of Resources Replaced

•

Refer to the question column for response

Trade war is an economic conflict where countries make it difficult for global trading to happen. Trade wars can make importing products to a country very expensive. A recent example is the US-China trade war; prices were raised on us-built vehicles exported to China. This affected consumer the most as there was an upshot of price.

Trade war is an economic conflict where countries make it difficult for global trading to happen. Trade wars can make importing products to a country very expensive. A recent example is the US-China trade war; prices were raised on us-built vehicles exported to China. This affected consumer the most as there was an upshot of price.

The abuse of power within the supply chain can be linked to corruption. If individuals with seniority favor one supplier over another, they can exercise their power to award the contract to whoever they wish. According to CIPS code of conduct, this is not ac-ceptable.

According to French and Raven, there are five types of power (Legitimate power, Re-ward, Expert, Referent and Coercive), and these powers can most likely be used in corruption.

When reviewing supplier’s response the procurement professional should consider the right quantity of product or service that has to be ordered at anytime as against the price to decide how to gain the best cost.

Factors to consider include the following

(1)Cost of inventory

(2) cost of insurance

(3) cost of transportation.

•

Refer to the question column for response

An offer is created when one party communicates to another or to multiple parties that they wish to enter into a legal binding agreement in accordance with the terms stated, for example; a company in promotion advertising for buyers to buy one and get one free, an offer is a buying organization communicating to a supplier to supply X number of goods and be paid x amount upon delivery at company premises, an offer is when a football club proposes to pay X amount to a player if agrees to play for them for a month. An offer can be legally banded if accepted, whereas invitation to treat does not. An invitation to treat is just an invitation from one party to another to begin negotiations with the intention of creating an offer. If an offer is made without stating terms, this becomes an invitation to treat, for example, an invitation to treat is when a pharmacy displays a drug in its shelf. An invitation to treat can be linked to a request a buyer send to suppliers asking them for specific information.

Stakeholder are individuals or organizations that can be affected directly or indirectly by any project or decision. For successful procurement activities to take place, stakeholders must be identified, engaged and managed. Not all stakeholders require the same level of engagement and management. To appropriately manage identified stakeholders, the Mendelow management matrix has categorized stakeholders in four quadrants, according to how low or high their power and interest in the project could be. The four categories are:

1) Minimum effort (low power-Low interest)

2) Keep satisfied (high power-Low interest)

3) Keep informed (Low power – high interest)

4) Manage closely (High power- High interest)

•

Refer to the question column for response

Continuous improvement relates to removing waste from the supply chain and improving processes to increase efficiency within whole life asset management in a full power project (a flour producing firm) can benefit from continuous improvement in the following ways;

1) Reduce cost of spears by recondition parts, instead of disposing them out rightly.

2) Can reduce down time by conducting routine maintenance after hours.

3) Can reducing accident by up skilling operators on safety

4) Can reduce waste oil by following owner’s manual instead of relying on experience.

5) Create efficiencies by operating a 24/7 shift pattern.

ILO stands for International Labour Organization- It is a United Nations agency whose mandate is to advance justice and promote decent work by setting international labor standard.

ETI is Ethical Trading Initiative: It is a leading alliance of companies, trade unions and NGOs that promote respect for workers right around the globe. Its vision is a world where all workers are free from exploitation and discrimination and enjoys condition of freedom, security and equity.

A contract is written or verbal agreement, made between two or more parties that is legally enforceable. For a contract to be legally binding it must include intention of parties entering into the contracts. All parties must have the capacity to contract or be contracted. They must be of a sound mind, there should be a promise (offer) for performance from the other party and an exchange (consideration) of one thing for another within an agreement for contract to be binding, and there must be an acceptance of the offeror’s offer by the offeree.