Sourcing in procurement and supply

Transcription

1 D3/November 2013 Diploma in procurement and supply Sourcing in procurement and supply Date Wednesday 20 November 2013 Time Start End Duration 3 hours QUESTION PAPER INSTRUCTIONS FOR CANDIDATES This examination has FIVE compulsory questions worth 20 marks each. 1. Do not open this question paper until instructed by the invigilator. 2. All answers must be written in the answer booklet provided. 3. All rough work and notes should be written in the answer booklet. QP05 QUALIFICATIONS 2013

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3 You are advised to allow 20 minutes to read carefully and analyse the information in the case study before attempting to answer the questions. CASE STUDY CORNHILL AGGREGATES Cornhill Aggregates (CA) quarries, supplies and manufactures building materials for the construction sector. Quarries are where stone is extracted from the ground. The company has 59 quarries, 63 asphalt plants, 25 rail terminals and 29 pre-cast concrete plants. CA has an annual procurement spend of 800 million, sourcing a highly complex range of goods and services. These include explosives used in quarrying. CA operates a logistics business, a rail division and a marine transport operation. CA also purchases numerous business support activities such as utilities, telecoms, print and waste management. The company currently deals with 9,600 suppliers. Saj Cutler recently joined CA as procurement director and set about the task of establishing a central procurement function. His number one objective is to simplify and standardise the sourcing processes of the organisation, as there is currently no common approach and limited use of electronic systems. Additionally, centralised sourcing is not always the best approach. Quarries tend to be, by their nature, in remote locations and this favours local sourcing. In these situations, Cutler feels that it is better to understand local suppliers and to benchmark them against national suppliers rather than setting up a national contract. Cutler says, One solution does not fit all in this business. Bitumen is another example of non-standard sourcing. CA annually buys more than 175,000 tonnes of bitumen, which is widely used in the industry. While bitumen is not a commodity, its price is very much influenced by oil, says Cutler. If you look at the input costs, it is the crude oil price which is the main driver. Cutler s second objective is to establish robust supplier selection criteria. Contracts are currently awarded on the lowest price without taking into account other factors. Personal protective equipment (PPE) is an example of a spend category where Cutler feels that the lowest price may not represent the best value for money. Two suppliers have been shortlisted to provide PPE jackets to CA. After taking reliability and life expectancy into consideration, the higher-priced jacket is found to be the better value for money. Cutler also wants to set up longer term contracts with fewer suppliers and recognises the need to determine the financial stability of suppliers to achieve this. Another challenge for CA is corporate social responsibility. As part of its sustainable construction strategy, the company has an objective of zero to landfill by the end of next year. 400 suppliers are currently used to supply waste services and Cutler is finding it difficult to obtain the necessary management information to deal with this sourcing issue. CA s international operations provide another sourcing challenge. We have standard terms and conditions that we expect our suppliers to comply with. However, we need to understand contracts from an international point of view and adapt our sourcing strategy accordingly. With many different sites under his control, Cutler is aware that he needs to communicate his sourcing strategies clearly: You have to get the message out there in an easy, simple form. This is why we need to have all communications structured. There is little point doing the best deal in the world, and then not gaining the support of other departments. The operational teams have excellent technical capability and complement my team s commercial and programme management expertise well. PLEASE TURN OVER Page 3 of 8 D3 Exam Questions November 2013

4 QUESTIONS These questions relate to the case study and should be answered in the context of the information provided. You are advised to spend 32 minutes on each question. Q1 (a) Explain the terms strategic sourcing and tactical sourcing. (8 marks) (b) Suggest how the procurement director at CA might engage more closely with stakeholders to gain their support when sourcing. (12 marks) Q2 Discuss the benefits for CA of balancing commercial and technical criteria when awarding business to suppliers. (20 marks) Q3 (a) Identify THREE financial statements which can be used to assess an organisation s financial stability. (6 marks) (b) Explain how the procurement team at CA might use financial statements to assess the financial stability of potential PPE suppliers. (14 marks) Q4 (a) Explain the types of electronic systems that might be used to simplify and standardise the sourcing process at CA. (12 marks) (b) Summarise the potential benefits for CA of introducing electronic systems. (8 marks) Q5 (a) Discuss THREE additional considerations that CA should take into account when sourcing from international suppliers as opposed to domestic suppliers. (12 marks) (b) Summarise TWO actions that CA might take to achieve the ethical sourcing of waste services. (8 marks) END OF QUESTION PAPER Page 4 of 8 D3 Exam Questions November 2013

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8 PLEASE RETURN THIS FORM TO: CIPS ASSESSMENT MANAGEMENT CENTRE ADAMSWAY, MANSFIELD NOTTINGHAMSHIRE NG18 9DR TEL: +44(0) FAX: +44(0) Page 8 of 8 D3 Exam Questions November 2013