Procurement and supply workflow

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1 AC3/May 2016 Advanced certificate in procurement and supply operations Procurement and supply workflow QUESTION AND ANSWER BOOKLET Candidate Number Date Thursday 19 May 2016 Time Start 09:30 End 11:30 Duration 2 hours Centre Event INSTRUCTIONS FOR CANDIDATES This examination has FOUR compulsory questions worth 25 marks each. 1. Do not open this booklet until instructed by the invigilator. 2. Before you begin, check your candidate number and unit title is correct at the top of this answer booklet. Your name must not appear anywhere on this answer booklet. 3. Write your answer to each question in the space provided. 4. If you require extra paper, you should request it from the invigilator. Ensure you write your candidate number and the question number clearly on each sheet of continuation paper used. 5. All answers must be written in blue or black ink including diagrams 6. This booklet must remain intact. Do not remove any pages. Cross out any work you do not wish to be marked. 7. At the end of the examination, hand this booklet to the invigilator. AS03 Official use only Question Marks Awarded Invigilator s Q1 Use Only Q2 Q3 Q4 Total Please mark with an A if the candidate is absent from this examination

2 SECTION 1 Write your answers in the spaces provided. You are advised to spend 30 minutes on this question. SCENARIO Q1 Jenny Forrester recently started a role as the buyer for R H Allen Ltd, a small manufacturing company. Jenny is responsible for all procurement activity within the company and this involves the use of a wide range of documentation. (a) Listed in the table below are descriptions of THREE documents that Jenny might see within the procurement process. Provide the correct document title against each description and identify whether the document originator is the buyer or supplier company. (6 marks) Document title (1 mark each) Originator (1 mark each) Document description Detail of what goods and quantities have been received and when Offer (usually in writing) to provide specified goods or services Formal request for payment, creating an account receivable. Page 4 of 20 AC3 Exam Questions May 2016

Jenny has received a purchase requisition (Fig 1) from the production department. The requisition was flagged as extremely urgent as there was no product left in stores.

3 Jenny has received a purchase requisition (Fig 1) from the production department. The requisition was flagged as extremely urgent as there was no product left in stores. However, before processing the requisition Jenny needs further clarification from the originator. R H Allen Ltd PURCHASE REQUISITION Requisition Number: RHA Date: Quantity Description Price UOM Total 1000 Specialist Fixing Nut FXN00997 $2.78 Each 2780 Total requisition value: 2780 Originator Name: Supplier details: Originator Contact: tjheth23@rhallen.com Date required: ASAP Delivery address: No.6 Stores Nuts & Bolts Ltd Unit 3, Parkway Manchester Fig 1 (b) Identify FIVE areas of the purchase requisition in figure 1 where Jenny may require further clarification before placing a purchase order. For each area identified explain why further clarification may be required. (10 marks) Area requiring clarification (1 mark each) 1. Explanation (1 mark each) PLEASE TURN OVER Page 5 of 20 AC3 Exam Questions May 2016

4 (c) Following Jenny s request for clarification, suggest THREE different actions that Jenny might take in order to action the requisition. (3 marks) (d) Jenny s job also involves analysing and comparing a wide range of supplier quotations for other goods and services. Explain how Jenny might apply the following THREE criteria to support the comparison and selection of suppliers. 1. Suppliers contractual terms (2 marks) 2. Suppliers quality performance (2 marks) Page 6 of 20 AC3 Exam Questions May 2016

5 3. Suppliers CSR/sustainability policies (2 marks) PLEASE TURN OVER Page 7 of 20 AC3 Exam Questions May 2016

6 SECTION 2 Write your answers in the spaces provided. You are advised to spend 30 minutes on this question. Q2 Dahlia Reynolds buys stationery, office equipment and services within a large third sector organisation. An important part of Dahlia s role is raising purchase orders. The process that Dahlia follows for the completion of purchase orders is shown in Fig 2. STEP 1 Accept purchase requisition from originator STEP 2 Transfer key information from the purchase requisition to the purchase order STEP 3 Add additional purchasing details to the purchase order STEP 4 Allocate a purchase order number and record it in the purchasing log STEP 5 Obtain the correct level of authorisation for the purchase order STEP 6 Send the completed purchase order Fig 2 Completing a purchase order Page 8 of 20 AC3 Exam Questions May 2016

7 (a) In the table below, explain why each of the steps in the process is important and the typical content in each step. Use examples to support your answers (12 marks) STEP 1 Explanation of why each step is important including examples (2 marks each) STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 PLEASE TURN OVER Page 9 of 20 AC3 Exam Questions May 2016

8 (b) Dahlia uses three different types of purchase orders in her role. These are shown in Fig 3. Low-value order purchases Blanket order purchases Individual order purchases Fig 3 The table below contains a list of products and services that Dahlia purchases using one of the three approaches in figure 3. Identify the most appropriate purchase order type for each product or service and justify your answer. (8 marks) Product or service 1. A large printer or photocopier Purchase order type and justification (2 marks each) 2. Coffee for visiting suppliers 3. Stationery products (e.g. paper, notebooks and pens) 4. Office cleaning services Page 10 of 20 AC3 Exam Questions May 2016

9 (c) Dahlia knows that each purchase order raised must have a budget allocated to it by the originator. Identify FIVE benefits of effective budgeting. (5 marks) PLEASE TURN OVER Page 11 of 20 AC3 Exam Questions May 2016

10 SECTION 3 Write your answers in the spaces provided. You are advised to spend 30 minutes on this question. Q3 Marco Bertoli works in the purchasing department at Global Electronics Ltd, a manufacturer of printed circuit boards (PCBs) and small electronic assemblies. Over recent months, there has been a significant rise in stock levels of some electronic components and Marco has been asked to gather information on historical demand for these components, which are held in stock, in order to forecast future usage more effectively. (a) Suggest TWO examples of internal data that Marco might use to gather this historical demand information. (2 marks) (b) The table below contains information collected by Marco on the usage of one of the electronic components over a period of six months. Month Monthly Usage Part No. YVT April 1,600 May 1,200 June 1,200 July 1,000 August 600 September 400 Page 12 of 20 AC3 Exam Questions May 2016

11 (i) Using a simple moving average for all of the data above, identify the predicted usage for the component in October. Show your calculations and answer in the space below. (3 marks) (ii) In order to recognise the higher importance of data from recent months, Marco applies weighting as follows: September (0.4) August (0.3) July (0.2) June (0.1) Use a weighted average to identify the predicted usage for the component in October. Show your calculations and answer in the space below. (3 marks) PLEASE TURN OVER Page 13 of 20 AC3 Exam Questions May 2016

12 (c) Global Electronics Ltd uses robots on the production line for the assembly of electronic components. Marco is aware that when purchasing a new robot, the total cost of ownership or whole-life cost should be considered. (i) Identify THREE types of cost that Marco should include when considering the total cost of ownership. (3 marks) (ii) Provide a brief explanation of each type of cost. (3 marks) (iii) Identify an example of each type of cost. (3 marks) An example has been included in the table below for reference. Type of cost (1 mark each) Explanation (1 mark each) Example (1 mark each) e.g. Acquisition cost Initial cost of purchase Cost of item, delivery, etc Page 14 of 20 AC3 Exam Questions May 2016

13 (d) When reviewing potential suppliers, Marco often refers to their financial documents as a way of assessing their financial stability. Below are four statements relating to the content of financial documents. For each of the statements, identify whether it is TRUE or FALSE and explain the reason for your answer. (8 marks) Statement 1 The balance sheet is a summary of income earned and expenditure incurred by an organisation over a period of time. Statement 2 The cashflow statement shows the overall cash surplus or deficit at the beginning of the year and at the end of the year. Statement 3 Current liabilities are found in the balance sheet and are payable within twelve months of the balance sheet date. Statement 4 The only financial document where retained profits can be found is in a profit and loss account (or statement of income and expenditure). PLEASE TURN OVER Page 15 of 20 AC3 Exam Questions May 2016

14 SECTION 4 Write your answers in the spaces provided. You are advised to spend 30 minutes on this question. Q4 Ruth O Conner is an assistant buyer working for Regional Water Limited, a regional utilities organisation supplying water and energy services. Ruth s manager has asked her to conduct a survey of internal customers to find out their views on the customer service provided by the purchasing function. (a) Identify THREE internal customers who Ruth might contact for the survey and provide an example of the type of customer service that each customer might expect from the purchasing function. (6 marks) Internal customer (1 mark each) 1. Expected service from purchasing (1 mark each) Page 16 of 20 AC3 Exam Questions May 2016

15 (b) The feedback that Ruth receives from the survey includes a wide range of positive and negative comments. Ruth s manager explains that this could be due to the zone of tolerance within customers expectations. Explain what is meant by zone of tolerance in this context. (4 marks) (c) A number of the negative comments that Ruth has received in the survey feedback relate to the standard of documentation prepared by the purchasing function. Ruth has reviewed how documentation should be prepared by the purchasing function and has proposed three improvements to her departmental manager. Suggest how each of these improvements could lead to improved customer service. (6 marks) Documentation approach 1. Use standard documents wherever possible. Likely improvement (2 marks each) 2. Follow organisational processes and procedures when preparing documents. 3. Pay attention to areas such as accuracy, legibility and clarity. PLEASE TURN OVER Page 17 of 20 AC3 Exam Questions May 2016

16 (d) The purchasing team at Regional Water Limited is required to communicate regularly with internal stakeholders and suppliers. Figure 4 shows five different ways that technology can be used to send messages and data. Virtual conferencing Automated call handling SMS and MMS text messages Sending messages and data Fig 4 Electronic data interchange Identify the most appropriate communication method in each of the situations outlined in the table below and explain your answer. (9 marks) Situation 1. The purchasing team wants to ensure that phone enquiries from stakeholders are directed to the correct person and dealt with efficiently. Most appropriate communication method (1 mark each) Explanation (2 marks each) 2. Ruth needs to change the time of her meeting with Najib from marketing. The meeting is tomorrow but she is out of the office all day today. 3. Regional Water Limited operates over a large geographical area with suppliers widely distributed. Ruth will be hosting a supplier meeting to communicate new purchasing processes to the whole supply base. END OF QUESTION PAPER AND ANSWER BOOKLET Page 18 of 20 AC3 Exam Questions May 2016

17 PLEASE RETURN THIS FORM TO: CIPS ASSESSMENT MANAGEMENT CENTRE c/o LINNEY DIRECT, A7 GOODS IN BELLAMY ROAD, MANSFIELD NOTTINGHAMSHIRE NG18 4LN UNITED KINGDOM TEL: +44(0) FAX: +44(0) Page 20 of 20 AC3 Exam Questions May 2016

Procurement and supply workflow

AC3/November 2016 Advanced certificate in procurement and supply operations Procurement and supply workflow QUESTION AND ANSWER BOOKLET Candidate Number Date Wednesday 16 November 2016 Time Start 09:30