Foundation Diploma in Purchasing and Supply. Purchasing Contexts L4-05 LEVEL 4. Senior Assessor s Report

Transcription

1 Foundation Diploma in Purchasing and Supply Purchasing Contexts L4-05 LEVEL 4 Senior Assessor s Report May 2009

2 INTRODUCTION All four questions were based on a private limited company called Style of the Nile (SN). SN designs and sells a range of clothing and associated goods. The design of the clothing has been influenced by ethnic art and designs collected by the owners on a holiday in Egypt from where the inspiration for the company name came from. Over the years the owners of SN have built a successful brand with a reputation for quality and unique designs. SN sells its range of clothing and associated goods through its chain of boutiques located in major airports throughout the European Union. Question 1 Part (a): Compare the advantages of operating as a sole trader with those of operating as a limited company such as Style of the Nile (SN) This question provided an opportunity for many candidates to gain high marks at the start of the examination. Candidates were clearly familiar with relative advantages of a sole trader and a private limited company. Candidates generally demonstrated knowledge and understanding, and offered a comparison of the advantages of both thus gaining marks. Candidates, who failed to attain high marks, appeared to have rushed to write down everything they knew about a sole trader and a private limited company including the disadvantages and only partly answered the question. In many instances answers were simply an explanation of each form of business rather than a comparison of the advantages. Some answers were formatted as bullet point lists or charts; such answers lacked detail and comparison, and consequently did not achieve high marks. As with all questions attention to command words is essential. Part (b) Explain how private sector companies such as SN are formed. As with the above question, this question was not wholly case specific as all private limited companies are formed in the same way. This question was answered well and it gave the opportunity for many candidates to gain further marks. The question required knowledge of the Memorandum of Association and the Articles of Association. Candidates familiar with these two documents explained their L4-05/SA report/may

3 role and purpose in the formation of a limited company. Such answers also made reference to the Registrar of Companies and the subsequent Certificate of Registration issued by the registrar if the documents are formally in order and the objects specified in the memorandum appear to be lawful - since a company may only be registered if it has a legal purpose. Answers that failed to gain high marks confused the documents or gave very brief explanations of the process that lacked depth of knowledge and understanding. Many candidates' discussed (or confused) partnerships, public limited companies, or simply restated the case and that SN was formed by the two brothers for the purpose of selling clothes. Question 1 Part (c) (5 Marks) Outline the sources of finance available to companies such as SN. With a question command word outline and 5 marks available, candidates were not required to give detailed answers. Most candidates achieved high if not full marks for this question usually based on finance from bank loans, bank overdrafts, venture capitalists, local government grants or investment initiatives, retained profit, or family and friends against a share in the business. Answers that failed to gain high marks included few sources of finance, discussed the sale of shares on the stock market or use of a rights issue to raise finance. Other suggestions included a merger or the possible sale of assets. Question 2 Part (a) Explain to the buyers at SN the differences and similarities between purchasing goods and services. There were many excellent answers to this question. Not only was there knowledge and understanding of the differences and the similarities between goods and services but the question had been read and the differences related to the purchasing of goods and services had been addressed. Such responses firstly addressed the differences such as L4-05/SA report/may

4 tangibility, separability, homogeneity and perishability before explaining the many similarities. Similarities included that both can be segmented, aggregated, specified and costed, measured and assessed. The implication of the differences for purchasing goods and services was then explained in detail. By comparison candidates who did not attain high marks simply explained the differences between goods and services often very briefly and did not consider the similarities. When similarities were considered they were often very simplistic, for example both bought with money. There was a tendency not to read the question in full and focus on perceived key words such as differences, goods services. Part (b) (15 Marks) Discuss the requirements SN must consider when purchasing goods for resale. This question requires careful analysis as it specifically relates to purchasing for resale. It is not a generic question relating to the purchase of goods. It also relates to information within the case study. For many candidates this question provided another opportunity to gain high marks. Answers acknowledged that SN buys to sell and as a retailer SN must develop a product mix to maximise potential sales from each customer. This mix will change in line with seasons, tastes and fashions and SN will have to monitor contemporary themes. Typically candidates referred to requirements such as: store image and brand; target market, affordability, availability, fluctuating demand and production flexibility, terms and conditions, ease of exit from the supply agreement, quality and standards, and security of designs and supply. Candidates who achieved high marks identified relevant requirements and discussed each in detail. Such answers reflected the case study and the retail sales scenario given. By comparison responses that failed to gain high marks provided little detail, simply offered a list of considerations any buyer might consider when buying goods or based their answer on the 5 rights. In many instances such answers simply related to a detailed explanation of the 5 rights and lacked context. Question 3 Part (a) Explain the benefits for SN of creating a centralised purchasing function. For high marks answers had to reflect the case study and avoid generic listing of benefits or dogmatic responses. L4-05/SA report/may

5 Candidates who gained high marks were clearly familiar with the benefits of centralisation but more importantly were able to answer in the context of the case study. Such answers explained the benefits to SN of a standardised approach to ordering, payment and payment terms. This would avoid the non-payment of invoices currently being experienced. Additionally, inventories could be better controlled reducing obsolescence and loss of working capital, and greater control of costs through consolidation, quantity discounts and rebates achieved. Other relevant considerations included career development and systematic staff training opportunities. Responses that failed to gain high marks provided generic lists often over several pages. Attempting questions in this way does not help the candidate to gain marks as inevitably the points are not in context and writing such lengthy time consuming answers reduces the time available for other questions. Question 3 Part (b) (15 Marks) Assume a decision to centralise purchasing had been made. Describe how the roles and responsibilities for the centralised purchasing function might be divided in order to overcome the problems identified (in the case study). This required candidates to read the case study thoroughly and ensure they understood the problems before attempting the question. Candidates clearly found this question more challenging and there were a wide range of answers and marks. Candidates who had read the case study in detail should have picked up on a number of key points (potential problems) that could influence how roles and responsibilities might be divided. Such issues included: SN planned new product development, growth, use of new sources of supply, different approaches to purchasing goods and services, quality and delivery issues and importing. The importance of purchasing integrating with other departments and avoiding a silo mind-set is particularly important. It was expected that answers would suggest a flat hierarchy that minimises the sub-division of roles, possibly based on product category or group/country of supply, or group/country of supply. Other possibilities included a structure based on customers or outlets. Specialists could be appointed for international purchasing and the purchasing of routine items not intended for resale could be undertaken separately. Reference to a purchasing analyst and expediter would be appropriate. For high marks the role (i.e. product specialist or similar) should be identified and their possible responsibilities (i.e. supplier selection, specification development, negotiation and contract award) all relative to the problems identified Answers that did not gain high marks failed to discuss roles and responsibilities within the context of the case, in some instances describing roles but not responsibilities or L4-05/SA report/may

6 concentrating on procedures and processes. Often candidates suggested tasks that could be undertaken and provided a simple list such as agreeing clear payment terms, having clear and formal orders. Diagrams were often unclear and their rationale not explained. Question 4 Part (a) Explain how the appointment of agents could benefit SN. To answer this question successfully candidates were required to have an understanding of the role of an agent in an International Supply context. Many candidates found question 4 difficult to answer well and consequently attained low marks. Results differed by centre indicating that some providers / candidates had not studied this area of the unit content with the same degree of attention. Low marks on this question resulted in many marginal fails or marks falling short of credit and distinction grade boundaries. Candidates who achieved high marks understood that agents add very little to the transformation process within the supply chain. They do not manufacture anything and they add very little tangible value. However, in many situations such as that within the case study, their role is critical and they do add significant intangible value. Within the context of the case typical benefits of an agent included: providing key introductions; representing SN, quality and all ethical aspects of supply are maintained such as undertaking frequent supplier checks; providing supply market information on a wide range of issues including capacity, legal considerations, risk analysis, business custom and practice and language skills/knowledge. An appointed agent would become a trusted adviser to SN in all business dealing and their presence would reduce the need for SN buyers to make frequent and expensive trips to the respective countries. Some responses lacked detail and candidates appeared to be unfamiliar with the role of an agent within the case scenario, ignored the case study or simply developed a list without demonstrating any understanding or knowledge. Question 4 Part (b) (10marks) Discuss the differences between tariff and non-tariff barriers to trade that SN might encounter. L4-05/SA report/may

7 As with the above question, knowledge and understanding of International Supply within the context of the unit content was required. This question provided a wide range of marks and it was clear that many centres / candidates had not thoroughly revised this area. Although there were exceptions, many candidates provided an incomplete or incorrect answer to this question. A significant number appeared not to have read the case study and discussed the movement of goods within the European Union although the case study clearly stated the import of textiles manufactured from outside the EU this led to many confusing responses to the question. Candidates, who understood that typical tariff barriers include an extensive range of import tariffs (duties) payable on imported goods, achieved high marks. Typical nontariff barriers include import licences, quota systems and restrictive customs procedures which prolong the importing process. Responses that failed to gain high marks stated that tariffs are levies or taxes but then went on to state non-tariff barriers are the opposite (i.e. not a tax or a trade restriction whatsoever) and therefore non-tariff barriers actually facilitate trade. Another common mistake was to state tariffs relate to incoming goods and non-tariffs are for exports. Other answers stated that everything could be a barrier to trade and provided a list that included: language barriers, cultural barriers, time difference barriers, and so on without actually answering the question set. Question 4 Part (c) (5 Marks) Explain ONE reason for barriers to trade. Overall this question was answered well with the range of marks determined by the depth and breadth of response. Most candidates were aware that the main reason for barriers to trade is simply one of protectionism. Governments in response to pressure / representation from domestic producers, from what they see as a threat to their market share / profitability from overseas producers, introduce a range of measures to prevent, limit or increase the costs of imports. Often this simply protects inefficient domestic producers from competition. Domestic producers win as the threat of imports is removed or greatly reduced and domestic producers loose as domestic competition is stifled and foreign imports become less competitive. Other related reasons include: to preserve employment levels or to raise government revenue through import tariffs. Some candidates provided vague answers that demonstrated little understanding or explained infrastructure reasons creating barriers. L4-05/SA report/may

8 APPENDIX: Matrix indicating the learning objectives of the unit content that each question is testing L4-05 PURCHASING CONTEXTS Question No Learning Objective a b c a b c a b c a b c 1 Understanding diverse organisations, contexts and situations 1.1 X 1.2 X X X X Recognising the need for different approaches to purchasing different 2 types of goods and services 2.1 X 2.2 X X X X L4-05/SA report/may