CIPS. Improving Supply Chain Performance

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1 CIPS Level 5 PRACTICE QUESTIONS Improving Supply Chain Performance

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3 Practice Questions This is a collection of exam-standard questions to help you practise what you have learned. Each question or small group of questions is prefaced by an indication of the chapter in your reference text that it mostly relates to. However, bear in mind that exam questions may range across more than one syllabus area; to prepare a full answer you may need to draw on material from more than one chapter. See Chapter 1 of your reference text Collymore Briefly describe the ideas of Professor Michael Porter on securing competitive advantage by means of value chain analysis. What is the role of the purchasing function in this process? Collymore plc is a large company operating in a concentrated industry (an industry dominated by a small number of large firms). How can the concept of value chain analysis assist Collymore in developing competitive advantage? Internal customers A recent trend in management thinking is to view each department as satisfying the needs of customers. In this context a customer may mean another internal department of the organisation. Discuss the argument that the purchasing function should create strong links with its internal customers and indicate the benefits that might arise from this approach. See Chapter 2 of your reference text Centralisation and decentralisation Define centralised and decentralised purchasing organisational structures. Outline the relative merits of centralised and decentralised purchasing organisational structures.

4 See Chapter 4 of your reference text Purchasing and quality You have recently been appointed as a buyer for a leading food manufacturer. You have been asked by the purchasing manager to make a presentation on: A definition of quality management and its benefits. The role of purchasing in implementing quality management. Draft notes to prepare yourself for the presentation. Vendor appraisal Purchasing departments in recent years have assumed a broader role in increasing and maintaining quality standards. Putting yourself in the position of a buyer sourcing a quality-critical component, explain: the procedures and criteria you would use in a vendor appraisal the steps you would take to ensure that performance standards were maintained once the suppliers had been selected. Ensuring supplier quality Describe the role of the purchasing function in ensuring quality through: appropriate selection of suppliers; and management of suppliers following selection. In what other areas can the purchasing function contribute to quality? See Chapter 5 of your reference text Limpar You work in the purchasing department of Limpar Limited and are currently engaged in a project to introduce value analysis concepts across the company s range of manufacturing activities. Your manager has suggested that the company s suppliers have an important role to play in this process and has asked you to prepare a report analysing the ways in which they can contribute. You are required to present your ideas on this topic in the form of a report addressed to your manager. 4

5 See Chapter 6 of your reference text Reducing the supplier base A recent trend in procurement policy is to reduce the number of an organisation s suppliers. You are required to account for the existence of this trend and to discuss its advantages and disadvantages. Bottleneck It might be argued that relationship management is an important consideration for bottleneck suppliers, but less important elsewhere. Discuss this view. See Chapter 7 of your reference text Manufacturing strategy Modern research suggests that eventual product costs and quality are determined above all at the design stage. Critically examine the inference that managers should therefore seek improved profitability by focusing on manufacturing strategy at the expense of development throughout the supply chain. New products It is common to analyse the process of developing new products by distinguishing various phases; as an example, Dobler and Burt distinguish between the investigation phase; the development phase; and the production phase. What contributions can the purchasing function make to the process of new product development during each of these phases? 5

6 See Chapter 8 of your reference text Logistics management Logistics is the concept which seeks to provide for the management and co-ordination of the activities within the supply chain from sourcing and acquisition, through production, where appropriate, and on through distribution channels to the customer. The goal of logistics is the creation of competitive advantages through the simultaneous achievement of high customer service levels, optimum investment and value for money. (CIPS) Classify the main activities for which a logistics manager might be responsible under the headings: materials management physical distribution management. For each activity you have identified explain how effective logistics management can improve an organisation s strategic performance. See Chapter 9 of your reference text Teamworking Evaluate the use of teamworking from the point of view of an organisation. Managing conflict Discuss how far conflict is constructive or destructive. Identify a range of strategies for resolving conflict. Phases of negotiation Discussions of the strategy and tactics of negotiations often analyse the process into a sequence of phases. Using any suitable model of the negotiation process, discuss the buyer s approach to each phase of negotiation. How can this kind of analysis improve the performance of a buyer in conducting negotiations? Competitive bidding Briefly outline the types of situations in which a competitive bidding approach is likely to be most suitable. In what situations is this approach likely to be unsuitable? What alternatives does a buyer have if he wishes to avoid a competitive bidding process? 6

7 See Chapter 12 of your reference text Technology Examine the different ways in which developments in technology are having an impact on organisations. What are the implications for purchasing departments of such developments in technology? 7

8 THE MAY 2007 EXAM Air Services Ltd Safety at all costs? Introduction Air Services Ltd (ASL) operates a servicing, parts supply and fitment business for small independent commercial and private light aircraft owners across Europe, North America and Scandinavia. Originally established by two aircraft engineers in Sweden to service a single make of aeroplane, it expanded geographically initially and then through additional aircraft makes to build up a diverse portfolio. ASL now services aircraft from 15 different manufacturers for which a total of 110 models are covered. Structure The organisation currently operates with two managing directors, one responsible for technical development and the other for business functions (marketing, sales, finance). The structure of the organisation is as follows. There is a head office in Gothenburg, Sweden which deals with finance, marketing, training, central records and purchasing. There are a total of six regional control centres located in Canada, Eastern USA, Western USA, UK, Southern Europe and Northern Europe. These deal with sales, human resources, co-ordinating the work of the aircraft service teams and providing technical support for parts and fitment procedures. Aircraft service staff are either permanently based around larger activity areas (with static workshop facilities) or cover a region and have a mobile workshop. Processes The activities of ASL are subject to very strict controls as determined by the relevant aviation authorities. Safety is paramount within the industry. Traceability of all fitted components is a requirement and detailed records must be kept of any maintenance work carried out on an aircraft. The organisation prides itself on the standard of administration completed but notes concerns about the relevant costs and bureaucracy raised by the shareholders. Balancing these issues is a challenge. Parts storage and distribution is facilitated through a central warehouse in Sweden. Parts are purchased from the original manufacturer of the aircraft and so may travel from the country of origin (eg the USA) and then be returned to there if that is the call off point for the required aircraft service work. This brings about a certain level of control and is seen as maintaining the standard of the records, but sometimes causes delays. 8

9 The main library of assembly drawings, procedures and parts specifications is also maintained in Sweden, so that parts received may be carefully checked and despatched with the most upto-date copies of supporting procedures. Regional control centres also keep technical records for current client contracts. In one instance the managing director (technical) discovered that one of the regional control centres did not use the recent technical information but issued an old copy from its own records. Although this had no impact upon the operation performed, there was potential for a serious error had the procedure been changed. Training is carried out in two main ways. Either technicians attend courses held by the original aircraft manufacturers or manufacturers will send a representative to ASL if there are sufficient delegates requiring instruction on a particular model. As ASL only uses original manufacturers for parts (unless manufacturers indicate suitable alternatives) it deals in the main with these organisations and a range of non-specialists for generic purchases (office, transport/courier services, information technology etc). The aircraft parts suppliers have been criticised by ASL in the past for being unresponsive. This has led ASL to build up relatively substantial stocks to try and reduce lead times for the completion of non-scheduled maintenance activities (issues arising from faults identified during routine services). Some of these suppliers have noted the continuing growth of ASL and are now seeking to develop their relationships with them. Market ASL is planning to further expand its activities into North Africa and the Middle East. It has appointed a business development manager for the region who has made a presentation to ASL s board of management proposing to take over an existing regional operator. Its systems are very different from those of ASL, as the regional operator practises localised procurement. Recent activity in the market place has also become intense. Some of the manufacturers are looking to extend their scope of operations and are developing their dealer services networks. Conversely, other manufacturers involved in larger aircraft have been looking to outsource their activities to focus more upon design and build, drawing other potential competitors into ASL s market segments. One of the manufacturers has approached ASL to discuss the possibility of becoming the sole servicing agent for its products. 9

10 The meeting A meeting between the managing directors of ASL and the business development manager has identified some key areas of concern for the organization. Whilst costs have remained stable when measured against the volume of work, aircraft servicing prices have continued to fall steadily, eroding margins. There have been some unacceptable delays in shipment of aircraft parts internationally, and there have been other delays caused by damage to aircraft parts during transportation. Customs controls are becoming tighter and are delaying distribution of aircraft parts to the aircraft service teams. Archiving and document transfer costs are proportionally higher for ASL compared to its competitors. The new business development manager has criticised communication both internally and externally throughout the supply chain. There is concern over the capacity of ASL to develop expertise in the required time if the manufacturer s offer to become the single servicing agent on larger models is accepted. The board of management is unsure of its true market position in the light of competitive changes within the industry. The information in this case study is purely fictitious and has been prepared for assessment purposes only. Any resemblance to any real organisation or person is purely coincidental. 10

11 QUESTIONS All four questions relate to the case study above and should be answered in the context of the information provided. Question 1 Acting as a consultant to ASL, prepare an informal report to the managing directors to: (i) Explain the benefits of a kaizen approach for ASL (ii) Evaluate potential areas on which a kaizen approach may focus. (25 marks) Question 2 Propose and justify FOUR key objectives for ASL of forthcoming negotiations with its suppliers considering the supply and distribution problems already encountered. (12 marks) Recmmend how ASL should undertake the negotiation process with its suppliers and indicate where any potential problems may occur. (13 marks) Question 3 Following the meeting, the new business development manager has proposed a move to a decentralised approach to purchasing for ASL. Evaluate the merits of such a proposal. (15 marks) Illustrate how information and communication technology (ICT) could contribute to the successful implementation of a decentralised purchasing approach for ASL. (10 marks) Question 4 Assess how a range of supplier management tools could contribute to the increased efficiency of ASL s aircraft service delivery. (25 marks) 11