Certificate in Purchasing and Supply. Purchasing Operations L3-02 LEVEL 3 MARKING SCHEME

Transcription

1 Certificate in Purchasing and Supply Purchasing Operations L3-02 LEVEL 3 MARKING SCHEME May 2007

2 PURCHASING OPERATIONS MARKING SCHEME SECTION A TF BETA PLC Q1 (a) to test the candidate s knowledge of the doctrine of privity to test the candidate s application of the doctrine of privity Syllabus Reference(s): 4.4 explanation that privity of contract means that only a party to a contract can enforce the terms of that contract. (3 marks) Recognition that Anatel were not part of the disputed contract and under the privity of contract rule could not be sued. Recognition would also be given if the candidate discussed collateral contracts. (2 mark) 5 marks Q1 (b) to test the candidate s knowledge of contract formation to test the candidate s understanding of contract formation to test the candidate s analysis of the need for contract terms Syllabus Reference(s): marks for appropriate format Explanation of the term battle of the forms that outlines when a contract is formed. This should include some discussion about offer and acceptance. The concept of counter-offer should also be included. Mention of the importance of the last document would be expected. Recognition of the importance of the purchase order with terms and conditions included and an analysis of the other documents that may be involved, such as the request for quotation, order acknowledgement and delivery note. L6-02/May07/DJD/FV 2/12

3 Q1 (c) to test the candidate s knowledge and understanding of types of specifications to test the candidate s application of selecting suitable types of specifications to the case scenario. Syllabus Reference(s): 2.3 Definition of a technical/blueprint specification such as a highly prescriptive written specification or drawing giving a fully detailed definition of what is required or similar. Analysis of the problems of using prescriptive specifications such as time consuming, costly to prepare, it may limit the number of suppliers able to comply and the risk of the design not performing is borne by the purchaser. A good answer would suggest the use of a functional or performance specification. A definition or description of the type of should be provided, such as A performance/functional specification are brief documents that define the required function to be achieved, and details of the input parameters; but they do not state how this function is to be achieved. Advantages described, such as suppliers can use their full expertise and innovation to develop the lowest cost solution, less effort is required to produce the specification, and the risk of not meeting the specification is borne by the supplier. A good candidate would make reference to the problems in the case study. Q2 (a) to test the candidate s knowledge of the need for buffer stocks to test the candidate s understanding of factors that effect buffer stock quantities Syllabus Reference(s) 1.3 L6-02/May07/DJD/FV 3/12

4 Explanation that buffer stock is a reserve to take care of requirements running above the average rate, or delivery periods which exceed the normal lead time. This will recognise that it is to cover the uncertainties both in demand and supply. A good answer will recognise that it is sometimes called safety stock. Recognises that many factors impact on the buffer stock level, such as required service levels, variability of demand and supply, company policy, the type of products are some of the other factors that affect the level of safety stock. Good answers will recognise that the costs of keeping stocks will also be an important factor. (1 mark) 5 marks Q2 (b) to test the candidate s knowledge of ROL systems to test the candidate s application of minimum order levels to problems detailed in the case Syllabus Reference(s) 1.3 L6-02/May07/DJD/FV 4/12

5 2 marks available for producing a well-structured memo. (i) Recognition that the current ROL is incorrect, even if safety stock is set at zero. Reference to problems caused by the reorder level system such as small orders, parts ordered independently of other stock items, and leads to random reordering pattern, can lead to ordering of slow-moving items. Recognition that a basic reorder level is equal to the average usage in the lead time plus safety stock. Good answers will provide an explanation with an example of the problems, such as the H250 where an order has been placed even though the stock is 90 and usage is 10 per week. Other examples from the table can be provided. (ii) Reorder levels for each of the parts should therefore be 3 weeks usage. + 1 weeks safety stock. G250 (50x4 = 200 units, S450 (100x4 = 400 units), S x 4 = 400 units etc. So for the S450 parts need to be ordered immediately. Alternative answers where safety stock is set at more than 1 week can be accepted if some justification provided. 4 marks for correct calculation of both examples Q2 (c) to test the candidate s knowledge of stock replenishment systems to test the candidate s understanding of fixed interval ordering. to test the candidate s application of fixed interval ordering to problems detailed the case Syllabus Reference(s): 1.3 L6-02/May07/DJD/FV 5/12

6 Advantages should include the fact that orders will be placed at the same time for all parts, enabling larger shipments to be made from the UK, hence reducing costs. Easier administration and control of one shipment could also be discussed. Possible identification of slow moving or obsolete items. Workload planning for purchasing and warehouses would become easier. Explanation of fixed interval ordering system that must recognise that the order quantity is not fixed. Inventory levels are reviewed on a periodic basis. Replenishment quantities are enough to bring stock levels up to a pre-determined maximum stock level Good answers will also discuss how this pre-determined maximum stock level is established or how the order size is determined. Order size = Demand over lead time + demand over review interval + safety stock physical stock stock on order. So for the part G250 the reorder quantity = 3x x = 350 units. Note for the S450 Reorder quantity = 450. Etc. A good answer should also include a well-labelled diagram that shows the maximum stock, actual stock, quantity to be ordered and shows the review period. Q3 (a) to test the candidate s knowledge and understanding of contract terms Syllabus Reference(s): 4.3 Express terms are clearly stated and recognised in the contract between the parties. Examples could include price, delivery date and so on. Implied terms are not always mentioned but are assumed to exist and can form part of the contract. Examples could be used from legislation, such as the Sales Of Goods Act : 5 marks L6-02/May07/DJD/FV 6/12

7 Q3 (b) To test the candidate s understanding of remedies available to the buyer for breach of contract Syllabus Reference(s): 4.3 Explanation of the difference between a condition and warranty. Conditions are crucial to the performance of a contract. Warranty involves terms of lesser importance to the performance of the contract. (3 marks) Recognition that if a supplier breaches a condition of contract the buyer can rescind the contract, repudiate the contract, seek an order from the court for specific performance or receive damages Recognition that for breach of a warranty the buyer can only sue for damages. Good answers will mention that a court will decide whether or not a term is a condition or warranty (1 mark) Q3 (c) To test the candidate s knowledge of dispute resolution methods Syllabus Reference(s): 4.5 Explains there are four different approaches to resolving contractual disputes. Negotiation, arbitration, adjudication and through a court of law. Description of each method with some recognition of advantages and disadvantages of each. Good answers will recognise that litigation is usually a last resort and that negotiation is the quickest and least costly method L6-02/May07/DJD/FV 7/12

8 Q4 (a) To test the candidate s knowledge and understanding of types of lead time Syllabus Reference(s): 1.5 Explanation that recognises internal lead time is the time between identifying the need and the issue of a complete purchase order. Whereas the external lead time is the time between the supplier receiving the order and completing the purchase order. : 3 marks per explanation of lead time. 6 marks Q4 (b) To test the candidate s knowledge and understanding of methods of measuring supplier delivery performance Syllabus Reference(s): 3.1 Two methods should be described such as the number or percentage delivered on time, number or percentage delivered within (say) five days of the contracted delivery date. Or the ratio of average number of days late to agreed contractual delivery time. Good answers will recognise that measuring delivery performance is part of vendor rating. 6 marks Q4 (c) To test the candidate s knowledge of logistic operator s systems To test the candidate s understanding of the advantages of using third party logistics operators Syllabus Reference(s): 1.4 L6-02/May07/DJD/FV 8/12

9 Provides explanation of a third-party logistics operator. Good answers will recognise and explain the benefits that they can provide, such as warehousing, group age, satellite tracking, route panning, palletisation and they may have different vehicles for different types of load or journey. They can also help with the documentation and customs clearance procedures. They can also give advice on packaging requirements for international journeys. They can also give accurate costs for collecting and delivering overseas supplies or similar (7 marks) Good answers will recognise they can save the buyer time and money and that the total lead time may be reduced. Good answers will also recognise that large third-party logistics operators may have advantages over smaller operators. For instance, they may own their own aircraft or vehicles. They may have special arrangements with customs for clearing goods. 13 marks Q5 (a) To test the candidate s knowledge and understanding of price elasticity of demand. Syllabus Reference(s): 1.6 Explains that the sensitivity of quantity demanded to changes in price is known as the price elasticity of demand. The word responsiveness is often used. A good answer will include a formula such as: PED = percentage change in quantity demanded Percentage change in price 4 marks Q5 (b) To test the candidate s knowledge and understanding of cost elements Syllabus Reference(s) 1.6 L6-02/May07/DJD/FV 9/12

10 Explains three major cost areas such as labour, raw materials and overheads. These need not be specifically named but the cost described must be a type of cost. Direct materials and indirect costs may be described. Profit is not a cost. 6 marks Q5 (c) To test the candidate s knowledge and understanding of pricing strategies Syllabus Reference(s): 1.6 Explains three pricing strategies that should include skimming (starting with a high price and reducing it later), penetration (when a product is given a low initial price to get into the market. As volume of sales goes up, the price is increased) and psychological (bases pricing on what customers expect to pay, for instance, a high price may make people think the product is high quality). Contribution pricing (selling below full cost but covering variable costs) also acceptable. Suitable example for each provided. 3 mark per method with example. 9 marks maximum. Links to costs, stage of product life cycle, competition should be made. Alternative answers such as company policy/strategy can be accepted. A good answer will link the pricing strategy to price elasticity and provide a suitable explanation. 15 marks Q6 (a) To test the candidate s knowledge of the purchasing cycle Syllabus Reference(s): 3.1 Definition such as is all of the procurement activities that take place from the initial identification of need to the final satisfaction of that need. This includes writing specifications, soliciting quotations, order placing, receiving the goods, paying for them and rating the supplier, among other activities or similar 5 marks L6-02/May07/DJD/FV 10/12

11 Q6 (b) To test the candidate s understanding of types of the stages of the purchasing cycle Syllabus Reference(s): 3.1 The diagram would probably contain TEN activities similar to this list: identification of need, establish the specification, defining the contract terms, surveying the market, source the market, supplier appraisal, inviting quotations/tenders, analysing quotations and select supplier, negotiation, contract award, payment and vendor rating/review of performance. Other versions with less stages are acceptable provided a complete cycle of activities is described. Complete cycle with descriptions 7 marks. Most stages and descriptions 5 marks. Some recognition with descriptions up to 3 marks Good answers will show this as a cycle with an arrow showing that it is not a one-off activity. Activities should be in a logical order but may not be exactly as detailed above. Recognition that some re-buys may not follow all the stages. (3 marks) Q6 (c) To test the candidate s knowledge and understanding of vendor rating Syllabus Reference(s): 3.1 Suggested elements could be: price, delivery and quality. Other valid elements could be ease of obtaining information, reaction to problems and accuracy of documents. Discussion of how each is measured should be present, such as a categorical system (very good, satisfactory or unsatisfactory) or a numeric type system (such as, 9/10 for delivery). (6 marks) Good answers will suggest some form of weighting for the elements and that quality is usually given the highest weighting. (3 marks) Recognition that vendor rating is used to monitor and control suppliers. Good answers will recognise that this information will be fed back to suppliers and is linked to managing supplier quality. (1 marks) L6-02/May07/DJD/FV 11/12

12 END OF MARKING SCHEME L6-02/May07/DJD/FV 12/12