CIPS Exam Report for Learner Community:

Transcription

1 CIPS Exam Report for Learner Community: Qualification: Professional diploma in procurement and supply Unit: PD4 - Supply chain diligence Exam series: May 2016 Each element of a question carries equal weighting unless otherwise stated. Question 1 (a) Explain FOUR main areas of ethical labour practice that an organisation should consider when it enters into a contract with a supplier for the manufacture of goods, in order to protect the suppliers workforce (b) Outline Three remedial actions that an organisation might take when breaches of ethical practice have occurred within its supply chain 16 s 9 s Learning outcome addressed 1.2 Examples of good content/good approaches in answers; Answers could have started with acknowledging an organisation would be expected to have used an established supplier selection process, to avoid suppliers with known problems, and then give four areas of explanation. Many answers recognised that this is a high profile area for organisations with mention of audits, inspections, codes of conduct and so on. Answers normally identified four specific areas of ethical labour practice, with details of the areas of ethical labour practice. Areas of explanation could include inter alia, child labour, working hours and conditions, regular payment of wages and salary slavery, freedom of association, health and safety policy, freedom to join trade unions, use of sub-contractors and their compliance with ILO standards. There were a number of answers where clear examples were used to support answers; examples included ILO, standards and legislation. Also some responses gave examples of good practice in their own organisation to support the four chosen areas. Question required four areas in the answer. A number of candidates failed to identify four specifics, and May 16_PD4_EXAM REPORT _LEARNER_COMMUNITY_ 1/7

2 answers were one disjointed paragraph, or included more than four specifics. Concluding comment: Question 1 was generally well answered, with most candidates gaining pass standard or better. Part (b) Learning outcome addressed 1.2 Command word explanation: Outline give the main features, facts or the general idea of something Three specific remedial actions were required where breaches of ethical practice have occurred. Answers included three specifics, typically the following implementation of new procedures and standards, revision of contractual agreements, joining Ethical Trading Initiative or some sort of label standard, de-list non performing contractors, initiate a public relations campaign, appoint independent auditors to review breaches of ethical practice and so on. The better answers centred around the actual actions, not just a summary of three types of breach, and where the actions were clear and credible the full nine marks were awarded. As in 1a), question b asks for a specific number of things i.e. three remedial actions. The same problem occurred in this part of the answer more than three specifics, or long and disjointed answers where it was difficult to see where the candidate was going in some papers. Question 2 There is significant merger and acquisition activity with economies between a wide range of organisations a) Explain three reasons for mergers and acquisitions b) Explain the purpose of regulating mergers and acquisitions 15 s 10 s Learning outcome addressed 2.3 May 16_PD4_EXAM REPORT _LEARNER_COMMUNITY_ 2/7

3 Most answers began with indicating the difference between mergers and acquisitions, this being well answered and understood by the majority of candidates and rewarded in marking. Good content included three specific reasons for mergers and/or acquisitions, which included, synergy, bargain buys, third party pressure, managerial, surplus funds, diversification and even necessity (Lloyds/HBOS for example). Pass answers gave valid explanations for three reasons only, but better candidates included good examples where mergers and acquisitions had occurred, some using their own organisation as the example. A number of answers gave more than three reasons, while others were not specific enough to identify the reasoning in the answer. Many failed to take this opportunity to give examples. Part (b) Learning outcome addressed 2.3 Regulation can cover a wide scope and better answers explained the Competition and ets Authority (formerly the OFT), EU Competition Commission and Stock exchange/city Code and rules and regulations on takeovers and mergers and also included a number of specifics in the answer, again there were also some examples of failed mergers or acquisitions with reasons for their failure. The Cadbury/ Kraft acquisition was a particularly popular example cited in both parts of this question. Many candidates gave detailed reasons for the need of regulations in mergers and acquisitions, the better candidates used examples with some using their own experiences of the use of regulations but in quite a technical question such as this it was accepted that many candidates would not have hands on experience of such a transaction. Part b at times produced a re-run of part a, i.e. giving more reasons for M and As as opposed to regulation of them. Concluding comment: It is fair to say a number of answers were weak in Q2(b), and in a number of cases it was not attempted or answered in a way more appropriate for part (a). May 16_PD4_EXAM REPORT _LEARNER_COMMUNITY_ 3/7

4 Question 3 (a) Define the term commodities and distinguish between hard and soft commodities (b) Explain the use of future contracts when buying commodities 15 marks 10 s Learning outcome addressed 3.3 Command word explanation: Define- Explain the exact meaning of a word or phrase Many answers appreciated that there were two parts of the question. First the definition, a commodity is a product, which is of uniform quality and traded across various markets. They are unbranded and undifferentiated products and services that are considered to be the same in nature no matter the source and supplier. They tend to be primitive products such as raw materials in their basic state as the more refined the less undifferentiated they become. These commodities are traded across markets situated in different corners of the world through commodity exchanges such as the New York Mercantile Exchange, the London Metal Exchange, etc. In the second part of the question, candidates provided an examination along the lines of there is generally two types of commodities, hard commodities and soft commodities. Hard commodities include crude oil, iron ore, gold, and silver and have a long shelf life. Agricultural products such as soybean, rice or wheat, are considered soft commodities since they have a limited shelf life. These commodities have to be similar and interchangeable or fungible. For example, wheat from one country or market should be of the same quality as wheat from another, or gold in one country should be of the same purity as gold from another. Candidates often gave a definition resembling the above definition together with a clear examination of hard and soft commodities. Some candidates referred to the key differences in these two categories to a high level (hard and soft) including sensitivity of soft commodities to spoilage, which changes the way the commodities prices behave for this area, and marks were awarded accordingly. Examples of poorer content/ poorer approaches in answers and concluding comment: This area appeared to be well understood in most papers with little confusion in the two types of commodity. May 16_PD4_EXAM REPORT _LEARNER_COMMUNITY_ 4/7

5 Part (b) Learning outcome addressed 3.3 Answers often started with an overview that commodity buying is price volatile, which encourages the use of futures contracts to mitigate the impact of price fluctuations in the future. A futures contract is a standardised contract between two parties to buy or sell a specified asset of standardised quantity and quality for a price agreed upon today (the futures price or strike price) with delivery and payment occurring at a specified future date, the delivery date. The contracts are negotiated at a futures exchange, which acts as an intermediary between the two parties. The party agreeing to buy the underlying asset in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to sell the asset in the future, the "seller" of the contract, is said to be "short". Both parties of a futures contract must fulfil the contract on the delivery date. The seller delivers the underlying asset (commodity) to the buyer, or, if it is a cash-settled futures contract, then cash is transferred from the futures trader who sustained a loss to the one who made a profit. Hedging, commodity options and a contract for difference and derivatives were also explained by the more prepared candidates in the examination of futures contracts. The above is a broad summary based on the better papers and although candidates did not need to hit every point, the better answers were planned and hit the basic risk based points. Examples of poorer content/ poorer approaches in answers and concluding comments: The markers were not looking for an advanced technical response, more a broad explanation of this financial process to manage risk.there were a number of papers were the concept of futures was not understood even though a clear link to commodities was made in the question. May 16_PD4_EXAM REPORT _LEARNER_COMMUNITY_ 5/7

6 Question 4 Appraise benchmarking as a concept to improve an organisation s supply chain processes 25 marks Learning outcome addressed 4.3 Command word explanation: Appraise- Evaluate, judge or assess something, giving views based on strengths and weakness of a given situation Many answers started with detailing the concept of benchmarking a standard against which something is compared - and to consider the value and benefits and also the disadvantages and limitations/costs. Many answers gave a good overview mentioning a series of benchmarking tests on their supply chain processes. Supply chain examples were always rewarded, for example movement of goods, quality over a period and planning and action post benchmarking review. Answers identified benchmarking as an ongoing concept to have real benefit, and also identified the basic different types namely; Internal benchmarking where one part of an organisation compares its performance with another part of the same organisation External benchmarking where comparison is made with an external organisation Functional benchmarking where specific functions are benchmarked against those of other organisations where it perceives to have better or best practice in that function, especially in this case the supply chain related functions. Almost all answers addressed the requirement for an appraisal giving benefits and drawbacks although many answers were somewhat brief and lacking in detail and hence limiting marks that could be awarded. Some of the drawbacks highlighted were cost, choice of provider, internal or external leads, possibility of copying flawed supply chain processes, and the chance of complacency. As mentioned, this was a wide concept question and candidates took different approaches and broadly, providing the concept was well explained, the different types of benchmarking were explained in relation to improvement of supply chain processes and that some of the components were reviewed and that a range of potential disadvantages were looked at, candidates scored well. Examples of poorer content/ poorer approaches in answers and concluding comment: The concept of benchmarking as a tool for comparison and to improve performance was generally clearly understood by the overwhelming majority of candidates although some were unable to quote and explain specific theoretical types of benchmarking such as internal, external, peer, competitive, generic, and world class in their answer so limiting the overall mark that could be awarded. In addition a clear steer was May 16_PD4_EXAM REPORT _LEARNER_COMMUNITY_ 6/7

7 provided in the question relating to benchmarking as a concept to improve an organisation s supply chain processes and this was not picked up by some candidates. In conclusion, there were a number of very good answers clearly indicating a good knowledge of the subject and these candidates were rewarded with high scores. May 16_PD4_EXAM REPORT _LEARNER_COMMUNITY_ 7/7