Procurement and supply workflow
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1 AC3/November 2015 Advanced certificate in procurement and supply operations Procurement and supply workflow QUESTION AND ANSWER BOOKLET Candidate Number Date Wednesday 18 November 2015 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
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3 SECTION 1 Write your answers in the spaces provided. You are advised to spend 30 minutes on this question. SCENARIO Q1 Brian has recently started work in the purchasing function of HTF Limited, a large organisation which manufactures food products. Brian s role is as a buying assistant for the team which buys the machinery and facilities that produce the food products. The team is also responsible for purchasing the services such as training, maintenance and cleaning to support the manufacturing operation. Brian has never worked in a purchasing function before and has asked for an explanation of some of the key documentation. TASK (a) In the table below, provide a brief explanation for each of the purchasing documents identified. (6 marks) Purchasing document Purchase Requisition Explanation (Up to 2 marks each) Request For Quotation (RFQ)/Enquiry Goods Received Note (GRN) PLEASE TURN OVER Page 3 of 24 AC3 Exam Questions November 2015
4 (b) Brian also wants to understand the use of specifications and service level agreements (SLAs) as part of the request for quotation (RFQ) process. Explain the purpose of the two documents providing ONE example of typical content from HTF Limited for the purchase of machinery and facilities. (6 marks) Document: Specification Purpose (Up to 2 marks each) Typical example of content from HTF Limited for machinery and facilities (1 mark each) Service Level Agreement (SLA) Page 4 of 24 AC3 Exam Questions November 2015
5 SCENARIO (c) TASK Whilst reviewing the quotations, Brian has noticed that they are presented in different formats with inconsistent section headings and criteria. He has decided to develop a quotation comparison format in order to organise the quotation information. In the table below, suggest FOUR criteria for a quotation comparison matrix for the two supplier quotes. (4 marks) Criteria for question comparison 1. Supplier 1 Supplier PLEASE TURN OVER Page 5 of 24 AC3 Exam Questions November 2015
6 (d) Explain THREE types of contractual term that might be included in a supplier quotation. (9 marks) Type of contractual term (1 mark) Example: Price Typical content/example (Up to 2 marks) Example: Inclusion of clauses to ensure a fixed contract price or to clarify acceptable price adjustments for the duration of the contract. Page 6 of 24 AC3 Exam Questions November 2015
7 SECTION 2 Write your answers in the spaces provided. You are advised to spend 30 minutes on this question. Q2 The following methods can all be used by organisations to purchase goods or services from suppliers: Blanket purchase order Individual purchase order Purchasing card. (a) For each of the scenarios below, identify which ONE of the above purchasing methods is most appropriate and explain the reason for your answer. Scenario 1: John s company has installed a new machine and he needs to buy one instruction manual from an Internet bookshop. (2 marks) Scenario 2: Anne is the buyer responsible for purchasing protective equipment such as gloves, overalls and safety boots which are required on a regular basis throughout the year. (2 marks) Scenario 3: The air-conditioning system at Edith s organisation has broken and she needs to buy a specially designed replacement system. (2 marks) PLEASE TURN OVER Page 7 of 24 AC3 Exam Questions November 2015
8 Once a purchase order has been created, there are a number of activities that can be applied. (b) The table below shows FIVE activities which follow the creation of a purchase order. You are required to explain each activity and indicate whether it is the responsibility of the buying or supplying organisation. (5 marks) Activity Explanation Responsibility Order authorisation (1 mark) Order documentation despatch Order acknowledgement Order amendment Order status reporting Page 8 of 24 AC3 Exam Questions November 2015
9 (c) The following THREE statements relate to the use of cost centres when creating purchase orders. For each of the statements, identify whether it is TRUE or FALSE and explain the reason for your answer. Statement 1: A cost centre can be a product, a place or a person within an organisation. (2 marks) Statement 2: When raising a purchase order, the purchasing department always applies its own cost centre. (2 marks) Statement 3: The use of cost centres can lead to improved monitoring of costs and expenditure. (2 marks) PLEASE TURN OVER Page 9 of 24 AC3 Exam Questions November 2015
10 SCENARIO Amerjit works in the purchasing department of A4U an organisation which manufactures domestic appliances such as washing machines, dishwashers, toasters and kettles. When buying components for the production line, Amerjit usually raises electronic purchase orders based on electronic requisitions from the user departments. Unfortunately, the purchasing IT system has failed and will not be available for the next 24 hours. Amerjit has just received an urgent phone call from the manufacturing function and is required to raise a manual purchase order for a critical component today in order to keep the production line going. Amerjit s contact in manufacturing could not remember all of the details from the electronic requisition but has given her the following information: Part description: Mounting bracket RH silver Supplier name: Jones and Mason Limited Amount of stock remaining: Approximately 3 days Originator: P. Green Cost Centre: A4UP 0063 TASK (d) Suggest FOUR additional fields of information that Amerjit will need to complete in order to raise a manual purchase order correctly and explain why the information is important for A4U. (8 marks) Additional information field (1 mark each) Example: Order quantity Reason why the information is important for A4U (1 mark each) Example: This will determine how long the order will take to fulfil and how long the new stock will last. Page 10 of 24 AC3 Exam Questions November 2015
11 BLANK PAGE PLEASE TURN OVER Page 11 of 24 AC3 Exam Questions November 2015
12 SECTION 3 Write your answers in the spaces provided. You are advised to spend 30 minutes on this question. SCENARIO Q3 The Fine Furniture Company (FFC) manufactures high quality wooden furniture such as tables, chairs, book shelves and storage cabinets. When marketing its products, FFC emphasises that all the wood used in the manufacturing process is sustainably sourced and that all of the varnishes and finishes used on the products are ethically tested and environmentally friendly. FFC is currently preparing its corporate budget for the following year. Fig 2.1 shows the budget preparation process. STEP 1 STEP 2 Production budget STEP 3 (a) (b) Labour (c) Overheads STEP 4 STEP 5 Functional budgets Master budget Functional budgets STEP 6 Cash budget Functional budgets STEP 7 Budgeted balance sheet Fig 2.1 Budget Preparation Process Page 12 of 24 AC3 Exam Questions November 2015
13 (a) You are required to identify the missing items in the process steps shown in Fig 2.1. Write your answers in the table below and provide an explanation of the item including an example of the type of information that FFC might include. (12 marks) STEP 1 Missing item for process step (1 mark each) Explanation of item including example (Up to 2 marks each) STEP 3(a) STEP 4 STEP 5 PLEASE TURN OVER Page 13 of 24 AC3 Exam Questions November 2015
14 SCENARIO (b) In order to prepare its corporate budget, FFC must make a forecast of future demand for its products. Fig 2.2 shows two types of forecasting approach, qualitative and quantitative. Around them are six forecasting techniques. You are required to provide a brief explanation of each forecasting technique and identify which techniques are qualitative and which are quantitative by drawing a line linking them to the correct forecasting approach. The first forecasting approach has been completed for you as an example. (5 marks) 1. Delphi method Explanation: Two or more rounds of forecasting questionnaires sent to experts with adjustments made after each round. 2. Time series Explanation: 3. Expert systems Explanation: QUALITATIVE 4. Simple moving average Explanation: QUANTITATIVE 5. Weighted average Explanation: 6. Test marketing Explanation: Fig 2.2 Forecasting types Page 14 of 24 AC3 Exam Questions November 2015
15 (c) The table below contains historical demand information for four of the product lines at FFC. The information has been recorded over the last six months. Month Volume of demand Book shelves Tables Chairs Storage cabinets Jan Feb Mar Apr May Jun TASK (i) Draw a line graph showing demand for each of the product lines. (4 marks) Book shelves Tables Jan Feb Mar Apr May Jun 0 Jan Feb Mar Apr May Jun Chairs Storage cabinets Jan Feb Mar Apr May Jun 0 Jan Feb Mar Apr May Jun PLEASE TURN OVER Page 15 of 24 AC3 Exam Questions November 2015
16 (ii) Using trend analysis, identify the basic pattern of demand for each product line. (4 marks) Product line Pattern of demand explanation (1 mark each) Book shelves Tables Chairs Storage units Page 16 of 24 AC3 Exam Questions November 2015
17 SECTION 4 Write your answers in the spaces provided. You are advised to spend 30 minutes on this question. SCENARIO Q4 Last month, an article appeared in one of the furniture industry publications which claimed that the Fine Furniture Company (FFC) had not been behaving as ethically as the marketing information suggested. There were allegations of non-sustainably sourced wood and environmentally harmful processing associated with some of the wood finishes. The purchasing manager of FFC has conducted a review of FFC s sourcing processes and supply chain activities and has discovered that a small quantity of goods are being sourced by the design and manufacturing departments without the knowledge or approval of the purchasing function. When the purchasing manager challenged these user departments he was told that they were unhappy with the level of customer service they were receiving from purchasing as it did not meet expectations. The following specific issues were raised: 1. Requisitions were taking too long to process 2. Users were not kept informed of the progress of their orders 3. Users felt that the approved suppliers were too expensive 4. Users did not feel that the purchasing processes were adding value. PLEASE TURN OVER Page 17 of 24 AC3 Exam Questions November 2015
18 TASK (a) For each of the issues raised, you are required to suggest how the expectation might be managed and make ONE suggestion for each issue about what could be done to improve the perceived level of customer service. (8 marks) Issue 1 Suggestion to manage internal customer expectations (1 mark each) Suggestion to improve internal customer service (1 mark each) Page 18 of 24 AC3 Exam Questions November 2015
19 SCENARIO The purchasing manager has arranged a meeting between the purchasing team and users from the design and manufacturing departments at FFC. The purpose of the meeting is to understand how the relationship between the departments can be improved. During this meeting he has stressed the importance of effective verbal and non-verbal communication for both the purchasing function and user departments. TASK (b) Suggest THREE types of verbal and THREE types of non-verbal communication that the purchasing team might use effectively during the meeting. (6 marks) Type of verbal communication (1 mark each) Type of non-verbal communication (1 mark each) PLEASE TURN OVER Page 19 of 24 AC3 Exam Questions November 2015
20 (c) The purchasing team at FFC believes that by improving the use of Information Communications Technology (ICT) within the organisation, it can provide a better service to its internal customers. Provide a definition and TWO advantages for the purchasing function for each of the communication technologies below. (6 marks) Communication technology Definition (1 mark each) Intranet 1. Advantages (1 mark each) 2. E-catalogue Page 20 of 24 AC3 Exam Questions November 2015
21 (d) Electronic Data Interchange (EDI) has been an important IT development for the purchasing function. (i) Explain the term Electronic Data Interchange (EDI). (2 marks) (ii) Outline THREE uses of Electronic Data Interchange (EDI) (3 marks) END OF QUESTION PAPER AND ANSWER BOOKLET Page 21 of 24 AC3 Exam Questions November 2015
22 BLANK PAGE Page 22 of 24 AC3 Exam Questions November 2015
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24 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 24 of 24 AC3 Exam Questions November 2015
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