CIPS L4M1 Scope and Influence of Procurement and Supply Assignment Sample , UAE
Organisations understand that procurement and supply are essential for creating value. By managing the supply of products and services, they can ensure that they are meeting the needs of their customers – both internal and external. This module will teach you the basics of the CIPS Procurement Cycle, so that you can understand and contribute to your organisation’s procurement and supply strategies.
This will help those interested in understanding different procurement and supply perspectives develop a well-informed awareness. Additionally, it will provide an introduction to those who are expected to handle complex and non-routine procurement and supply problems.
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Assignment Task 1: Describe the categories of spend that an organisation may purchase
There are Several types of procurement an organisation may engage in when it comes to acquiring goods and services: stock, non-stock, and capital .
Stock procurement is the process of buying items that will be stored and used at a later time. This type of procurement is often used for inventory items or supplies that are regularly consumed by the organisation.
Non-stock procurement, on the other hand, involves purchasing goods or services that will not be stored but rather immediately consumed. This could be in the form of office supplies or food items for a cafeteria. Capital procurements are those purchases that are made with long-term investments in mind. These could include investments in real estate, vehicles, or heavy machinery.
Types of procurement are important considerations for the organisation when it comes to making decisions about purchasing goods or services. The three types of procurement are stock, non-stock, and capital.
There are typically two types of procurement – direct and indirect. Direct procurement is when an organisation buys goods or services from a supplier that they have a direct relationship with, whereas indirect procurement is when an organisation buys goods or services from a supplier who then buys them from another supplier. This can become complicated as there are often many levels of suppliers in between the initial purchase and the final product or service.
There are also two types of expenditure – capital and operational. Capital purchases are items that are bought with the intention of being used for more than one year (e.g. computers, office furniture) and operational expenditures are items that are bought with the intention of being used for less than one year.
Stock procurement is when an organisation buys goods on a regular basis. The three types of stock procurement are: new items, items with a wait time, and items on clearance.
Non-stock procurement is purchasing goods that are not generally purchasable on a regular basis. This type of procurement is often more complex, but it is also considered to be less costly. Services procurements can generally be broken down into three broad categories: Consulting, Professional, Support Maintenance, and Production.
Consulting Professional services are typically engagements where the service provider is hired to provide expert advice or assistance with a particular task or project. Support/ Maintenance services are usually contracts for ongoing assistance with running and maintaining a system or network. And Production services are contracts for the actual creation of a product or service.
The plan to purchase the item matters, as it decides what type of procurement is appropriate. The organisation can either plan to use the item for less than one year (non-stock procurement), or the organisation can purchase the item with the intention to make repeated purchases over time (stock procurement).
Assignment Task 2: Analyse the different sources of added value in procurement and supply
The different sources of added value in procurement and supply can be summed up with the term “total life cycle costs” or the total costs of ownership (TCO). This encompasses all the factors that make up the cost of acquiring and owning something, from the initial purchase price to operating and maintenance costs to eventual disposal or recycling.
When it comes to assessing suppliers, buyers need to look beyond just the purchase price and consider all the other associated costs. This might include delivery times, warranty coverage, technical support, spare parts availability, and anything else that could affect long-term operations and maintenance. By taking a TCO approach, buyers can identify suppliers that offer not only the best prices but also the best overall value.
So many of the products purchased by businesses are purchased with the sole goal of cutting costs. This is ironic because the true success of a business is measured by the lifetime profits of products purchased. Purchases should be made to maximize total lifetime profits.
There are a number of sources of added value in procurement and supply, including innovation, sustainability and market development.
Innovation can be a source of added value in procurement and supply through the introduction of new products or services, the development of new production processes or the implementation of new technologies.
Sustainability can be a source of added value through the reduction of environmental impacts, the promotion of responsible sourcing practices or the achievement of social benefits.
Market development can be a source of added value through the expansion of market reach, the enhancement of supplier relationships or the diversification into new markets. In conclusion, those who purchase products to cut costs are missing the true success of a business, which should be measured by the total lifetime profits of a purchase. As a result, innovations, sustainability and market development can be a valuable source of added value in the procurement and supply of products.
Achieving quality, timescales, quantities and place considerations in procurement can create added value for a business.
- Quality: Ensuring that the goods or services procured meet the required standard can add value to a business. This may be through ensuring that goods are fit for purpose or that services are delivered as agreed.
- Timescales: Meeting deadlines and ensuring goods are delivered on time can be a challenge in procurement. Achieving this can add value to a business as it can help to avoid disruption to the supply chain or missed opportunities.
- Quantity: Ordering the correct quantity of goods or services can be vital for businesses. Not ordering enough can lead to running out of stock and not ordering too much can help to lower the organisation’s operational costs.
- Place: Ensuring that goods or services are sourced from a cost-effective and efficient supplier can add to your business’s bottom line. Innovative and sustainable sourcing methods can create added value for a business.
Assignment Task 3: Compare the concepts of procurement and supply chain management
Procurement is the process of acquiring goods and services. It’s essentially the act of finding and buying what your company needs to function. A supply chain, on the other hand, is a network of suppliers and vendors who provide products and services to a business.
The supply chain stretches from the supplier all the way to the customer, and it encompasses everything in between – from raw materials to finished products. Supply chain management (SCM) is the process of managing this entire supply chain. It involves coordinating supplier relationships, ensuring that quality standards are maintained, forecasting demand, and ensuring that products are delivered on time and in full.
While SCM is crucial for any business, it’s extremely important for retailers. They need to be able to order products that are in demand at the right time to keep their shelves stocked. Knowing what’s selling based on consumer feedback, historical sales data, industry research, and other sources is important to make the best guess about what to order .
Supply chain management is the process of managing the entire supply chain. It’s crucial for retailers, who need to be able to order products based on demand to keep shelves stocked. The main difference between procurement and supply chain management is that procurement is focused on acquiring goods and services, while supply chain management is focused on ensuring that the right goods and services are available at the right time and place to meet customer demand.
Procurement is the process of identifying needs, sourcing suppliers, negotiating prices, and placing orders. Supply chain management goes beyond procurement by incorporating activities such as logistics, transportation, inventory management, and quality control.
By incorporating these additional activities, supply chain managers can ensure that the right goods and services are available to meet customer demand. Take this example. If you are running a grocery store and need to order orange juice, you need to pay attention to the whole supply chain. If you buy an orange juice from a distributor in Florida, but your store is in New York, you might run the risk of not having the product on hand and running out.
The concepts of procurement and supply chain management are related, but they are not the same. Procurement is the process of sourcing goods and services from suppliers. Supply chain management is the coordination and management of all activities involved in getting those goods and services to the end customer.
A complex supply chain can involve many different steps, and it can be difficult to manage all of those steps effectively. That’s where supply chain management comes in. Supply chain managers must coordinate production, transportation, warehousing, and other activities to ensure that goods and services are delivered on time and at the right price. They must also ensure that quality standards are met and that customers are satisfied with their products or services.
Assignment Task 4: Differentiate the stakeholders that a procurement or supply chain function may have
Stakeholders are people interested in an organization, its business, strategy, or performance, who are actively involved in or affected by those operations. Stakeholders can be divided into three groups: internal, external, and organizational.
Internal stakeholders are typically employees, but they can also be contractors or third-party consultants on tap. External stakeholders are people outside the organization who have an interest in the organization’s operations or business, such as suppliers, distributors, and customers.
Organizational stakeholders are individuals inside the organization who have a voice in the company’s direction. Examples could be a board of directors or a work team.
In a procurement or supply chain function, internal stakeholders might be the teams that identify opportunities or RFPs, the supplier management team, the campaign management team, and the finance team. External stakeholders might include distributors, customers, and industry associations.
Organizational stakeholders might include the management team, the board of directors, and indirect stakeholder groups, such as human resources or legal. An organization may have interests in more than one stakeholder group. If so, the organization has what is known as a “multiple stakeholder issue.” When this is the case, each stakeholder group should be analyzed separately, considering intersections among the different groups.
In a procurement or supply chain function, the organization may have interests in more than one stakeholder group. When this is the case, each stakeholder group should be analyzed separately, considering intersections among the different groups .
The Board of Directors is the authority of the company, so this stakeholder group should have a say in whether or not corporate activities conform to the goals and focuses of the company. When the Board of Directors is not informed, there is a risk that the company may make decisions that can lead to a loss in revenue, customer satisfaction, or legal action.
Human Resources brings together the internal workforce that is necessary to get the internal operations of the company done. Human Resources is not just here to “protect the employer, it supports the people who work inside the organization”.
Mapping stakeholders for a procurement or supply chain function can be an iterative process.
Mapping stakeholders for a procurement or supply chain function can be an iterative process. By considering intersections among the different stakeholder groups, organizations can be more intentional about balancing the interests of all groups. When the Board of Directors is not informed, there is a risk that the company may make decisions that can lead to loss in revenue, customer satisfaction, or legal action. When this is the case, each stakeholder group should be analyzed separately, considering intersections among the different groups.
Assignment Task 5: Explain the key aspects of the procurement cycle
The procurement cycle is often made up of identifying areas of need, researching with suppliers, defining specifications, comparing prices, negotiating contracts, ordering, reviewing deliveries, and invoicing.
The CIPS Procurement Cycle defines the stages of a generic sourcing process from identification of needs to contract award and implementation and end of life disposal of the product.
Researching with suppliers is usually the starting point in the procurement cycle. The price of the product is most commonly what will be researched with suppliers, but other needs can need to be taken into consideration, such as delivery time, lead time, warranties, warranties, terms, and conditions. Next, specifications will be defined and compared, and this process will involve comparing the specifications with the details of the suppliers.
The next stage is negotiating contracts which involves negotiating prices and other terms such as lead time, delivery time, product warranties, and return policies. Contract negotiation can involve taking into account other issues such as risk, quality, legal, and intellectual property, and it is always best to understand these before entering these negotiations.
This process will finish by reviewing deliveries where the product will be inspected and the material numbers will be verified. If this product is for resale, the retailer will want to make sure that the product is unpacked and to ensure that this product is in the condition that it was supposed to be.
Differentiating between pre contract award and post contract award stages is that pre contract award would be when the supplier is chosen, but post contract award would be when the material has been placed. The first stage of this process is defining and comparing, and this process will involve comparing the specifications with the details of the suppliers. The next stage is negotiating contracts which involves negotiating prices and other terms such as lead time, delivery time, product warranties, and return policies. Contract negotiation can involve taking into account other issues such as risk, quality , safety, liability, delivery, etc.
After contracts are finalized they are negotiated, and the next step after the negotiation is conformity assessment.
This process will finish by reviewing deliveries where the product will be inspected and the material numbers will be verified. If this product is for resale, the retailer will want to make sure that the product is graded correctly.
Assignment Task 6: Analyse the key stages of a sourcing process
Supplier selection has been a key requirement in business for a long time. The fact of the matter is that the company is going to be heavily reliant on their suppliers for a lot of different things, and they need to make sure that they are doing their due diligence when it comes to finding the best match.
The key stages of a sourcing process usually relate to the following:
- Defining needs – this usually involves understanding what the organisation is looking for in terms of products or services, and being able to articulate those needs clearly.
- Creating a contract – this is where potential suppliers are identified and invited to bid for the work. It’s important to have a clear idea of what you’re looking for from potential suppliers, as this will help to ensure that you get the best possible quotes.
- Evaluation and selection – once quotes have been received, it’s important to evaluate them carefully in order to make the best decision about who should be awarded the contract. This stage can involve a number of factors, such as price, quality, reliability, eligibility, convenience, quality, and innovation, amongst others.
- Negotiation – after the winning supplier has been selected, an agreement has to be made to make sure that expectations are clear.
- Supplier Selection-The sourcing process begins with the identification of potential suppliers. A number of factors are considered in the selection process, including price, quality, delivery performance, and past performance.
- Contract Award- The chosen supplier is then invited to submit a proposal, which is evaluated against a set of specified criteria. The contract is typically awarded to the supplier that offers the best value for money.
- Contract or Supplier Management- Once the contract has been awarded, the supplier must be managed in order to ensure that they meet the agreed-upon standards and deliver on their commitments. This includes regular monitoring of performance as well as corrective action where necessary.
The sourcing process can be divided into three main stages: identification and evaluation of potential suppliers, qualification of suppliers, and selection of suppliers. The purpose of the identification and evaluation stage is to identify a pool of potential suppliers that meet the buyer’s requirements. This stage typically involves a review of supplier directories, online databases, or other sources of information.
The purpose of the qualification stage is to assess whether potential suppliers are capable of meeting the buyer’s requirements. This stage typically involves an assessment of supplier capabilities, including their quality standards, production capacity, financial stability, and ability to meet delivery deadlines. The selection stage is where the buyers select finalists from among the qualified suppliers. The proposal stage can include presentations, demonstrations, or other ways to showcase a potential supplier’s strengths.
Assignment Task 7: Explain how electronic systems can be used at different stages of the sourcing process
Electronic systems can be used at different stages of the sourcing process in a variety of ways. Answer: Different electronic systems can be used at different stages of the sourcing process.
1-E-requisitioning systems allow buyers to create and submit purchase requests electronically. This system speeds up the requisitioning process, as it eliminates the need for buyers to create purchase orders manually.
2-E-catalogues provide an online listing of products and services that suppliers offer. Buyers can use e-catalogues to compare prices and product offerings from multiple suppliers.
3-E-ordering systems allow buyers to place orders electronically direct from supplier catalogues. This system removes the need for buyers to contact suppliers by phone or email to place orders, which can save time and improve efficiency.
4-E-sourcing systems allow buyers to research suppliers online. Online requisition systems provide suppliers with a platform to submit product pricing and delivery information that buyers need when identifying potential suppliers.
Electronic purchase to pay (P2P) systems can have a significant impact on the sourcing process. By automating the purchasing and payment processes, these systems can save time and money for both buyers and suppliers.
For buyers, P2P systems automate the ordering process, making it easier to find and order products from suppliers. They also automate the payment process, reducing the time spent processing payments. This can help buyers save money by allowing them to purchase goods and services more quickly and efficiently.
For suppliers, P2P systems automate the invoicing process, making it easier for them to submit invoices and receive payments. They also allow suppliers to track orders and payments more easily, helping them to better manage their business.
Assignment Task 8: Analyse the relationship between achieving compliance with processes and the achievement of outcomes
Compliance with processes enables an organisation to improve its sourcing performance by ensuring that all procurement activities are standardised and follow a consistent methodology. Standardisation of processes also allows for the measurement of performance against pre-determined goals and objectives, which in turn can help to identify areas for improvement.
In order to achieve compliance with processes, it is important that all stakeholders understand and adhere to the relevant procedures. Organisations can use various methods to ensure compliance, such as training programmes, procedural manuals or online tools. In addition, effective communication is essential for maintaining a high level of process compliance. By working together as a team and following best practices, organisations can streamline their procurement operations and achieve better results.
The relationship between process compliance and the achievement of added value or goals is a complicated one. Generally, the more compliant an organization is to its processes, the more likely it is to achieve its goals. However, this is not always the case, as there are many factors that contribute to success. One key element of process compliance is ensuring that all employees understand and follow the processes in place. This can be a challenge, as not everyone may be on board with the new way of doing things. Another factor that contributes to success is making sure that processes are effective and efficient.
If they are not, then employees will find ways to circumvent them in order to get their work done. Lastly, it is important to ensure that process changes are communicated effectively and knowledgeably. This is key to ensuring that all employees know what they need to do in order to be compliant with the changes.
According to the recent survey by the Association of Certified Process Professionals, organisations must establish a process compliance program in order to define and map their organization’s key processes, and then develop and implement related performance measures to assess performance.
This ensures that the company is indeed pursuing the processes that are the most likely to achieve their goals. In the modern, ever-changing business landscape, process compliance is a key area which many organizations have found themselves in need of help in order to ensure that they are continuing to come in line with regulations.
Assignment Task 9: Explain key aspects of corporate governance of a procurement or supply chain function
Corporate governance of a procurement or supply chain function refers to the set of processes and practices by which an organisation ensures that it complies with applicable laws and regulations, while also adhering to its own standards of ethical conduct.
The need for documented policies and procedures for procurement to ensure that all purchases are made in the best interests of the company, it is important to have a documented set of policies and procedures for procurement. Such policies should include guidance on who is authorized to make purchase decisions, what type of goods or services may be purchased, what criteria will be used to evaluate suppliers, and so on.
It is also important to have a policy governing how potential conflicts of interest are handled. For example, if a supplier is also a vendor or customer of the company, how will that conflict be resolved? Will the company award contracts to the supplier regardless of price? Will the company consider only prices offered by other suppliers?
Most importantly, corporate governance in this context helps to ensure that those responsible for procuring goods and services (and making decisions about which suppliers to use) are held accountable for their actions. This includes putting in place clear procedures for reporting any suspected wrongdoing, as well as mechanisms for investigating allegations of impropriety.
In addition, good corporate governance encourages transparency and communication within the procurement or supply chain team, so that everyone is aware of their responsibilities and potential risks. By working together in this way, the procurement team will be able to identify and mitigate any potential risks to the organisation.
To minimise the chance of any potential wrongdoing or inviting bad publicity, procurement teams should also ensure that they are looking ahead to identify any potential risks.
Procurement and supply chain management are vital functions within any organisation. They are responsible for acquiring the goods and services that the organisation needs to operate, and ensuring that those goods and services are delivered in a timely, cost-effective manner.
Procurement and supply chain management have traditionally been seen as support functions, rather than core business operations. However, in recent years there has been a shift towards seeing them as strategic functions, and giving them a more central role within the organisation. This is reflected in the way that corporate governance is structured for procurement and supply chain management activities.
Assignment Task 10: Analyse the impact of organisational policies and procedures on procurement
The use of procurement policies, procurement strategies and procurement manuals can have a significant impact on the procurement process.
Policies provide the framework within which decisions are made and can be used to ensure that all stakeholders are aligned with the organisation’s objectives. Procurement strategies provide a plan for achieving these objectives, while procurement manuals provide detailed guidance on how specific processes should be executed.
The use of these tools can help to ensure that procurements are conducted in an efficient and cost effective manner, and that all applicable regulations are complied with. They can also help to improve communication and collaboration between different parts of the organisation, and between the organisation and its suppliers.
The involvement of internal functions and personnel in the sourcing process can have a significant impact on procurement. When different parts of the organisation are involved in the process, it can lead to conflict and confusion, and can slow down or even prevent the purchase of goods or services.
It’s important for organisations to develop clear policies and procedures for procurement, so that everyone involved in the process knows their role and responsibilities. This will help to ensure that purchasing is efficient and effective, and that goods and services are procured in a timely manner.
With these tools, organisations can ensure that they are complying with all applicable regulations, and can improve communication and collaboration between different parts of the organisation.
Responsible procurement is the ethical and responsible sourcing of goods and services. It takes into account the social, environmental, and economic impacts of a company’s supply chain. The goal is to ensure that workers are treated fairly and that the products are not harmful to the environment.
The International Labour Organisation (ILO) is a United Nations agency that promotes decent work for all workers around the world. One of its core conventions is the Forced Labour Convention, which prohibits employers from using forced or bonded labour. This includes child labour, which is often found in developing countries where manufacturers subcontract production to avoid strict labour laws and regulations.
Assignment Task 11: Examine the different structures of a procurement or supply chain function
Most organizations have a centralized procurement or supply chain function, which is responsible for the acquisition and management of the organization’s goods and services. The purpose of a centralized procurement or supply chain function is to ensure that the organization gets the best value for its money by consolidating its purchasing power and negotiating better prices with suppliers.
One of the primary functions of a centralized procurement or supply chain function is to develop and implement policies and procedures that ensure that conflicts of interest are avoided. A conflict of interest can occur when an individual or company has a financial interest in a supplier that could influence their judgement about whether or not to award a contract to that supplier.
There are different structures that can be used within a procurement or supply chain function, and the most appropriate structure will usually depend on the organisation’s size and structure, as well as its strategic goals. Centralised structures involve a small number of people making decisions about all aspects of the procurement or supply chain, while devolved structures give more responsibility to local teams who are closer to the customers or suppliers.
Each structure has its pros and cons, but in general centralised structures are better suited to large organisations with complex needs, while devolved structures work better for smaller organisations that need to be more agile. It’s also important to have good customer service in place, so that stakeholders can easily get in touch with someone who can help them.
Good customer service is vital to the success of any organisation, regardless of how it structures its procurement or supply chain functions.
A procurement or supply chain function can have a variety of structures, but it is typically hybridized in some way. For example, a consortium may be used to procure goods or services, or a centralized purchasing department may be used to manage the supply chain.
Each structure has its own benefits and drawbacks, so it’s important to understand what each one can offer before making a decision. A centralized purchasing department can provide economies of scale and better oversight of the supply chain, but it may not be as nimble as a consortium when it comes to responding to sudden changes in the market.
Conversely, a consortium can be more agile than a centralized purchasing department, but it may not have the same level of buying power. The key to being successful is to have the right arrangement of buyers and suppliers – one way or another.
Assignment Task 12: Examine the impact of the not-for-profit or third sector on procurement or supply chain roles
The third sector or not-for-profit industry is a relatively new and growing sector. This sector has been on the rise as the population of people have become more conscious about their impact on the environment and society. It is important to understand that these organizations are not for-profit, they exist solely to provide a product or service; for example, we can think of charities, NGOs, and foundations.
These organizations rely heavily on donations and funding – which can be difficult during down economic times. Nowadays many of these organizations make sure that they are sustainable and environment friendly by selecting sustainable products or suppliers with eco-friendly practices; this goes beyond just the companies themselves but also their suppliers’ practices.
The objectives of the not-for-profit or third sector can vary, but are typically centred around social welfare or public service provision. This may include the provision of goods and services to those in need, either free of charge or at a reduced cost.
Due to the nature of their work, the not-for-profit or third sector is often exempt from certain regulations which would ordinarily impact on procurement or supply. For example, charities are not required to tender for services where this would conflict with their charitable objects. This exemption can be beneficial as it allows organisations within the sector greater flexibility when sourcing goods and services. However, it can also lead to potential inefficiencies and higher costs as organisations may not be obliged to seek the best possible deal.
The not-for-profit or third sector has a number of objectives which can impact on the procurement or supply process. These include, but are not limited to, improving social and economic conditions, providing public services, and promoting social welfare.
Third sector organisations can also be impacted by regulations such as charity law, company law, contract law, and employment law. Such regulations may affect how the organisation procures or supplies goods or services. For example, a regulation such as contract law may require that a third sector organisation enters into a contract with a supplier in order to procure goods or services.
This regulation could impose obligations on the third sector organisation by requiring that they are provided for a fixed or predetermined price or, alternatively, that they are tendered for. This could conflict with the charitable objects of the third sector organisation.
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