122 Questions
What are the four key tasks associated with the 'Need' step in the procurement operational cycle?
Identify a need, Identify the specification, Check reasons for ordering, Agree on reasons for ordering
What does the 'Operational cycle' in procurement involve?
Identifying requirements, specifying, authorizing, researching suppliers, choosing supplier, establishing price and terms, placing order, receiving and inspecting, approving and paying invoice, updating records
What are the three stages of the operational procurement as shown in figure 1.7?
Identify, Specify, Authorize
What is the purpose of documentation in the procurement and supply process?
To make activities efficient and effective, and to support the procurement and supply process
What is the purpose of a purchase requisition in the procurement process?
To inform the procurement department about the need for an item and require authorization
What is the advantage of computerized procurement systems?
Reducing the time procurement staff spend interacting with buyers
What is the purpose of a purchase order in the procurement process?
To make purchases on credit, set clear expectations, and create a legally binding document
What is the crucial purpose of the purchase order process?
Creating a legally binding document and organizing the workforce
What information should a purchase order include?
Unique reference number, expected delivery date, item description, quantities ordered, and item prices
What is the first step in the procurement process?
Researching available suppliers
What is the purpose of a purchase order in relation to credit purchases?
To create a legally binding document for credit purchases
What is the purpose of a purchase requisition?
To inform the procurement department about the need for an item and require authorization
What is the purpose of physically receiving the goods or service in the procurement process?
To ensure the actual receipt of the ordered items
What is the role of purchase orders in aiding budgetary control?
Setting clear expectations and aiding in budgeting
What is the purpose of various types of documentation in the procurement and supply process?
To support the operational cycle in procurement and supply
What is the advantage of purchase orders in providing an audit trail?
Creating a legally binding document and organizing the workforce
What is the purpose of a delivery note in the procurement process?
To list the contents of the delivery and the quantity of each item
What is the purpose of a three-way match in the procurement process?
To verify that the items ordered have been received, in the correct quantity, and meet the required quality standards
What is the purpose of a bill of materials (BOM) in procurement?
To provide a guide for assembling manufactured products
What is the purpose of a specification in procurement?
To communicate the organization's needs and enable suppliers to propose solutions
What is the purpose of a delivery note number in the procurement process?
To track the shipment of goods to the buyer's premises
What does a goods received note indicate in the procurement process?
Satisfaction with the received goods and initiation of the payment process
What is the purpose of a pre-qualification questionnaire (PQQ) in the procurement process?
To shortlist potential suppliers before a full ITT or an RFP/RFQ by looking at their past performance
What is the purpose of an invitation to ask questions in a request for proposal (RFP)?
To help clarify any points that are uncertain in a supplier's mind and avoid inappropriate quotes
What distinguishes a request for proposal (RFP) from a request for quotation (RFQ)?
RFP is used when the organization does not know exactly what it needs, while RFQ is used when the organization has a clear idea of its needs
What is the purpose of a project budget in running a request for proposal (RFP)?
To put a boundary around potential solutions and avoid having suppliers suggest solutions far beyond what is needed
What is the main focus of an entrepreneurial attitude in procurement?
Challenging conventional thinking and delivering maximum value for money
In a multi-national organization, what is the risk of having procurement in each country's operations?
Uncoordinated approach and lost savings opportunities
What is a benefit of centralizing procurement in a multi-national organization?
Creating larger buying volumes and greater leverage with suppliers
What factor helps in deciding whether to centralize procurement?
Standardization of purchased items
What is the purpose of competition laws in regulating business practices?
To prevent practices that prevent free trade and competition
What is the impact of competition on product development and service standards?
It stimulates innovation and improves quality and service standards
What is the purpose of competition laws in the United States and European Union?
To regulate antitrust and competition
What is the intention behind deregulation in an industry?
To make competition in overseas markets easier for its own country's businesses
What is the purpose of competition laws in China and Russia?
To regulate anti-monopoly practices
What does competition law generally prohibit?
Practices or agreements that prevent free trade and competition
What is the effect of competition on companies and their workforce?
It encourages constant improvement and innovation
What is the purpose of deregulation in industries?
To improve services, reduce costs, and lower prices
What is the aim of the Agreement on Government Procurement (GPA)?
To open government procurement markets among its parties and ensure fair trade internationally.
What is the estimated percentage of public sector procurement in the European Union's GDP?
25-30%
What is the purpose of the European Union Directives related to public procurement?
To ensure procurement takes place through a transparent and non-discriminatory process.
What is the estimated annual procurement spend of all UN agencies combined in 2010?
$14.5 billion
What is the main purpose of delegation in management?
To assign responsibility or authority to another person to carry out specific activities.
What is the main concept of authority in delegation?
The power to allocate resources, take decisions, and give orders in achieving corporate or departmental objectives.
What is the purpose of the World Trade Organization's Agreement on Government Procurement?
To ensure open, transparent, and fair public procurement among its parties.
What is the estimated annual value of government procurement opened to international competition through the GPA?
US$ 1.7 trillion
What is the main purpose of the European Union Directives related to public procurement?
To ensure procurement takes place through a transparent and non-discriminatory process.
What is the aim of the Agreement on Government Procurement (GPA)?
To open government procurement markets among its parties and ensure fair trade internationally.
What is the estimated percentage of public sector procurement in the European Union's GDP?
25-30%
What is the purpose of the European Union Directives related to public procurement?
To ensure procurement takes place through a transparent and non-discriminatory process.
What is the purpose of a Procurement Pre-Qualification Questionnaire (PQQ)?
To assess supplier's capability to meet minimum standards and deliver contract
What is the key component of an Invitation to Tender (ITT)?
Provides suppliers with all necessary information and ensures a fair and transparent process
What guides behavior in procurement and supply?
Documented policies and procedures
What forms the basis for an organization's policies?
Principles, values, and mission statements
What is a policy in the context of an organization's operation?
A collection of principles summarizing how an organization wants to operate
What are the key principles in Unilever's Responsible Sourcing Policy?
Conducting business lawfully and with integrity, and working on the basis of freely agreed terms of employment
What helps suppliers assess risks and price the job accurately in the procurement process?
Draft contract template
What are the information requirements in a Procurement Pre-Qualification Questionnaire (PQQ)?
General supplier details, financial records, business activities, references, insurance cover, quality assurance procedures, policies, and health and safety practices
What does an Invitation to Tender (ITT) provide to suppliers?
All necessary information and ensures a fair and transparent process
What is the primary purpose of documented policies and procedures in procurement and supply?
To guide behavior and ensure adherence to organizational principles and values
What is the significance of a draft contract template in procurement?
Helps suppliers assess risks and enables them to price the job accurately
What is the role of principles, values, and mission statements in an organization's policies?
Form the basis for an organization's policies
What percentage of GDP does public sector procurement represent worldwide?
15-20%
How many signatories are involved in the Agreement on Government Procurement (GPA) within the World Trade Organization?
47
What is the estimated percentage of the European Union's GDP that its public procurement represents?
25%
What is the main aim of the ASEAN Economic Community regarding competition laws and policies?
To enact competition laws
When did Hong Kong's Competition Ordinance come into force?
2015
What is the main purpose of the Agreement on Government Procurement (GPA) within the World Trade Organization?
To open government procurement markets
What is the estimated percentage of public sector procurement in the European Union's GDP?
25%
What is the main focus of EU Directives related to public procurement?
Requiring transparent and non-discriminatory procurement processes
What is the main aim of China's competition law?
To promote fairness
What is the main aim of Vietnam's competition law?
To promote international integration
What is the main purpose of the EU Directives related to public procurement?
To require transparent and non-discriminatory procurement processes
What does the Agreement on Government Procurement (GPA) within the World Trade Organization require for public procurement?
Open, transparent, and fair processes
What is the primary purpose of category management in procurement?
To continuously monitor supply markets for opportunities to improve service or lower costs
In larger organizations, what is deemed necessary for procurement?
Professional procurement department with specialists
What is the role of strategic direction in procurement?
To develop specific product or service mix needed for procurement
What triggers sourcing activity in organizations?
Category management
What is the primary responsibility of procurement in organizations?
To secure the required goods and services
What is the key focus of information management in procurement?
Collecting data for strategies and plans
What is the purpose of contract management in procurement?
To continuously monitor supplier delivery and risk management
What is the primary goal of supplier relationship management in procurement?
To work with key suppliers to make improvements
What is the nature of procurement processes in organizations?
Cyclical and ongoing
In organizations where procurement is strategic, who is likely to lead the function?
Director of Procurement
What are typical procurement and supply policies in strategic organizations?
Supply chain risk management and shared procurement plan
What is the primary focus of responsible sourcing in organizations?
Ensuring ethical and sustainable sourcing practices
In a multi-national organization, where is procurement often located when it is not seen as a strategic function?
Under the operations director or finance director
What influences the decision to centralize procurement in multi-nationals?
Standardization of purchased items, size of operations, and geographic proximity of the operations
What is the primary purpose of competition laws in the United States, European Union, China, and Russia?
To regulate competition and prevent anti-competitive practices
What is the aim of deregulation in industries?
To reduce or eliminate restrictions to make competition easier
What often accompanies deregulation in sectors previously controlled by the government?
Privatization of government assets
What do competition laws prohibit?
Free trade and competition
What is the primary focus of competition laws in the United States and European Union?
Regulating business practices
What is the main intention behind deregulation in previously state-controlled industries?
To improve services, reduce costs, and privatize government assets
What is the purpose of competition laws in China and Russia?
To regulate competition and prevent anti-competitive practices
What is the effect of competition on companies and their workforce?
Stimulating innovation and improving quality, service standards, and reducing costs
What is the aim of the Agreement on Government Procurement (GPA)?
To improve competition and reduce restrictions on industries
What is the purpose of privatization in sectors previously controlled by the government?
To improve services, reduce costs, and transfer government assets to the private sector
What is the purpose of a Procurement Pre-Qualification Questionnaire (PQQ)?
To assess supplier's capability to meet minimum standards and deliver contract
What is the key component of an Invitation to Tender (ITT)?
Provides suppliers with all necessary information and ensures a fair and transparent process
What guides behavior in procurement and supply?
Documented policies and procedures
What forms the basis for an organization's policies?
Principles, values, and mission statements
What is a policy in the context of an organization's operation?
A collection of principles summarizing how an organization wants to operate
What are the key principles in Unilever's Responsible Sourcing Policy?
Conducting business lawfully and with integrity, and working on the basis of freely agreed terms of employment
What helps suppliers assess risks and price the job accurately in the procurement process?
Draft contract template
What are the information requirements in a Procurement Pre-Qualification Questionnaire (PQQ)?
General supplier details, financial records, business activities, references, insurance cover, quality assurance procedures, policies, and health and safety practices
What does an Invitation to Tender (ITT) provide to suppliers?
All necessary information and ensures a fair and transparent process
What is the primary purpose of documented policies and procedures in procurement and supply?
To guide behavior and ensure adherence to organizational principles and values
What is the significance of a draft contract template in procurement?
Helps suppliers assess risks and enables them to price the job accurately
What is the role of principles, values, and mission statements in an organization's policies?
Form the basis for an organization's policies
Which of the following is NOT one of the top five processes in the procurement process according to figure 4.8?
Operational management
In larger organizations, what justifies the need for a professional procurement department?
Increased complexity of goods and services bought
What is the purpose of category management in procurement?
To continuously monitor supply markets
What is the role of the procurement director in relation to supply chain risk of failure?
To monitor and manage the risk
In a strategic function organization, who is likely to head up the procurement and supply department?
A director
What is the purpose of the information management process in procurement?
To collect and turn data into useable information
What triggers sourcing activity in procurement?
All of the above
What is the purpose of contract management in procurement?
To monitor delivery from the supplier and manage risk
What is the primary responsibility of senior managers in very small organizations regarding procurement?
Authorizing purchases
What is the purpose of the procurement plan in a strategic function organization?
To own and coordinate a shared procurement plan with agreed targets
What is the primary purpose of the strategic direction process in procurement?
To cascade the strategic direction for the organisation as a whole
What is the primary responsibility of the managing director in a strategic function organization?
To oversee procurement and supply
Study Notes
Procurement and Supply Process Overview
- The procurement process involves several key stages: requisition, authorization and order, and delivery.
- Researching available suppliers is the first step, followed by selecting a provisional supplier, checking terms, and placing an order.
- Upon delivery, the process involves physically receiving the goods or service, checking the invoice for accuracy, and updating relevant records.
- Various types of documentation, such as requisitions and purchase orders, support the procurement and supply process.
- A purchase requisition is an internal document used to inform the procurement department about the need for an item, and it requires authorization.
- Computerized procurement systems have several advantages, including reducing the time procurement staff spend interacting with buyers, providing an audit trail, and aiding in budgetary control.
- Purchase orders are used to make purchases on credit, set clear expectations, create a legally binding document, organize the workforce, and aid in budgeting and providing an audit trail.
- The purchase order process involves approval by a buyer based on the requisition, and if not approved, it is returned to the requisitioner with reasons for rejection.
- A purchase order should include a unique reference number and relevant information such as expected delivery date, item description, quantities ordered, and item prices.
- Once the purchase order is approved, a copy is sent to the requisitioner, often the warehouse for physical goods, to enable planning of activities and capacity management.
- The purchase order process is crucial for creating a legally binding document and organizing the workforce.
- The procurement process involves various documentation types, such as requisitions and purchase orders, to support the operational cycle in procurement and supply.
Procurement and Supply Management in Organizations
- In organizations where procurement is not seen as a strategic function, it often reports to an operations director or finance director.
- The largest and most complex organizations, such as multi-nationals, face the challenge of deciding where to locate procurement and supply.
- Multi-nationals approach the dilemma of centralization and decentralization differently, with various benefits associated with each approach.
- Factors influencing the decision to centralize procurement include standardization of purchased items, size of operations, and geographic proximity of the operations.
- Competition is important for stimulating innovation and improving quality, service standards, and reducing costs in an economy.
- Competition laws, known as antitrust or competition law, are in place in the United States, European Union, China, and Russia to regulate competition and prevent anti-competitive practices.
- Competition law prohibits practices or agreements that prevent free trade and competition, bans predatory pricing, and monitors mergers and acquisitions to avoid monopolies.
- Deregulation occurs when a government reduces or eliminates restrictions on an industry to make competition in overseas markets easier for its own country's businesses.
- Deregulation and competition law in the UK allowed competition to enter previously state-controlled industries, such as the Post Office, British Rail, and local bus services.
- The intention of deregulation was to improve services, reduce costs, and privatize government assets in these sectors.
- Deregulation is often accompanied by the government selling its assets in these sectors, a process known as privatization.
- Deregulation and competition law are related to law on deregulation and state aid, aiming to improve competition and reduce restrictions on industries.
Test your knowledge of the procurement and supply process with this overview quiz. Explore key stages, documentation types, and the role of purchase orders in creating a legally binding document. Master the requisition, authorization, and delivery stages, as well as the benefits of computerized procurement systems.
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