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For Non-UK Students

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UNIT CONTENT LEVEL 4 Foundation Diploma in Purchasing and Supply

Many members who have previous business experience or qualifications commence their CIPS studies with Level 4. Together with Level 5 and 6 it is the most common route to reach full Membership and obtain the designatory letters MCIPS.

The units that make up the award are:


L4-01 Effective Negotiation in Purchasing and Supply
L4-02 Developing Contracts in Purchasing and Supply
L4-03 Measuring Purchasing Performance
L4-04 Managing Purchasing and Supply Relationships

L4-05 Purchasing Contexts (Integrative unit)


Detailed Syllabus




The unit is designed to provide students with the ability to apply a variety of theories relating to negotiation in respect of preparation, planning and participating in the negotiation

Students will undertake activities such as cost and market analysis, using information to support the planning of
negotiation with suppliers to achieve best value. Students also apply their knowledge of various legal implications
affecting negotiations.

Negotiating is often a finely balanced activity and involves managing a range of complex relationships, and students should be prepared to effectively manage those relationships, avoiding conflict while maintaining the
balance of power.

By the end of this unit, students should be able to plan, prepare and undertake effective negotiations, demonstrating high levels of personal effectiveness and achieving best value within the supply chain.


On completion of this unit, students will be able to:

• Apply negotiation theories to achieve effective outcomes to the negotiation process
• Set objectives for negotiations
• Prepare and plan for effective negotiations
• Take an active part in negotiation meetings
• Use a range of effective and persuasive negotiation techniques
• Show an appreciation of the different approaches required when negotiating with customers including those based overseas
• Explain how to negotiate within the confines of organisations’ pre-determined parameters, for terms, conditions and legal requirements
• Demonstrate personal effectiveness in the negotiation process
• Evaluate negotiation effectiveness and recommend improvements for future negotiations



1.0 Preparing for negotiations in different settings (Weighting 25%)

1.1 Prepare for the different phases of negotiation,
• Preparation
• Open
• Test
• Agree
• Finalise the deal

1.2 Obtain information required to understand the supplier organisation, including:
• Supplier information supply/demand/timings/costings/budgets/readiness, capacity, account management structure
• Competitor information. i.e. supplier competitors
• Market analysis

1.3 Undertake market analysis to support negotiations.
• Political
• Economic
• Social
• Technological
• Environmental
• Legal

1.4 Undertake supplier SWOT analysis.
• Identify strengths
• Identify weaknesses
• Identify opportunities
• Identify threats

1.5 Assess any legal information and implications for the purchase and supply of goods that might impact upon
• Sale of Goods Act
• Caveat Emptor
• Negotiating terms and conditions
• Penalties and Damages
• Unfair Contract Terms Act

1.6 Undertake a risk assessment specifically relating to:
• Win-lose and win-win
• Win perceived win
• Generating variables and alternatives
• Flexibility and adoption in negotiations
• Risk assessment matrix


2.0 Financial tools for negotiations (Weighting 25%)

2.1 Identify and calculate elements of fixed and variable costs associated with supply.
• Define fixed costs
• Define variable costs
• Suppliers’ perspectives on fixed and variable costs
• Open book costing

2.2 Identify and calculate direct, indirect and standard costs.
• Difference between direct and indirect costs
• Standard costs
• Actual costs
• Budget costs

2.3.Identify total costs and margins.
• Define total costs
• Define margins
• Suppliers’ margins vs. market pricing

2.4 Undertake a break-even analysis.
• Demonstrate break-even through economic charts
• Modelling using break-even
• Suppliers’ perspectives on break-even
• Buyers’ perspectives on break-even

2.5 Apply the concept of supply and demand in a variety of organisations including monopolistic, oligopolistic
supply in negotiation including:
• An analysis of supply and demand
• Shifting supply
• Elasticity

3.0 The negotiation process (Weighting 25%)

3.1 Determine the objectives and strategies for negotiation meetings.
• Setting targets
• Walk away
• Straw issues

3.2 Identify the different stages of the meeting and ensure that the meeting is timed, resourced and managed.
• Opportunities for conditioning
• Room layout/surroundings
• Psychology surrounding away or at home
• The supplier’s position


3.3 Establish the bargaining position of the purchaser.
• Parameters for negotiation terms and conditions for suppliers
• Who is attending the meeting, why and the level of authority they hold
• Positions and interests
• Power base
• Strength of the purchaser
• Size of the organisation


3.4 Use a range of persuasion techniques and tactics: incentives, concessions, motivations to buy, and demonstrate an understanding of the implications of offering such rewards.
• Threat, emotion, logic, compromise and bargaining
• Tactics and ploys
• Turning no into yes
• The psychology of concessions
• Introduction to game theory

3.5 Follow-up the negotiation and finalise the deal.
• Explain the importance of ratification of negotiations once they have ended
• Describe how the process of evaluation leads into a planning process for the next stage of negotiation where objectives may be altered
• Determine the legal requirements for the organisation and ensure they are complied with
• Implement ongoing actions relating to the negotiation process
• Evaluate the negotiation process and recommend improvements within the process and association behaviours
• Review the ongoing relationship, being aware of requirements and necessities to re-negotiate at appropriate intervals

4.0 Effective behaviour for negotiation (Weighting 25%)

4.1 Effectively use verbal and non-verbal communications in negotiation situations including reducing the potential for conflict.
• Sales influencing tools
• The other person’s perspective
• Body language
• Behavioural technologies


4.2 Define and evaluate the attributes of a good negotiator and apply them to effective negotiations.
• Interpersonal sensitivity
• Characteristics of a skilled negotiator
• The emotionally intelligent negotiator
• How to improve negotiation capabilities

4.3 Develop effective questioning skills.
• Power of three
• Information seeking questions
• Questions designed to coerce information

4.3 Appraise different negotiation practices in international cultures.
• Culture and negotiation
• Body language
• Barriers to international negotiation

4.4 Demonstrate how to negotiate effectively on the telephone.
• Factors affecting telephone negotiation
• Good practice when negotiating by telephone
• Listening for language cues

4.5 Demonstrate how to negotiate effectively with internal customers across the organisation.
• Listening to the internal customer’s perspective
• Rapport building techniques
• Dealing with difficult customers
• Concessions, and the impact on purchasing

4.6 Evaluate personal effectiveness in negotiation, through the analysis of outcome, gains, ability to adapt to
differing situations, meeting of pre-determined objectives and the disappointments of non-achievement.
• Reflecting on performance
• Feedback mechanisms
• Looking ahead to improvement and development






This unit is designed to help students to gain an appreciation of the complexities of both the legalities and commercial issues of contractual arrangements entered into with external organisations.The unit provides an underpinning knowledge of the legalities of the formation of contracts as well as the key ingredients of any commercial arrangement - a specification, the contractual terms and key performance indicators.

Students will be able to apply a variety of terms to contracts in given situations, and will be aware of the significance of a range of different contractual terms that are typically applied to a range of procurements affecting both direct and indirect expenditures. The unit also analyses the processes used for tendering or for requests for proposals from external suppliers through to contract award.


On completion of this unit, students will be able to:
• Recognise the use of specifications, performance measures and contract terms for procurements of products and services from suppliers
• Identify a range of legal aspects in relation to the contracting process
• Describe and apply the legalities linked to the formation of contracts
• Explain the impact of both implied and express terms in contracts
• Recognise the remedies for breaches of contracts and draft terms to cover such risks
• Appraise and discuss the legal and relationship issues arising through the use of tendering procedures, including e-tendering, and the application of EU procurement directives
• Outline the practices that can be adopted for contract review and award

1.0 Develop commercial agreements
(Weighting 20%)
1.1 Identify the various categories of procurements that organisations typically undertake.
• The types of products and services that are typically purchased by organisations, such as purchases for re-sale, capital equipment, sub-contracted work, facilities, ICT and MRO items
• Categories of expenditures on goods and services

• The procurement function’s role in setting up agreements for purchased goods and services


1.2 Formulate objectives for the procurement of both goods and services.
• The five rights of purchasing
• Achieving a balance between objective: time versus cost
• The use of specifications, performance measures and contractual terms in supply agreements

1.3 Recognise the impact of specifications on achieving value for money.
• The functions of a specification
• The types of specification
• Choosing the most appropriate type of specification for the purchase decision

1.4 Discuss the use and application of key performance indicators in agreements with suppliers.
• The development of performance measures that can be applied to commercial agreements
• Examples of performance measures
• Developing targets for supplier performance

1.5 Recognise the use and the content of contractual terms for purchased goods or services.
• Purchasers’ and suppliers’ standard contracts
• The differences between purchasers’ and suppliers’ terms

2.0 The formation of contracts (Weighting 25%)

2.1 Identify and apply the legal aspects relating to the formation of contracts.
• Offer
• Acceptance
• Consideration
• Intention to create legal relations
• Capacity
• The contractual promise
• The distinction between framework and call off contracts

2.2 Discuss the legalities and commercial considerations linked to the battle of the forms.
• The exchange of suppliers’ and purchasers’ terms in the contract formation process
• Counter-offers and acceptance
• Precedent set by case law on contract formation
• The creation of e-contracts


2.3.Identify and discuss the legal aspects relating to the formation of contracts in international trade.
• International law
• The Vienna Convention, Uniform Law for
International Sale of Goods (1980)

2.4 Discuss standard model form contracts and their uses and applications.
• The use of model form contracts
• Examples of model form contracts such as CIPS, the New Engineering Contract, Joint Contracts Tribunal

3.0 Contractual terms (Weighting 35%)

3.1 Analyse and discuss the effectiveness of a supply agreement.
• Contractual obligations
• Contract termination

3.2 Recognise different contract terms and their impact on any breach of contract.
• Conditions
• Warranties
• Innominate terms

3.3 Discuss and apply implied terms.
• Key legislation relating to contracts
• Sale of Goods Act (as amended)
• Supply of Goods and Services Act
• Unfair Contract Terms Act
• Contracts (Rights of Third Parties) Act

3.4 Discuss standard contracts terms for indemnities.
• Intellectual property rights
• Insurances
• Accidents and damage
• Third parties

3.5 Recognise and discuss the use of express contractual terms.
• Liquidated damages
• Guarantees
• Passing of property
• Sub-contracting and assignment
• Payment
• Transfer of undertakings and protection of employment regulations
• Confidentiality
• Other terms

3.6 Identify the provision in contracts for amendments, change, review and renewal.
• Contract duration
• Dispute resolution
• Default and termination clauses
• Variation and change control
• Contract renewal

3.7 Appreciate and discuss international considerations in contract terms
• The choice of legal system
• Arbitration
• The use of incoterms

4.0 Letting contracts (Weighting 20%)

4.1 Discuss the stages of the procurement process underlining the tendering process.
• The stages of the procurement process
• The principles of tendering
• The use of pre-qualification and evaluation criteria
• Post-tender negotiation
• Contract award
• Contract transition arrangements

4.2 Outline and discuss the EU procurement directives.
• The objectives of the EU procurement directives
• Supplies, services, works and compliance
• Coverage of the directives - the thresholds
• The consolidated procurement directive
• Open, restricted, negotiated and competitive dialogue
• Award criteria
• Debriefing

4.3 Discuss the use of e-tendering and outline the legal issues.
• Supplier databases
• Electronic tender systems
• Electronic notice systems

4.4 Recognise the importance of reviewing the outcomes of contracts and identify problems that require immediate action.
• Contract management
• Contract review
• Improving the contracting process





This unit is designed to help students to measure the effectiveness of the supply chain and its contribution
towards aiding the competitiveness and effectiveness of the organisation.

Students taking this unit should be able to apply a range of measurement techniques used to monitor the performance of a variety of individual suppliers, how they perform financially versus target, compliance to
contract/specification, and potential risks that they may present.

Measurement will take place on three levels, organisational,
functional and individual. Students should be able apply a range of techniques and provide results that evaluate supplier performance, and make suggestions for future improvements


On completion of this unit students should be able to:
• Determine how measuring performance in supply chain activities fits into the overall management process of an
• Discuss the benefits of implementing a well structured approach to measuring organisational, functional and
individual performance
• Categorise types of performance measures that are available to supply chain managers
• Argue the reasons for measuring a suppliers performance
• Appraise measures that can be used to improve supplier performance
• Use a range of accounting techniques to measure organisational efficiency
• Interpret and apply statistical data used to measure performance


1.0 Measuring and evaluating the performance of the purchasing and supply function (Weighting 40%)


1.1 Describe the role and importance of measuring performance, how it fits into the overall management
decision-making process, and how it contributes to continuous improvement and continuity of supply.
• Importance of performance measurement for control purposes
• Link to organisations mission and strategic goals/objectives
• Its role in the purchasing management process
• Advantages and disadvantages of performance measurement for the purchasing function

1.2 Explain the concept and forms of added value and evaluate the benefits of value-added solutions including:
• Savings resulting from improved performance
• Reducing inventory costs and administration
• Extending payment and warranty terms
• Using consignment stock
• Improving operational efficiency

1.3 Classify the information required to perform purchasing activities and to measure and evaluate purchasing
• Departmental versus strategic goals of the organisation
• Resource requirements
• Costing, pricing, inventory management
• Supplier/vendor information
• Product/Service specifications

1.4 Outline and appraise the types and categories of key performance measures available to organisations
• Contributions to profitability - savings, service and inventory
• Basic workload control
• Infrastructure and competency

1.5 Demonstrate an understanding of how an organisation’s purchase and supply function can manage and reduce
inventory costs, and outline the methods available to do so.
• Economy: achieving best value for money. Managing the cost of the supply operation
• Efficiency: use of appropriate inventory management systems/techniques.
• Effectiveness: level of service provided by the inventory function to its end users


1.6 Suggest how the use of information technology may help in the acquisition of purchase and supply
performance data.
• Use of appropriate management information systems to capture and record information relating to all
related costs re: stock/inventory levels and use; and overall costs relating to the purchasing function
• Databases for recording/storing supplier/vendor information
• Stock movement/monitoring systems, including point-of-sale data capture and delivery details
• Statistical database for quality monitoring purposes


2.0 Measuring and evaluating the performance of the supplier (Weighting 30%)

2.1 Demonstrate an understanding of the key areas associated with supplier selection and evaluation.
• The key stages in the buying process
• The variables considered when making the purchasing decision

2.2 Explain the importance of measuring a supplier’s performance and distinguish from supplier appraisal.
• Supplier appraisal: assessment of supplier capability to control quality, quantity and price
• Supplier performance: comparison against a standard, performance on previous orders and against other supplier’s performances

2.3 Discuss the impact of supplier performance on an organisation’s quality and productivity.
• Good suppliers allow an organisation to perform efficiently and effectively. Issue of right-first-time-every-
time. Lower costs of operation
• Poor suppliers adversely affect performance. Knock-on effect of sub-standard goods and services, plus
untimely deliveries all add cost to an organisation.

2.4 Apply and evaluate appropriate measures to develop sustained improvement of supplier performance
• Carters Model of performance measures (9Cs)
• Simple vendor rating calculations
• Use of financial ratios


2.5 Discuss the importance of close and frequent buyer-supplier communication and of its importance within
supply contracts.
• Demand-supply chain relationships
• Inter-organisational partnering and long-term commitment
• Benefits relating to working together: cost reduction, joint product and service development, joint performance measurement and appraisal

2.6 Outline how a shared measurement approach will inform a process of continuous improvement, and employ appropriate financial and accounting tools to assess organisational efficiency including:
• Cash flow analysis
• Use of appropriate ratios – activity ratio, liquidity ratio, working capital – to assess organisational efficiency
• Identification of supplier fraud

2.7 Discuss the use of performance measurement as a tool for supplier relationship development.
• Measurement as a motivating factor for both parties
• Mutual opportunities to create understanding to improve performance
• Positive approach to relationship building and continuous improvement
• Identification of weaknesses and problems

2.8 Discuss possible measures relating to a supplier’s research and development, cultural adaptation and similar qualitative performance.
• Compare conformance to international and recognised industry standards or benchmarks
2.9 Determine ways of measuring supplier achievement of service levels. Use of evaluation reports relating to:
• Cost of initial purchasing measure
• On-going levels of performance in carrying out the service: quality, after-sales service, price, consistency
of performance

3.0 Measuring and evaluating the performance of the buyer (Weighting 30%)

3.1 Discuss the benefits of a well-managed and structured approach to measuring an individual’s performance
• Investors in people guidelines and structure
• Performance against target assessments
• Planning for improvements


3.2 Outline the appraisal and evaluation techniques that can be employed within such an approach.
• Periodic reviews
• Informal and formal appraisals

3.3 Review how individual components of a purchasing job link to the overall objectives of the organisation.
• Contribution of individuals to an organisation’s profitability
• Management of basic workload
• Development of purchasing infrastructure

3.4 Discuss and demonstrate how an individual’s knowledge, expertise and skills can be developed to the
benefit of both that individual and the organisation.
• Individual benefits: level of responsibility, job satisfaction, career progression, skills development
• Organisational benefits: better-trained workforce
• Improved productivity and profitability
• Competitive advantages

3.5 Identify and appraise the training needs of individuals, using appropriate analytical approaches, including:
• Job profiles
• Key objectives
• Performance measures
• Appraisals

3.6 Suggest and evaluate relevant statistical data and/or information as a basis for measuring an individual’s
performance including:
• Measuring performance against pre-set targets relating to cost reduction, profitability and productivity

3.7 Compare the relative performance measures of the buyer with those of his/her respective suppliers.
• Key measures of supplier performance: competency, commitment, capacity, control
• Key measures of buyer performance: skill and knowledge, plus contribution to an organisation’s goals and targets






This unit is designed to enable students to focus on developing and managing effective relationships, old and
new, within the supply chain.

Students will be able to review and develop existing relationships and identify opportunities for establishing new
relationships that will enhance the performance of the supply chain, while exploring the benefits and risks of
establishing such relationships.

By the end of this unit, students should be able to develop new relationships, manage existing relationships and exploit opportunities in both, that will maximise the effectiveness of the supply chain.


On completion of this unit, students will be able to:
• Review the effectiveness of existing relationships and identify potential areas for growth and diversification in
the supply chain
• Evaluate supply chains and identify key relationships and growth opportunities
• Evaluate techniques for supplier selection and assessment, for the provision of goods and services
• Suggest procedures to support the outsourcing of services
• Apply a range of interpersonal and communication techniques required to develop personal effectiveness in
• Identify supply chain problems and propose resolutions
• Èxplain how to monitor and review supply chain relationship effectiveness


1. The context of relationships in supply chain management (Weighting 30%)

1.1 Describe and classify the range of relationships that may exist within supply chains.
• Definition of relationships in the context of supply
• Overview of internal and external relationships


1.2 Evaluate the contribution of appropriate and well managed relationships to organisational success, including achieving collaboration and co-operation:
• Explain the relationship spectrum
• Differentiate a range of relationships between buyers and sellers including:
• Adversarial
• Arms length
• Transactional
• Closer tactical
• Single sourced
• Outsourced
• Strategic alliance
• Partnership
• Co-destiny
• No one relationship fits all

1.3 Evaluate the challenges in managing effectively the relationships between purchasers and suppliers:
• Supply positioning model
• Supplier preferencing model
• The reasons for changing the way in which a relationship operates
• Managing risk in commercial relationships
• Buyer and supplier behaviour in relationships
• Market management matrix

1.4 Recognise the natural life cycle of supply relationships and appraise the position of specific relationships in
their life cycle.
• The concept of the relationship life cycle
• The stages of the relationship life cycle
• Linking the relationship life cycle to the relationship spectrum
• Understanding your position in the relationship life cycle

1.5 Analyse the impact of lean and agile supply philosophies on supplier relationships.
• Traditional supply philosophy
• Lean supply philosophy
• Agile supply philosophy

1.6 Review the CSR and ethical, technological, legal and environmental constraints on relationship development.
• Component parts of CSR
• The case for CSR
• The case against CSR
• CSR and supplier development


1.7 Identify and appraise the relationship between internal and external stakeholders in the supply chain and consider ways of maintaining objectivity within the relationships.
• Consider ways of maintaining objectivity in relationships
• Services versus manufacturing supply chain relationships
• Technical specialists versus purchasing specialists

1.8 Assess the importance of culture and relationship values within supply networks.
• Organisational culture
• Relationship values and behaviours
• Managing buyer and supplier perspectives on values and behaviours

2. Assessing and selecting suppliers (Weighting 25%)

2.1 Describe and select objectives for relationships with suppliers.
• The impact of internal and external stakeholders on supplier selection
• The impact of internal suppliers on supplier selection
• The external supplier’s view of the selection process
• Manufacturing and service supply chains
• Upstream and downstream supply chain activities

2.2 Evaluate and apply techniques for supplier appraisal and selection.
• Supplier appraisal techniques
• Vendor rating
• Supplier auditing

2.3 Evaluate the effectiveness of the assessment process.
• Supplier appraisal deliverables
• Measuring the supplier appraisal process
• Effect of supplier appraisal upon relationship development
• Supplier appraisal in the context of the relationship cycle

2.4 Discuss the constraints on supplier selection within the public sector.
• Legislation affecting supplier selection
• Supplier selection routes available to the public sector
• The buyer’s perspective on selection legislation
• The supplier’s perspective on selection legislation


2.5 Evaluate the impact of reciprocal trading on purchasing relationships.
• Describe reciprocal trading
• Examples of organisations’ policies on reciprocal trading
• Managing reciprocal trading in the selection process
• The impact of reciprocal trading on relationships during and after the selection process
• Addressing the problem

2.6 Evaluate and mitigate against the potential risks of a change of supply source.
• Risks of change
• Cost of change
• Mitigation of risk and cost
• Communication and stakeholder management

2.7 Evaluate suppliers for strategic capability.
• Assessing transactional versus strategic approaches to the supply market
• Buyer and supplier interaction
• Ad hoc or partnership sourcing

3. Managing outsourced relationships (Weighting 15%)

3.1 Develop and apply procedures for undertaking an outsourcing exercise and maintaining effective outsourced relationships. Define and differentiate between service contracts and sub-contracting, outsourcing and in-sourcing.
• The outsourcing decision-making process
• The outsourcing process
• Legal implications of outsourcing

3.2 Demonstrate how performance should be managed in outsourcing exercises.
• Managing the outsourcing contract
• Establishing and implementing performance measures
• Monitoring performance measures
• Understanding why some organisations are in-sourcing

3.3 Evaluate the impact of outsourcing on relationships between customers and providers.
• Outsourcing relationships and the relationship spectrum
• Outsourcing relationships and partnerships
• How to manage change in an outsourced relationship


4. Developing and managing relationships with suppliers (Weighting 30%)

4.1 Identify the causes of conflict in supply relationships and select appropriate methods for their resolution.
• The positive and negative roles of conflict
• Conflict factors
• Conflict factors related to the types of relationships in the relationship spectrum
• Stakeholder management and conflict

4.2 Evaluate the concept of power and dependency in the context of managing supplier relationships.
• Power versus dependency
• Relationship issues resulting from power and dependency
• Managing power and dependency

4.3 Demonstrate the need for transparent communications between purchasers and suppliers in the effective
management of supply relationships.
• Stakeholder communication
• Communication tools and techniques in the context
of supplier management
• Transparency: open-book costing

4.4 Review the impact of e-purchasing strategies on supply relationships.
• e-purchasing and the relationship spectrum
• e-purchasing and supply situations
• Appropriateness of e-tools and their effect on relationships
• Suppliers perspective of e-purchasing
• Stakeholders perspective of e-purchasing

4.5 Appraise the relationship aspects of international supply contracts.
• Factors affecting international supply contracts
• Managing risk in international relationships
• Factors affecting performance measurement and on-going monitoring
• International supplier development

4.6 Demonstrate a range of techniques to develop stronger relationships between purchasers and suppliers.
• Supplier development
• Supplier development opportunities
• Supplier development versus supplier relationships
• Tools and techniques
• The stakeholder and supplier development


4.7 Apply a range of techniques for managing multi-tiered supply relationships.
• The importance of measuring relationship development and performance
• Areas of performance measurement
• Difficulties involved in measuring performance
• Measuring service and manufacturing suppliers
• The buyer and supplier perspectives on performance measurement

4.8 Apply a range of measurement tools to assess the performance of suppliers and the strength of relationships between purchasers and suppliers.
• Executive sponsorship
• Account management
• Continuous improvement programmes
• Service level agreements
• Key performance indicators
• Relationship assessment tools
• Feedback mechanisms

4.9 Review the circumstances in which supply relationships end, and select appropriate methods for their
termination and, where appropriate, determine ways of retrieving and retaining the relationship.
• Resolving disputes
• Using the contract to terminate a relationship
• Maintaining a supply relationship post-conflict

4.10 Evaluate the relationship challenges of multi-national suppliers in the context of a global supply chain.
• Barriers to successful ongoing relationship management
• Multi-national organisations as customers in local and national supply chains
• Multi-national organisations as suppliers in local and national supply chains
• The positive impact of multi-national organisations in developing economies


L4-05 PURCHASING CONTEXTS (Compulsory Integrative Core Unit)


This unit is designed to enable students to apply the fundamental principles of purchasing and supply in a variety
of different contexts, including a range of private sector organisations, including multi-nationals and small/ medium-sized enterprises (SMEs), plus the public sector; national and local government; the NHS; and the not-for profit sector including charities and the voluntary sector. Students will be able to consider the procurement cycle as it applies to a diverse range to purchased products and services including raw materials, commodities, components, utilities and services, both domestically and in an international context.

This unit will tackle the different challenges faced by a wide range of organisations and sectors as they strive to achieve best value, quality, effectiveness and competitiveness within the broader supply chain.

Successful students will be able to apply sound principles of purchasing and supply management to a diverse range of sectors and organisations and will be able to employ and develop transferable best practice where appropriate.


On completion of this unit, students will be able to:
• Identify the procurement cycle as it applies to a variety of different organisations and contexts
• Recognise the transferability of the fundamental principles of purchase and supply management
• Appraise the need for different approaches to purchasing in differing organisations and contexts
• Recognise good practice procurement processes and consider how they can be adapted and transferred to
other contexts
• Compare the diverse legal and regulatory environments in which procurement activity takes place
• Discuss the ethical implications of purchasing in different contexts
• Evaluate centralised versus decentralised purchasing structures
• Explain how to implement requisitioning and call-off to end users in decentralised Valued Added.E. portals (V.A.E)



1.0 Understanding diverse organisations, contexts and situations (Weighting 50%)

1.1 Evaluate the different objectives of public, private and not-for-profit sector organisations and the different
environments in which they operate.
• Ownership and control
• Sources of finance, financial structures and governance
• Resource issues
• Legal and regulatory environments
• Contrasting business objectives
• Importance of corporate social responsibility

1.2 Appraise the different types of private sector organisations and the differing demands that they place
on those managing the provision of goods and services including:
• Different forms, including limited companies, plcs and limited liability partnerships
• Formation and cessation of private sector firms
• Regulation of private sector and impact on purchasing
• Impact of profit motive on purchasing activities
• Transactional activity such as mergers and acquisitions (M&A) together with the role of Competition Commission
• Contrast specific types of private sector organisations and influences on purchasing function:
• Manufacturing
• Engineering
• Fast Moving Consumer Goods (FMCG)
• Retail
• Technology
• Services

1.3 Review the different types of public sector organisations and the variety of approaches taken to the purchase and supply of goods and services.
• Contrast different types of public sector including central government, local government and
government agencies
• Regulation of public sector and impact on purchasing
• Concept of best value, balancing conflicting objectives and priorities
• Multiple forms of stakeholder and their influences


1.4 Review the different types of voluntary and not-for-profit sector organisations.
• Contrast different types
• Regulation of voluntary and not-for-profit
organisations and impact on purchasing
• Importance of corporate and social responsibility (CSR)

1.5 Discuss the context of the purchasing function and different purchasing situations.
• Purchasing as a discrete organisational function within the supply chain
• Relationship between the purchaser and a supply market
• The various functional models for purchasing:
including centralised, decentralised, centre-led action network (CLAN), lead buyer/business partnering and
matrix structure
• Typical division of roles and responsibilities within purchasing
• The part-time purchaser
• Customers of the purchasing function
• Merits of internal versus external outsourcing of supply
• Role of a SSU and how it can be measured for effectiveness
• Merits of consortium buying with other independent organisations

2.0 Recognising the need for different approaches to purchasing different types of goods and services
(Weighting 50%)

2.1 Classify different types of product and customer requirements.
• Identify a range of customer groups and understand their different needs
• Contrast the difference between customers and consumers
• Contribution of purchasing to customer satisfaction
• How customer feedback is collated and used
• Contrast consumer products and industrial products
• Identify key requirements in goods for resale
• Regulatory framework for protection of consumers
• Impact of corporate and social responsibility (CSR) on consumer confidence


2.2 Recognising different methods of purchasing.
• Classification of supply chains, tiered supply, managed services and the role of an agent
• The purchasing cycle, its key stages and its relative transferability
• Importance of cross-functional teams, varying cross-functional requirements and the impact of this on purchases
• Methods of purchase:
• Spot-buying and one-off purchases
• Long-term supply relationships
• Framework agreements and call-off arrangements
• Projects: how scoped, purchased and paid for
• Low value orders including use of purchasing-cards
• Typical purchase-to-pay (P2P) methods
• Merits of competitive tendering: the key stages, appraisal and evaluation of tenders, and merits of e-tendering

• Good practice and its application to purchasing including benchmarking
• Consumables
• Call-off orders

2.3 Purchasing raw materials and commodities.
• Recognise the key differences between direct and indirect purchasing
• Methods of purchasing raw materials and commodity items and key considerations including
finance and the futures markets
• Contribution of purchasing to the bottom-line
• Purchasing for stock
• Purchasing for production
• Key considerations when purchasing perishable items

2.4 Purchasing services.
• Key differences between a product and a service
• A typical range of services: legal, professional, human resources, advertising and media, facilities
management, IT, maintenance repair and operations (MRO) and finance
• Key requirements when specifying a service to be purchased
• Operation and merits of managed services
• Managing service level agreements


2.5 Purchasing and financing capital expenditure items.
• Key differences between operational and capital expenditure
• A range of Capital Expenditure (CAPEX) items
• Financing considerations, including benefit/cost analysis (BCA), investment, return on investment
(ROI), break-even, post project appraisal (PPA) and whole-life costing
• Public and private funding initiatives including private financial initiative (PFI), public private partnership (PPP), build-own-operate-transfer (BOOT)
• A simple budgeting cycle
• Economic factors of financing including inflation and interest rates

2.6 International Purchasing.
• Key drivers for globalisation and standardisation
• The organisations which affect international trade including the World Trade Organisation,World Bank, International Chamber of Commerce and European Union
• International trade zones, tariffs and international trading agreements
• Modes of transport and shipping regulations
• Incoterms
• Reasons for sourcing internationally, including market expansion and competitiveness
• Key considerations when sourcing from another country
• Impact of international standards
• Relative merits of off-shoring



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