CIPS Level 4 Diploma in procurement and supply | Distance Learning

Unit Title:	CIPS Reference
Contexts of procurement and supply	D1
Business needs in procurement and supply	D2
Sourcing in procurement and supply	D3
Negotiating and contracting in procurement and supply	D4
Managing contracts and relationships in procurement and supply	D5

On completion of this unit, candidates will be able to:
A) Offer advice and guidance to main stakeholders on the application of the sourcing process
B) Understand supply chains which organisations operate in.

1.0 Understand the added value that can be achieved through procurement and supply chain management

1.1 Explain the categories of spend that an organisation may purchase
• Definitions of procurement and purchasing and supply
• Typical breakdown of organisational costs represented by procurements of goods, services or constructional works
• Stock and non-stock procurements
• Direct and indirect procurements
• Capital purchases and operational expenditures
• Services procurements

1.2 Analyse the different sources of added value in procurement and supply
• The five rights of procurement
• Achieving the right price for procurements from external suppliers
• Defining total life cycle costs or the total costs of ownership
• Achieving quality, timescales, quantities and place considerations in procurements from external suppliers
• Other sources of added value such as innovation, sustainability and market development
• Defining value for money

1.3 Compare the concepts of procurement and supply chain management
• Definitions of procurement, supply chains, supply chain management and supply chain networks
• The length of a supply chain
• Definitions of logistics and materials management
• Comparisons of supply chain management with procurement

1.4 Differentiate the stakeholders that a procurement or supply chain function may have
• Defining stakeholders
• Examples of stakeholders for a procurement or supply chain function
• Mapping stakeholders for a procurement or supply chain function

2.0 Understand the stages of sourcing processes in creating added value outcomes that can be achieved with suppliers

2.1 Explain the main aspects of sourcing processes
• Defining the stages of a generic sourcing process from identification of needs to contract and supplier management
• Analysis and planning, tender management and contract management
• Differentiating between pre contract award and post contract award stages

2.2 Analyse the main stages of a sourcing process
• Stages of the sourcing process that relate to defining needs, creation of contract terms, supplier selection, contract award and contract or supplier management
• The purpose and added value that is created by each of the stages of the sourcing process

2.3 Explain how electronic systems can be used at different stages of the sourcing process
• Erequisitioning, ecatalogues, eordering, esourcing and epayment technologies
• The impact of electronic purchase to pay (P2P) systems on the sourcing process

2.4 Analyse the relationship between achieving compliance with processes and the achievement of outcomes
• Organisational needs for structured sourcing processes
• The relationship between process compliance and the achievement of added value outcomes

3.0 Understand the main aspects of organisational infrastructure that shape the scope of a procurement or supply chain function

3.1 Explain the main aspects of corporate governance of a procurement or supply chain function
• Conflicts of interest
• The need for documented policies and procedures for procurement
• Organisational accountability and reporting for procurement roles and functions
• The status of procurement and supply chain management within organisations
• Codes of ethics in procurement
• The CIPS code of ethics

3.2 Analyse the impact of organisational policies and procedures on procurement
• Aspects that can be included in procedures for procurement and supply such as responsibilities for procurement, regulations relating to competition, levels of delegated
authority, responsibilities for the stages of the sourcing process, invoice clearance and payment
• The use of procurement policies, procurement strategies and procurement manuals
• The involvement of internal functions and personnel in the sourcing process
• Responsible purchasing and the International Labour Organisation core conventions

3.3 Compare the different structures of a procurement or supply chain function
• The use of centralised and devolved structures
• Hybrid structures of a procurement or supply chain function (such as consortium
structures, shared services, lead buyer structures, and outsourced) Interacting with other people and building rapport
• The need for customer service and value for money outcomes

3.4 Explain the common IT systems that can be used by a procurement or supply chain function
• P2P systems
• Systems for inventory management
• Enterprise Resource Planning (ERP) technologies
• Communications systems for internal and external use

4.0 Understand the need for compliance with requirements when undertaking procurement activities in different sectors

4.1 Identify different economic and industrial sectors
• Economic classifications including public and private sectors, charities, not for profit and third sector
• Industrial classifications and sectors such as manufacturing, retail, construction, financial, agriculture and service
• Codes of ethics in procurement including the CIPS Code of Ethics

4.2 Analyse the impact of the public sector on procurement or supply chain roles
• Objectives of public sector organisations such as improving services, communities and corporate social responsibility
• Regulations that impact on procurement and supply chain operations
• Need for competition, public accountability and value for money

4.3 Analyse the impact of the private sector on procurement or supply chain roles
• Objectives of private sector organisations such as profitability, market share, shareholder value and corporate social responsibility
• Regulations that impact on procurement and supply chain operations
• The importance and role of branding

4.4 Analyse the impact of the not for profit or third sector on procurement or supply chain roles
• Objectives of the not for profit or third sector
• Regulations impacting on charities
• Need for regulated procurement exercises

On completion of this unit, candidates will understand practices that help achieve value for money solutions in
procurement.

This unit explores a variety of elements that underpin the development of criteria. It also considers the options
that should be explored when procurement and supply personnel are involved in defining requirements.

1.0 Understand how to devise a business case for requirements to be sourced from external suppliers

1.1 Analyse how business needs influence procurement decisions
• Type of purchase such as new purchase, modified re-buy, straight re-buy
• Implications of the business needs on the types of procurement
• Procurement’s role in developing a business case

1.2 Explain how costs and prices can be estimated for procurement activities
• Types of market data that can provide information on costs and prices
• Direct and indirect costs
• Producing estimated costs and budgets
• Approaches to total costs of ownership/ total life cycle costing

1.3 Explain the criteria that can be applied in the creation of a business case
• Examples of criteria typically applied in the production of a business case: costs, benefits, options, alignment with organisational needs and timescales
• Benchmarking requirements

1.4 Explain the operation of financial budgets for the control of procurements
• The purpose of financial budgets
• Cost entries and timings of cash flows
• Performance and control of budgets
• Dealing with variances to budget

2.0 Understand the fundamentals of specifications and key performance indicators that are included in contractual arrangements made with suppliers

2.1 Assess different types of specifications used in procurements of products or services
• Definitions of specifications
• Examples of specifications such as drawings, samples, branded and technical
• Conformance based specifications
• Output or outcome based specifications

2.2 Explain the content of specifications for procurements
• Drafting specifications and developing market dialogue with suppliers
• The use of standards in specifications
• Typical sections of a specification
• Standardisation of requirements versus increasing the range of products
• Including social and environmental criteria in specifications
• The role of Information Assurance in developing specifications

2.3 Develop examples of key performance indicators (KPIs) in contractual agreements
• Defining contractual performance measures or KPIs
• The use of service level agreements
• Typical KPI measures to assess quality performance, timeliness, cost management, resources and delivery

3.1 Explain sources of contractual terms for contracts that are created with external organisations
• The use of express terms
• The use of standard terms of business by both purchasers and suppliers
• The use of model form contracts such as NEC, FIDIC, IMechIEE

3.2 Interpret examples of contractual terms typically incorporated into contracts that are created with external organisations
• Main terms in contracts for indemnities and liabilities, sub-contracting, insurances, guarantees and liquidated damages
• Terms that apply to labour standards and ethical sourcing

3.3 Assess the main types of pricing arrangements in commercial agreements
• The use of pricing schedules
• The use of fixed pricing arrangements
• Cost plus and cost reimbursable pricing arrangements
• The use of indexation and price adjustment formulae
• The use of incentivised/ gainshare pricing arrangements
• Payment terms

4.0 Understand the main implications of outsourced work or outsourced services for procurement

4.1 Differentiate outsourcing from other types of procurement
• Make or buy decisions
• Defining outsourcing
• Outsourcing non- core and core work or services

4.2 Assess how outsourcing can impact on procurement
• Costs and benefits of outsourcing
• Risks in outsourcing
• The market development and growth of outsourcing
• Regulations affecting employees’ terms of employment

4.3 Develop a plan for procuring outsourced work or services
• Determining core competences and outsourcing opportunities
• The procurement process for outsourcing
• Developing a business case for outsourcing
• Express contract provisions for outsourcing
• Establishing exit plans for outsourcing

On completion of this unit, candidates will be able to apply a set of appropriate tools and techniques that can
assess sourcing options available to organisations when procuring goods, services or works from external suppliers.

This unit identifies sound approaches to sourcing activities that assess the commercial and technical capabilities of organisations to help achieve the right choice of supplier.

1.1 Explain the sourcing process in relation to procurement
• Definitions of sourcing
• Supplier pre-qualification or criteria for supplier appraisal
• Strategic and tactical sourcing
• Forming teams with stakeholders for the sourcing process
• Vendor or supplier performance management

1.2 Compare the main approaches to the sourcing of requirements from suppliers
• Sole sourcing
• Single, dual and multiple sourcing arrangements
• The use of tendering: open, restricted and negotiated approaches to tendering
• Direct negotiations with suppliers
• Intra company trading and transfer pricing arrangement
• Implications of international sourcing

1.3 Develop selection and award criteria that can be commonly applied when sourcing requirements from external suppliers
• Typical selection criteria such as: quality assurance, environmental and sustainability, technical capabilities, systems capabilities, labour standards, financial capabilities
• Typical award criteria such as: price, total life cycle costs, technical merit, added value solutions, systems, resources
• Balancing commercial and technical award criteria

1.4 Explain the main consequences on supply chains when sourcing requirements from suppliers
• Sourcing internally
• Sourcing from small and medium sized enterprises (SMEs)
• Sourcing from third sector organisations
• Ethical sourcing and the fair trade movement
• Supplier tiering and supply chain networks

2.0 Be able to develop a plan for sourcing goods or services from external suppliers

2.1 Choose appropriate selection criteria to inform the identification of appropriate external suppliers in the sourcing plan
• Typical selection criteria such as: quality assurance, environmental and sustainability, technical capabilities, systems capabilities, labour standards, financial capabilities

2.2 Choose a balance of commercial and technical award criteria in the sourcing plan
• Typical award criteria such as: price, total life cycle costs, technical merit, added value solutions, systems, resources
• Balancing commercial and technical award criteria

2.3 Produce a plan for the sourcing of goods or services from external suppliers
• The structure of a plan for sourcing goods or services from external suppliers

3.1 Identify the main sources of information on potential suppliers' financial performance
• Financial reports
• The role of credit rating agencies
• Secondary data on markets and suppliers

3.2 Calculate measures of liquidity, profitability, gearing, investment from relevant financial data on potential suppliers
• Financial statements such as the profit and loss, balance sheet and cash flow statements
• Measures and ratios of profitability, liquidity, gearing and investment

3.3 Evaluate the financial performance of potential suppliers using relevant financial data
• Ratio analysis to make conclusions on profitability, liquidity, gearing and investment
• The limitations of ratio analysis

4.0 Understand the main processes that can be applied to the sourcing of requirements from external suppliers

4.1 Assess commonly used sources of information on market data that can impact on the sourcing of requirements from external suppliers
• The importance of analysing markets
• Compiling data on expenditures on suppliers
• Indices that measure economic data
• Secondary data on markets and suppliers
• Commodity pricing
• Analysing potential sales

4.2 Explain the main processes used for obtaining quotations and tenders
• Advertising requirements
• Requests for information or quotations
• The operation of tendering
• Formalised arrangements for tendering
• Decision criteria for dispensing with tendering

4.3 Evaluate the criteria that can be commonly applied to the assessment of quotations or tenders
• Assessment of suppliers proposals
• The use of weighted points systems for assessment
• Recommending sources of supply

4.4 Explain how electronic systems can be used to help the sourcing of requirements from external suppliers
• Erequisitioning and purchase ordering systems
• Ecatalogues on intranets and the internet
• The use of eauctions
• Etendering systems

5.1 Analyse the main legislative, regulatory and organisational requirements when sourcing in the not for profit, private and public sectors
• The use of competitive tendering processes
• The impact of timescales on tendering processes
• Procedures for contract award
• Regulatory bodies that impact on the private sector
• Organisations that impact on product and safety standards

5.2 Analyse the main legislative, regulatory and organisational requirements when sourcing from international suppliers
• Documentation relating to imports
• Import duties and tariffs
• Payment mechanisms
• The use of incoterms
• Customs control and clearance
• Ethical sourcing fair trade standards
• Currency regulations
• Applicable law

On completion of this unit, candidates will be able to:
A) Identify approaches to achieve negotiated agreements with external organisations.
B) Recognise the use of legal terms that should regulate commercial agreements.

The creation of formalised agreements is a critical part of the work of personnel in procurement and supply. This unit analyses approaches to the negotiation of agreements made with external parties and the formation of legally binding contracts. After contracts have been entered into, there can be conflict over performance issues and on costs, timing and quality of supplies. This should involve negotiation to achieve required outcomes.

1.1 Explain the documentation that can comprise a commercial agreement for the supply of goods or services
• Invitation to tender or request for quotation
• Specification
• Key performance indicators (KPIs)
• Contractual terms
• Pricing and other schedules (such as for health and safety records, details of suppliers staff, use of sub-contractors, non disclosure/ confidentiality agreements)

1.2 Assess the legal issues that relate to the creation of commercial agreements with customers or suppliers
• Invitations to treat or invitations to negotiate
• Rules relating to offer and acceptance, consideration, intention to create legal relations and capacity to contract
• The battle of the forms and precedence of contract terms
• Risks presented by contracting on suppliers terms or through oral contracts
• The Vienna Convention on the International Sales of Goods
• Misrepresentations made pre-contract award

1.3 Explain the main types of contractual agreements made between customers and suppliers
• One off purchases
• Framework arrangements and agreements
• The use of mini- competitions
• Call offs
• Services contracts
• Contracts for the hire and leasing of assets

2.0 Understand the main approaches in the negotiation of commercial agreements with external organisations

2.1 Analyse the application of commercial negotiations in the work of procurement and supply
• Definitions of commercial negotiation
• Negotiation in relation to the stages of the sourcing process
• Sources of conflict that can arise in the work of procurement and supply
• Team management and the influence of stakeholders in negotiations

2.2 Compare the types of approaches that can be pursued in commercial negotiations
• Win-win integrative approaches to negotiations
• Win-lose distributive approaches to negotiation
• Lose-lose approaches in negotiations
• Setting targets and creating a best alternative to a negotiated agreement (BATNA)

2.3 Explain how the balance of power in commercial negotiations can affect outcomes
• The importance of power in commercial negotiations
• Sources of personal power
• Organisational power: comparing the relative power of purchasers and suppliers
• How suppliers gather information on purchasing organisations
• How purchasers can improve leverage with suppliers

2.4 Analyse the different types of relationships that impact on commercial negotiations
• The relationship spectrum
• Building relationships based on reputation, trust and justice
• Repairing a relationship

3.1 Evaluate costs and prices in commercial negotiations
• Types of costs: direct and indirect, variable and fixed
• Break even analysis: cost volume profit formulae
• Costing methods such as absorption, marginal or variable and activity based costing
• Volumes, margins and mark ups and their impact on pricing
• Negotiating prices

3.2 Explain the economic factors that impact on commercial negotiations
• The impact of micro economics and the types of markets on commercial negotiations
• Macro economics and its influence on commercial negotiations
• Sources of information on micro and macro economics

3.3 Explain the main variables that can be used in a commercial negotiation
• Setting objectives and defining the variables for a commercial negotiation
• The bargaining mix
• Positions and interests
• Openings and presenting issues

3.4 Analyse the resources required for a negotiation
• Choice of location
• Involving appropriate colleagues
• Use of telephone, teleconferencing or web based meetings
• Room layout and surroundings

4.1 Explain the stages of a commercial negotiation
• Defining the stages of a negotiation such as preparation, opening, testing, proposing, bargaining, agreement and closure
• How behaviours should change during the different stages of a negotiation

4.2 Evaluate the main methods that can influence the achievement of desired outcomes
• The use of persuasion methods
• The use of tactics to influence the other party

4.3 Evaluate the main communication skills that help achieve desired outcomes
• Types of questions
• Effective listening
• Push and pull behaviours
• Nonverbal communication
• The influence of culture in commercial negotiations

4.4 Explain how to analyse the process and outcomes of the negotiations to inform future practice
• Reflecting on performance
• Opportunities for improvement and development
• Protecting relationships after the negotiation

On completion of this unit, candidates will be able to apply methods to improve supplier performance, recognising
the need for a structured approach when dealing with performance and relationship issues.

This unit concentrates on approaches to contract and supplier relationship management involving stakeholders in these processes. Personnel involved in creating contracts and relationships with external organisations need to ensure outcomes that achieve organisational requirements including costs, quality, risk
management and timing.

LEARNING OUTCOMES
1.0 Understand the dynamics of relationships in supply chains

1.1 Classify types of commercial relationships in supply chains
• Internal and external relationships
• The relationship spectrum
• The relationship life cycle

1.2 Apply portfolio analysis techniques to assess relationships in supply chains
• Probability and impact assessment of risks
• Matrices to identify supply, supplier and purchaser positioning
• Developing action plans

1.3 Classify the competitive forces that impact on relationships in supply chains
• Sources of competitive advantage
• Competitive forces: sources of competitive rivalry, bargaining power of buyers and suppliers, threat of new entrants and potential substitutes
• STEEPLE factors that impact on supply chains (social, technological, economic, environmental, political, legislative and ethical)

1.4 Analyse the sources of added value that can be achieved through supply chain relationships
• The link between relationships as a process and the achievement of added value outcomes
• Sources of added value: pricing and cost management, improving quality, timescales, quantities and place considerations in procurements from external suppliers
• The link between organisations in supply networks

2.1 Evaluate the elements of a legally binding agreement
• Contract terms that regulate commercial agreements and relationships
• Oral statements and representations
• Model form contracts
• The use of standard contracts versus negotiated/ bespoke contracts
• Applicable law and defined terms

2.2 Compare implied and express terms that affect performance issues
• Definition of express terms
• Implied terms through legislation, case law and custom
• Implications of international law

2.3 Explain the recourses for non-performances in contract
• Vital and non-vital contract terms
• Identifying non-conformances/ breach of contracts
• Assessing damages
• Limits of liability
• Procedures for termination

2.4 Explain the main approaches to conflict resolution in commercial contracts
• Negotiated settlements
• The mechanisms of alternative dispute resolution
• Other mechanisms for dispute resolution, adjudication, arbitration and litigation
• Contractual provisions for dispute resolution

3.1 Assess the main types of contractual risk
• Risks that can impact on contracts, such as internal, market, economic, legal, ethical sourcing and performance based risks
• The role of information assurance
• The assessment of contractual risks

3.2 Interpret financial, technical and performance data relating to the performance of contracts
• Data that relates to the performance of contracts
• Interpreting data relating to the performance of contracts
• Contract administration

3.3 Assess the responsibilities for contract management
• Responsibilities for contract management: procurement or non-procurement role
• Contract implementation plans and on-going demand management
• Planning and governance for contract management
• Resources required for contract management

3.4 Explain the main responsibilities of a contract manager
• Performance management and ensuring compliance to agreed standards
• Payment responsibilities
• Risk assessment and management
• Contract development
• Relationship management

4.0 Understand the main techniques for the management of contracts and suppliers

• Definitions of contract management and supplier relationship management
• The management of individual contracts compared to the management of relationships with suppliers

4.2 Explain the main techniques for supplier relationship management
• Supplier selection
• Team selection and responsibility for supplier improvement
• Supplier performance measurement
• Creating targets and assessment of performance

4.3 Explain the main techniques for supplier development
• Approaches to supplier development
• Defining quality assurance and total quality
• Approaches to quality improvement

4.4 Explain techniques for relationship improvement
• Continuous improvement
• The operation of balanced scorecards
• Relationship assessment methodologies
• Value stream mapping

Level 4 - Diploma in procurement and supply