Unit content guide - CIPS and qualify... · a clear understanding nationally of the level of a...

Certificate inpurchasing and supplyThe units that make up the award are:

• Understanding the purchasing environment• Purchasing operations• Client and supplier relationships• Securing supply• Purchasing in action - integrative unit

Unit content guide

RevisedcontentSeptember2009

CIPS_L3_UnitContGuide:Layout 2 9/7/09 10:01 Page 2

The content (including references, names and acronyms) are correct at the time of publication, June 2009. Copyright CIPS ©


The Chartered Institute ofPurchasing & Supply qualificationsladder has six levels of awards. Fordetails of the entry requirementsfor each level, please refer towww.cips.org

The CIPS Certificate in purchasingand supply is a Level 3 vocationallyrelated qualification. It has beenaccredited by the Office of theQualifications and ExaminationsRegulator (Ofqual) and appears onthe National Database ofAccredited Qualifications (NDAQ). Please refer towww.accreditedqualifications.org.uk

The Level 3 Certificate inpurchasing and supply consists offive compulsory units. One of these,Purchasing in action, is anintegrative unit which is designedto draw together the knowledgeand understanding achieved in theother four units and to demonstratehow these units combine andintegrate in a working environment.The integrative unit should betaken after the compulsory unitshave been completed.

Assessment for each unit is byexamination, with the exception ofthe integrative unit when there is achoice for students in the UK. Ifyour study centre has beenapproved you can choose either aclosed book examination or a work-based assessment.

If you wish to study for this awardit is expected that you willundertake 30 guided learning hoursper unit, ie a total of 150 guidedhours. The definition of guidedlearning hours is:

“A measure of the amount of inputtime required to achieve thequalification. This includeslectures, tutorials and practicals, aswell as supervised study in, forexample, learning centres andworkshops.”

You will find that study centres varyon the exact format for delivery ofthe study programme. AdditionallyCIPS would recommend that youalso commit a similar number ofhours of self-study, including widerreading of the subject areas andrevision to give yourself the bestchance of successful completion ofthe award.

Below is a list of the units, theirNDAQ reference numbers and CIPSreference codes which are used toidentify the units for examinationpurposes.

Certificate in purchasing and supplyIntroduction

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LEVEL 3 – CERTIFICATE IN PURCHASING AND SUPPLY NDAQ QUALIFICATION NUMBER 100/6111/3

Understanding the purchasing environmentPurchasing operationsClient and supplier relationshipsSecuring supplyPurchasing in action - integrative unit

A/500/1702F/500/1703T/500/1701J/500/1704L/500/1705

CIPS ref code L3-01CIPS ref code L3-02CIPS ref code L3-03CIPS ref code L3-04CIPS ref code L3-05


AssessmentAssessment is the way in whichCIPS will measure whether or not astudent is able to demonstrate theirknowledge, understanding andability to apply their learning in anygiven situation.

An assessment could be anexamination, assignment orproject.

Business essentialsThese are commonly occurringthemes through the CIPSqualifications, that do not warranta unit in their own right, but thatare important holistically to thelearning undertaken within CIPSqualifications.

They are areas of importance,innovation and some emergingthemes, such as:

• Quality management• International issues• Business finance• Information management• External factors

Command wordsCommand words are generallyverbs that are used to indicate thelevel of learning undertaken. Theytend to be hierarchical in nature.

For example, at Level 3, acommand word will be‘demonstrate’ or ‘explain’, whereasa command word at Level 6 will be‘synthesise’, or ‘critically evaluate’.

These words reflect the level ofcomplexity of your learning andultimately your assessment at thatlevel.

Compulsory unitsThese are units that you must takethat constitute necessaryknowledge and understanding tofulfil learning requirements for CIPSqualifications.

Entry levelThis is the point at which you willenter the CIPS qualifications ladder.This entry will be based upon pre-requisite knowledge,understanding and experience.

ExemptionsStudents who have successfullycompleted certain post-schoolstudies may apply for exemptionsfrom equivalent courses in theirprogramme of study. To earn anexemption from either levels ofqualifications or option units withinqualifications you should contactCIPS or see www.cips.org

Please note that gaining anexemption, does not mean that yougain an exit award at that level,rather that you bypass that level oflearning because of equivalentlearning and achievement gainedelsewhere.

Exit awardAn exit award is in essence aqualification. CIPS has six exitawards in total.

• Introductory certificate inpurchasing and supply

• Certificate in purchasing andsupply

• Foundation diploma inpurchasing and supply

• Advanced diploma in purchasingand supply

• Graduate diploma in purchasingand supply

• Executive diploma in purchasingand supply

Certificate in purchasing and supplyGlossary of terms

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For each qualification you study,you will receive a certificate ofachievement confirming your exitaward.

Indicative contentThe knowledge required in order tofulfil the learning objectives andachieve the learning outcomes – inother words what you need toknow.

Integrative unitsIntegrative units are intended tohelp students see connectionsbetween all aspects of theirlearning within a particular level ofqualification. For the purpose ofCIPS qualifications, awards atlevels 3 and 6 will have anintegrative unit.

Learning objectivesDetermines the level of learningyou must undertake in order toachieve the learning outcomes.

LevelThe level determines thecomplexity of learning, the depth oflearning and the comparison oflearning with other qualifications.

CIPS has qualifications at levels 2to 7. The levels are as follows:

• Level 2Introductory Level – this is forsomebody new to thepurchasing and supplyprofession and often in a juniorcapacity

• Level 3Junior technical – alsopotentially new to learning

• Level 4Operational/juniormanager/new to the profession

• Level 5Manager/specialist role

• Level 6Senior managers/specialistprofessional

• Level 7Postgradute strategic leader

The levels are determined byOfqual, who are the Governmentregulator for education, and enablea clear understanding nationally ofthe level of a person’s learning andability in that field.

National QualificationsFrameworkThis framework is a governmentframework, where qualificationsthat are approved by Government,as being fit for purpose, andmeeting the quality criteria, arelisted.

Qualifications listed within thisframework are monitored against avariety of measures to ensurequality of qualification, associatedprocedures and delivery.

OfqualOfqual is the Government regulatorfor professional bodies such asCIPS, and act as the caretaker ofqualifications included in theNational Qualifications Framework.

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Optional unitsThese are units where you havechoice and opportunity tospecialise in an area of interest.There is an opportunity to selecttwo optional units at advanceddiploma and two optional units atgraduate diploma.

Qualifications ladderThis ladder represents thehierarchical nature of CIPSqualifications. The ladder has sixsteps within it. It starts with anIntroductory Certificate through tothe Graduate Diploma.

Each step of the ladder isrepresented by qualification withan ‘exit award’.

Statements of practiceA goal for attainment, whichindicates what you need to knowand be able to do to complete yourstudies in a particular subject area.

Each unit has six to seven learningoutcomes which outline what youwill achieve as a result of yourlearning in that particular unit.

StudentMember who is studying a CIPSqualification.

UnitA segment of learning within theCIPS qualifications, which has avalue in terms of hours of learning. Each unit is individual, has its owntitle, rationale and content. A unitwill also have an assessmentattached to it in order todemonstrate achievement andconclusion of the learning.

WeightingsWeightings are allocated to eachunit, to determine how the learningcan be sensibly split.

Each unit has a content weightingof 100%. Within each unit, eachsubject area is given a weightingeg 20% or 25%.

This weighting indicates the levelof input and learning required bythe deliverer and the learner inorder to complete the subject area.

However, the weightings do notnecessarily reflect the marks thatmay be allocated to a question inthat subject area of the unit.

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ABC Analysis • Stockcategorisation methodApplication of Pareto’s Law of the80/20 rule: ABC classifications aredetermined in ascending rank orderof all products according to theproduct classification as apercentage of the total purchasingspend. Ranking can also be byvolume, value, weight etc.

CSR • Corporate socialresponsibilityCSR means the commitment to asystematic consideration of theenvironmental, social and culturalaspects of an organisation’soperations. This includes the keyissues of sustainability, humanrights, labour and communityrelations, as well as supplier andcustomer relations beyond legalobligations; the objective being tocreate long-term business valueand contribute to improving thesocial conditions of people affectedby an organisation’s operations.

DBFO • Design, build, financeand operate A contract strategy generallydeployed in the public sector thatuses a single contractor to act asthe sole point of responsibility forthe management and delivery of aconstruction project on time and tobudget. This will be in accordancewith a pre-defined outputspecification using reasonable skilland care.

EDI • Electronic datainterchangeThe exchange ofdocuments/information betweencomputers using telephone lines.

EFT • Electronic funds transferFinancial or value transactionscarried out between parties bymeans of computer systems. It canalso refer to financial informationabout transactions being passed.

EFTPS • Electronic fundstransfer at point of salePayment at an electronic terminalthat enables the movement offunds electronically over computernetworks.

EOQ • Economic order quantityAlso known as the Wilson EOQModel or simply the EOQ Model. Itis a model that defines the optimalquantity to order that minimisestotal variable costs required toorder and hold inventory.

EPOS • Electronic point of saleA system that allows the flow ofinventory/products from warehouseto point of sale in an optimal time.

EU • European Union The European Union was created in1992 following the signing of theMaastricht Treaty. Its aim is tocreate an environment for the freemovement of goods, services,labour and capital across themember states. There is also anemphasis on the abolition of trustsand cartels and the development ofjoint and reciprocal policies onlabour, social welfare, agriculture,transport and international trade.

Incoterms • Internationalconsignment delivery termsThere are 13 Incoterms developedwhich are intended to makeinternational trade easier and helptraders in different countries tounderstand one another. Using theterm enables those reading them tounderstand who is responsible forrisk, transport and costs as well asother issues.

Certificate in purchasing and supplyAcronym guide

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JIT • Just in timeOriginally a concept imported fromJapan, based on the idea that onlysufficient quantities should bemanufactured or be made availableto satisfy customer’s immediateneeds. Relies on an efficient supplychain, for its success.

Kanban A Japanese term, which translatesliterally as “card.” It is the systemof record cards that accompanycomponents through the productionprocess. In other words, a signalthat triggers deliveries of specificquantities of supplies in a just-in-time system.

MRP • Material requirementplanning A product-oriented computerisedtechnique aimed at minimisinginventory and maintaining deliveryschedules.

PFI • Private finance initiativeAn agreement that promotespartnership between both privateand public sectors which enablesutilisation of a wide variety ofassets and services available in theprivate sector. The objective is toimprove the quality and quantity ofpublic sector capital products, andto also provide more efficientpublic services.

PPP • Public privatepartnershipA PPP refers to any alliancebetween public bodies, localauthorities or central governmentand private companies. PPPstypically involve the jointownership of a special purposevehicle established under companylaw.

RFID • Radio frequencyidentificationTechnology enabled efficiencieswithin the supply chain by trackinggoods and services from point ofmanufacture through to retail pointof sale (RPOS).

SLA • Service level agreementService Level Agreement is adocument which defines therelationship between two parties:the provider and the recipient. This is clearly an extremelyimportant item of documentationfor both parties. If used properly itshould: • Identify and define the

customer’s needs • Provide a framework for

understanding • Simplify complex issues • Reduce areas of conflict • Encourage dialogue in the event

of disputes • Eliminate unrealistic

expectations.

SMEs • Small and mediumsized enterprisesA small firm is an independentbusiness, managed by its owner orpart-owners and with less than 50employees. A medium sizedcompany must meet thresholds forannual turnover and have fewerthan 250 employees.

The third sectorVoluntary and communityorganisations such as charities andalso social enterprises (socialenterprises have social orenvironmental purposes as centralto what they do). They are profitmaking but rather than maximisingshareholder value their main aim isto generate profit to further theirsocial and environmental goals.Examples of social enterprises areThe Big Issue and the fair-tradechocolate company DivineChocolate.

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COMPULSORY UNIT

UNIT CHARACTERISTICSThis unit is designed to develop anunderstanding of the impact of theexternal national and internationalbusiness environment upon thepurchasing function in a range ofdifferent organisations and sectors.

Purchasing has a critical role toplay in ensuring that value formoney is achieved in both profitmaking and not-for-profit makingorganisations. In addition, tounderstanding the macro/microenvironment, purchasingprofessionals must have acommercial and financialawareness relating to ensuringbest value is achieved.

By the end of this unit studentsshould be able to recognise theimplications of the purchasingenvironment for a variety oforganisations, in a variety ofsectors, and have an awareness ofbusiness and commercial issuesassociated with achieving bestvalue in the purchasing function.

STATEMENTS OF PRACTICEOn completion of this unit, studentswill be able to:

• Explain how differentorganisations and sectorsinteract in the businessenvironment, both nationallyand internationally

• Describe the different types ofmarket structures in whichorganisations operate

• Outline the importance ofunderstanding and meetingstakeholder expectations in thepurchasing environment

• Explain how analysing theexternal environment can assistin making informed purchasingdecisions

• Demonstrate an understandingof the importance of analysingfinancial information relating tothe external environment.

Certificate in purchasing and supplyUnderstanding the purchasing environment

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LEARNING OBJECTIVES ANDINDICATIVE CONTENT

1. UNDERSTANDINGDIFFERENT PURCHASINGCONTEXTS(Weighting 40%)

1.1 Describe the different typesof organisational structuresand sectors involved inpurchasing goods andservices:• Public sector• Private sector• Small, medium enterprise• Third sector• Primary sector,

manufacturing sector, retailsector, service sector.

1.2 Explain the effects ofdifferent market conditionson the following: • Perfect competition• Imperfect competition:

monopolistic competition,monopolies

• Oligopolies.

1.3 Discuss how differentmarket forms affect thedegree of competition in amarket and how thisimpacts on how purchasingoperates in the market• Sole suppliers: monopolies• Large supplier base giving

competitive advantage• Restricted supply markets.

1.4 Identify the differentstakeholder groupsinvolved in the public andprivate sector purchasingfunctions, and explain theconcept of stakeholderco-operation:• Employees• Customers• Suppliers• Shareholders• Local government• Local businesses• Charities• Political parties• Pressure groups• Stakeholder co-operation.

2. UNDERSTANDING THELOCAL, NATIONAL ANDINTERNATIONALEXTERNAL FACTORSIMPACTING UPONPURCHASING(Weighting 40%)

2.1 Explain the impact ofpolitical factors affectingpurchasing locally,nationally andinternationally:• Political initiatives and

drivers: changes in publicand private sectors

• Private finance initiatives(PFI)

• Public private partnerships(PPP)

• Design, build, finance andoperate (DBFO)

• Government policy andfunding

• Political drivers• International politics and

policies• Trade sanctions• Political directives.

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2.2 Identify economic factorsaffecting purchasinglocally, nationally andinternationally:• Interest rates• Exchange rates• Investment programmes• The business cycle – boom

and bust• International economics.

2.3 Explain how social factorscan affect purchasinglocally, nationally andinternationally• Culture• Demographics• Local practices• Language• Behaviour• Communications• Ethics• Local working practices

and working hours.

2.4 Identify and explain howtechnological factors canaffect purchasing at locallevels, nationally andinternationally• Technology as a way of

opening up new markets• New communication

technologies• Government initiatives

with technology• Evolving nature and scope

of e-procurement• Different paces of

technological developmentnationally andinternationally, indeveloped and developingeconomies

• E-sourcing.

2.5 Identify environmentalfactors affectingpurchasing at local levels,nationally andinternationally andexplain their potentialimpact• Environmental policy• Pollution, removal of rain

forests, ie issues relatingto environmentally friendlypractices

• Reducing and disposing ofwaste in the purchasingfunction

• Legislation on emissions• Kyoto agreement and its

impact upon commercialoperations.

2.6 Explain and provideexamples of the mainsources of English law:• Statute law, • Common law • European law.

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3. UNDERSTANDINGFINANCIAL TOOLS FORANALYSING THEEXTERNAL PURCHASINGENVIRONMENT(Weighting 20%)

3.1 Identify the legalobligations relating tofinancial reporting ofpublic, private and not-for-profit organisations• UK legal requirements to

put accounts into thepublic domain.

3.2 Use a range of basic ratioanalysis tools forassessing financial dataon suppliers andcompetitors active in thepurchasing environmentincluding:• Gross profit ratio• Net profit ratio• Current ratio• Acid test ratio.

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COMPULSORY UNIT

UNIT CHARACTERISTICSThis unit is designed to introducestudents to a variety of purchasingactivities. Students should beaware of the operational objectivesof purchasing and the need tobalance considerations of cost,lead-time and quality.

Included in the basic principles ofpurchasing is the need tounderstand the variety of keyactivities that purchasers areinvolved in including projectadministration activities,contributing to the development ofspecifications, contract formationand the process of sourcingsuppliers.

By the end of this unit, studentsshould be able to understand thekey operational processes andprinciples involved in thespecifying, sourcing andcontracting of suppliers.


• Identify the different types ofoperational objectives relevantto the purchasing function in avariety of different sectors

• Explain the importance of thegood practice relating to settingobjectives within purchasing

• Describe how to preparesupplier specifications

• Explain policy and informationrequirements of the organisationwhen preparing specifications

• Outline the stages of identifyingand sourcing suppliers

• Describe the differentapproaches for verifying supplierinformation

• Identify the essential elementsof a legally binding agreement.

Certificate in purchasing and supplyPurchasing operations

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1.0 IDENTIFYINGOPERATIONAL NEEDS OFTHE PURCHASINGFUNCTION(Weighting 25%)

1.1 Identify the differencesbetween operationalobjectives in thepurchasing function of avariety of organisationcontexts: • Manufacturing• Services• Retailing• Assembly• Factoring and wholesaling• Public sector• Third sector.

1.2 Define good practice inpurchasing in all sectorsin terms of obtaining the‘right quality’• Definitions of quality• The costs of getting quality

wrong• Specifications and quality• Approaches to managing

supplier quality• The concept of zero

defects.

1.3 Define good practice inpurchasing in all sectorsin terms of obtaining the‘right quantity’ • Understanding economic

order quantities (EOQ) • Calculating demand• Concept of buffer stocks• Concept of insurance

stocks• Concept of dependant

demand.

1.4 Define good practice inpurchasing in all sectorsin terms of ‘right place’ • Selecting transport types • Ensuring availability of

appropriate documentation• Incoterms • Types of transport

packaging .

1.5 Define good practice inpurchasing in all sectorsin terms of ‘right time’ • Internal, external and total

lead-time• Expediting and measuring

delivery performance• Demand factors• The need for buffer stocks• Minimum stock levels• Supplier’s production times• Logistics operator’s

operational systems.

1.6 Explain good practice inpurchasing in all sectorsin terms of obtaining the'right price’ • Price elasticity• Pricing strategies:

skimming, penetration,psychological

• The concept of costbuilding

• The concept of break-evenanalysis

• The elements of price:materials, labour,overheads, marketing,logistics and profit

• Understanding a supplier’scost base and profitmargins

• Examining what themarket will bear

• Maintaining profit margins• Link between cost and

price .

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2.0 CONTRIBUTINGTOWARDS THEDEVELOPMENT OFSPECIFICATIONS(Weighting 25%)

2.1 Explain the meaning ofspecifications andtolerances:• The definition of a

specification• Why it is regarded as the

heart of the contract• What are the implications

of zero defects• The need for the buyer to

drive the specification• The legal aspects of letting

the supplier drive thespecification.

2.2 Explain the importanceand purpose of developingspecifications forpurchasing products andservices• Expressing the control of

the buyer • Providing scope and

definition• Avoiding misinterpretation• Methodology in delivering

a product or a service.

2.4 Describe how buyers andsuppliers can contributetowards effectivespecification development• Liaison with users• Understanding the user’s

needs• Understanding the legal

implications• Minimising the tolerances• Early supplier involvement

(ESI).

2.5 Explain informationrequirements fordeveloping effectivespecifications• Technical requirements:

project specifications,material specifications

• Timelines: schedules• Delivery requirements for

supply: times required• Availability of commercial

products or services• Features of effective

specifications• Use of international

standards.

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2.3 Identify the different types of specification and explain thedifferent contexts in which they are used:

Methods: Used in sectors:• Blueprint/design • Engineering, projects,

construction• Brand name • Small businesses,

consumers• Sample • Textiles, commodities• Market grade • Commodity trades• Standards • Engineering, manufacturing• Performance/functional • Manufacturing, electronics

and most sectors• Chemical/physical properties • Chemical engineering,

engineering, construction.


2.6 Identify areas withinspecifications wherelegislation and companypolicy might impact uponthe development ofpurchasing specifications• Corporate social

responsibility (CSR), ethics,conflict of interest

• Quality kite marks,processes, procedures

• Minimum standards ofpractice and performance.

3.0 AN INTRODUCTION TOSOURCING SUPPLIERS(Weighting 25%)

3.1 Identify the differentstages of sourcingsuppliers:• Identifying the needs• Establishing the

specification• Surveying the market• Sourcing the market• Appraising (audit) suppliers• Inviting quotations

(tenders)• Analysing quotations and

select the most promisingsupplier

• Negotiating the best valuefor money

• Awarding the contract• Monitoring, reviewing and

maintaining performance.

3.2 Identify informationsources to locate potentialsources of supply: • Internet• Networking• Trade fairs and exhibitions• Visits from company

representatives• Advertisements• Sales literature• Trade directories.

3.3 Explain thepre-qualification criteriafor new suppliers:• Financial status• Capacity of the company to

produce• Technical capability • Environmental

Management andISO14001

• Adherence to systems andprocedures, ISO9001

• Corporate socialresponsibility (CSR)

• Conformance to legislation• The supplier’s supply chain• The supplier’s customer

base• The culture of the company• The identified costs of the

proposed purchase.

3.4 Explain the different waysof verifying the informationprovided by suppliersincluding:• References• Financial assessments• Ability to manage high

volumes• Delivery and quality

records.

4.0 AN INTRODUCTION TOCONTRACTS FORPURCHASING(Weighting 25%)

4.1 Provide an overview of thelegal system and thesources of law as theyrelate to purchasingoperations:• The basis of the legal

system in the UK and inEurope

• The difference betweenstatutes and case law

• The role of parliament andthe judiciary

• EU directives andprocurement.

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4.2 Outline the keycomponents of theformation of contract:• Offer• Acceptance• Consideration• Intention to be legally

bound• Capacity.

4.3 Explain the concept ofcontract terms andconditions • Defining terms and

conditions• Force majeure• Liquidated damages• Express and implied terms• Understanding the need for

terms• Examining basic terms:

termination, payment,ownership, risk, sub-contracting

• Use of standard/modelforms of contracts.

4.4 Identify the key aspects ofUK legislation relating topurchasing operations andexplain the keyimplications• Sale of Goods Act -

implied terms• Caveat emptor• Supply of Goods and

Services Act - impliedterms

• Unfair Contract Terms Act -exemption clauses

• Contract, Rights of Thirdparties Act 1999 – conceptof privity.

4.5 Describe differentapproaches to resolvingcontractual disputes• Negotiation• Arbitration• Adjudication• Through a court of law.

4.6 Identify and explain thelegal remedies availablefor a breach of contract• Rescind• Repudiate• Specific performance• Damages through a court

of law.

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COMPULSORY UNIT

UNIT CHARACTERISTICSThis unit is designed to enablethose working in purchasing tounderstand the nature and scope ofoperational supplier andstakeholder relationships in orderto optimise the performance of keysuppliers.

The need to add value throughrelationships is central to thesuccess of any commercialrelationship and developing astrong customer focus is central toachieving organisational goals.

Students will be able to act asinternal consultants representingthe purchasing function inoperational relationships.

There is a variety of skills involvedin developing a strongcustomer/supplier interface,including basic communication andinformation seeking.

Students will be able to contributetowards the improvement ofpurchasing efficiency and ensurethat operational relationships areboth maintained and improvedwithin the supply chain.

STATEMENTS OF PRACTICEOn completion of this unit studentsshould be able to:

• Explain how to maintaineffective commercialoperational relationships withinthe supply chain

• Explain how to distinguishbetween internal and externalcustomers

• Explain to provide excellentcustomer service and highstandards of communication toboth internal and externalcustomers

• Outline the need for effectiveand efficient purchasingprocesses

• Identify the informationrequirements of those involvedin operational relationships

• Explain how to improveoperational supply relationships.

Certificate in purchasing and supplyClient and supplier relationships

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1.0 UNDERSTANDING THENATURE AND SCOPE OFOPERATIONALRELATIONSHIPS(Weighting 30%)

1.1 Explain the role ofpurchasing as a serviceprovider function• Distinguishing between

suppliers and customers• Stakeholder management• Customer relationship

management• Relationships in the supply

chain• Key components of a

relationship.

1.2 Describe the importanceof multi-tasking and cross-functional activities withinthe purchasing process• Cross-functional

relationships within theorganisation

• The part cross-functionalactivity plays in anorganisation

• Cross-functionalrelationships in thesupply chain

• Implications of workingacross a diverse customerbase

• The role of the purchasingprofessional as an internalconsultant.

1.3 Describe the contributioneffective teams can maketo the management ofoperational relationshipsin the purchasing function• Importance of team

working in the purchasingenvironment

• Different stages of teamformation

• Barriers to effective teamworking

• Roles within teams• Profiling teams• Idea generation• Joint responsibility• Continuity.

1.4 Identify the informationrequirements of allstakeholders in the supplychain and explain howthis informationcontributes to effectivemanagement ofoperational relationships• Internal consultancy as a

means of understandingrequirements

• Data gathering tools andtechniques

• Types of informationrequired across the supplychain

• Quantitative versusqualitative data.

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2.0 UNDERSTANDING THEIMPORTANCE OFOPERATIONALRELATIONSHIPSBETWEEN THE THEPURCHASING FUNCTIONAND OTHERSTAKEHOLDERS.(Weighting 40%)

2.1 Explain the benefits ofmaintaining goodoperational relationshipswithin the purchasingfunction: strongrelationships, improvedbusiness efficiency andgreater effectiveness• Benefits of excellent

relationship management• Potential costs to the

organisation of poorrelationship management

• Managing long-termrelationships

• Pros and cons of long-termrelationships.

2.2 Describe the differencebetween good and badcustomer service• Defining customer service• The characteristics of good

customer service• The characteristics of

internal customerrelationships

• The characteristics ofexternal customerrelationships

• Operational requirementsof good customer service

• The value to theorganisation of goodcustomer service

• Understanding thecustomer’s perspective.

2.3 Explain the importance ofdetermining andmaintaining service levelagreements both internallyand externally within thepurchasing function, andhow service levels aidefficiency and consistency• Service level agreements

and their relevance in thepurchasing function

• Objectives of service levelagreements

• How to construct a servicelevel agreement

• Problems with maintainingand monitoring servicelevel agreements.

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2.4 Outline each stage of thecommunications cycleand its relevance inenhancing effectivecommunication• The communication

process: the key steps• Barriers to effective

communication• Overcoming barriers to

communication• Importance of managing

communication.

2.5 Explain how tocommunicate effectivelywithin the supply chainthrough use of thefollowing communicationtools:• Writing emails• Writing letters• Writing memoranda• Writing reports• Preparing documentation• Verbal and non-verbal

communication.

2.6 Explain how effectivecommunicationprogrammes ensure thatstakeholders within therelationships areconsulted on issues ofimportance:• Definition of a

communicationprogramme

• Why communicationprogrammes fail

• Stakeholdercommunication techniques

• Focus groups• Consultation forums• Briefings and seminars.

2.7 Explain how newtechnologies can impacton communication andrelationships in the supplychain:• Supplier and customer

networks• Electronic data interchange

(EDI)• Internet • Intranet• Short message service

(SMS) and Multi-mediaservice (MMS)

• Virtual conferencing.

2.8 Explain how to negotiateeffectively in order toachieve supplier co-operation on day-to-dayoperational issues:• Building rapport• Tactical negotiation in the

context of an existingrelationship

• Supplier management• Role of an account

manager• Understanding the

supplier’s perspective.

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3.0 MAINTAINING ANDIMPROVINGOPERATIONALRELATIONSHIPS(Weighting 30%)

3.1 Identify and describe arange of tools formonitoring operationalrelationship success• Supply chain management

versus suppliermanagement

• Gaining executivesponsorship

• Benefits of managingoperational relationships

• The different stages oftrust in the buyer/supplierrelationship

• Key performance indicators• Key components of

relationship mapping.

3.2 Explain how purchasingplans are used as a meansof communication withinthe purchasing function• The importance of

purchasing plans• Purchasing plans as a

means of communication• Feedback mechanisms• Barriers to successful

monitoring.

3.3 Identify ways ofdeveloping opportunitieswithin the operationalrelationship including:• Stages of relationship

development• Problems in relationship

development• Broadening supply• Improving supplier

commitment and co-operation

• Supplier developmentprogrammes

• Risks of failing to developopportunities.

3.4 Describe techniques toimproving operationalrelationships• Improving communication• Profiling suppliers• Profiling customers• Improving delivery and

adherence to servicestandards

• Carrying out supplierperformance appraisal

• Developing supplierloyalty.

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COMPULSORY UNIT

UNIT CHARACTERISTICSThis unit is designed to enablethose who work in purchasing togain a broad understanding of thekey requirements of controlling thesupply of goods. Additionally,inherent within securing supply isthe importance of stores andwarehouse management, alongwith materials handling.

Students should be able tocontribute towards the assessmentof stock requirements, and assist inthe scheduling of the flow ofsupplies.

By the end of this unit studentsshould be able to understand theimplications of effective schedulingof stock, and the importance ofinventory control as a method ofimproving efficiency while, at thesame time, driving down costsassociated with holding stock.


• Explain the implications ofholding stock

• Describe the different methodsused to value stock

• Demonstrate an understandingof a variety of inventory controlmethods

• Define the terms ‘safety stock’and ‘service levels’, anddescribe their effect on orderquantities

• Explain how the scheduling ofthe flow of supplies meets therequirements of an organisation

• Explain how to contribute toproviding information on theprinciples of stores andwarehouse layout, includingdesign and layout

• Explain the advantages anddisadvantages of different typesof materials handling equipment

• Calculate stock demand.

Certificate in purchasing and supplySecuring supply

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1.0 UNDERSTANDING THEIMPLICATIONS OFHOLDING STOCK(Weighting 30%)

1.1 Explain why organisationsneed to secure supply• The reasons for holding

stock• Risks associated with

stocking out• The costs of stocking out• The different categories of

stock, eg vulnerable supply• Stockholding policies.

1.2 Identify and explain theproblems associated withholding stock• Potential for damage and

deterioration• Loss of value• Theft• Fraud• Use of space• Working capital and cash-

flow.

1.3 Explain the valuation ofstock• The reasons for stock

valuation• The methods of stock

valuation• Average cost• Standard cost• Replacement cost.

1.4 Identify the range ofpayment techniques forstock and explain theissues associated with thepassage of title withmaterial flows• Payment methods

• payments in advance• open account• stage or partial payment

• Transfer of property andtransfer of possession

• The passing of risk• Delivery and acceptance• Bailment.

2.0 USING STOCK CONTROLMETHODS EFFECTIVELY(Weighting 20%)

2.1 Calculate the demand forstock • Stock categorisation

methods (ABC analysis)• Techniques for managing

bottleneck items• Forecasting techniques

• Moving weightedaverage

• Moving straight average• Delphi technique

• Coping with seasonaldemand

• Factors influencingforecasts.

2.2 Identify techniques formonitoring and controllinginventory• Stock control techniques• Kanban• Vendor-managed inventory• Consignment stocking.

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2.3 Explain what is involvedin fixed order point,periodic review systemsand economic orderquantities (EOQ)• Demand, usage and lead

times• Fixed order point• Periodic review• Costs of acquisition• How much to order, and

the economic orderquantity (EOQ).

3.0 INVENTORYMANAGEMENT FACTORS(Weighting 25%)

3.1 Explain the concept ofstandardisation andvariety reduction in stocksupplied• Why stock proliferation

occurs• The advantages of

standardisation• Approaches to variety

reduction• The management of slow-

moving and redundantstock.

3.2 Explain the differencesbetween dependent andindependent demand inmanaging stock• Definitions of dependent

and independent demand• Terminology: bills of

materials, masterproduction schedules

• Inventory control systemsfor dependent andindependent demand

• Materials requirementplanning (MRP).

3.3 Define and explain safetystock and service levels• Definitions of safety stock• Definitions of service

levels• The relationship between

safety stock, service levelsand order quantities.

3.4 Explain the concept ofclassification and coding• Different coding systems

available• The benefits of coding

systems• The characteristics of a

good coding system• Types of coding systems.

3.5 Explain how suitable datasystems are used tocollate and prepare datafor analysis on securingsupply• Stock recording methods• Stocktaking (periodic and

continuous)• Use of information

technology (IT) systems inmanaging stock

• Current developments in IT.

4.0 PHYSICAL STOCKMANAGEMENT(Weighting 25%)

4.1 Explain the internalrequirements to considerin selecting a warehouselocation• Location of a warehouse• Transport networks• Accessibility• Functionality• Size and flexibility of

premises• Costs• Whether to lease or own

premises• Purpose-built site or adapt

existing premises• Proximity to operational

premises and customersites.

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4.2 Identify the range ofexternal factors toconsider when selecting awarehouse location• Understanding of local

factors including:availability and cost oflabour force, localinfrastructure

• Political influences: grantsand regional aid, businesstaxes, environmentalfactors (potential negativeimpact caused by noiseand congestion) and powerof local lobby groups.

4.3 Outline the factors whichshould be taken intoaccount when designingeffective stores andwarehouses• Principles of warehouse

design• Identification of potential

problems that inhibit storeand warehouse design

• Factors influencingwarehouse layout

• Different layout techniques• The use of IT systems and

simulation in warehousedesign.

4.4 Explain the generalprinciples of store andwarehouse layout and thefollowing storageprinciples:• Flow• Space• Utilisation• Flexibility.

4.5 Explain the principlesunderpinning efficientmaterials handling:• The range of materials

handling solutionsavailable

• The advantages anddisadvantages of variousmaterials handlingsolutions

• Live storage• Palletisation and unit loads• The principles of packing

and packaging.

4.6 Outline the different stocktransaction recording andstocktaking methods• Paper-based• Electronic documentation• Databases.

4.7 Identify and explainmethods of automatedstock-handling andpayment systems• Barcoding• Radio frequency

identification (RFID)• Electronic point-of-sale

(EPOS)• Electronic funds transfer at

point-of-sale (EFTPS)• Warehouse management

systems.

4.8 Explain relative merits ofstockless purchasing andjust in time (JIT) inventorymanagement• Introduction to the

principle of improvingproductivity andeliminating waste throughJIT systems

• The development of JIT• Advantages and

disadvantages of JIT• The impact of JIT on

purchasing operations.

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INTEGRATIVE UNIT

UNIT CHARACTERISTICSThis unit is designed to consolidatethe learning from all four modulesin the Certificate in purchasing andsupply and is an assessmentvehicle. You will be assessed onthe learning objectives.

A selection of some of the coreareas from each module will berevisited in order to testunderstanding, with the emphasison providing a route map whichshows how all the subjects arelinked together within thepurchasing function.

All of the core areas will bereviewed in the context of the end-to-end purchasing process whichbrings together elements from anumber of different modules ateach stage.

The core areas being reviewed are:

Purchasing operations: how thefunction can make a difference bybeing involved at an early stage,from identification of need throughto contract negotiation.

Client and supplier relationships:looking at the differentrelationships that exist in thesupply chain and how purchasingcan improve operational efficiencythrough effective managementpractices.

Understanding the purchasingenvironment: helping studentsappreciate the importance ofinternal and external analysis andhow this can help when workingwith clients and suppliers at eachstage of the purchasing process.

Securing supply: looking at thevarious methods available forsecuring supply, and how supplierrelationship management caninfluence inventory control.


• Demonstrate knowledge of thekey principles governing eachunit within the Level 3qualification and indicate howthey link together

• Describe the end-to-endpurchasing process and the keycomponents within it

• Discuss the importance thatrelationships play withinpurchasing

• Outline the importance ofpurchasing consultancy and howthis can be carried out withinthe organisation

• Explain how analysing theinternal and externalenvironment can assist inmaking informed purchasingdecisions

• Discuss the relevance ofcontracts within the purchasingfunction

• Demonstrate an understandingof the part storage of suppliesplays in the end-to-endpurchasing process

• Explain how ongoing suppliermanagement can improveoverall purchasing efficiency.

Certificate in purchasing and supplyPurchasing in action

26



1.0 UNDERSTANDING THEKEY COMPONENTS OFTHE END-TO-ENDPURCHASING PROCESS:THE PURCHASING CYCLE(Weighting 30%)

1.1 Explain the role ofpurchasing withinorganisations and how todistinguish betweenfunctional and operationalobjectives• Overview of the purchasing

cycle: the end-to-endprocess

• Different types ofoperational objectives thatexist in purchasing

• The differences betweenfunctional and operationalobjectives

• How to work across thefunction within the contextof the cycle

• How the function worksoutside the organisationand within the supplychain.

1.2 Discuss the importance ofearly purchasinginvolvement and ways ofworking in terms ofstakeholder maps, projectteams and communicationprogrammes• Working with internal and

external stakeholders todevelop specifications

• Identifying internal andexternal stakeholders

• Working as part of a team• Communicating the

process.

1.3 Explain how to sourcesuppliers and the processused to ensure maximumcompetition• Information gathering• Tools and techniques to aid

the process• Analysis of the external

market• Conditioning the supply

market using request forquotations

• Communicating theprocess.

1.4 Identify the importantareas of communicationrequired to ensure aneffective purchasingprocess• The need for close

communication with otherkey internal functions

• The need for closecommunication with all keysuppliers.

2.0 WORKING WITHSTAKEHOLDERSTOWARDS SUPPLIERSELECTION ANDIMPLEMENTATION(Weighting 40%)

2.1 Describe how purchasingwould work with internalcustomers to ensuresuccess in relation toselecting the right supplier• The stakeholder’s

perspective• Purchasing’s perspective• Selection methods• Information requirements

when analysing suppliers• Communicating the

process.

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2.2 Explain how the level ofcompetitiveness withinthe market can effect theoverall deal negotiated• Different market conditions• Supplier development• Tactical negotiation versus

strategic negotiation.

2.3 Explain how contracts canaid negotiation andidentify the differentstages of contractformation• Types of legislation in

existence that could effecta commercial contract

• Steps involved in forming alegally binding contract

• Working with internalstakeholders to ensurecontract closure

• Working with suppliers toensure contract closure

• Monitoring the contract.

3.0 WORKING WITHSUPPLIERS TO ENSUREIMPLEMENTATION ANDSECURING SUPPLY FORTHE LONG TERM(Weighting 30%)

3.1 Explain the need forservice level agreements(SLAs) once contractshave been agreed andhow to involve the keystakeholders in relation toimplementation of theSLAs• Working with a supplier in

order to create a servicelevel agreement (SLA)

• The importance of buildinga relationship with thesupplier

• How to involve internalstakeholders

• Communicating theprocess.

3.2 Explain the importance ofsupplier development andhow to create the rightenvironment with bothinternal and externalstakeholders in order tomake this happen• Supplier relationship

management• Tools and techniques• How to involve and work

with internal and externalstakeholders inrelationship building

• Communicationprogramme.

3.3 Provide an overview ofhow to work withsuppliers to ensureadequate stock levels,stock utilisation, stockturn and ultimatelyinventory efficiencies• Inventory, stockless

purchasing and JIT• Information requirements

and how to obtain them• Monitoring the situation

and keeping allstakeholders informed

• Completing the end-to-endprocess.

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Easton House, Easton on the Hill, Stamford, Lincolnshire PE9 3NZ, UKTel: +44 (0)1780 756777 • Fax: +44 (0)1780 751610

Email: [email protected] • Web: www.cips.org

ED19/PP/V4/02/06/09


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