L3M2 Ethical Procurement and Supply Questions and Answers

Explanation

Value engineering, like value analysis, but at the design stage, seeks to create at least as great an output, but with fewer components / inputs.

Explanation

Reverse e-auction.

This term is used in your syllabus.

Explanation

Whilst alerting senior managers to wrongdoing within the organisation may be whistling in the wind, requiring one to wet one's whistle afterwards, the term for this increasingly common practice in organisations is 'whistleblowing'.

Explanation

The Economic Order Quantity is a formula which attempts to calculate the most efficient quantity to order at any given time, by attempting to reconcile the cost of stockholding and the cost of plac-ing an order. This could then have implications for the timing of an order being placed.

The cost of holding stock can be reasonably accurately calculated and agreed with one's peers. However, determining the cost of placing an order can keep colleagues up late into the night, and can be a great topic to liven up a sleepy procurement / finance function.

Explanation

Functionality.

The idea of value analysis or value engineering is that cost should be taken out of the product, whilst enabling the same performance.

Explanation

The answer is 'six'.

Six Sigma is a statistical approach to quality management.

Explanation

This actually happened and the banking authorities in both the UK and the US fined the bank heavily.

Closing the bank down would be too Draconian a step; imprisoning the Chief Executive could hap-pen and others in the banking sector have been imprisoned for wrongdoing - a famous case of 'The NatWest Three' saw three managers of a UK bank extradited and imprisoned in the US.

Explanation

The correct answer is 'tolerances'. The tighter the tolerance ie the more restrictive the specification, the more challenging for a supplier to deliver, and the more costly it is likely to become.

Explanation

How powerful are stakeholders?

How much interest do they have?

Using these measures to help manage stakeholders effectively.

Explanation

Output per unit of input resource.

Efficiency is, in a sense, seeking to get as much out of a system, while putting in as little as possible.

Explanation

It's the 'materials usage budget'.

This budget would help monitor whether the usage of materials was in line with forecast (budget), or whether there was a variance.

Explanation

The price / cost iceberg.

The notion that when you buy something for a price, only part of the total cost has been exposed. a potentially very significant chunk of cost remains unseen, 'below the waterline'.

Explanation

Lifetime costing, TCO and whole life costing are essentially the same concept - looking at buying based on total costs over the useful life of an asset, not just the purchase price. Although this con-cept seems obvious once you know it, very many people, including senior managers as well as politi-cians, seem to be unfamiliar with the notion.

Explanation

It's a cycle.

This is relevant to the measurement of cycle times, as featured in your syllabus.

Explanation

Once a supplier is contracted, monitoring performance is vendor rating.

Prior to a supplier being contracted, attempting to understand what their performance would be like is called 'supplier appraisal'.

Explanation

This is a definition of embezzlement.

The other terms shown as possible answers are also part of the syllabus for this subject.

Explanation

Key Performance Indicators should be specific, measurable, achievable, realistic and time-bound; or words very similar to those, meaning broadly the same.

Explanation

Suboptimal

Less than optimum.

Explanation

The product has a defect; it might be rejected, then it would be a reject.

The effect of this might be that it would affect profitability.

Explanation

Anytime, up to bid receipt closing date, would be acceptable normal practice.

Late bids should never be accepted.

Explanation

This is the notion that the way people behave (and are treated) inside the organisation is likely to reflect the way they behave to others outside the organisation.

Explanation

This is a reference to cost reduction - something which procurement is often tasked with as an activ-ity.

Thisquestionis pretty straightforward - we wouldn't normally seek cash, profit or value reductions. However, there is something a little bit counter-intuitive: adding or creating something by making a reduction... Perhaps 'less is more'.

Explanation

The variance is adverse - more was spent than budgeted - this is not favourable.