TACTICS & OPERATIONS
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CONTENTS
§ Upgrade Updated March 2006
§ Answer finder Updated March 2006
§ Use the news Updated March 2006
§ Mark maximisers Updated March 2006
UPGRADE
At Profex, we’re committed to updating our Study Texts annually, so our material is (we hope) getting better and better – as well being always up-to-date. More or less.
We hate it when we send a new edition to print and a month later, something happens to make it look about as current as Betamax video… This is our chance to put those things right – and give you a free Text Upgrade!
Amendments and errata are where we put right our occasional bloopers.
Updates are for examinable events that came to our attention after we’d gone to press.
Additions are topics that came up in the latest exam but weren’t (yet) covered in the Study Text – and won’t hold on until the next edition!
Integrated learning is where we give handy ‘checklists’ for topics (usually in the ‘How to…’ style) which draw on material across the syllabus.
Please contact us if you spot any errors, or facts that are past their use-by date, in your Profex Study Text. We’ll gratefully ‘patch’ the problem here – and incorporate the amendments in the next editions of the Texts.
AMENDMENTS & ERRATA
None identified at this time.
UPDATES
Chapter 5, section 4: EU Procurement Directives
The Public Contracts Regulations 2006 came into effect in the UK on 31 January, 2006. They bring together the three existing directives for public works, suppliers and services contracts.
The regulations provide (among other matters) for:
§ Competitive dialogue in the award of complex contracts. Following pre-qualification, the purchasing authority discusses the form of contract and the technical specifications of the project with potential bidders (generally at least three), before the key tender documents are issued. Once the authority has identified the solution(s) that meet its needs, bidders submit tenders based on the solution(s).
§ The use of framework agreements: agreements with suppliers, the purpose of which is to establish the terms governing contracts to be awarded during a given period (limited to four years) in particular with regard to price and quantity).
§ Dynamic purchasing systems. A ‘DPS’ is a completely electronic purchasing system, set up for a limited duration, for the awarding of purchase contracts for commonly used goods, works or services. The DPS must be open throughout its duration to any supplier who satisfies specified selection criteria and submits an ‘indicative tender’ (terms under which the supplier would be prepared to enter into a contract with the purchasing authority) which satisfies the criteria. This is an entirely voluntary provision.
§ Electronic auctions. All communication following and including the invitation to pre-qualified bidders to submit new prices and/or values must be instantaneous (electronic). Only price and quality elements which can be expressed as a value suitable for incorporation within a formula can be included at the auction stage: other quality aspects must be addressed prior to the auction stage. Detailed rules are given to ensure the fairness of the auction.
§ The ‘Alcatel period’. The regulations give effect to the European Court of Justice judgement in the Alcatel case, which decided that an unsuccessful tenderer should have a real chance at being awarded a contract if there have been procedural irregularities. The regulations provide for a 10 day ‘stand still’ period between contract award and execution, in order to allow for a legal challenge. The contracting authority must notify unsuccessful tenderers promptly, and provide a ‘debrief’ if requested. Should a challenge emerge, the contract will be suspended for court proceedings.
Link: http://www.ogc.gov.uk – and do a site search on the terms you’re interested in.
ADDITIONS
None identified at this time.
INTEGRATED LEARNING
HOW TO… IMPROVE PURCHASING PERFORMANCE
q Standardisation (variety reduction) of specifications and items purchased, to reduce small orders and standardise process and delivery for economies of scale
q Reduction of acquisition costs, through: e-procurement; collaborative purchasing or aggregation of spend; or centralisation of procurement of high-value items, to take advantage of economies of scale
q Approved suppliers, price indicators and/or centralised blanket orders, to reduce ‘maverick’ spend – while allowing local units to purchase low-value items locally
q Reduction of stock holding costs, through improved planning, forecasting and inventory management
q Reduced vulnerability through: systematic supplier evaluation and selection; development of longer-term supplier relationships; rationalised supplier base; switch of emphasis from price to quality
q Use of multi-functional teams and Early Supplier Involvement to improve product development and specification
q The application of IT systems to purchasing: e-procurement, e-auctions, EPOS/barcoding/RFID for inventory control and so on
q Improved ethical and environmental compliance through ethical performance measures and monitoring, staff training and awareness
q Improved integration of the purchasing function within the organisation: liaison with other functions for demand forecasting, specification, finance support; making the business case for purchasing’s ability to add value
HOW TO… IMPROVE THE CONSISTENCY OF OUTPUTS
q Standardisation (variety reduction) of specifications for outputs and inputs
q Standardisation of equipment (where relevant) and processes
q Careful supplier selection, vendor audits, approved suppliers and/or blanket orders and post-contract management
q Standard operating procedures to define and manage service quality
q Staff training and development to standardise delivery
HOW TO… MAINTAIN SUPPLIER PERFORMANCE
q Use of contract terms and conditions (eg service level agreements, liquidated damages or penalty clauses for performance failure)
q Vendor rating
q Periodic supplier/plant visits
q Quality control and/or quality assurance of incoming supplies
ANSWER FINDER
Here we analyse the latest exams: what topics were set, where the key pitfalls and easy marks were, what the examiner said – and where you can find material for an answer, in your Profex Study Text.
The full text of past exams, marking schemes and Chief Examiners’ reports can be accessed by members at: http://www.cips.org
The 2005/6 edition of your Profex Study Text contains analysis of exams up to November 2004 – and the May 2003 paper as a Mock Exam, with full suggested solutions by Profex.
EXAM: MAY 2005
Rubric
The format of the exam was unchanged (as set out on pages xi and 303 of your Study Text).
Question topics
The right-hand columns refer to the 2005/6 edition of the Study Text.
Section A: Compulsory question based on a case study about the amalgamation of police forces, with potential for centralised purchasing.
Marks / Chapter / Paragraph1(a) / 20 / Improving purchasing performance*
1(b) / 15 / Contracts for outsourced services / 6 / 6.6ff
1(c) / 15 / Challenges and methods of complex capital acquisition from overseas / 9
5
11 / 1.4ff,
2.14ff, 3.1ff
4.1ff
Section 5
Note that it was vital to apply the principles plausibly to the details given in the case study.
* This is a cross-syllabus question, requiring you to identify improvements arising from the centralisation of the purchasing function and the establishment of effective tactical/operational practices. We have summarised some of the general improvements that may be possible, in an ‘Integrated learning’ checklist: see the Upgrade pages above.
Section B: 25 mark essay questions (2 out of 5)
2 / Use of e-Auctions / 5 / 3.30ff
3 / Why process variation is undesirable
Methods to eliminate variability / 3
3
4 / 2.10, 3.2ff
2.1, 2.5
3.2, 3.8, 5.5ff
4 / Styles of negotiation
Tools of analysis to assist in negotiation / 14
14 / 4.6, 4.12, 4.13
Section 3
5 / Suppliers seen as a resource, and how this affects supplier selection / 5 / Table 5.1, 2.31 – 2.33
6 / Role of database integration in balancing supply and demand / 8
13 / 2.8ff, 3.1
2.12ff, 2.35ff
Table 13.1
Note that it was vital to expand on the principles to provide a substantial, essay-form answer.
Pitfalls
Ø Exam verbs. ‘Evaluate’ and ‘explain’ are often used by this examiner. They are high-level exam verbs: not the same as ‘describe’ or ‘explain’. (See our FAQs page.)
Ø Case study relevance. Answers to Q1 must be applied to the context of the case study – in this case the centralisation of a purchasing function (1(a)) and an overseas/EU capital acquisition (1(c)). Candidates who failed to spot or address these specific issues – and trotted out ‘sweeping’ (irrelevant) recommendations of MRP and JIT – did not gain marks... A particular pitfall was failing to spot that the capital acquisition came under EU procurement directives…
Ø Reading the question. Q4, for example, asked about styles of negotiation: not ‘tactics’ or ‘processes’… It also asked for an evaluation of each style in different negotiation scenarios: look out for multiple question requirements!
Easy marks
Ø Focus on mainstream syllabus topics: quality control, negotiation, supplier relationships)
Ø Highlighting topics (outsourcing, e-auctions and integrated IT purchasing systems) which have been the subject of recent feature articles in Supply Management.
What the examiner said
‘Candidates who planned their response before starting it often gained higher marks because their answers were well structured, addressed the entire question and were focussed on the question.’
‘Use of examples was very effective in some of the responses to section B questions and it is in this way that candidates can demonstrate the extent of their knowledge and understanding.’
EXAM: NOVEMBER 2005
Rubric
Unchanged.
Question topics
The right-hand columns refer to the 2005/6 edition of the Study Text.
Section A: Compulsory question based on a case study about a rapidly-growing restaurant chain (multiple business units).
Marks / Chapter / Paragraph1(a) / 20 / Suggestions for improving purchasing performance*
1(b) / 15 / Ways of achieving more consistent output quality*
1(c) / 15 / Evaluate/solve inventory control problems / 7
13 / 2.19ff
2.28, 3.8, 2.37
* These are highly integrative questions: rather than send you all over the syllabus/text for an answer, we’ve put together a checklist in the ‘Integrated learning’ feature of our Upgrade section, above.
Note that it was vital to apply the principles plausibly to the details given in the case study. You needed to consider the specific items being purchased by the restaurants, for example (including high value items like wine, and items with logistical issues of freshness like vegetables) – and address the specific problems raised by the scenario. In terms of output quality, you also needed to remember that restaurants combined product with service.
Section B: 25 mark essay questions (2 out of 5)
Chapter / Paragraph2 / Explain/evaluate:
(a) bar codes (12 marks) and
(b) integrated data base systems (13 marks) / 13
13
8 / 3.9ff,
4.1ff
2.10, 3.2
3 / Contribution of purchasing to ‘lean thinking’ / 6 / 1.20ff
4 / Identify/explain negotiation styles / 14 / 4.6, 4.12, 4.13
5 / Evaluate sourcing decision (risk; capital acquisition; overseas sourcing) / 11
9
10 / 5.1ff
Table 9.2, 1.23ff
1.4
6 / Facts in make-or-buy decision (15 marks)
Steps to main supplier performance (10 marks)* / 6 / 4.4
3.1ff
* We discuss vendor rating in detail – but other methods may also be relevant: we’ve included a brief survey as an ‘Integrated learning’ checklist in the Upgrade section above.
Note that it was vital to expand on the principles to provide a substantial, essay-form answer.
Pitfalls
Ø Exam verbs. ‘Evaluate’ and ‘explain’ are often used by this examiner. They are high-level exam verbs: not the same as ‘describe’ or ‘explain’. (See our FAQs page.)
Ø Case study relevance. Answers to Q1 must all be applied to the context and details of the case study – in this case, a restaurant chain with specific problems of inventory control, cost efficiency and quality management.
Ø The need for integrated, ‘joined-up’ thinking on purchasing issues and processes.
Easy marks
Ø Focus on mainstream syllabus topics: negotiation, inventory control, barcoding/databases, lean supply, sourcing decisions.
Ø The examiner considered this ‘a particularly straightforward examination’!
What the examiner said
Ø ‘Where candidates performed less well it was generally through not answering the question posed and just writing everything that the candidate knows about the subject...’
Ø ‘In other cases, candidates did now show any discretion as to what may be a suitable solution to a problem and what would not: an example of this would be recommending Taguchi techniques for achieving consistency of output in a kitchen…’
USE THE NEWS
Here we pick up on some of the Hot Topics covered in the In the News feature. We consider how they might come up in exam questions – and how you can use the examples and illustrations in your answers.
Chapter 6: Outsourcing
Make sure that you can draw on the cautionary tale of British Airways and Gateway Gourmet: see ‘In the News’ (in the free access area of this site)... It perfectly illustrates the point made in paragraph 6.32, about the drawbacks of outsourcing…
In the exam, you might be asked about the benefits of outsourcing, or the drawbacks. If a question asks you to ‘evaluate’ or ‘discuss’ outsourcing, you need to present both viewpoints – in which case the BA example will be a useful balance to examples of successful outsourcing.
The BA story could also be used specifically to illustrate the need for:
§ Multi-sourcing, rather than putting all strategic eggs in one basket!
§ Careful supplier appraisal, including criteria related to human resource management and ethical standards