Certificate in

Procurement and Supply

Operations
Module 2 (L2M2)
Procurement and Supply Operations

Leading global excellence in procurement and supply

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Certificate in Procurement and Supply Operations
Module 2 - Procurement and Supply Operations

Key to symbols

Learning outcomes

Further reading

Session introduction

Activities

Case study, questions, etc

Session summary

Leading global excellence in procurement and supply

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 Global Standards
4.2,6.1

Leading global excellence in procurement and supply

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Module Content Overview
This is a core module on the Certificate in Procurement and Supply Operations

Module purpose: On completion of the module, learners will be able to identify types of business
organisations. They will define the fundamentals and components of the contracting process, identify sources
of information on suppliers and customers and define pricing methods used for the purchasing of goods or
services.

Module aim(s): In any organisation, a significant element of the procurement and supply function is based
around the contracting process. This module is designed for those involved in the procurement and supply
operation who, to ensure success, must demonstrate knowledge and comprehension of the associated
components and systems that are at their disposal to support the contracting process. They must also know
where sources of information on suppliers and customers are and recognise the advantages and
disadvantages of pricing methods used for the purchasing of goods or services.

Final overall knowledge and skills: the holder of the CIPS Certificate in Procurement and Supply
Operations will demonstrate:

Knowledge Descriptor (the holder….) Skills Descriptor (the holder will….)

Knowledge and understanding of facts, procedures and
ideas in an area of study or field of work to complete well-
defined tasks and address straightforward problems.
They can interpret relevant information and ideas.
Awareness of a range of information that is relevant to the
area of study or work.
Select and use relevant cognitive and practical
skills to complete well-defined, generally routine
tasks and address straightforward problems.
Identify, gather and use relevant information to
inform actions.
Identify how effective actions have been.

Leading global excellence in procurement and supply

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Total Qualification Time (TQT) and Learning Hours
In arriving at a final number of learning hours, CIPS applies the TQT Criteria 1 (equal to 10 x credit value
rounded to nearest whole number) and split learning hours for each module into:

• Guided Learning Hours (GLH): which CIPS define as a measure of the amount of input time required
to achieve the qualification. This includes lectures, tutorials and practicals, as well as supervised study
in, for example, learning centres and workshops. GLH also includes the time required for learners to
complete external assessment under examination or supervised conditions.

• Self-Study Requirement (SSR) : which CIPS define as other required learning as directed by tutors will
include private study, preparation for assessment and undertaking assessment when not under
supervision, such as preparatory reading, revision and independent research and wider reading of the
subject areas.

For this module:

• TQT = 30hrs
• GLH = 20hrs*
• SSR = 9hrs
• Assessment = 1hr

*Note: This document includes 5 x 2 hour sessions = 10 hours of guided learning. The remaining 10 hours of
guided learning are to be developed at the discretion of the provider and may constitute additional learning
interventions which will supplement those included here.

Assessment:

• 36 x Multiple Response Questions – all questions have equal weighting

• Pass mark will be 70%

1
Ofqual: Total Qualification Time criteria Condition E7 available at: https://www.gov.uk/government/publications/total-
qualification-time-criteria

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
Learning outcomes, assessment criteria and
indicative content
Learning outcomes help to define the scope, style and depth of learning within a module. Delivery
organisations, tutors and learners can see where development should be taking place and the areas and
disciplines that should be actively researched and/or reviewed during the associated study. The student will
be assessed against each learning outcome during the final assessment.

Assessment criteria are the key areas that will be assessed on the module. Learners and delivery
organisations and tutors should have these in mind during study and CIPS assessors will utilise them during
the final writing and marking of assessments.

Indicative content is an indication of the key areas that should be covered during the modular learning. This
should not be regarded as an exhaustive list and delivery organisations and tutors are encouraged to include
more content by way of regional cases and/or examples. Similarly, learners should not see this as a final
listing and should be encouraged to develop their knowledge through further reading around the indicative
areas of content.

Study
1.0 Know the types of organisations and how they operate Session Guide
Chapter
1.1 Identify the types of business organisations
• Private public and third sector organisations 1 1
• Production and service organisations 1 1
1.2 Describe how organisations operate
• People, objectives and structure in organisations 1 1
• The formal and informal organisation 1 1
1.3 Identify the key operating functions within organisations
• Differentiation and integration in organisations 1 1
• Typical functions in organisations such as production, operations, marketing
and sales, customer support, human resources, personnel, finance, IT, and 1 1
technical functions
• Differentiating procurement and supply 1 1
Study
2.0 Know the components of contractual agreements Session Guide
Chapter
2.1 Identify types of contracts
• Spot purchases 2 2
• Term contracts 2 2
• Framework arrangements/blanket orders/panel contracts and call offs 2 2
2.2 Identify the kind of pricing arrangements applied in commercial contracts
• Fixed pricing, lump sum pricing and schedule of rates 2 2
• Cost reimbursable and cost plus arrangements 2 2
5

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
 • Variable pricing arrangements 2 2
• Target pricing arrangements 2 2
• Risk and reward pricing arrangements 2 2
Define the different documents that compose a contract for the purchase or
2.3
supply of goods or services
• Defining contracts and agreements 2 2
• The use of tendering and quotations 2 2
• The documents that comprise a contract - the specification, key
performance indicators (KPIs), contract terms, pricing and use of other 2 2
schedules
• Contracts for the supply of goods or services 2 2
Study
3.0 Understand sources of information on suppliers and customers Session Guide
Chapter
3.1 Explain the use of the Internet to locate details about suppliers and customers
• The need for supplies of products and services from external suppliers 3 3
• Outsourced services 3 3
• Seeing suppliers as a part of a supply chain 3 3
3.2 Explain the use of credit rating agencies
• Defining products and services 3 3
• The customer role 3 3
• Seeing customers as a part of a supply chain 3 3
3.3 Describe systems used in procurement and supply
• Systems for purchase ordering 3 3
• Capturing data on expenditures 3 3
• The use of portal sites to locate suppliers or customers 3 3
• Examples of supplier database systems 3 3
Study
4.0 Understand pricing methods used for the purchasing of goods or services Session Guide
Chapter
4.1 Explain the advantages and disadvantages of a range of pricing methods
• Fixed pricing, lump sum pricing and schedule of rates 4 4
• Cost reimbursable and cost plus arrangements 4 4
• Variable pricing 4 4
• Target pricing 4 4
• Risk and rewards pricing 4 4
Final module recap and discussion
5 1,2,3,4

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
Certificate in Procurement and Supply Operations
Module 2 - Procurement and Supply Operations

Session 1
Assessment Criteria
Know the types of organisations and how they operate
1.1,1.2,1.3
Identify the types of business organisations

Describe how organisations operate

Identify the key operating functions within organisations

CIPS Module Study Guide for Module L2M2 – Chapter 1

CIPS Global Standard for Procurement and Supply
Pillar: Process Standards
Segments: 6.1

Know the types of organisations and how they operate

• In this session you will learn about the different types of organisations, how they
operate, how they are funded and what is important to each organisation.
• Organisations are run in a variety of ways depending on their owners, how they
get their money and who their customers are.
• The people, objectives and structures within the organisation are very important
to how it runs.
• We will look in detail at the different types of people, their personalities,
strengths and weaknesses, and how they work within the organisation, along
with the objectives the organisations have and the structures that are formed.
• Organisations have many departments within them. All departments are
responsible for different things within the business. These will be discussed in
detail within the various departments, what their roles are and how they all work
together towards a common goal.
• Finally you will learn about the main differences between procurement and
supply.

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
 Identify the types of business organisations (discuss each sector in turn - use local
examples if possible – also see examples in the module study guide)

• Public sector
• Private sector
• Third sector
• Production and service organisations
o Differences vs similarities
Describe how organisations operate (discuss each element in turn - use local examples if
possible – also see examples in the module study guide)

• People, in organisations and teams

o Motivational models
 Maslow (see Fig 1.4 of module study guide)
 Herzberg (see Fig 1.5 of module study guide)
 Belbin’s Team Roles (see Table 1.7 of module study guide)
 Tuckman (see Fig 1.6 of module study guide)
• Organisational objectives
o SMART
o Mission and Vision statements
o Cultural influence – 4 types
• Organisational structure
o Hierarchical vs flat vs tall
• The formal and informal organisation
o Contrast the 2 types of organisation
 Advantages vs disadvantages

Identify the key operating functions within organisations (discuss each function in turn -
use local examples if possible – also see examples in the module study guide)

• Differentiation and integration in organisations

• Typical functions in organisations:
o production, operations, marketing, sales, customer support, human
resources, personnel, finance, IT, and technical functions
• Differentiating procurement and supply
o Compare and contrast
 Complementary roles

See final case study for the module.

• Discuss key elements within it that demonstrate the key discussion points in this
session of the module.
Offer contextual case studies relevant to the region and industrial focus of the area.
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region.
See short case studies within the associated chapter of the CIPS course study guide
• See student exercises based on modular learning outcomes

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
 Students should leave this session with an overall appreciation of the types of sectors
an organisation can be in and explain the differences between them. Production and
service organisations have many variances as well as some similarities. They should also
be able to identify each organisation and describe what traits they have. They will
understand motivational factors and how they affect overall success. Finally, they will
describe the advantages and disadvantages of differentiation and integration in the
public, private and third party sectors and understand the different responsibilities
faced by those working in procurement and by their colleagues in supply.

Leading global excellence in procurement and supply

Content may not be copied, reproduced, published, altered or transmitted in any form or by any means, in whole or in
part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
Certificate in Procurement and Supply Operations
Module 2 - Procurement and Supply Operations

Session 2
Assessment Criteria
Know the components of contractual agreements
2.1,2.2,2.3
Identify types of contracts

Identify the kind of pricing arrangements applied in commercial contracts

Define the different documents that compose a contract for the purchase or supply of
goods or services

CIPS Module Study Guide for Module L2M2 – Chapter 2,

CIPS Global Standard for Procurement and Supply
Pillar: Process Standards
Segments: 4.1, 6.1

Know the components of contractual agreements

• In this session you will look at contracts, their importance, the different types and
when each type is best used.
• Contracts can be for spot purchases, for a long or short term, or for an agreement
to have goods or services supplied at certain times, in certain quantities.
• Pricing arrangements can vary depending on the need and the organisation.
Prices can be fixed, variable, linked to a target or be linked to a reward of risk
arrangement. This chapter will explore all pricing options through examples.
• Contracts can be complicated and are made up of a variety of processes and
documents. Contracts can be for goods or services and therefore can be quite
different from one another.
• You will learn about what forms a contract, what a tender is and how it fits within
Procurement.
• Finally in this session you will examine which documents are included within a
contract, why they are important and how they are created.

10

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
 Identify types of contracts (discuss each type of contract in turn and where they might be
appropriate - use local examples if possible – also see examples in the module study
guide)

• Spot purchases
• Term contracts
• Alternatives to spot and term contracts:
o Framework arrangements
o Blanket orders
o Panel contracts
o Call offs

Identify the kind of pricing arrangements applied in commercial contracts (discuss each
type of pricing arrangement in turn and where they might be appropriate - use local
examples if possible – also see examples in the module study guide)

• Fixed pricing
• Lump sum pricing
• Schedule of rates
• Cost reimbursable or cost plus arrangements
• Variable pricing arrangements
• Target pricing arrangements
• Risk and reward pricing arrangements

Note* We will return to this topic in Session 4 of this module.

Define the different documents that compose a contract for the purchase or supply of
goods or services (discuss each type of document in turn and where they might be
appropriate - use local examples if possible – also see examples in the module study
guide)

• Defining contracts and agreements

• The use of tendering and quotations
• The documents that comprise a contract - the specification, key performance
indicators (KPIs), contract terms, pricing and use of other schedules
• Contracts for the supply of goods or services

See final case study for the module.

• Discuss key elements within it that demonstrate the key discussion points in this
session of the module.
Offer contextual case studies relevant to the region and industrial focus of the area.
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region.
• Have students develop and complete example documents to illustrate the
practical application of the theoretical ideas
See short case studies within the associated chapter of the CIPS course study guide
• See student exercises based on modular learning outcomes
11

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
 Students should leave this session with an overall appreciation of the components of
contractual agreements. They will understand that contracts can come in many forms
and include various pricing arrangements. Each contract has a place within business and
has its own advantages and disadvantages. In order to reach the stage in business
where a contract is formed, quotations and tenders are required. Students will
understand the difference between a quotation and a tender and how each are used
within organisations.

12

Leading global excellence in procurement and supply

Content may not be copied, reproduced, published, altered or transmitted in any form or by any means, in whole or in
part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
Certificate in Procurement and Supply Operations
Module 2 - Procurement and Supply Operations

Session 3
Understand sources of information on suppliers and Assessment Criteria
customers 3.1,3.2,3.3
Explain the use of the Internet to locate details about suppliers and customers

Explain the use of credit rating agencies

Describe systems used in procurement and supply

CIPS Module Study Guide for Module L2M2 – Chapter 3

CIPS Global Standard for Procurement and Supply
Pillar: Processing Standards
Segments: 4.1, 4.2

Understand sources of information on suppliers and customers

• Information is readily available for buyers to locate details on their suppliers and
customers. In this session you will learn about how to research such information.
• In order to make an informed decision prior to agreeing contractual terms it is
important to check suppliers’ financial statuses. This can be done by using a credit
rating agency and in this session you will gain knowledge as to how this happens.
• Procurement has a variety of systems which are used for ordering and capturing
data as well as for holding details on suppliers. In the final part of this session we
will discuss the examples of the associated data systems and how they fit into the
procurement function.

Explain the use of the Internet to locate details about suppliers and customers

• Discuss the use of Internet search engines to locate details about suppliers and
customers
o Examples of systems (see Chapter 3 of the module study guide)
o Locating information
• The types of information presented by suppliers and customers on their websites
o Examples
o How to use variety of information types/formats
• B2B and B2C E-Commerce
o Examples (local if possible) of B2B transactions
o Examples (local if possible) of B2C transactions
o The use of electronic signatures
13

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  Legal impacts

Explain the use of credit rating agencies

• The role of credit rating agencies and credit rating scores

o Definition and reasons for use
• Examples of credit rating scores (local if possible or see section 3.2 of module
study guide)
o The use of credit rating scores
• Profit and loss accounts
o Examples (local if possible or see section 3.2 of module study guide)
 What to look for
• Publications on individual organisations and markets
o Examples of information produced (local if possible or see section 3.2 of
module study guide)
 What to look for

Describe systems used in procurement and supply

• Systems for purchase ordering

o MRP systems and calculations
 Examples (local if possible)
 MOQ, Batch Quantity, Buffer Stock
o Sending and storing Purchase Orders
 PO management and delivery methods
• Capturing data on expenditures
o Why/what/when/how
o Examples of data to be captured (local if possible)
• The use of portal sites to locate suppliers or customers
o What may feature on a supplier portal
o Examples (local if possible)
• Examples of supplier database systems (local if possible)

See final case study for the module.

• Discuss key elements within it that demonstrate the key discussion points in this
session of the module.
Offer contextual case studies relevant to the region and industrial focus of the area.
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region.
See short case studies within the associated chapter of the CIPS course study guide
• See student exercises based on modular learning outcomes

14

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
 Students should leave this session with an overall appreciation that in procurement
research is very important. Suppliers and customers should be thoroughly vetted and
evaluated prior to any contractual agreement being made. This helps to reduce the risk
an organisation exposing itself to risk. Students will understand that there are many
ways to conduct research from visiting suppliers’ and customers’ websites to
conducting official credit rating checks through accredited agencies. They will also know
that procurement includes many processes for tasks such as ordering and capturing
data and will have an awareness of the variety of processes and how each system can
work to aid the procurement function.

15

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
Certificate in Procurement and Supply Operations
Module 2 - Procurement and Supply Operations

Session 4
Understand pricing methods used for the purchasing of Assessment Criteria
goods or services 4.1

Explain the advantages and disadvantages of a range of pricing methods

CIPS Module Study Guide for Module L2M2 – Chapter 4

CIPS Global Standard for Procurement and Supply
Pillar: Process Standards
Segments: 4.1

Understand pricing methods used for the purchasing of goods or services

• Refer back to session 2 of this module - there are a variety of strategies that can
be used within procurement for pricing.
• In this session you will learn about the advantages and disadvantages of the
pricing methods.
• You will have gain knowledge of the various pricing methods that can be used
within procurement.
• The pricing method used depends on several factors which will be detailed to
enable understanding.
• Pricing can be fixed or variable, linked to performance criteria or be associated
with meeting targets.
• The risk shifts depending on the method used. It is therefore important to
understand who is responsible for the risk and how this is managed.

Explain the advantages and disadvantages of a range of pricing methods (cover the
advantages and disadvantage each of the following pricing strategies using local
examples if possible – also see advantages and disadvantages in table 4.1 to 4.7 of the
module study guide) (remember that students should have a working knowledge of
pricing strategy from session 2 of this module and be familiar with the differing
methods)

16

Leading global excellence in procurement and supply

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 • Fixed pricing
• Lump sum pricing
• Schedule of rates
• Cost reimbursable or cost plus arrangements
• Variable pricing
• Target pricing
• Risk and reward pricing

See final case study for the module.

• Discuss key elements within it that demonstrate the key discussion points in this
session of the module.
Offer contextual case studies relevant to the region and industrial focus of the area.
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region.
See short case studies within the associated chapter of the CIPS course study guide
• See student exercises based on modular learning outcomes

Students should leave this session with an overall understanding of the pricing methods
and strategies that are used in procurement. They should appreciate that to be able to
make an informed decision they must explore all of the associated advantages and
disadvantages of each method in detail. They must also appreciate that a contract does
not have to include only one pricing method and can be made up of different strategies
for different areas of the agreement. Finally they should understand that the ultimate
goal for building long-term, strategic and collaborative supplier relationships is to agree
on a form of pricing that will result in a Win-Win situation.

17

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
Certificate in Procurement and Supply Operations
Module 2 - Procurement and Supply Operations

Session 5
Assessment Criteria
Final module recap and discussion All assessment criteria for this
module

All learning outcomes for the module as discussed in sessions 1 to 4.

CIPS Module Study Guide for Module L2M2 – Chapter 1,2,3 and 4
CIPS Global Standard for Procurement and Supply
Pillar: Process Standards
Segments: 4.1, 4.2,6.1

Discuss the overall aims of the module:

Module aim(s): In any organisation, a significant element of the procurement and supply
function is based around the contracting process. This module is designed for those
involved in the procurement and supply operation who, to ensure success must
demonstrate knowledge and comprehension of the associated components and systems
that are at their disposal to support the contracting process. They must also know where
sources of information on suppliers and customers are and recognise the advantages and
disadvantages of pricing methods used for the purchasing of goods or services.

Discuss the final assessment

Format
• 36 x Multiple Response Questions – all questions have equal weighting

Content and question types

• Use the sample questions provided for types and formats of questions

18

Leading global excellence in procurement and supply

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part, without the prior written permission of CIPS. Copyright ©2018 CIPS.
 See final case study for the module.
• Use this to pull together all of the key elements discussed within sessions 1 to 9
of this module, highlighting associated assessment criteria.
Offer contextual case studies relevant to the region and industrial focus of the area.
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region.
• Help students to cement ideas and concepts through practical application of
ideas, theories and models.
See short case studies within the associated chapter of the CIPS course book
• Use these to highlight key learning against assessment criteria
Student Exercises
Use these to highlight key learning against associated learning outcomes for the module

On completion of the module, learners will be able to identify types of business

organisations. They will define the fundamentals and components of the contracting
process, identify sources of information on suppliers and customers and define pricing
methods used for the purchasing of goods or services.

19

Leading global excellence in procurement and supply

Content may not be copied, reproduced, published, altered or transmitted in any form or by any means, in whole or in
part, without the prior written permission of CIPS. Copyright ©2018 CIPS.