L4M8 tutor notes

CIPS Level 4 Diploma in Procurement and Supply
Tutor Notes
Module title: Procurement and Supply in Practice [L4M8]
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Leading global excellence in procurement and supply

Learning Outcome 1 Demonstrate the application of the procurement cycle
These notes are designed to support teaching staff using the CIPS Teaching Resources PPT slides. Teaching
staff are advised to cross reference against the relevant module content and learner resources (e.g., study
guide). Supplementary resources are available on cips.org in the Student Zone, CIPS Knowledge and Supply
Management online journal (www.cips.org).
SLIDE TUTOR NOTES
1 Not applicable
2 A need – something that is required for an individual or an organisation to be able to

carry out their objectives. For example, a warehouse worker might need more nuts and
bolts, or an engineer might need a component to develop their concept.
There are four types of need.

• Tangible needs – things that can be touched or seen, e.g., components to produce
end products, stationery or machinery.
• Intangible needs – cannot be touched or seen, e.g., services, electricity or
insurance.
• Direct needs – directly related to the end cost of the product or service the
organisation manufactures or supplies. For example, in an organisation that
manufactures cars, a direct need would be any components required to produce
the finished vehicle.
• Indirect needs – not directly related to the end product or service. For example,
marketing materials, or facilities management services.
Class discussion
Suggest some examples of needs, e.g., website design for an online cushion shop;
shampoo to be used in a hairdressers, etc.
Ask learners to categorise each one into the two-by-two table shown on the slide.
For each need, you could ask learners to indicate by a show of hands whether it is tangible
or intangible, then direct or indirect.
Homework activity
Learners to gather three examples for each of the 4 types of need from their organisation.
To be discussed at the start of the next session.
3 Within an organisation:
• Anyone can identify a need
• Only certain individuals have the authority to request them – this ensures that
only justified needs are raised
Requisitions: forms used to communicate the need to procurement. Includes the

following.
• The date the requisition was raised
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SLIDE TUTOR NOTES
• A description of what is required, including any quality requirements and

specifications
• The preferred supplier
• The quantity required
• When, where and why the need is required
• The name of the person who identified the need
• The name of the person who approved the need
The requisition must be authorised by a budget holder with authority, before it is passed
to the procurement department.
Requisitions are most commonly raised via e-mail or by an automated process, based on a
material requirements planning (MRP), system – use the diagram on the slide to explain
what information MRP systems refer to in order to determine if a requisition is needed.
Individual activity
Learners to research (where necessary) and write brief responses to the following
questions relating to the organisation they work in:
1. Who can raise a requisition?
2. Who can approve them? (e.g., all/certain team leaders)
3. Who can authorise them? (e.g., senior management)
4. How are requisitions received by procurement, e.g., electronically, or from an MRP
system?
5. What information must be included in your organisation’s requisition form?
4 Before a procurement professional can develop the strategy or plan for procurement, they
need to undertake market analysis and testing.
Tools that can help with this include the following.
• STEEPLE analysis – considers the social, technological, environment, economic,
political, legal and ethical factors of the external environment
• SWOT analysis – considers the strengths and weaknesses of your proposal and the
opportunities and threats that exist – talk through the diagram on the left of the
slide
• Porter’s Five Forces – considers the level of competition within the marketplace,
which helps buyers formulate a strategy to negotiate prices with their suppliers
• Levels of supplier competition – from perfect competition to a monopoly, can
determine the level of scope to negotiate with suppliers
• Supply and demand – affects costs incurred and prices charged by suppliers
• Push and pull – determines the best sourcing strategy
• Supplier segmentation – integrated, strategic, collaborative, transactional – the
type of need will determine which type of supplier relationship is required
• Product life cycle – the number of products required for an item varies according
to the stage it is at
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SLIDE TUTOR NOTES
• Ansoff matrix – categorises the organisation’s strategy for growth - talk through
diagram on the right of the slide
• Early supplier involvement – to gain insight from their experience
• Make or buy and offshoring decisions – considers the importance of the need to
organisational success, as well as the organisation’s capabilities, and how value for
money can be achieved
Individual activity
Ask learners to locate a requisition in their organisation, and then answer the following
questions.
1. Determine what level of competition there is amongst suppliers for that item, e.g.,
perfect competition, monopoly, etc. What impact does this have on the scope for
negotiation?
2. Ask their procurement colleagues for an example of how different types of
competition have affected their ability to negotiate with a supplier. Could be a
typical example, or when they were ‘surprised’ by a different outcome than
expected.
3. Find out about their organisation’s strategy for growth, and consider how this
could impact on the procurement department’s sourcing strategy.
5 Supplier evaluation, or appraisal, is conducted prior to sending out the invitation to tender
documentation.
It involves evaluating suppliers against predetermined criteria to assess their suitability to
work in conjunction with the buying organisation.
This helps to ensure that contracts are awarded to the most suitable supplier.
Each organisation has their own policies and procedures for undertaking pre-tender
evaluation of suppliers, for example, conducting site visits and audits or having meetings
with potential suppliers.
There are several methods that can contribute to evaluating suppliers, including the
following.
• Pre-qualification, or ‘selection’, questionnaires (refer to example shown on slide) –
used to establish if a supplier has the capacity and capability to supply the product
or service to the standard required.
• Carter’s 10 Cs – used to assess the supplier across ten areas, including their level of
competency, the control the supplier has over its supply chain, whether the
supplier’s culture fits with the buying organisation, etc.
• Credit checks – used to gather information from various sources to produce a
score that reflects how financially stable the supplier is and whether they pose a
risk to work with.
• Financial checks – ensure that suppliers are financially sustainable, that means
they are performing well and are likely to be in business for the foreseeable future.
• Reviewing a supplier’s code of conduct, code of ethics, health and safety policies
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SLIDE TUTOR NOTES
and corporate social responsibility policy – all are used to establish whether they
are reputable organisations.
• Reputational factors, e.g., quality, sustainability, ethics and supplier relationships
are used to avoid working with suppliers that could pose a risk.
• Benchmarking – is used to compare a supplier’s a function, process, performance
or price to that of another which is best-in-class.
• Relationships with other organisations – used to understand how they work with
others.
Paired activity
Allocate one of the methods listed above to each pair of learners.
Learners to carry out research about their method, and then report back to the class with
3-5 key points, e.g., what it is, how it works, how it contributes to supplier evaluation, etc.
Lead class discussion to ensure key learning points are drawn out.
6 Tender process.
• Potential suppliers are invited to bid to supply a product or service.
• Generally used for higher value items or where regulation requires it, e.g., in the
public sector.
• It has seven stages. (Refer learners to stages on the slide.)
Stage 1: Determine which style of tender is to be conducted.

• Open
• Restricted
• Negotiated
• Competitive dialogue
• Advertise the tender
Stage 2: Prepare the invitation to tender (ITT) documentation that will be sent out to
potential suppliers.
Should include comprehensive information to enable that all potential bidders fully
understand the need and can prepare and send a suitable response.
Stage 3: Send the ITT documents to all potential suppliers at the same time.
Usually sent via a portal on an e-tendering system.
Stage 4: Receive responses, known as ‘bids’ by the deadline date.

Legally, any bids that arrive after the deadline should be disregarded from the process.
Including late bids is unfair and could lead to a challenge later in the process.
Stage 5: Evaluation.
Check bids to ensure they have been provided in the correct format and include the
required information.
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SLIDE TUTOR NOTES
Disregard incomplete bids or bids that are not formatted to the correct standard.
Evaluate bids against the stated evaluation criteria and score using weightings and scales
prescribed by the procurement organisation.
Use a cross-functional team to guarantee the process is fair, open and transparent and
that the chosen bid is fit for purpose in all areas.
Stage 6: Award contract and give feedback.

Offer the contract to the winning supplier via formal communication, such as a letter or an
e-mail.
The winning supplier does not have to accept the contract, so it is good practice to await
their response prior to notifying the unsuccessful suppliers.
Once the awarding supplier has accepted the contract, the unsuccessful bidders should be
notifed.
Stage 7: Contract management.

Ongoing evaluation of the supplier’s performance against the criteria included in the ITT.
Ensures that risk is reduced by identifying defects or performance issues at an early stage.
Individual activity
1. Are tenders used by your organisation?
2. If yes, typically, what type of items are put out to tender?
3. For a particular tender, find out which departments were involved in the evaluation
of the bids.
4. What were the evaluation criteria? Which areas were most heavily weighted, and
which were the lightest?
7 Supplier management starts after a contract has been awarded and continues through
the duration of the contract.
The relationship life cycle has four stages – refer to the diagram on the slide.
• Pre-relationship
• Development
• Maturity
• Decline
Each phase is characterised by different levels of competition and co-operation – refer to

the diagram on the slide.
The buyer should consider the stage that the relationship is in and the style of
relationship required. This depends on the strategic position of the product or service
being procured.
Supplier management can be conducted by the following.

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SLIDE TUTOR NOTES
• Using credit checks

• Monitoring performance against KPIs and service level agreements
• Conducting reviews, audits and benchmarking activities
Learner activity
1. Select a contract from your organisation/category.
2. Identify what stage of the relationship life cycle the supplier is in.
3. What changes do you expect to see in the levels of co-operation and competition in
the near future?
4. What methods of supplier management are used in your organisation?
8 Stakeholder – anyone who has an interest or can impact on the organisation or project
can be internal or external.
Steps for stakeholder management:

1. Identify all stakeholders
2. Use Mendelow’s stakeholder management matrix (refer to the diagram on the
slide) to analyse stakeholders according to their level of power and interest, to
determine how they need to be managed.
• Keep satisfied
• Manage closely – these are the key stakeholders
• Keep informed
• Minimum effort
3. Manage stakeholders effectively – there are seven elements:
• Communication – Keep the stakeholders up to date with
projects/developments/changes
• Consultation – Ask for feedback and opinions and consider them
• Empathy – Understand how the stakeholder is feeling – how would you
feel in their position?
• Planning – Prepare and plan prior to engaging stakeholders
• Relationships – Be open and honest, fair and reasonable and try to
construct good relationships
• Risk – Understand the risk that stakeholders could present and have a
strategy to work around this
• Compromise – If the stakeholder has a valid case then be prepared to
change strategy and accommodate their feedback
Individual activity
1. Identify the key stakeholders for the procurement function of your organisation.
Consider internal and external stakeholders.
2. Which groups of stakeholders are key stakeholders? (Which ones have the highest
level of interest and power?)
3. What methods of communication are currently used for each group? Are they
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SLIDE TUTOR NOTES
appropriate or do any need to change?

4. Are there any groups of stakeholders that are currently being overlooked and not
communicated with?
9 Quentin has been working in the procurement department for a car manufacturing
organisation for a couple of years.
He has shown a solid understanding of the role of a procurement professional and has
been tasked with running the tender process for a new piece of machinery that is
required to spray paint the body panels. There are only a few manufacturers of this type
of machinery worldwide.
Quentin is preparing for a meeting with his manager, Janet, who is mentoring him
through the tender process.
Janet has asked Quentin to come prepared to tell her the following information.
1. What type of need is the new piece of machinery: direct or indirect; tangible or
intangible?
2. At least three tools he plans to use for market analysis, and what information each
one will provide.
3. What method of tender he thinks is most appropriate, given the number of
potential suppliers.
4. What kind of supplier relationship they should be looking for, for this large one-off
purchase.
5. Which internal stakeholders need to be communicated with, and which ones need
to be engaged with more closely in the project.
Work in groups to discuss the questions Quentin needs to answer and provide reasons for
your answers.
8
Learning Outcome 2: Demonstrate the application of the key stages of the sourcing
process
SLIDE TUTOR NOTES
10 Not applicable
11 Use diagram on the slide to ensure learners understand the difference between sourcing
and procuring, and the stages involved in each.
This learning outcome focuses on sourcing activities.
Ask targeted questions, e.g., by providing examples of specific tasks, to ensure learners
understand whether they fall under sourcing or purchasing.
12 All contracts are formed in the same way and all include four important stages – refer to
the slide
• Intention – the contracting parties must intend to enter into a legal contract. They
should be of sound mind and fully aware of their contractual obligations.
• Capacity – All parties should be of sound mind and fully aware of their contractual
obligations.
• Offer – the promise in exchange for performance from the other party.
• Consideration – the exchange of one thing for another within an agreement.
• Acceptance – the point where the offeree accepts the proposal from the offeror.
Terms – the rights and duties agreed between parties, which are then documented in a
contract. There are two types.
• Implied terms – always present in a contract and set by the law of the land. Implied
terms do not have to be written or verbally agreed. Examples include the Sale of
Goods Act, so that goods sold are fit for purpose, and negligence and confidential
breaches.
• Express terms – the terms written into the contract. They usually relate to items
that can be negotiated and agreed between the parties involved. Examples include
payment terms, the specification, delivery details, quantities, and indemnity
clauses, etc.
Standard form or model contracts – templated contract comprising standardised and

non-negotiated terms and conditions.
• Used to reduce the time required to negotiate specific terms for each agreement.
• Used in specific industry sectors, such as construction and engineering.
• The position for the parties entering into the standard contract is in effect ‘take it
or leave it’.
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SLIDE TUTOR NOTES
Individual activity
Learners to find out if their organisation uses standard form or model contracts for any
categories of items.
What terms are stated?
13 Damages – terms that can come into effect if a contractual breach occurs. There are two
types.
• Liquidated damages – fixed amounts of money agreed between the parties that
becomes payable upon a breach of contract. They are enforceable by law.
• Unliquidated damages – an unspecified amount of money. Unliquidated damages
terms are used when the amount of money that will compensate the aggrieved
party is unable to be predetermined.
A breach of contract occurs when one party fails to perform as per their legal obligation.
Three categories of contractual breach (refer to the explanations on the slide).
• Material
• Anticipatory
• Fundamental
When creating the terms, it is good practice to agree with a supplier to include the types
of breach that could result in the contract ceasing.
Termination of a contract can be through:

• Breach – one party fails to perform their legal obligations
• Performance – one party is unable to carry out the agreed actions
• Prior agreement – if both parties agree and this conforms with reasons stated in
the contract
• Rescission – one party has misrepresented themselves or has conducted an illegal
act
• Completion – the contract has successfully concluded
Pairs or small group activity

Present (verbally or on a worksheet) each group of learners with some scenarios for
terminating a contract, for example, an audit consultant says they have a professional
qualification, but it is discovered this is untrue; a supplier gives notice that they have been
unable to obtain a particular component, which means they will not be able to deliver as
per the contract.
Learners to discuss each scenario and determine the category of the breach.
Homework
Learners to speak with colleagues to find out if a breach of contract, or termination of a
contract has occurred in their organisation.
• What was the reason for it?
• What was the impact on the organisation?
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SLIDE TUTOR NOTES
14 Supplier selection
Conduct research on potential suppliers to gather information on aspects such as the
following. (Refer to the list on the slide, and either provide, or ask learners for, examples of
the sources of information, and what should be looked for in each aspect.)
• Financial performance
• Organisational structure
• Culture
• Ethical policy
• Corporate social responsibility
• Sustainability
• Environmental awareness
• Reputation
• Quality
• Global accreditations
• Technology used
• Their location
Individual activity
• What is the process for supplier selection in your organisation?
• What aspects are researched?
• What methods are used to obtain the information?
• Which aspects are given most priority/weighting? Is this always the case, or does it
depend on the nature of the contract?
Start the next session with a class discussion to compare and contrast supplier selection
methods and what is looked out for by learners’ organisations.
15 If a supplier has financial difficulties it could result in the following.

• Reduced quality of goods
• Delays
• Shortages
• Price increases
• Failure to supply
To reduce this risk, research suppliers’ financial performance to check the business is
financially sustainable.
Methods used include the following. (Provide an explanation and what constitutes as a
good and bad indicator for each one.)
• Credit ratings
• Reviewing the balance sheet (refer to calculation on the slide)
• Reviewing liquidity (refer to calculation on the slide)
• Reviewing profitability (refer to calculation on the slide)
• Requesting references from other customers
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SLIDE TUTOR NOTES
Learner activity
Prepare a worksheet for learners that shows a balance sheet that includes figures for
assets, liabilities, profit and sales for a fictional organisation.
Ask learners to use the information from the balance sheet to calculate the following.
• The current ratio
• Quick ratio
• Gross profit ratio
Ask learners whether the figures indicate good financial performance, or not.
Figures could be set up so there is a mix of indicators, e.g., good quick ratios but low gross
profit ratio, or vice versa to make it less clear cut.
16 Responses to the RFQ or ITT should be evaluated according to the criteria and weightings
that were agreed at the start of the process.
The evaluation criteria can cover many aspects – refer to the list on the slide, and discuss
(or ask for suggestions from learners) the impact of each one.
• Currency – If suppliers have provided prices in their own currency rather than
yours, you will need to convert prices so they are comparable.
• Order quantities – economies of scale can reduce the piece part price, but, if this
results in a higher quantity of products being quoted for or supplied than is ideally
needed, the cost to source the need increases.
The procurement team should do the following.

• Work cross-functionally with other departments to draw on their expertise when
assessing bids against the criteria
• Carry out a whole-life costing, to ensure all the other costs that will be incurred
throughout the life are considered
• Consider additional organisational benefits that working with a particular supplier
might bring, e.g., enhancing an existing supplier relationship
Once all bids have been evaluated against all criteria, the evaluations are put into a
weighted scorecard. The supplier with the highest weighted score is the most suitable
option to be awarded the contract.
Awarding the contract

• Prior to the award of the contract, advise key stakeholders of the chosen supplier
to ensure that there are no valid objections.
• Issue acceptance to the winning bid in writing in order to finalise the formal
agreement.
• The contractual terms should replicate those stated in the documentation
originally sent to the suppliers when a quotation or bid was requested.
• Any amendments to these terms must be negotiated and agreed prior to
acceptance to avoid a ‘battle of the forms’ situation.
• When the supplier has given their acceptance, the contract becomes legally
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SLIDE TUTOR NOTES
binding and should be signed.

• The two parties can then start work on contract mobilisation, which is the period
of time between the awarding of the contract and its commencement.
• Remember to let the unsuccessful suppliers know that they have not been
awarded the contract at this point.
Learner activity
Ask colleagues if they can show you a weighted scorecard that was used to evaluate
tender bids.
Analyse the scorecard to understand which areas/criteria were weighted more heavily,
and which less so.
What can you glean about what was important in relation to that contract at that time?
17 Contract management – making sure that goods and services get delivered to the
specifications required.
Supplier management – forming and developing relationships with suppliers and their
organisations.
Within many organisations, a large percentage of value is supplied by a relatively low

number of suppliers. (Refer to the ABC analysis diagram on the slide.)
Procurement’s efforts should go into managing the 20% of contracts that account for 80%
of spend.
The Kraljic matrix can also be used to categorise suppliers and identify the style of
management required according to their impact on profit and risk.
The four categories that are produced are the following.
• Routine suppliers can be managed transactionally.
• Bottleneck suppliers should be managed tactically.
• Strategic suppliers should be managed collaboratively.
• Leverage suppliers should be managed at arm’s length.
Learner activity
Use the Kraljic matrix to categorise the suppliers of the contracts you are responsible for.
1. What category do they fall into?
2. How should they be managed?
3. Is this how you currently manage them? If not, what changes are required?
18 A range of relationships can exist between a buyer and supplier, from competitive to
collaborative. They are characterised by the frequency and reach of the relationship and
the transparency of the two parties (refer to the graph on the slide)
Characteristics of competitive relationships are the following.
• Parties are focused on cost.
• Tactical.
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SLIDE TUTOR NOTES
• Not concerned about the long-term sustainability of the relationship.

• Often referred to as win-lose because when one party gains, the other loses.
Characteristics of collaborative relationships are the following.

• Based on the sharing of information, trust, respect and both parties achieving a
positive outcome.
• Focused on achieving win-win outcomes.
• Promote joined-up thinking and innovation.
• Require much more time and effort to maintain the relationship, but this should
result in both parties achieving their objectives.
Benefits of a collaborative relationship include the following.

• Shared information
• Innovation
• Reduced defects
• Improved quality
• Continuity of supply
• Stable supply chain
• Cost reduction
Learner activity
1. Ask learners to use the Internet to find some examples of collaborative
relationships between organisations.
• What parties were involved in the collaboration?
• Why did each party need to collaborate with each other?
• What was the aim of the collaboration?
• Learners to discuss their examples with a partner, or within a small group.
2. Identify one or more collaborative relationship that exists between your
organisation and its suppliers.
• What are the key features of the relationship? For example, is there regular contact
between the two organisations?
• What are the benefits of the collaborative relationship for each organisation?
19 Destiny is responsible for large-scale procurements for the fire-fighting teams in her
region.
She has put out a tender for the supply and maintenance of a fleet of fire-fighting trucks.
The tender documentation was completed carefully, and outlined the specification, the
contract terms that would apply, and the evaluation criteria that would be used to assess
the bids.
When assessing the bids, she notices the following points.

• One of the suppliers has attached their own terms and conditions.
• An international supplier has submitted prices in their own currency instead of her
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SLIDE TUTOR NOTES
local currency.
• Another supplier has quoted prices based on EXW Incoterms®.
Work in groups to discuss the following questions.

1. What issues could arise as a result of each of the situations?
2. How should Destiny deal with each of those bids?
3. What does Destiny need to do in order to obtain prices that will be comparable?
Learning Outcome 3: Demonstrate the application of whole life asset management

SLIDE TUTOR NOTES
20 Not applicable
21 Whole-life asset management also known as whole life-cycle costs (WLC).

• Relates to fixed assets
• Aims to obtain the best value throughout the lifetime of the asset
• It is the process of evaluating the total price and all other costs associated with the
item so an informed decision can be made about which option will provide the
best value for money for the organisation
• It is a continuous process that monitors performance of the asset once it is in situ
and calculates the optimum time to replace or refurbish the asset.
There are eight elements that form the cycle of whole-life asset management – refer to
the diagram on the slide.
1. Identify the need, objectives and risk – for example, objectives could include being
more energy efficient, reducing cost or keeping up with the competition.
2. Procurement – consider all the elements within the whole-life asset management
cycle in the process to ensure that the best value is gained.
3. Construction – much of the cost of the asset is derived from this stage. A readily
available or mass-produced asset has lower design and manufacturing costs than
bespoke items.
4. Commissioning – is bringing the asset into working condition. Costs incurred at this
stage include installation, training, insurance, testing, operational efficiencies and
performance and quality.
5. Deterioration and maintenance – assets that last longer without deterioration
represent better value. Depreciation gives an indication of how quickly an asset
loses value over time. Maintenance costs include the reliability of the asset, price
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SLIDE TUTOR NOTES
and availability of spare parts, the cost of skilled technicians or engineers,

frequency of service requirements and downtime due to maintenance.
6. Condition performance monitoring – carried out by a system that monitors key
aspects, such as temperature, vibration, speed, output, etc., in order to identify
any defects early on so decisions can be made to prevent stoppages.
7. Decommissioning – withdrawing an asset from service. Costs incurred at this stage
include the costs of removal and transport, labour, and downtime. The asset could
be reconditioned at this stage to extend its life cycle.
8. Renewal and replacement – this is when the whole cycle starts again as the
decision is made about whether it is better for the organisation to continue using
the existing asset or to purchase a new one.
Tutor-led class discussion

Ask learners for suggestions of large-asset purchases from their organisations, or provide a
scenario, for example, purchasing a large machine that puts beans into cans/tins.
Ask learners for suggestions of the costs that would need to be considered/activities that
would be undertaken, or questions that would need to be answered in order to calculate
whole life-cycle costs for each stage.
Then consider how to find information to answer the questions.
22 Global sourcing – the practice of obtaining products or services from the worldwide
market in order to achieve cost savings.
• The savings are frequently achieved by seeking efficiencies in skilled labour, raw
materials or reduced import tariffs.
• Usually involves an extended supply chain, which includes the following. (Refer to
the diagram on the slide.)
• Raw material suppliers from the primary sector
• Producers from the secondary sector
• Distributors from the tertiary sector
• Retailers from the tertiary sector
• Customers/consumers
When using global sourcing and an extended supply chain, some costs are harder to
identify and do not always present themselves at the start of a project.
They are known as ‘hidden costs’ and examples include the following.
• Internal overheads
• Transition/mobilisation
• Language barriers
• Time differences
• Post-contract reviews
• Culture differences
• Ethical behaviour
• Reputation
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SLIDE TUTOR NOTES
• Supplier financial position

• Exchange rates
• Logistics
• Lead time
• Inventory
• Incompatibility
• Changes in duties/taxes
• Trade wars
Tutor-led discussion/learner activity

1. Start by leading a class discussion to consider the first three bullet points: internal
overheads, transition/mobilisation and language barriers. Encourage discussion
about how each factor could have hidden costs, e.g., language barrier – cost of
interpreters, but also misunderstandings could result in discrepancies, which would
require costs to fix.
2. Learners to work in small groups. Allocate 3–4 points to each group, and ask them
to discuss and come up with similar considerations.
3. Bring the class together to share ideas.
23 The whole life asset management strategy takes considerable time. (Refer to the diagram
on the slide.)
• It involves many stakeholders.
• It requires lots of resources from departments around the organisation.
• It requires cross-functional teams to be set up, with representatives from many if
not all departments.
Being involved in cross-functional teams takes people away from carrying out their main
roles and activities.
This reduces their efficiency and output in their main role.
This reduction can only be justified financially if it will be offset against the potential
purchase of an asset.
Whole life asset management can create value when undertaken on high-value
procurements and will be a fixture within an organisation for many years.
For low-value purchases, the cost of creating asset management work could far outweigh
the cost of the asset, which would not be deemed cost effective as it would be a waste of
resources.
Learner activity
Learners to work in small groups.
Either allocate a scenario to each group, or ask learners to decide on a scenario based on
the organisations they work in.
Each group to discuss the benefits of cross-functional teams by thinking about the
following.
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SLIDE TUTOR NOTES
1. Listing all the departments in their organisation(s).

2. Considering which departments should be involved in a cross-functional team for
the purchase.
3. What aspects of procurement would the other departments be concerned with.
Bring the class together to share key findings.
A couple of prompts are included below.

Marketing
• Does the asset give a competitive advantage to promote to consumers?
• What value does this give and for how long?
Finance
• What are the tax implications?
• At what rate will the asset depreciate?
• How much will insurance cost?
• Lease or buy?
• What is the life expectancy of the asset?
• What is the resale value of the asset at the end of its life?
24 When conducting whole life asset management, the procurement professional needs
three things from senior management.
• Authority to proceed with the whole-life asset management based on the available
resources, the validity of the business case, and associated objectives.
• Buy-in – senior managers’ belief in the concept, ideas, methods and desired
outcome.
• Support in the form of helping to secure resources, clarifying end goals, being a
point of escalation if problems occur, and acting as an ally during difficult times.
Procurement should create a business case to gain buy-in from senior management for
the application of whole life asset management.
A business case includes the following sections – refer to the diagram on the slide.
• Introduction
• Objective
• Approach
• Resources
• Benefits
Learner activity
1. Obtain a copy of a business case that was created for whole life asset
management/WLC from your organisation, or obtain a template version.
2. Review the document against the checklist above.
• Are all of the areas covered?
• Are there any additional areas covered in your organisation’s template?
• What types of content is included in each section, for example, financial
18
SLIDE TUTOR NOTES
data, project plans?

• Where would you obtain the information from each section from? Which
department is best-placed to provide data?
3. What is the process for presenting business cases: who presents (the author of the
document, the procurement director), and who are they presented to (senior
managers, the board?) Who approves business cases?
25 Decommissioning – is to take out of operation and dismantle.

• This comes at the end of the asset’s life cycle
• Processes and costs involved are often overlooked when applying whole life asset
management
Reasons for decommissioning an asset include the following.

• Reached end of their life cycle
• They are no longer cost effective.
• They require upgrading to keep up with the competition.
• Environmental reasons or sustainability issues with the asset.
• The organisation’s requirement for a product or service changes unexpectedly.
• Changes to legislation or regulation.
The following are the four stages in the decommissioning process – refer to the diagram
on the slide.
• Preparation
• Dismantling
• Processing
• Disposal
Learner activity
Does your organisation have any large assets? Work with a partner whose organisation
does, if yours does not.
Write down as many activities as you can think of that would need to be undertaken for
each stage.
See if you can obtain the decommissioning plans for the asset from your organisation.
Have all of the stages been considered in the plan?
What aspects were included in the plan that you had omitted from your list?
26 Most assets depreciate (reduce in value) over time – refer to the graph on the slide.
This is documented within the accounting process.
• A partially depreciated asset still has financial value attributed to it – refer to the
diagrams on the slide
• A fully depreciated asset is deemed to have no financial value left – refer to the
diagrams on the slide
• A fully depreciated asset should still feature on an organisation’s balance sheet so
19
SLIDE TUTOR NOTES
that stakeholders are aware of what is owned, but it should be noted that it is fully
depreciated.
• When an asset comes to the end of its life within an organisation, it can either be
fully or partially depreciated.
• When an organisation sells or disposes of an asset, it is removed from the fixed
asset list.
• When the asset is no longer present on the fixed asset list it can be removed from
the balance sheet.
Learner activity
Prepare a worksheet for learners that includes several examples of depreciation scenarios,
e.g., an asset that costs $75,000, and depreciates at $8250 a year.
Ask learners to calculate the following.
1. How many years it will take for the asset to fully depreciate.
2. How much value could theoretically be obtained if it were sold, in Year 4 for
example?
27 Disposing of waste
• If not done correctly, it could have a detrimental effect on the environment and on
the health and wellbeing of humans and animals.
• There are local, regional and national laws that need to be conformed to protect
humans and the environment.
• Organisations’ disposal of assets and waste is closely monitored around the world.
• Organisations can face large fines if they break waste disposal rules.
• Many companies are working hard to try and be more environmentally conscious
and reduce the impact their waste has.
• Complying with regulations and disposing of assets in an environmentally friendly
way reduces the risk of extra costs being added to the whole life asset
management process due to fines.
Talk through the table on the slide which shows some of the laws and regulations on
waste management that apply within the EU.
Learner activity
Find out about the laws that apply to waste management in your country.
• Name of the regulation.
• When it came into effect.
• What it covers.
• What are the consequences for non-compliance?
• How is this monitored?
28 Romeo works at an organisation that manufactures mobile phones.
He is the procurement lead for the purchase of an automated picking system to be
20
SLIDE TUTOR NOTES
installed in their central warehouse.

Discuss the following questions in small groups and record your own answers.
1. Which departments should Romeo include in a cross-functional team, and why?
2. What costs should Romeo consider when calculating whole life cycle costs?
3. What types of information should Romeo include in each of the areas of the
business case?
4. What waste disposal regulations will Romeo need to consider? (Assume Romeo’s
organisation is based in your country.)
Learning Outcome 4: Demonstrate the application of ethical and responsible

sourcing within an organisation
SLIDE TUTOR NOTES
29 Not applicable
30 A procurement professional needs to ensure that there are no unethical or corrupt

activities within their processes or their supply chain.
Corruption – an unethical activity undertaken by a person with control or in authority.
Examples include the following.
• Bribery – the act of offering something of value in return for influencing a decision.
It is illegal in many countries, but not all.
• Deception – a deliberate effort to present false information, withhold information
or influence any stage of the procurement cycle in a way that is detrimental to
other parties.
• Abuse of power – when individuals misuse their position.
• Embezzlement – the taking of money or property by a person to whom it has been
entrusted.
• Fraud – acting to deliberately secure monies from another party through dishonest
methods, e.g., kickbacks, collusion, bid rigging, invoicing fraud, substitutions and
false claims.
Class discussion
What are some of the ways that corruption can present itself within procurement?
Pose some scenarios and ask if they represent corrupt or ethical practices.
• Offering money or gifts in return for the award of a contract, or inside knowledge
21
SLIDE TUTOR NOTES
to gain an unfair advantage against the competition.

• Falsifying documentation.
• Awarding a contract to a supplier in return for a kickback, rather than on merit.
Remind learners that different countries have different practices, (e.g., gift-giving, or
‘grease payments’), but that it is important to defer to your country’s legal definitions.
Refer to the diagram on the slide – it shows that the purchasing organisation has no direct
link with the subcontractor or the public authority. However, if the supplier has paid the
local authority to overlook some performance or technical irregularity in return for the
subcontractor giving kickbacks to the supplier, it is still part of the purchasing company’s
supply chain, so they are responsible.
Due diligence carried out by the purchasing organisation should reveal unethical practices.
Check and verify all supplier documentation, such as regulatory compliance, prior to
awarding a contract.
Other critical aspects to investigate include the following.

• Modern slavery – includes human trafficking, bonded labour, forced labour, child
labour and domestic slavery.
• Human rights violations – the statutory ways in which individuals expect to, and
should, be treated. They include dignity, fairness, respect, equality, and freedom,
and they can relate to sexual orientation, gender, religious beliefs, cultural values,
race, ethnicity, or nationality.
These areas must be examined with care during the evaluation stage. Investigate
suppliers’ policies and practices in relation to the treatment of their workers and the
associated organisations within their supply chain.
31 CIPS Code of Conduct – outlines the actions and behaviours that CIPS members are
expected to follow. (Refer to the extract on the slide.)
Class discussion
1. Ask learners if they have read or are familiar with the Code of Conduct.
2. What is the purpose of the Code of Conduct?
3. Ask for some examples of things that are included in the Code of Conduct, or run
through some of the examples below.
The following are some examples from CIPS Code of Conduct.
• Never engage in unethical or irresponsible sourcing and related activities.
• Always act in a professional manner, disclose any concerns or conflicts of interest
and keep the confidence of all parties within the supply chain.
• Regularly and thoroughly conduct due diligence on suppliers, report any concerns,
and keep up to date with regulations by expanding knowledge through CPD.
• Set positive and ethical examples for colleagues and suppliers alike.
• Comply with the country’s law in which the procurement function has agreed and,
22
SLIDE TUTOR NOTES
if there is no agreed law, ensuring that CIPS Code of Conduct is followed at all
times.
• Anyone who is a member of CIPS must agree to honour the code. It is therefore
important to familiarise yourself with and understand the code and ensure that
work carried out meets with the code’s guidelines.
• The code promotes the adoption of ethical processes and responsible sourcing
within procurement and supply and encourages any concerns to be raised with a
person of authority within the organisation.
• The code should be applied in everyday procurement activities and demonstrated
throughout the procurement cycle. Any third parties that the procurement
professional or their organisation engages with should also commit to the code.
• A procurement professional’s organisation should work towards developing and
implementing a code of ethics within their own company that reflects the
principles and standards shown in the CIPS code.
32 Code of ethics
• A set of morals, values and principles set out by an organisation to display what
they deem to be acceptable conduct and behaviour.
• Outline the values and missions of the organisation and state how professionals
within the organisation should behave and perform within their role.
• Contribute towards the application of responsible sourcing.
• Based on Nolan’s 7 Principles of Public Life identified in 1995 – refer to the diagram
on the left-hand side of the slide.
• Also determined by the organisation’s mission statement and values.
Organisations and codes of practice
• It is not a legal requirement to have a code of ethics, but it is good practice.
• Many organisations have their code of ethics on their website or available in an
electronic format.
• Buyers should check that potential suppliers have an ethical code of practice in the
pre-qualification or supplier questionnaire stage of the process.
• Codes of ethics help to give confidence that the suppliers, if approved, conduct
themselves in an ethical and responsible way.
Whistleblowing – the exposure or reporting of information that suggests some form of
wrongdoing within the workplace.
Non-compliance – if the ethical code of conduct within an organisation is breached, in any
area, there are consequences for both the individual who carried out the breach and often
the associated organisation.
Use diagram on the right-hand side of the slide to discuss the process associated with the
codes of ethics.
Activity
23
SLIDE TUTOR NOTES
In small groups, learners to discuss and record the aspects they would expect to be covered
in a code of ethics. (Prompt: treatment of workers within the supply chain, diversity,
conflict of interest)
Learners can conduct some Internet-based research if they are not sure.
Ask learners to obtain their organisation’s code of ethics and read through it if they have
not done so already.
Learners to note down the aspects covered.
33 Steps to support ethical practices in the supply chain include the following.
• Carrying out strong due diligence prior to the contract being awarded.
• Use selection and evaluation methods to assess which suppliers or potential
suppliers meet the criteria associated with ethical practice.
• Validate claims made by suppliers by checking their documentation and ensuring
that processes are actually in place.
• Use suppliers that are accredited, or are a member of an association that
promotes good ethical conduct (again, this needs to be validated; the use of a logo
is not sufficient).
The following organisations represent good ethical conduct.
• Chartered Institute of Procurement and Supply (CIPS)
• International Labour Organisation (ILO)
• Institute of Environmental Management and Assessment (IEMA)
• Assured Food Standards
• Carbon Trust
• Ethical Trading Initiative (ETI)
• Fair Trade Foundation
• Ethical Company Organisation
• Anti-Slavery International
Activity
Learners to carry out individual research on the organisations that represent ethical
conduct, such as CIPS, ILO, ETI, Fair Trade Foundation or Amnesty International.
• Where do they operate?
• Who can be members?
• What are their aims?
• How do they achieve this?
24
SLIDE TUTOR NOTES
Learners to share their findings in small groups.
34 Supplier monitoring and key performance indicators (KPIs)

These continually monitor suppliers throughout the life of the contract to ensure that the
ethical and responsible practices that were specified in the contract are adhered to.
Also helps to ensure the following.
• Ethical and responsible sourcing is being carried out.
• The required procedures and standards are being adhered to by their organisation.
• The required procedures and standards are being adhered to throughout the
supply chain.
Discuss examples of KPIs that relate to the measurement of ethical supplier performance.
• How many complaints have been received regarding diversity?

• How much packaging is being recycled?
• What percentage of energy is generated by renewable sources?
• What is the percentage of employees that leave each year? This can be an
indicator of working conditions.
• How many additional deliveries are made per order? This can indicate awareness
of pollution from transport.
KPIs measure and scores can be displayed on a dashboard – refer to the image on the
slide.
Lead a class discuss to draw out the following points.
• How the indicators relate to the initiatives
• What the different columns show, e.g., figures for different years, and variation
• How colour has been used to highlight change
• What the initiatives tell us about what is important to the organisation
35 The triple bottom line (TBL)

• It was devised by John Elkington
• It advocates measuring sustainability in relation to the performance and
investment against the 3Ps: People, Planet and Profit
• It is a useful tool for recording how sustainable an organisation is.
• It should be accompanied by setting objectives in relation to what the 3Ps show,
and then monitored by implementing KPIs or other measuring methods to ensure
improvements are made
People – the social dimension
• It considers the effect that an organisation has on its stakeholders, such as the
employees, consumers, producers and suppliers.
25
SLIDE TUTOR NOTES
• An organisation should have strong ethical principles in place and should be giving
something back to the local community.
Planet – the environmental dimension
• It considers the immediate and long-term effect that an organisation has on the
environment.
• Organisations should consider the effects of pollution and waste management,
how they can use renewable energy, and use and replenish natural resources
responsibly and sustainably.
Profit – the financial dimension
• Considers not just the amount of money made, but the continuity of the
organisation and enabling good work to be carried out in the community.
• Organisations should consider the long-term effects, not just the short-term.
Learner activity
1. Categorise each of the examples according to which dimension they relate to.
• A large privately owned call centre donates its end-of-life computers to local youth
clubs and social groups to help the under privileged gain Internet access.
• A driving instructor switches to a hybrid vehicle to teach his learners to reduce CO2
emissions.
• A chocolate manufacturer buys cocoa beans only from ethically run and
sustainably maintained cacao plantations.
• A legal firm opens its canteen over festive periods to provide a meal to individuals
in the local community who cannot afford a celebration.
• A packaging manufacturer makes enough profit to be able to re-invest in
state-of-the-art recycling machinery for its cardboard waste.
Lead a class discussion to share ideas. Was it always clear cut which dimension each one
belonged to?
2. Does your organisation use the TBL?
36 Sustainable procurement – balancing business needs against economic and social

development and environmental protection.
Examples of sustainable practices include the following.
• Evaluating and monitoring suppliers to ensure that only ethical and
environmentally aware organisations are awarded contracts, e.g.,
• Working with suppliers that have and are working towards sustainable and
environmental accreditations
26
SLIDE TUTOR NOTES
• Working with suppliers that promote their allegiance to organisations such

as the ILO or ETI
• Considering TBL as a way of reporting on suppliers’ organisations
• Actively working to reduce environmental damage in the supply chain, for
example, balancing the needs of just in time with the environmental impact of the
additional deliveries
• Evaluating needs and only procuring what is required
• Adapting and developing specifications to reflect the changing requirements of the
consumer and also to comply with regulations and legislation as these are
amended
• Gaining standards and accreditations
• Removing waste from the supply chain
• Applying continuous improvement in the supply chain
• Developing the procurement professionals of the future
• Amending specifications
Refer to the image on the slide to discuss factors that need to be adopted for the future
sustainability of procurement.
37 Samira is conducting due diligence on some potential suppliers for a contract to outsource
the IT helpdesk function of her organisation.
Work in groups to discuss the following questions:
1. Identify three actions Samira should undertake as part of due diligence, and what
she should be on the lookout for.
2. Why would you recommend Samira sets up regular ongoing supplier monitoring?
3. What should Samira do if she identifies possible child labour being used in the
extended supply chain?
27

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CIPS Level 4 Diploma in Procurement and Supply

Leading global excellence in procurement and supply

SLIDE TUTOR NOTES

2 A need – something that is required for an individual or an organisation to be able to

There are four types of need.

Requisitions: forms used to communicate the need to procurement. Includes the

• A description of what is required, including any quality requirements and

Stage 1: Determine which style of tender is to be conducted.

Stage 4: Receive responses, known as ‘bids’ by the deadline date.

Stage 6: Award contract and give feedback.

Stage 7: Contract management.

Each phase is characterised by different levels of competition and co-operation – refer to

Supplier management can be conducted by the following.

• Using credit checks

Steps for stakeholder management:

appropriate or do any need to change?

SLIDE TUTOR NOTES

This learning outcome focuses on sourcing activities.

Standard form or model contracts – templated contract comprising standardised and

Termination of a contract can be through:

Pairs or small group activity

15 If a supplier has financial difficulties it could result in the following.

The procurement team should do the following.

Awarding the contract

binding and should be signed.

Within many organisations, a large percentage of value is supplied by a relatively low

• Not concerned about the long-term sustainability of the relationship.

Characteristics of collaborative relationships are the following.

Benefits of a collaborative relationship include the following.

When assessing the bids, she notices the following points.

Work in groups to discuss the following questions.

Learning Outcome 3: Demonstrate the application of whole life asset management

SLIDE TUTOR NOTES

21 Whole-life asset management also known as whole life-cycle costs (WLC).

and availability of spare parts, the cost of skilled technicians or engineers,

Tutor-led class discussion

• Supplier financial position

Tutor-led discussion/learner activity

1. Listing all the departments in their organisation(s).

A couple of prompts are included below.

data, project plans?

25 Decommissioning – is to take out of operation and dismantle.

Reasons for decommissioning an asset include the following.

installed in their central warehouse.

Learning Outcome 4: Demonstrate the application of ethical and responsible

SLIDE TUTOR NOTES

30 A procurement professional needs to ensure that there are no unethical or corrupt

to gain an unfair advantage against the competition.

Other critical aspects to investigate include the following.

Learners to share their findings in small groups.

34 Supplier monitoring and key performance indicators (KPIs)

• How many complaints have been received regarding diversity?

35 The triple bottom line (TBL)

2. Does your organisation use the TBL?

36 Sustainable procurement – balancing business needs against economic and social

• Working with suppliers that promote their allegiance to organisations such

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