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Scott is a procurement manager who is evaluating a bid from a supplier to provide a new IT system to his office that will be used by 100 employees. He is considering the total life-cycle costs. Which of the following should Scott consider? Select THREE
Answer : A, C, D
total life-cycle costs include; acquisition costs, maintenance and training.
Added value and functional fit are quality criteria that should also be evaluated when selecting a supplier, but do not fall under total life-cycle costs.
Note: total life cycle costs and whole life asset management are the same thing. You may see both terms used in the exam. I think CIPS is moving more towards Whole Life Asset Management now as the preferred vocabulary but they're the same thing.
When selecting a supplier on technical merit, its important that the supplier is a good 'functional fit' for the organisation. What is meant by 'functional fit'?
Answer : B
The correct answer is 'the supplier is able to work at the same technical level as the buyer'. It's about being able to integrate the businesses together in terms of IT systems and such like.
When conducting an ABC analysis- what category of items and type of suppliers would you typically find in the A category?
Answer : C
A Category spend is high value and strategic suppliers. C category is low value, high volume of spend aka tail spend. The bits in the middle are B category.
For example when you have a baby you have to buy lots of stuff for it. Your A spend is the big, important and expensive purchases like the pram, cot, carseat. You spend a lot of time in this category because they're important purchases you want to get right. The Tail Spend / C are all the little bits like nappies, baby shampoo, sippy cups. The B category are the bits in between - the purchases are kinda important but aren't as strategic or important as A category. Toys may fall into this category.
When would a procurement professional use the Pareto principle?
Answer : A
The Pareto Principle can be used when considering changing a supplier. It helps to categories suppliers by how strategically important the item is that they provide to the business.
Which of the following is not a indices that measures economic data?
Answer : D
ISO isn't an indices- it stands for 'International Labour Association'.
The others are all indices that measure economic data; consumer price index, producer price index and gross domestic product.
