CIPS L2M2 - Lecture

Procurement and Supply Operations [L2M2]
Learning Outcome (LO)1: Know the types of

organisations and how they operate
All rights reserved. These slides are provided exclusively to CIPS Approved Study Centres for the sole purpose of teaching CIPS
Professional Qualifications, they are not to be used for any other purpose and may not be altered, copied, sold or lent to other
Slide 1
parties. Copyright ©2018 CIPS
Learning Outcome 1: Know the types of
organisations and how they operate
1.1 Identify the types of business organisations
• Private public and third sector organisations
• Production and service organisations
1.2 Describe how organisations operate

• People, objectives and structure in organisations
• The formal and informal organisation
1.3 Identify the key operating functions within organisations

• Differentiation and integration in organisations
• Typical functions in organisations such as production,
operations, marketing and sales, customer support, human
resources, personnel, finance, IT, and technical functions
• Differentiating procurement and supply
Slide 21
All rights reserved. These slides are provided exclusively to CIPS Approved Study Centres for the sole purpose of teaching CIPS Professional
Qualifications, they are not to be used for any other purpose and may not be altered, copied, sold or lent to other parties. Copyright ©2018 CIPS
Type of Business Organization
There are 3 Types
1. Public (Health care, Education, Military, Municipals)
2. Private (Sole trader, Partnership, Private limited, Public limited)
3. and TSOs, Third sector organisations (NGOs,

cooperatives, foundations)
(1.1) Public, private and third sector
organisations – a comparison
Slide 51
Organization Delivery
An origination always supply something to someone.
They are responding to a need of their client.
• Tangible (Product), like books engine, computers etc..

• Intangible (Services) like education, medical treatment, social services
etc..
What you think about TSOs??!! Majorly what they provide??
Like what??
So there are two main type of organizations within

Business;
1. Production Organizations, Appel, Siemens, Almari

2. Service Organizations, Fahas, SAMA, DAMCO, MOI(Absher)
(1.1) Production organisations
Slide 31
(1.1) Service organisations
Slide 41
Location of Organization
Important Issues while selecting location
• Travel connections
• Local environment
• Demographics
• Security
• Competition
• Expansion
(1.2) Organisational structures
Slide 61
Organization can be formed as
• Formal : Structured, planned and well
organized. Legal entity. Everyone knows their
role.
• Informal : Less structured, for example

running a club or online forum by like
minded people.
(1.2) Objectives
Slide 71
Organization’s Statements
• Mission Statement
That explains
• Organization’s business
• Reason for its existence
• Its goal
• Define the aims and the way it intends to reach
to the objectives
Example: Starbucks States:
“Our mission: to inspire and nurture the human spirit-
One person, one cup and one neighborhood at a
time.
Organization’s Statements
• Vision Statement
That explains
• Where organization would like to go in future
Example: Caterpillar’s Vision Statement is:

“Be the global leader in customer value”.
(1.3) Typical functions in organisations
Slide 81
Organizations can develop and function in two
ways
• Differentiation
Where each department will have their own
set of rule and culture from the rest of the
business. Minima; interaction between
different departments.
• Integration
All departments are aligned in terms of rules,
polices and strategy. Likely to work together
closely.
Procurement!
Q?
Why it is important for procurement to
understand all of the business functions??
Recommended reading
Level 2 CIPS Procurement and Supply Operations

Study Guide
Procurement and Supply Chain Management

Lysons/Farrington
Slide 9
Learning exercise: Head First
• ‘Head First’ is a chain of hairdressing salons. The
organisation’s mission statement is for every client to
receive a luxury experience every time.
• The main business functions of operations, finance,
procurement and marketing are performed in their Head
Office. Each department has a Head that members of the
team report to. The Heads of each department reports to
the Managing Director.
• Within each salon, there is a Salon Director, who is also
the most senior hairdresser. All members of staff from
the salon – that is Junior and Senior stylists and
colourists, trainees and the receptionist report to the
Salon Director. The Salon Director reports to the
Managing Director.
Learning exercise: Head First
1. What sector does Head First operate in?
2. What are the most likely source(s) of funding for Head

First?
3. Based on the information provided, draw the
organisational structure. What type is it?
4. Do you think the salons and the Head Office functions will
operate by differentiation or integration? Provide a
reason for your answer.
Slide 10
McQs
Learning Outcome (LO)2: Know the components of

contractual agreements
These slides are provided exclusively to CIPS Approved Study Centres for the sole purpose of teaching CIPS Professional Slide 11
Qualifications, they are not to be used for any other purpose and may not be altered, copied, sold or lent to other parties. Copyright
©2018 CIPS
LO2: Know the components of contractual
agreements
2.1 Identify types of contracts
• Spot purchases
• Term contracts
• Framework arrangements/blanket orders/panel contracts and call offs
2.2 Identify the kind of pricing arrangements applied in commercial contracts
• Fixed pricing, lump sum pricing and schedule of rates

• Cost reimbursable and cost plus arrangements
• Variable pricing arrangements
• Target pricing arrangements
• Risk and reward pricing arrangements
2.3 Define the different documents that compose a contract for the purchase or supply of goods or
services
• 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
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12 21
they are not to
(2.1) Spot purchases and term contracts
Spot purchases:
The price is agreed, the goods are supplied, the relationship ends.
•Fuel – shopping around each time could save money due to ever-changing prices
•New machinery – likely to be a one-off purchase, so a spot buy could get best
price
•Business cards – likely to be needed quickly when new person is hired
Term contract:
Contract clearly states what is to be supplied, where it is to be supplied
to, the specification and quantities in which the goods or services are to
be supplied, and the agreed price or pricing formula (refer back to the
five rights of procurement)
•Supply of components for a manufacturing organization – to ensure continuous
flow of components of the same specification
•Maintenance of machinery – to ensure quick response if machines need
repairing
•Providing cleaning services – ongoing need
(2.1) Spot purchases and term contracts
• Slide 1
Slide
13 21
(2.1) Framework arrangements, blanket orders, call-
offs, and panel arrangements
Framework arrangement
It’s an umbrella arrangement not a contract. Means individual terms do
not have to be set up for every order. Can be used for tangible goods or
intangible services.
Blanket order
Set price for a particular volume of goods or services for the duration of
the order. Buyer calls off an order. Supplier only supplies if supporting
contract is in place. If the supplier accepts the call-off order, a contract is
formed and they have to supply.
Slide
14 21
Panel arrangement
Several suppliers involved in a framework arrangement.
Suppliers may be differentiated by specialism but specifications remain
the same for all suppliers.
The Public Sector often uses a panel agreement for their framework
arrangements to ensure the services they supply are continuous.
Slide
14 21
Slide
14 21
(2.2) Fixed pricing, lump sum pricing and
schedule of rates
Pricing/Costing Methods
1. Fixed pricing:
2. Lump sum pricing :
3. Cost reimbursable or cost-plus
arrangements:
4. Variable pricing
5. Target pricing
6. Risk and reward pricing Slide
15 21
schedule of rates
Fixed pricing:
Fixed pricing is often used in blanket arrangements.

If a buyer has agreed fixed pricing, they know that
every call off they place for an item will be at the
same fixed price.
Slide
15 21
schedule of rates
Lump sum pricing :
buyer and supplier agree at the start of a project the final
price that is to be paid.
Slide
15 21
schedule of rates
Cost reimbursable or cost-plus arrangements:
are used when buying services where it is not possible to understand exactly what
is needed until the job starts, e.g., repairing a building that has been damaged, or
altering a factory to meet new legislation.
Need to consider:
•direct costs: associated directly to the job or contract e.g., raw materials, labour
•indirect costs: not associated directly with the job or contact e.g., wages of
support staff, rent of the office, lease hire of the company vehicle
1. Fixe fee method: Cost + fixed fee method

2. Percentage fee method: Cost + fixed percentage on supplier’s cost as fee
Slide
15 21
(2.2) Cost reimbursable and cost-plus pricing
Slide
16 21
(2.2) Cost reimbursable and cost-plus pricing-
Class Exercise
Fixed fee method
Direct + Indirect + fixed fee = total cost
$45,000 + $4500 + $15,000 = $64,500
Percentage fee method

Direct + 30% fee + Indirect + 30% fee = total cost
$45,000 + $13,500 + $4500 + $1350 = $64,350
• Not much difference between the two methods at these rates.

• What would happen if the direct costs were to rise to $60,000?
• Before doing calculations, consider what other costs/figures would be affected.
For example, would the indirect costs change?
Class Exercise
Variable pricing
Moves with the market – price to buyer reflects price paid by supplier
Can change daily, weekly or even hourly depending on what the product/service
Has an agreed mark up on it
Examples of commodities with variable pricing: precious metals, electricity, diesel
or gasoline.
Class Exercise
Target pricing:
Is used when there is a lot of trust between a buyer and a supplier. Target pricing
is when an end price is agreed and the supplier has to supply the goods or
service for that price. If the supplier goes over the target price, they lose money.
However, if they manage to do the work for under the target price sometimes the
money saved is split between the two organizations.
Costs to produce 1 tonne of grain
Class Exercise
Risk and reward pricing
is often when providing services; the supplier is paid when they meet
agreed objectives.
For example, a marketing consultant is brought in to improve
engagement on social media by 100% over a three-month period.
The consultant could set a low daily rate to cover their costs and then
agree to an additional payment based on achieving 10% engagement.
As soon as the consultant achieves the 100% increase, they can invoice
the organisation for the additional fee.
If they do not achieve the 100% increase, they are not able to invoice for
any additional fees.
Home Assignment
• Take Product or Services you would like to buy as an example and answer
below;
• Suggest some Prequalification criteria you would mention in RFIs or
Prequalification stage for prequalifying the vendors (Refer to the 10Cs).
• Suggest and write some specification for the tender. (Refer to the five
rights of procurement).
• Suggest some KPIs that could be included in the contract.
• Read about Open book costing from below link for discussion in next session.
(you can use below link)
https://morrisseylaw.com.au/cost-plus-contracts-what-are-they-and-when-
should-they-be-used/
(2.3) The use of tendering and quotations
A tender, or invitation to tender (ITT) -
document that states what service is required,
how often it is needed, where it is needed and
how long the contract will last. It is sent out to
prospective suppliers.
Slide 21
21
Slide 21
21
• Prepare
• Creation of requisitions and requirements

• Specifications, key performance indicators (KPIs)
and contract terms created. Provide suppliers
with information about what they need to
supply, when and how.
Slide 21
21
• Process
• Request for quotations - used to explore the commercial offerings from

current or prospective suppliers within the marketplace.
• Invitation to tender - sent to potential suppliers as an offer to them to

supply goods or services to an organization. Commonly used for high-
value or long-term contracts, or where there are many available suppliers.
• Pre-qualification questionnaire (PQQ) - asks for information on the

supplier’s financial history, compliance to regulations, quality procedures,
and sustainability and environmental policies to help buyers make an
informed decision about who to work with.
• Quotation – submitted by supplier in response to an RFQ.
Slide 21
21
• Evaluate
• The assessment of quotations and tenders from

suppliers.
• Buyer should check all details are as per
specification, etc.
• Use Carter’s 10 Cs to impartially assess the
tender/quotations. Remember, no extra marks
are awarded for exceeding the specification.
Slide 21
21
• Award
• In some cases, the buyer can award contracts

directly, in other cases they will need approval
from an authorised person, e.g., manager, etc.,
before awarding the contract.
Slide 21
21
• Tender vs quotations
Tender Quotation
• Document sent out to invite bids • Response to a request for

• Formal quotation (RfQ)
• Suppliers are often pre-evaluated • RFQ can be sent out to numerous
• Most common in public sector suppliers and is often not as
• Response in set format detailed as a tender.
• Can be negotiated • Suppliers can offer different
• Complex products or services solutions to an RFQ as long as the
• High-value products or services product or service does what the
RFQ states it needs to.
Slide 21
21
(2.3) Contracts and agreements
Contract terms: Contract

documents:
• Acceptance
• Specification
• Rejection • KPIs
• Revocation • Contract terms
• Time • Pricing
• Counter-offer arrangement
Slide 20
21
(2.3) Contracts and agreements
Slide 20
21
(2.3) Contract documents:
Slide 20
21
(2.3) Contract documents: TYPE OF SPECIFICATIONS
Slide 20
21
(2.3) Contract Terms:
Slide 20
21
(2.3) Battle of the forms
Slide 22
All rights reserved. These slides are provided exclusively to CIPS Approved Study Centres for the sole purpose of teaching CIPS Professional 21
Recommended reading
Level 2 CIPS Procurement and Supply Operations

Study Guide
Slide 23
Learning exercise: Oskar’s options
Oskar works in the procurement team at a local council.
The council needs to have all of the rooms in its main office building repainted. There are 24
rooms, which have an average wall surface area of 70m2, but they range in size from 40-150m2
The work needs to be done in the weekends in order to minimise disruption to the staff that work
there.
The work needs to be done within the next three months in order for it to be paid for from the
current financial year’s budget.
Oskar is open to using more than one company for this work in order for it to be completed in the
shortest time possible.
1. With a partner, discuss the work that needs to be done and write a specification
for the tender. (Refer to the five rights of procurement.
2. What pricing options could Oskar favour to incentivise the work being completed
quickly?
3. Suggest three KPIs that could be included in the contract.
Slide 24
21
McQs
Procurement and Supply Operations L2M2]
Learning Outcome (LO)3:Understand sources of

information on suppliers and customers
Slide 25
Learning Outcome 3: Understand sources of
information on suppliers and customers
3.1 Explain the use of the Internet to locate details about suppliers and customers
• The use of Internet search engines to locate details about suppliers and customers, and
the types of information presented by suppliers and customers on their websites
• B2B and B2C E-Commerce
3.2 Explain the use of credit rating agencies

• The role of credit rating agencies and credit rating scores, and the use of credit rating
scores
• Publications on individual organisations and markets
3.3 Describe systems used in procurement and supply

• Systems for purchase ordering
• Capturing data on expenditures
• The use of portal sites to locate suppliers or customers, and supplier database systems
Slide 26
(3.1) Researching suppliers
Slide 27
(3.1) B2B and B2C E-Commerce
• B2B
• B2C
• E-commerce
• BACS
Slide 28
Home Assignment
• Take any Contract / PO KPIs your
organization have with supplier. Put these
KPIs in a presentable format to present in
the next session.
(3.2) Credit rating agencies and credit rating scores
Credit rating agencies are impartial bodies that hold information about businesses and
consumers such as:
•Credit limits with organizations

•Trade payment history
•Profit and loss statements
•Turnover
•Shareholder funds
•Court judgements
Credit rating agencies give a credit rating score to an organization.
Slide 29
(3.2) Credit rating agencies and credit rating scores
•What does a high credit rating score indicate?

Good
(organization is able to afford to pay their debts in a timely
way and without defaulting.)
•What can a low credit rating score indicate?

(bad debt, but also new business’ that have not filed any
statements yet, so no history)
Slide 29
(3.2) Publications on individual organisations
and markets
Slide 30
(3.3) Systems for purchase ordering - Materials Requirements
Planning Systems (MRP)
• Sales team enters an order

• MRP system refers to current stock levels and
calculates how many of each product needs to be
manufactured
• The MRP refers to minimum order quantity, Batch
quantities and buffer stock to arrive at an order,
and creates a bill of materials (BOM) for each
product ordered
• The buyer uses the BOM to create PO
Slide 31
(3.3) Capturing data on expenditures
Procurement teams need to capture data on

expenditures in order to monitor how much has been
spent and how much budget there is left to spend.
Why do we need budgets?

So everyone knows how much they have to spend, and can make
decisions based on what best serves the companies’ needs.
Slide 32
(3.3) Capturing data on expenditures
Slide 32
(3.3) Portal sites and suppliers databases
Supplier portals are set up by an organization to enable suppliers to
apply to work with them. The portal may contain the following
information about the organization:
• Overview and what it produces

• Structure
• Definition of direct and indirect supply
• Environmental/CSR policy
• Ordering process
• Payment terms
• Supplier handbook
• Confidentiality agreement
• Standards required
• Process improvement techniques
• Shipping
Slide 33
(3.3) Portal sites and suppliers databases
Slide 33
(3.3) Customer sites and suppliers databases
Customer portals are used by buyers. Customer portals can be B2C, like
Amazon, or B2B. A B2B portal contains information about the customer,
such as:
• Personal details, including address
• Price lists
• Quotations
• Order history
• Invoices
• Available credit
• Contracts
Each customer has login information to their own area of the website to
ensure their details are secure.
Slide 33
Recommended reading
CIPS Level 2 Procurement and Supply Operations

Study Guide

Lysons/Farrington
Slide 34
Learning exercise: Credit scores
Carlos runs a not-for-profit makers space that has a selection of computer-
programmed machinery that members of the public can use. The organisation
has just won a government grant which will enable them to purchase and run a
laser cutting machine.
• Carlos needs to source a supplier who can supply, deliver and maintain the
machine.
• He is reviewing the responses to tender that have been submitted and they all
seem like strong candidates.
• Carlos has asked a credit rating agency to carry out a credit rating score on the
five respondents.
• Companies A, B and C have credit rating scores around 80-90. Company D has
a score around 55, and Company E has a score around 60.
Slide 35
Learning exercise: Credit scores
• 1. Based on the scores alone, which

companies would you recommend Carlos
works with?
• 2. What could the credit scores for

Companies D and E indicate?
• 3. How could this new information affect

Carlos’s decision as to whether to use the
supplier?
Slide 35
Credit Rating Wesite
• https://www.creditsafe.com/gb/en/credit-
risk/credit-reports/company-credit-
reports.html
McQs
Learning Outcome (LO)4: Understand pricing methods

used for the purchasing of goods or services
Slide 36
Learning Outcome 4: Understand pricing methods
used for the purchasing of goods or services
4.1 Explain the advantages and disadvantages of a
range of pricing methods
• Fixed pricing, lump sum pricing and schedule of
rates
• Cost reimbursable and cost plus arrangements
• Variable pricing
• Target pricing
• Risk and rewards pricing
Slide 37
(4.1) Factors to consider when deciding on the
most suitable type of contract
• How much profit does an organisation want to make?
• What is the supplier relationship like?
• How much will the costs be?
• Are any investments needed?
• Is there enough resource?
• Are the market prices stable?
• Could the job be done more quickly than suggested?
• How much risk should be taken?
Slide 38
(4.1) Fixed pricing
Slide 39
(4.1) Fixed pricing
Check understanding with the following scenario:
Simon works for a dressmaking factory. Based on
previous years’ orders, he places an order for 10,000
zips that can be called off over the course of the next
year. As a result of placing the large order, Simon
secures a good fee for them.
• Why might Simon have chosen to place a blanket

order at a fixed fee rather than making spot
purchases?
• What would happen if it turns out that Simon’s
organisation don’t need all 10,000 zips in the course
of the year?
(4.1) Lump sum pricing
Advantage Disadvantage
The buyer knows exactly what they will be The supplier could charge more for the
paying for the whole project project or contract using a different
strategy
The supplier knows how much money they The buyer could purchase the goods or
will receive which helps them budget services cheaper using another strategy
If the market prices rise, the buyer is not The supplier may not make the budgeted
affected as the lump sum price remains profit if the market prices rise
the same
The buyer is not exposed to any risk with The supplier takes on the risk of market
regards to price rises price rises.
The payment can be staged, which helps The payment can be staged, which means
with buyer’s cash flow the supplier doesn’t receive all the money
until the end of contract even if they
manufacture all inventory at the start
Slide 40
(4.1) Lump sum pricing
Bradley manages a building company. He has been asked to
provide a lump sum quote for a building job.
Bradley knows there are risks associated with this as there could
be some unknowns. He makes sure he takes all of his costs into
account, and adds on some contingency budget before.
• What costs does Bradley need to have included: direct costs

(labour, materials) and indirect costs (overheads), plus
contingency and profit.
• What other pricing method could Bradley have suggested that
would result in lower risk for him?
(4.1) Schedule of rates
Slide 41
(4.1) Schedule of rates
Kasha can’t decide if she wants to get carpet or
laminate flooring in her flat, but she knows the
maximum amount of money she can spend on it.
She asks a local floor fitter to supply schedule of rate
costs so she can compare price per square metre for
materials and fitting of the two different methods.
• How can the schedule of rates help her decide what

to choose? (She’ll be able to see price per square
metre and compare costs easily)
(4.1) Cost reimbursable and cost plus
arrangements
Advantage Disadvantage
The supplier is guaranteed to get their The buyer will not be able to budget
costs repaid effectively as there is no fixed pricing
It is a simple way of agreeing prices with The buyer will not know the exact cost of
transparency on both sides. the project until completion
If a fixed fee is agreed on top of the costs, If a fixed fee is agreed, the supplier could
the supplier knows exactly how much have made more money if a percentage
profit they will make from the outset fee had been negotiated
Everything is well documented in the The contract is often complex to write
contract
All supplier costs can be covered Some contracts do not include indirect
costs
Slide 42
(4.1) Cost reimbursable and cost plus
arrangements
Revisit the scenario from Slide 6 with Bradley and his
lump sum quote.
Ask learners to compare the two methods of pricing
from Bradley’s point of view, and from the supplier’s
point of view in the following cases:
•The job turns out to be easier than Bradley had

feared
•The job turns out to be more complex than Bradley
had costed for
(4.1) Variable pricing
Slide 43
(4.1) Variable pricing
Marsha is an administrator for a sales team at a large mobile
phone organisation.
Each week, she uses a price monitoring website to find the
cheapest deals on petrol in the town where the office is located
and emails all staff with company cars details of the cheapest
prices.
She’s discovered that she could achieve greater savings by
signing up to a fuel card contract.
Compare the two pricing methods and offer advantages and
disadvantages in relation to this scenario.
(4.1) Target pricing
Slide 44
(4.1) Target pricing
Revisit the building scenario from Slide 8.
• Ask learners to compare target pricing to lump-

sum pricing from Bradley’s point of view, and
from the Customer’s point of view.
• Why could target pricing be attractive to both
parties?
(4.1) Risk and reward pricing
Slide 45
(4.1) Risk and reward pricing
Ingrid is a workflow consultant who specialises in Lean manufacturing.
She signs a contract with a manufacturer of vertical blinds with the
following terms:
•$350 daily rate
•To achieve 10% cost savings by identifying waste within the production
workflow, and suggesting and implementing new work processes to
address the inefficiencies.
•If she meets the 10% cost savings target within 2 months, she will be
paid a bonus of 20% of the value of the cost saving.
•If she exceeds the 10% cost savings, she will be paid 25% of the value of
the cost savings as a bonus.
Chris, another consultant, has suggest a daily rate of $500 with no
bonus.
What factors would you need to consider before deciding which
supplier’s pricing arrangement is most advantageous for you as a
buyer?
Learning exercise: Get Out There
Get Out There

Get Out There is a supplier of outdoor clothing and camping equipment. They
want to update their brand identity to appeal to new groups of consumers.
They’re looking for a new marketing design supplier or suppliers to:
• develop their brand identity

• take on the production of print and web-based marketing
• update and maintain their website
• start and maintain social media accounts for them.
Slide 47
Learning exercise: Get Out There
Which type of pricing arrangement would be the best

to deliver the services for Get Out There?
Consider:
• The value of products or services required

• The quantity of each need
• The frequency of the needs
• The specification and likelihood of it changing
• The number of suppliers required
Slide 47
McQs
Recommended reading
CIPS Level 2 Procurement and Supply Operations

Study Guide

Lysons/Farrington
Slide 46

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Procurement and Supply Operations [L2M2]

Learning Outcome (LO)1: Know the types of

1.2 Describe how organisations operate

1.3 Identify the key operating functions within organisations

1. Public (Health care, Education, Military, Municipals)

2. Private (Sole trader, Partnership, Private limited, Public limited)

3. and TSOs, Third sector organisations (NGOs,

• Tangible (Product), like books engine, computers etc..

So there are two main type of organizations within

1. Production Organizations, Appel, Siemens, Almari

• Informal : Less structured, for example

Example: Caterpillar’s Vision Statement is:

Level 2 CIPS Procurement and Supply Operations

Procurement and Supply Chain Management

1. What sector does Head First operate in?

2. What are the most likely source(s) of funding for Head

Learning Outcome (LO)2: Know the components of

2.2 Identify the kind of pricing arrangements applied in commercial contracts

• Fixed pricing, lump sum pricing and schedule of rates

• Defining contracts and agreements

Fixed pricing is often used in blanket arrangements.

1. Fixe fee method: Cost + fixed fee method

Percentage fee method

• Not much difference between the two methods at these rates.

• Suggest some KPIs that could be included in the contract.

• Creation of requisitions and requirements

• Request for quotations - used to explore the commercial offerings from

• Invitation to tender - sent to potential suppliers as an offer to them to

• Pre-qualification questionnaire (PQQ) - asks for information on the

• Quotation – submitted by supplier in response to an RFQ.

• The assessment of quotations and tenders from

• In some cases, the buyer can award contracts

• Document sent out to invite bids • Response to a request for

Contract terms: Contract

Level 2 CIPS Procurement and Supply Operations

Oskar works in the procurement team at a local council.

Learning Outcome (LO)3:Understand sources of

3.2 Explain the use of credit rating agencies

3.3 Describe systems used in procurement and supply

•Credit limits with organizations

•What does a high credit rating score indicate?

•What can a low credit rating score indicate?

• Sales team enters an order

Procurement teams need to capture data on

Why do we need budgets?

• Overview and what it produces

CIPS Level 2 Procurement and Supply Operations

Procurement and Supply Chain Management

• 1. Based on the scores alone, which

• 2. What could the credit scores for

• 3. How could this new information affect

Learning Outcome (LO)4: Understand pricing methods

• Why might Simon have chosen to place a blanket

• What costs does Bradley need to have included: direct costs

• How can the schedule of rates help her decide what

•The job turns out to be easier than Bradley had

• Ask learners to compare target pricing to lump-

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