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MCG - CIPS Exam Centre Number - 005031578






Level 6 -Professional Diploma in Procurement and Supply

Level 5 - Advanced Diploma in Procurement and Supply

 Level 4 -Diploma in Procurement and Supply

Level 3 - Advanced Certificate in Procurement and Supply Operation

Level 2 - Certificate in Procurement and Supply Operations


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Level 3 - Advanced Certificate in procurement and supply operations

Qualification number: 600/7281/7




Procurement and supply environments [AC1]


Unit Purpose and Aim(s)


On completion of this unit, candidates will understand a range of external factors that can impact on procurement
and supply operations.


This unit focuses on the wider environment that impacts on procurement and supply in a range of different types of organisations, the public, private and not for profit or third sector can all be involved in fulfilling organisational needs.



1.0 Understand the role and scope of procurement and supply in different economic sectors

1.1 Summarise the functions of the private sector
• Definitions of organisations
• The size and scope of the private sector in different economies
• Functions of private sector organisations such as profit, growth, market share, share price, other financial measures, corporate and social responsibility

1.2 Analyse the role and scope of procurement and supply in the private sector

• Sole trade, partnerships, registered companies, incorporated and unincorporated companies
• Small and medium sized organisations (SMEs)
• Multinational organisations
• The roles of procurement and supply in the private sector

1.3 Analyse the role and scope of procurement and supply in the public sector
• Defining the public sector
• Central and local government
• The functions of public sector organisations
• The roles of procurement and supply in the public sector
• Commissioning and procurement
• Achieving budget savings and other sources of added value

1.4 Explain the roles of the not for profit or third sector
• Defining the not for profit and third sector
• Public accountability for the not for profit and third sector
• The role of procurement and supply in the not for profit and third sector


2.0 Understand market forces that impact on procurement and supply

2.1 Explain the implications of different types of competitive markets on procurement and supply
• Defining markets
• Perfect competition, imperfect, oligopolistic, duopolistic and monopolistic markets
• The impact of market competition on the procurement of supplies and services

2.2 Analyse the principles of market demand and supply and how these impact on procurement and supply
• Defining micro economics
• Demand and supply curves
• Shifts in demand and supply
• Elasticity of demand and supply

2.3 Explain the impact that market factors can have on organisations
• Market change
• The impact of demand and supply on pricing and availability
• The impact of product life cycles on demand

3.0 Understand the external environment and its impact on procurement and supply

3.1 Use analytical tools to explain the impact of the external environment on procurement and supply
• The use of environmental scanning
• The use of PEST (political, economic, social and technological) criteria or STEEPLE (social, technological, economic, environmental, political, legislation and ethical) criteria that impacts on organisations’ external environment
• The five forces model

3.2 Explain the implications of economic criteria that impact on procurement and supply
• Macro economic criteria such as interest rates, inflation, exchange rates, level of economic activity (GDP/ GNP) that impacts on organisations
• Micro economic criteria such as demand and supply that impacts on organisations


3.3 Explain the implications of political and legislative criteria that impact on procurement and supply
• Political criteria such as stability and instability that impacts on organisations, different economic sectors and on countries
• Legislation that impacts on organisations such as on standards, health and safety, environmental standards and employment law

3.4 Explain the implications of environmental and ethical criteria that impact on procurement and supply
• Environmental criteria such as natural risks, waste emissions, pollution and energy efficiency that impact on organisations
• Ethical and social criteria such as employment rights, community benefits, working conditions and standards that impact on organisations

3.5 Explain the implications of social criteria that impact on procurement and supply
• Changing societal preferences, tastes and fashions, demographics, labour and fair-trade standards and how these can impact on organisations




Procurement and supply operations [AC2]


Unit Purpose and Aim(s)


On completion of this unit, candidates will be able to identify a range of considerations in formulating agreements
with external organisations.

This unit assesses procurement and supply operations and is structured around the achievement of the five
rights namely price, quality, time, quantity and place.



1.0 Understand the main techniques that can achieve added value through procurement operations

1.1 Explain techniques to obtain supplies to the purchaser’s requirements
• The five rights of procurement
• Defining sources of added value
• Defining value for money
• Applying the five rights to procurement of both products and services

1.2 Analyse techniques to secure competitive pricing
• Using competition to obtain quotations on prices
• Comparing prices quoted to historical data
• Suppliers' approaches to pricing
• The link between costs and prices
• Negotiating improved prices
• Securing competitive pricing through competition or collaboration with suppliers
• Measuring achieved savings

1.3 Explain techniques to achieve quality supplies
• Defining quality
• Quality standards, processes and procedures
• The use of quality assurance
• The concept of zero defects
• Assessing quality of supplies of products and services

1.4 Assess techniques to secure required quantities at required timescales
• Internal, external and total lead time
• Expediting and measuring delivery performance
• Planning milestones and activities
• The use of scheduling
• Inventories and their costs


2.0 Understand the main tasks associated with each stage of the sourcing process

2.1 Explain how procurement needs are identified
• Liaison with users and customers and understanding their commercial needs
• Reviewing needs from customers
• The make or buy decision
• Definitions of specifications

2.2 Explain criteria that should be applied in creating specifications
• The importance of specifications in contracts with external customers and suppliers
• Creating specifications for products and services
• Conformance and output or outcome based approaches to developing specifications
• The role of key performance indicators (KPIs)

2.3 Assess approaches to the sourcing of supplies
• Surveying the market
• Supplier appraisal
• Inviting quotations and tenders
• Assessing quotations and tenders
• The use of esourcing technologies
• Measuring supplier performance

2.4 Explain approaches to the formation of agreements with external organisations
• Dealing with queries and clarifications
• Ensuring transparency and fairness with suppliers
• Mistakes and second bids in tenders
• The use of reverse auctions/ eauctions
• Forming agreements with customers and suppliers
• Transition and mobilisation arrangements


3.0 Understand the impact of technology on procurement operations

3.1 Explain the impact of electronic procure to pay (P2P) systems on procurement operations

• The stages of the sourcing process from identification of needs to the award of agreements
• Creating approvals and their timescales
• Defining procure to pay (P2P) systems
• Automating requisitions, purchase orders and invoices
• Integration of systems between organisations

3.2 Explain how the use of internet technologies can support procurement operations
• Providing data to smooth demand and supply
• Communicating via the internet
• Web based solutions such as erequisitioning, esourcing, eordering, einvoicing




Procurement and supply workflow [AC3]


Unit Purpose and Aim(s)


On completion of this unit, candidates will be able to interpret a range of data to help develop effective administration processes required when dealing with external organisations.

This unit identifies the typical work flows that procurement and supply personnel can be involved in working on.



1.0 Understand the workflow involved when making agreements with suppliers

1.1 Explain the details that should typically be created in a purchase requisition
• Documentation that enables procurements of supplies and services
• The use of requisitions
• Interpreting the details that should be included in requisitions

1.2 Explain the process for receiving quotations for the supply of goods or services
• Creating requests for information, quotations and proposals
• Dealing with queries and ensuring equality and fairness
• Receiving quotations

1.3 Assess the implications of contractual provisions that may be included in quotations for the supply of goods or services
• Analysing and comparing quotations
• Terms relating to prices, payment, delivery, quantities, conformance to order and liabilities
• Interpreting terms used by purchasers and suppliers
• Dealing with variations to terms

2.0 Be able to develop a standard purchase order for goods or services

2.1 Analyse the details that should typically be created in a purchase order
• Formats of purchase order documentation
• The fields and contents of standard purchase orders
• The use of cost centres and budgets

2.2 Complete a purchase order for goods or services

• Completing the details that should be included in purchase orders


3.0 Be able to interpret data relating to the workflow involved in procurement and supply

3.1 Calculate future demand from relevant data used within procurement and supply
• Sources of data on historic demand
• Qualitative and quantitative forecasts
• Performing calculations from equations
• Extrapolating historic data to form forecasts of demand
• Revising forecasts and establishing reasons for variances

3.2 Use data that relates to the pricing of goods or services for procurement and supply
• Direct and indirect costs
• Break even analysis (cost and volume profit formula)
• Analysing margins and mark ups
• Estimating whole life costs

3.3 Use financial data supplied in sets of accounts to gauge the financial standing of organisations in procurement and supply
• Sources of information on organisations
• Annual accounts
• Financial statements such as: balance sheet, profit and loss and cash flow

3.4 Draw conclusions from the operation of financial budgets for procurement and supply
• Comparing forecasts with actual expenditures
• The use of budgets
• Variance analysis

4.0 Understand how to deliver effective customer service to improve workflow in procurement and supply

4.1 Review how customer service improves workflow in procurement and supply
• Definitions of customer service
• The role of procurement and supply in customer service
• Managing expectations
• Achieving excellence in customer service


4.2 Explain how to clarify requirements when communicating with stakeholders
• The communications process with stakeholders
• Verbal and non-verbal communication, person to person and group communication
• Communicating by telephone
• Effective writing of letters, emails, memoranda and reports
• Preparing documentation
• Building rapport

4.3 Explain how technology impacts on communications in procurement and supply
• Supplier and customer networks
• Producing plans and information on intranets and web-pages
• Electronic newsletters and catalogues
• Messaging technology
• Sending data to external suppliers or customers




Inventory and logistics operations [AC4]


Unit Purpose and Aim(s)


On completion of this unit, candidates will be able to select appropriate techniques to ensure the right inventory can be purchased or supplied.

This unit focuses on the techniques that can be applied to achieve the availability of inventories through the flow of materials and information.



1.0 Understand the main implications of purchasing and supplying inventory

1.1 Classify the main types of inventory
• Definitions of inventory and inventory stock management
• Opening stock, work in progress and finished goods
• Safety stocks

1.2 Assess the costs involved in holding inventory
• Acquisition and holding costs
• Methods for the valuation of inventory such as LIFO, FIFO, average cost and standard cost
• The profit and loss entry of cost of sales and goods sold

• The balance sheet entry for inventory

1.3 Explain the main techniques for the monitoring and control of inventory
• Pareto analysis and ABC classifications of inventory
• Dependent and independent demand
• Just in time supply and kanban systems
• Consignment stocking and vendor managed inventory

1.4 Analyse the main techniques for calculating the future demand of inventory
• Economic order quantity
• Reorder point and periodic review systems
• The bullwhip effect
• Service levels for inventory and working with sales and marketing
• Qualitative and quantitative approaches to forecasting


2.0 Know the main methods for the storage and movement of inventory

2.1 Describe the principles of stores and warehouse design
• Location of stores and warehouses
• Stores and warehouse design
• Factors that influence stores and warehouse layout
• Flow, space utilisation and flexibility

2.2 Describe the use of product coding in inventory operations
• Systems for product coding
• Bar coding
• Order tracking technologies
• The use of RFID technologies

2.3 Describe the use of warehousing equipment
• Materials handling equipment
• Palletisation and unit loads
• Packing and packaging
• Environmental standards for packaging
• The use of automation in warehousing

3.0 Understand the principles of transportation in logistics

3.1 Explain the main modes of transportation in logistics
• Defining logistics and transportation
• Modes of freight transportation: road, rail, air and sea
• Transport planning and modeling
• Reverse logistics

3.2 Explain documentation that relates to transport in logistics
• Common transit procedure
• TIR carnet
• Uniform customs and practice for documentary credits and letters of credit
• Packing list, waybill, consignment notes, bill of lading
• Certificate of origin
• Single administrative document
• Electronic documents


3.3 Assess common types of incoterms in international logistics
• The role of the International Chamber of Commerce
• The development of Incoterms
• Classification of terms – E, F, C and D terms
• Rules for sea and inland waterway transport

3.4 Develop a plan for the transport of freight
• Arranging the purchase or export of cargo
• The role of freight forwarders and customs agents




Procurement and supply relationships [AC5]


Unit Purpose and Aim(s)


On completion of this unit, candidates will be able to explain a range of main principles and techniques that help
develop customer and supplier relationships. It is essential for procurement and supply personnel to form effective
relationships with suppliers, internal and external customers and other stakeholders.

This unit introduces the principles of marketing, the importance of cross functional working and the need to communicate effectively both within the organisation and with people from external organisations.



1.0 Understand the range of both internal and external relationships in procurement and supply

1.1 Assess the roles of personnel within an organisation who may be involved in a relationship in procurement and supply
• Procurement and supply and its interactions with other functions
• Devolved purchasers
• The decision making unit (organisational buying behaviour)
• Account management

1.2 Classify the stakeholders in a relationship between purchasers and suppliers
• Defining stakeholders
• Classifying internal and external stakeholders
• The RACI (responsible, accountable, consulted, informed) model as a classification tool
• Communicating with stakeholders

1.3 Explain the appropriateness of cross functional working when making relationships in procurement and supply
• Forming cross functional teams
• The added value procurement and supply provides to cross functional working and internal
• Barriers to team working
• Stages of team formation
• Characteristics of successful teams

1.4 Assess the roles of personnel involved in a supply chain relationship
• Definitions of supply chain
• Examples of supply chains
• The concept of supply chain networks
• Stakeholder involvement in supply chains


2.0 Understand the contribution that marketing makes to develop customer and supplier relationships
2.1 Review the principles and definitions of marketing
• The marketing concept
• Market driven approaches compared to product or sales led approaches

2.2 Explain techniques associated with marketing
• The 4ps and 7ps approaches to marketing
• The marketing mix
• Market segmentation
• Market targeting

2.3 Explain sources of competitive advantage sought through marketing
• Sources of competitive advantage
• Competitor profiling and analysis

2.4 Explain the relevance of marketing principles to purchasers
• Organisational buying behaviour
• Applying the 4ps or 7ps to the work of procurement and supply functions

3.0 Understand the elements of a commercial relationship between purchasers and suppliers

3.1 Explain the main techniques for the profiling of purchasers and suppliers
• The application of the portfolio analysis matrix
• The application of the supplier perceptions and other matrices to procurement and supply

3.2 Classify the types of information that can be exchanged between purchasers and suppliers
• Types of information exchange such as scheduling difficulties, demand forecasts, trends in costs and availability, designs and innovations and new product development

3.3 Explain how technologies may impact on a commercial relationship between purchasers and suppliers
• Explanation of supplier and customer networks
• The applications of the intranet and internet in commercial relationships
• The use of electronic catalogues
• The use of technology to exchange data





MCG - CIPS Exam Centre Number - 005031578