International Certificate in Purchasing and Supply

International Certificate
in Purchasing and Supply
Selecting the Right Supplier
C2
Nov08
DATE: Tuesday 18 November 2008
TIME: 09.30am to 12.30pm
DURATION: 3 hours
Instructions for Candidates:
This examination is in THREE sections.
Section A
Has TEN compulsory multiple-choice questions, worth 2 marks each.
Section B
Has SIX compulsory short-answer questions, worth 5 marks each.
Section C
Has THREE compulsory longer answer questions. Questions 17
and 18 are worth 15 marks each. Question 19 is worth 20 marks.
1. Do not open this question paper until instructed by the invigilator.
2. All answers must be written in the answer booklet provided.
3. All rough work and notes should also be written in the
answer booklet.
4. Cross out any work you do not wish to be marked.
QP 03
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SECTION A
Questions 1–10 are multiple choice questions. For each question, select ONE correct
answer from A to D and write ‘A’, ‘B’, ‘C’, or ‘D’ in your answer booklet. You are advised
to spend approximately 30 minutes on this section. Please write your answer clearly. If
your answer is not clear, you may be awarded no marks for it.
Q1
Which of the following stages in the purchasing cycle immediately follows
defining the specification?
(2 marks)
A.
B.
C.
D.
Sourcing the market.
Supplier appraisal.
Defining contract terms.
Inviting quotes/tenders.
Q2 Which of the following is an internationally recognised accreditation for
environmental performance?
(2 marks)
A.
B.
C.
D.
ISO14001.
QS9000.
BS5700.
ISO9001.
Q3 For which of the following purchase categories would a buyer enter into direct
negotiation with a supplier instead of issuing an enquiry?
(2 marks)
A.
B.
C.
D.
High value contracts.
Commodities.
Medium value low risk products.
Low value contracts.
Q4 If a supplier perceived that your business had potential for growth and that you
were an attractive customer, it would describe you as which of the following?
(2 marks)
A.
B.
C.
D.
Exploit.
Develop.
Nuisance.
Core.
Q5 Which of the following would be considered as an unethical practice when
carrying out a competitive tender?
(2 marks)
A.
B.
C.
D.
Only accepting gifts if all suppliers are willing to provide them.
Declaring conflicts of interest at the start of the tendering process.
Opening all tenders at the allocated time.
Using independent witnesses to verify the evaluation process.
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Q6 Which of the following organisations is most likely to use formal tendering
processes?
(2 marks)
A.
B.
C.
D.
Tertiary sector organisations.
Small independent organisations.
Public sector organisations.
Primary sector organisations.
Q7 When assessing a supplier’s financial reports, a change in stock turns from 14 to
21 would most likely indicate which of the following?
(2 marks)
A. Due to poor stock management the company is holding stock for seven days
longer.
B. Suppliers are delivering products seven days after they are required for
manufacturing.
C. There is more stock held in stores than is required to meet the needs of the
customer.
D. As a result of changes in practices the company is using stock faster.
Q8 Which of the following is a document most often used to obtain a price from a
supplier?
(2 marks)
A.
B.
C.
D.
Purchase requisition.
Request for information.
Purchase enquiry.
Order form.
Q9 In which of the following circumstances would a ‘restricted tender’ methodology
always be used?
(2 marks)
A.
B.
C.
D.
When
When
When
When
using
using
using
using
pre-qualified suppliers.
any supplier with ISO9001 accreditation.
local suppliers.
a supplier which has never been used before.
Q10 Which of the following best describes vendor rating?
A.
B.
C.
D.
A
A
A
A
system
system
system
system
of
of
of
of
(2 marks)
judging if a supplier will be capable of supplying your company.
measuring the performance of suppliers to your company.
ensuring all suppliers are quality assured.
deciding which new suppliers will be given a tender.
TURN OVER FOR SECTION B
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SECTION B
Questions 11–16 are short-answer questions. You are advised to spend approximately
60 minutes on this section.
Q11 List FIVE elements of environmental impact that a buyer should consider when
(5 marks)
selecting a supplier.
Q12 Explain TWO benefits for a purchasing organisation having an effective vendor
(5 marks)
appraisal programme.
Q13 (a) Define post tender negotiation.
(3 marks)
(b) State TWO circumstances in which post tender negotiation would generally
be carried out.
(2 marks)
Q14 List FIVE pieces of information which should be included on a typical ‘purchase
(5 marks)
enquiry’.
Q15 (a) Explain the purpose of a balance sheet.
(2 marks)
(b) Describe how a purchaser would use the information in a supplier’s balance
(3 marks)
sheet.
Q16 (a) Provide THREE examples of supplier information that may be requested from
(3 marks)
a supplier to help with a supplier evaluation.
(b) Suggest why a purchaser might be cautious when relying on information
supplied by a supplier.
(2 marks)
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SECTION C
Questions 17–19 require full answers, with examples where appropriate. You are
advised to spend a minimum of half an hour on each question.
Q17 (a) Identify FIVE sources of information which can be used when sourcing the
(5 marks)
market.
(b) Identify ONE disadvantage of each of the FIVE sources of information identified
(5 marks)
in part (a).
(c) Identify ONE advantage of each of the FIVE sources of information identified
(5 marks)
in part (a).
(Total 15 marks)
Q18
Profit and Loss for ABC Company Balance Sheet for ABC Company
($,000)
($,000)
Turnover
8,000
Fixed Assets
Cost of Sales
6,500
Property
500
Gross Profit
1,500
Plant and Equipment 1,400
Sales and General Admin Costs 70
Current Assets
Stock
800
Profit Before Interest & Tax
1430
Debtors
1,350
Interest Payable
35
Cash
70
Tax Payable
300
Current Liabilities
Creditors
1,200
Tax Owing
300
Profit After Interest & Tax
1,095
Dividends
150
Dividends
135
Overdraft
560
Reserves
960
Long Term Liabilities
Long Term Loans
300
Share Capital
650
Reserves
960
From the information provided calculate:
(a) Gross Profitability %.
(2 marks)
(b) Return on Capital Employed.
(2 marks)
(c) Current Ratio.
(2 marks)
(d) Credit Period (days).
(2 marks)
(e) Debtor Period (days).
(2 marks)
(f) Explain TWO reasons why it is important to obtain more than one year’s
(5 marks)
financial reports.
(Total 15 marks)
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Q19 Big Weld Manufacturing
Big Weld Manufacturing (BWM) is a manufacturer of automotive vehicle systems,
which it assembles at its plant from components imported from other countries.
Each system is sold to vehicle manufacturers for prices in the region of £250.
In recent years profitability has deteriorated as the overheads of the company
have increased. Customers have been critical of the company’s performance as
delivery performance has deteriorated. The number of rejected systems has also
increased. Increased competition is preventing BWM from increasing its prices
and a number of customers have cancelled orders in recent months.
The cost of replacing each rejected system is estimated at £70.
The buyers for BWM are looking to reduce the number of suppliers used by the
company, with the intention of focusing improvement activities on fewer suppliers.
Audits will be carried out on all selected suppliers to identify improvement
opportunities.
Component 654232 is used on the main vehicle system – each system contains
one of these items. Accuracy is really important as the item will only work if
manufactured correctly when put together in the system. There are currently
three suppliers for the part and BWM wishes to select one of these suppliers. The
current vendor rating system provides the information in Table 1:
Component 654232
Selling Price
Quantity Supplied (2006)
Rejected Parts (2006)
Delayed Deliveries (2006)
Supplier A
£0.95
5000
0.4%
5
Supplier B
£0.45
4500
1%
9
Supplier C
£0.65
3750
0.95%
11
Table 1
TASKS
(a)
From the information in the case study and in Table 1, recommend which supplier
should be selected to supply component 654232, and explain why this supplier
(5 marks)
should be selected. (b) Give FIVE reasons why poor supplier performance may lead to an increase in
(5 marks)
BWM’s overhead costs.
(c)
Identify FIVE supplier technical capabilities which BWM should assess in order to
(5 marks)
resolve the quality issues.
(d) Explain TWO methods of supplier assessment which might be appropriate for
(5 marks)
BWM to undertake in the case of component 654232.
(Total 20 marks)
END OF QUESTION PAPER
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