CIPS Level 2 Procurement cheat sheet

The five rights: right quality, right quantity, right price, right time and right place; some models add a sixth, right source.

Value for money is the optimum combination of whole-life cost and quality to meet the requirement - lowest price is not the same as best value.

Total cost of ownership = acquisition price + delivery and installation + operating + maintenance + training + disposal costs.

Procurement cycle order: identify need → define specification → analyse supply market → select supplier → contract → order → receive and pay → review and learn.

Make-or-buy rule: buy where an external supplier offers lower total cost, greater capability or extra capacity; make where confidentiality, control or capacity justify it.

Competition rule: the higher the value and the more competitive the market, the more formal the competitive process required.

Triple bottom line = economic + social + environmental, used to judge the sustainability of a sourcing decision.

Ethical buying principles: integrity, objectivity, transparency, confidentiality and declaration of any conflict of interest.

Procurement versus purchasing: purchasing is the transactional buy; procurement covers the whole cycle including specification, sourcing strategy and contract management.

Centralised model: one buying unit gives volume leverage, standard terms and fewer suppliers; the trade-off is slower response and less local ownership.

Decentralised model: buying by site or business unit gives responsiveness and ownership; risks are maverick spend, duplicated effort and lost volume leverage.

Centre-led (hybrid) model: a central team sets policy, category strategy and systems while local buyers execute orders and manage day-to-day supplier contact.

Category management treats a group of similar spend as a business unit with its own strategy, supplier plan and performance targets.

Profit leverage: a saving of £1 adds £1 to profit, so at a 10% net margin £10,000 saved equals the profit from £100,000 of extra sales.

Typical roles: buyer or purchasing officer, senior buyer, category manager, expeditor, contract manager, stores or warehouse staff, procurement analyst.

Cross-functional sourcing teams combine procurement, the user, technical specialists, finance and legal; the user owns the requirement, procurement owns the process.

Shared service centres handle high-volume transactional purchase-to-pay; centres of excellence handle strategy, policy and category management.

Procurement scope covers direct (production) spend and indirect (MRO, services, IT, capital) spend.

Document choice: RFI gathers market information only; RFQ prices a clearly defined item; ITT is a formal priced tender with stated evaluation criteria; RFP invites a proposed solution.

Tender sequence: define need → pre-qualify (PQQ) → issue ITT → clarifications → close → evaluate → clarify → award → standstill and debrief → contract.

Weighted score for a bid = sum of (criterion score × criterion weight); the weights must total 100%.

Evaluation criteria must be set and disclosed before tenders are opened; changing them after receipt invalidates the process.

Specification types: brand (no competition), conformance or technical (detailed design), performance or functional (output-based, allows innovation), sample.

Three-way match before payment: purchase order = goods received note = invoice on price, quantity and terms; any difference is placed on hold.

Purchase-to-pay flow: requisition → approval → purchase order → receipt (GRN) → invoice → match → payment → file.

Negotiation is a package: price, delivery, payment terms, quality, volume, warranty and risk are traded together; nothing is agreed until all is agreed.

Supplier appraisal checks: financial stability, technical capability, capacity, quality and environmental certification, references, insurance and compliance.

A purchase requisition is internal and authorises the request; a purchase order is external and, once accepted, forms the contract.

A goods received note records quantity and condition on delivery and drives stock updates, invoice matching and supplier performance data.

Three-way match exceptions: price variance, quantity variance, short or damaged delivery - payment is withheld until the discrepancy is resolved.

Audit trail documents: requisition, approval, purchase order, goods received note, invoice, payment, contract variations and correspondence.

Incoterms define the point at which cost and risk pass from seller to buyer; they do not set price, title or payment method.

E-procurement tools: e-sourcing and e-tendering, e-auctions, electronic catalogues and orders, e-invoicing, purchasing cards, ERP spend data.

Common purchase-to-pay KPIs: invoice match rate, order cycle time, cost per order, maverick spend percentage, OTIF, savings achieved against target.

Records retention: contracts and tender files are kept for a defined period, commonly six years after expiry in the UK, to satisfy audit, tax and limitation rules.

Data protection rule: hold only the supplier and stakeholder data needed for the process, restrict access and dispose of it securely.

A stakeholder is any party that affects or is affected by a procurement decision: internal (users, budget holders, finance, legal, senior management) and external (suppliers, customers, regulators, community).

Mendelow quadrants: high power/high interest = manage closely; high power/low interest = keep satisfied; low power/high interest = keep informed; low power/low interest = monitor.

Kraljic quadrants: strategic (high profit impact, high supply risk) = partnership; leverage (high impact, low risk) = competitive tendering; bottleneck (low impact, high risk) = secure supply; non-critical = simplify.

Cost of change rule: the later a requirement is changed, the higher the cost of change, so users sign off the specification before sourcing begins.

Conflict of interest: declare it, record it and withdraw from the decision; failure to do so breaches the CIPS code and often the employer's contract.

A communication plan states audience, message, channel, timing, owner and feedback route.

Supplier relationship levels: transactional → preferred → partnership → strategic alliance; the level of relationship investment should match the Kraljic category.

The internal customers of procurement are user departments and budget holders; a service-level agreement sets response times and responsibilities.

Stakeholder roles in selection: users score quality and technical criteria, procurement scores commercial criteria, finance verifies financial standing.