CIPS Level 3 flashcards

34 cards. Read the term and the definition here. The deck at the top of this page is optional.

Five rights of procurement

Right quality, quantity, time, price and place. A purchase meeting only some of these delivers an incomplete outcome and creates rework, waste or operational failure for the internal customer.

Procurement cycle

The recurring sequence from understanding a need through specification, sourcing strategy, supplier selection, contract award, contract management and review, feeding lessons into the next cycle.

Triple bottom line

A sustainability framework measuring performance across people (social), planet (environmental) and profit (economic) outcomes, used to justify sustainable sourcing decisions beyond lowest purchase price.

Kraljic matrix

A portfolio tool plotting profit impact against supply risk. Non-critical items need efficient buying, leverage items competitive tendering, bottleneck items security of supply, strategic items close partnership.

Supplier preferencing matrix

Plots attractiveness of the buyer's account to the supplier against relative value of the business. Nuisance suppliers may exit; core suppliers warrant investment to protect continuity and innovation.

Total cost of ownership

All costs of acquiring, using, maintaining and disposing of a purchase over its life, including transport, quality failure, downtime and end-of-life, not just the quoted price.

Make-or-buy decision

A structured choice between producing internally and sourcing externally, tested against core competence, total cost, capacity, confidentiality and the maturity of the supply market.

Public sector procurement rules

Obligations of transparency, equal treatment, non-discrimination and proportionality. Requirements must be advertised, criteria published in advance, and award decisions defensible and debriefable to unsuccessful bidders.

Conformance specification

A prescriptive statement of exactly what the buyer requires, including materials and methods. It gives certainty and comparability but restricts supplier innovation and may embed outdated buyer assumptions.

Performance specification

States the required output or outcome and how it will be measured, leaving the method to the supplier. It encourages innovation but requires reliable KPIs and acceptance criteria.

Functional specification

Describes the need or purpose the purchase must fulfil rather than the product itself, opening the widest solution space and demanding careful evaluation of very different offers.

RFI versus RFQ versus RFP

An RFI gathers market information, an RFQ prices a clearly defined requirement, and an RFP or ITT invites proposals against published evaluation criteria. Choosing wrongly undermines comparability.

MEAT evaluation

Most economically advantageous tender: bids scored against published weighted criteria covering price and non-price factors such as quality, delivery and sustainability, with the scoring method stated in advance.

Incoterms risk transfer

Standard trade terms defining where cost, risk and task pass between seller and buyer. FOB transfers risk on loading; CIF adds freight and insurance; DDP places maximum obligation on the seller.

Economic order quantity

A formula balancing ordering cost against holding cost to identify the order size that minimises total stock cost for an item with predictable demand.

Safety stock

Buffer inventory held to absorb variability in demand or supplier lead time, sized against service-level targets and the cost of a stock-out.

Three-way match

A control comparing purchase order, goods receipt note and supplier invoice before payment. Discrepancies in price or quantity are held and investigated, preventing overpayment and fraud.

Fixed price contract

The seller agrees a set price for defined scope and bears the risk of cost overrun. Suitable where requirements are stable and well specified; variations must be formally controlled.

Cost-plus contract

The buyer reimburses allowable costs plus an agreed fee or percentage, placing cost risk on the buyer. Used where scope is uncertain or development work is required.

Gain-share contract

An incentive arrangement where savings against an agreed target are shared between buyer and supplier, aligning both parties toward cost reduction and continuous improvement.

Stakeholder power-interest grid

Classifies stakeholders by influence and concern. High power and interest are managed closely, high power and low interest kept satisfied, low power and high interest kept informed.

Stakeholder salience model

Ranks stakeholders by power, legitimacy and urgency. Those holding all three attributes are definitive and demand immediate attention; those with one attribute are latent.

Supplier relationship spectrum

A continuum from transactional spot buying through basic and collaborative relationships to strategic partnership, selected according to spend value, supply risk and need for innovation.

Service level agreement

A documented commitment between provider and customer stating services, performance metrics, targets, reporting frequency and remedies for failure, used with both internal and external suppliers.

Supplier scorecard

A periodic performance summary combining quantitative measures such as on-time-in-full and defect rates with qualitative ratings on responsiveness and collaboration, reviewed jointly with the supplier.

Supplier development

A planned programme of training, process improvement or technical support to raise a strategically important supplier's capability, used where switching supplier is costly or impossible.

Conflict handling styles

Competing, collaborating, compromising, avoiding and accommodating. Collaborating seeks mutual gain and suits long-term supply relationships; competing suits one-off, low-value disputes.

Purchase-to-pay cycle

The end-to-end workflow from requisition and approval through purchase order, receipt of goods, invoice matching and payment, with each stage controlled and recorded in the system.

Segregation of duties

Splitting requisition, approval, receipt and payment between different people so no individual controls a whole transaction, reducing fraud and error risk.

Maverick buying

Purchases made outside agreed contracts or channels. It erodes negotiated savings, fragments spend data and bypasses compliance checks; measured as PO compliance or off-contract spend.

Reverse auction

An online event where qualified suppliers bid prices downward in real time. Effective for well-specified, commoditised requirements with several credible bidders; unsuitable where quality dominates.

Master data quality

Accuracy and consistency of supplier, material and price records held in the ERP. Poor master data is a leading cause of invoice mismatches, duplicate vendors and failed reporting.

Straight-through processing

Automatic matching and posting of invoices without manual intervention, enabled by clean purchase orders, tolerance rules and electronic invoicing, cutting cost and cycle time.

Spend under management

The proportion of total third-party spend visible to and influenced by procurement. Low coverage signals maverick buying and unrealised leverage with suppliers.