CIPS Level 4 Diploma flashcards

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

Kraljic matrix

A portfolio tool classifying purchases by profit impact and supply risk into strategic, leverage, bottleneck, and non-critical categories to guide sourcing and relationship strategy.

Five rights of procurement

The procurement objectives of obtaining the right quality, quantity, time, price, and place, used as criteria for evaluating purchasing performance.

Total cost of ownership

The full lifetime cost of a purchase, including acquisition, operation, maintenance, and disposal, used instead of purchase price alone in evaluation.

Performance specification

A specification that states the outcome or function the item must achieve, leaving the supplier to decide how to meet it, encouraging innovation.

Strategic item

A purchase with high profit impact and high supply risk, requiring long-term partnership, joint planning, and detailed risk management.

Consideration

The element of a contract representing what each party gives in exchange, such as payment for goods, making the agreement legally binding.

Condition versus warranty

A condition is a fundamental term whose breach permits termination and damages; a warranty is minor and breach permits damages only.

Liquidated damages

A contract clause fixing a sum payable on breach, enforceable only if it is a genuine pre-estimate of loss rather than a penalty.

Force majeure clause

A contractual provision excusing or suspending performance when defined events beyond a party's control prevent fulfilment, avoiding breach liability.

Contract change control

A formal process for requesting, evaluating, approving, and recording variations to scope, price, or schedule, preventing uncontrolled scope creep.

Vertical alignment

The fit between procurement strategy and the organisation's corporate mission and objectives, ensuring purchasing contributes to overall goals.

Make-or-buy decision

An analysis comparing internal production cost and capability against external supply cost, risk, and strategic control before deciding to outsource.

Supplier preferencing matrix

A tool plotting the supplier's view of the customer, using attractiveness of the account against relative value, to predict supplier behaviour.

Reverse e-auction

An online event where pre-qualified suppliers bid prices downward in real time against a defined specification, driving competitive pricing.

Spend analysis

The classification of organisational spend by category, supplier, and business unit to reveal consolidation, compliance, and savings opportunities.

BATNA

The best alternative to a negotiated agreement; the fallback available if talks fail, which sets the reservation point and bargaining power.

ZOPA

The zone of possible agreement - the range between each side's reservation point within which a mutually acceptable deal can be struck.

Integrative bargaining

A negotiation approach seeking joint gains by exploring underlying interests and creating options, rather than dividing a fixed sum.

Principled negotiation

An interest-based method separating people from the problem, focusing on interests, generating mutual-gain options, and using objective criteria.

Cost-plus contract

A price mechanism paying allowable costs plus an agreed fee or percentage, transferring cost risk to the buyer but allowing flexibility.

Target cost contract

A mechanism setting a target price with gain-share or pain-share arrangements, incentivising the supplier to control costs against the target.

Incoterms

Standard international trade terms defining the division of costs, risk, and responsibilities between buyer and seller for delivery of goods.

Conflict of interest

A situation where a personal, financial, or other interest could improperly influence a procurement decision, requiring declaration and management.

CIPS Code of Conduct

Professional standards requiring integrity, transparency, accountability, and respect, guiding ethical behaviour of procurement and supply professionals.

Bribery

Offering, giving, requesting, or accepting a financial or other advantage to induce improper performance of a relevant function or activity.

Modern slavery statement

A public disclosure of the steps an organisation takes to prevent forced labour and human trafficking in its operations and supply chains.

Supplier code of conduct

A document setting minimum standards on labour, human rights, environment, and anti-corruption that suppliers must meet to remain approved.

Risk treatment options

The four responses to identified risk: avoid, reduce or mitigate, transfer to another party, and accept or tolerate within agreed limits.

Risk register

A log recording each risk's description, owner, likelihood, impact, score, mitigation action, and review date for monitoring.

Performance bond

A guarantee, often from a bank or insurer, paying the buyer a sum if the supplier fails to perform its contractual obligations.

Business continuity management

A framework of business impact analysis, recovery objectives, and continuity plans ensuring critical supply can continue through disruption.

Segregation of duties

A fraud control separating authorisation, recording, and custody of assets so no single person controls an entire transaction cycle.

Three-way matching

A control comparing purchase order, goods receipt, and supplier invoice before payment, preventing duplicate or unauthorised payments.