CIPS Level 5 Advanced Diploma flashcards

36 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, place and price. Some models add right source to capture ethical and sustainable sourcing. These criteria frame the objectives of any purchasing decision.

Kraljic Matrix

Segmentation tool plotting profit impact against supply risk. It produces non-critical, leverage, bottleneck and strategic categories, each requiring a different sourcing strategy and relationship intensity.

Performance Specification

A specification stating the required output or result rather than prescribing design. It transfers solution risk to the supplier and encourages innovation, but requires clear measurable acceptance criteria.

Pareto Analysis in Spend

The 80/20 rule applied to spend data: a minority of suppliers or categories usually accounts for the majority of value. It directs sourcing effort to highest-value areas first.

Total Cost of Ownership

Whole-life cost of a purchase: acquisition price plus transport, installation, operating, maintenance, downtime, disposal and risk costs. It supports decisions where the lowest price is not cheapest overall.

Category Management Definition

A cross-functional process managing a group of related spend as a strategic business unit, moving from transactional buying to a structured strategy based on spend, demand and supply market analysis.

Should-Cost Model

A bottom-up estimate building cost from materials, labour, overhead, margin and logistics. It creates an independent negotiation target and exposes supplier cost drivers rather than accepting quoted prices.

Demand Management Levers

Actions reducing or reshaping internal demand before sourcing: specification change, standardisation, volume reduction, substitution and reuse. They often deliver more value than price negotiation alone.

Hard Versus Soft Savings

Hard savings reduce price or budget and are cashable and measurable. Soft savings are cost avoidance or demand reduction that never appear as a budget cut. Report them separately.

Porter's Five Forces

Supply market analysis covering supplier bargaining power, buyer bargaining power, threat of new entrants, threat of substitutes and competitive rivalry. It informs sourcing strategy and negotiation leverage.

BATNA

Best alternative to a negotiated agreement: what a party will do if no deal is reached. A strong BATNA raises negotiating power and sets the walk-away point.

Zone of Possible Agreement

The overlap between the parties' reservation points, within which a deal is possible. If the zones do not overlap, no agreement exists without changing scope, price or other variables.

Integrative Negotiation

A value-creating approach that expands the pie by trading variables where each side's priorities differ. It contrasts with distributive bargaining over a fixed price.

Liquidated Damages

A contract clause fixing a sum payable for specified delay or breach. It must be a genuine pre-estimate of loss, otherwise it is an unenforceable penalty.

Force Majeure Clause

A clause excusing performance for defined extraordinary events outside a party's control, such as natural disaster or war. It usually requires notice, mitigation and often triggers suspension rather than termination.

Incoterms 2020

Standard trade terms defining cost, risk and obligation allocation between seller and buyer. Risk passes at the named point, not at invoice or payment. EXW favours the buyer, DDP the seller.

Economic Order Quantity

Order quantity minimising total ordering plus holding cost: square root of (2 x annual demand x order cost / annual holding cost per unit). It assumes stable demand and lead time.

Bullwhip Effect

Amplification of demand variation as orders move upstream in a supply chain. It is reduced by information sharing, shorter lead times, and less order batching.

Safety Stock

Inventory held to cover variability in demand and lead time. Higher target service levels require disproportionately more safety stock, raising holding cost.

Inventory Turnover

Cost of goods sold divided by average inventory value. Days of inventory equals 365 divided by turnover. Higher turnover generally indicates leaner working capital use.

Lean Versus Agile Supply Chain

Lean eliminates waste and suits stable, predictable demand. Agile uses buffers, postponement and responsiveness for volatile demand. Choice depends on demand predictability and variability.

Contract Formation Elements

Offer, acceptance, consideration, intention to create legal relations and capacity. A counter-offer rejects the original offer, so a contract forms only on the final accepted terms.

Implied Terms in Sale of Goods

Terms read into contracts by statute or custom, including title, description, satisfactory quality, fitness for purpose and correspondence with sample. They apply unless validly excluded.

Remoteness of Loss

A rule limiting damages to losses reasonably foreseeable at contract formation, or within the parties' contemplation. It prevents recovery of unusual consequential losses.

Apparent Authority

Where a principal's conduct leads a third party to reasonably believe an agent may act. The principal is then bound even if the agent exceeded actual authority.

Bid Rigging

A cartel offence where competitors coordinate bids, for example cover pricing or market allocation. It is prohibited by competition law and a serious procurement integrity risk.

Strategic Fit in Supply Chain

Matching supply chain responsiveness and efficiency to the demand uncertainty of the products served. Cost-leadership strategies favour efficient chains; differentiation favours responsive ones.

Cash-to-Cash Cycle

Days inventory plus days receivable minus days payable. It measures how long cash is tied up in the supply chain; shorter cycles free working capital.

Risk Pooling

Consolidating inventory at fewer locations to reduce total safety stock. It lowers holding cost but can increase transport cost and customer lead time.

Supplier Relationship Spectrum

A continuum from transactional buying through preferred supplier and strategic alliance to partnership and co-destiny. Governance intensity and collaboration should rise with strategic importance.

Situational Leadership

Adapting style to follower competence and commitment: directing, coaching, supporting or delegating. The appropriate style varies by task and individual, not by personality alone.

Stakeholder Power-Interest Grid

Mapping stakeholders by power and interest to choose engagement: manage closely, keep satisfied, keep informed or monitor. It prioritises communication effort in procurement projects.

Lewin Change Model

Unfreeze, change, refreeze. It frames change as disrupting current norms, implementing new behaviour, then stabilising it through systems, training and reinforcement.

Triple Bottom Line

Sustainability framework balancing social (people), environmental (planet) and economic (profit) outcomes. Procurement applies it across the whole life cycle of goods and services.

Scope 3 Emissions

Indirect greenhouse gas emissions in the value chain, including purchased goods, transport and product use. For most buyers they are the largest part of the carbon footprint.

Risk Response Options

Standard treatments are avoid, reduce or mitigate, transfer (insurance, contract terms), accept or retain, and exploit for upside risk. Each is recorded against a named risk owner.