CIPS Level 6 Professional Diploma flashcards

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

Supply chain surplus

The difference between the value the final customer places on a product and the total cost the supply chain incurs to fulfil that demand. Growth in surplus indicates a competitive supply chain strategy.

Bullwhip effect

Upstream amplification of demand variance caused by forecast updating, order batching, price promotions and shortage gaming. It raises inventory and cost across the chain.

Postponement

Delaying final product differentiation until actual demand is known. It lowers forecast-driven inventory risk but increases upstream holding and process complexity.

Little's Law

Average inventory equals throughput rate multiplied by average flow time. It links stock levels, processing speed and lead time in any stable process or pipeline.

Cash-to-cash cycle

Days inventory outstanding plus days sales outstanding minus days payables outstanding. It measures how long cash is tied up between paying suppliers and collecting from customers.

Safety stock formula

Safety stock equals the service-level z-factor multiplied by the standard deviation of demand over lead time. Higher target service levels raise required buffer stock non-linearly.

Push-pull boundary

The point in a supply chain where forecast-driven push processes give way to order-driven pull processes. Its position determines inventory risk and responsiveness.

Kraljic matrix

A portfolio model plotting profit impact against supply risk, producing leverage, strategic, bottleneck and non-critical quadrants. Each quadrant implies a distinct sourcing approach.

Invitation to treat

An invitation for others to make an offer, such as a tender notice or price list. It cannot itself be accepted to form a binding contract.

Liquidated damages

A contractually agreed sum payable on breach, enforceable only if it is a genuine pre-estimate of loss and not an unenforceable penalty.

Force majeure clause

A contractual provision excusing performance on specified extraordinary events. It is not a general legal doctrine, so relief depends entirely on the clause wording and notice conditions.

Repudiatory breach

A breach so serious it deprives the innocent party of substantially the whole benefit of the contract, entitling that party to terminate and claim damages.

Liability cap

A clause limiting the maximum sum one party must pay for specified losses. It allocates risk and must satisfy reasonableness tests where consumer or unfair terms law applies.

Contract management KPIs

Measures such as milestone compliance, acceptance against specification, variation volume, claim frequency and supplier performance against agreed service levels. They evidence whether the contract delivers its intended outcome.

Pareto spend analysis

Ranking suppliers or categories by spend to show that a small proportion of suppliers typically accounts for most of the value, focusing commercial effort.

Supplier preferencing matrix

A model plotting attractiveness of the buying account against spend placed with the supplier, indicating whether the buyer is development, core, exploit or nuisance business.

Reverse auction

An electronic event in which pre-qualified suppliers bid prices downward in real time. It suits commoditised, clearly specified items with multiple capable suppliers.

MEAT award criterion

Most economically advantageous tender: award based on the best combined score of price and quality criteria published in the tender documents, rather than lowest price alone.

Should-cost modelling

Building an independent estimate of a supplier's cost from materials, labour, overhead and margin. It supports negotiation and exposes cost reduction opportunities.

Tail spend

Low-value, high-transaction purchases usually spread across many suppliers. It is costly to process and often poorly controlled despite small individual values.

Situational leadership

Hersey and Blanchard's model matching leader style, from telling to delegating, against follower competence and commitment. Style should shift as capability develops.

Tuckman stages

Forming, storming, norming, performing and adjourning. Teams predictably pass through conflict at storming before establishing effective working norms.

Transformational leadership

Leadership through idealised influence, inspirational motivation, intellectual stimulation and individualised consideration, aiming to raise follower commitment beyond transactional reward exchange.

BATNA

Best alternative to a negotiated agreement: what a party will do if no deal is reached. It sets that party's reservation point and therefore the limit of acceptable terms.

ZOPA

Zone of possible agreement: the range between the two parties' reservation points within which a deal is preferable to their alternatives. No ZOPA means no rational settlement.

Kotter change steps

An eight-step sequence from creating urgency and a guiding coalition through vision, short-term wins and consolidation to anchoring change in culture.

Conflict of interest

A situation where personal or outside interests could improperly influence procurement decisions. It must be declared, recorded and managed, often by withdrawal from the process.

Tender integrity controls

Measures such as sealed submissions, a single receipt point, common closing time, equal information to all bidders and documented evaluation against published criteria.

Tacit knowledge

Experience-based knowledge held by individuals that is hard to codify, such as negotiation judgement. It transfers through mentoring, shadowing and communities of practice.

Segregation of duties

Splitting authorisation, recording and custody of assets between different people so no single person can initiate and conceal a fraudulent transaction.

Fraud triangle

Pressure, opportunity and rationalisation. Controls mainly reduce opportunity through approval limits, segregation of duties and independent review, since motive cannot be controlled.

Three lines model

Operational management owns and manages risk, risk and compliance functions monitor it, and internal audit gives independent assurance to the governing body.