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Procurement and Supply Environments (L3M1)

Module purpose

On completion of this module, learners will be able to identify the range of environments in which procurement and supply is expected to operate and the external factors that canimpact on overall success.

Module aim(s)

Procurement and supply is to operate in a varied range of environments. As well as the public and private sectors, those responsible for the procurement and supply function mayfind themselves working with those in not-for-profit organisations. This module is designed for those who are involved in the procurement and supply function, who must recognise the wider environment in which they work and the impacts that different types of organisations can have on successfully meeting with overall organisational needs. They must know the importance of the external environment and also identify the procedures that regulate procurement and supply.

Next steps

Joining a CIPS qualification programme means you will join the largest Institute in the world for those working in procurement and supply. You can join as a member online today. Once you've become a CIPS member you can book your examinations online.

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Learning outcomes, assessment criteria and indicative content

1.1 Define the different types and functions of the private sector

Definitions and different types of private sector organisations – sole traders, partnerships, registered companies, incorporated and unincorporated companies, SME, multinational corporations
The size and scope of the private sector in different economies
Functions of private sector organisations such as profit, growth, market share, share price, other financial measures, corporate and social responsibility

1.2 Describe the role and scope of procurement and supply in the private sector

Sole trade, partnerships, registered companies, incorporated and unincorporated companies
Small and medium sized organisations (SMEs)
Multinational organisations
The roles of procurement and supply in the private sector

1.3 Describe the role and scope of procurement and supply in the public sector

Defining the public sector
Central and local government
The functions of public sector organisations
The roles of procurement and supply in the public sector
Commissioning and procurement
Achieving budget savings and other sources of added value
Providing access to services
Regulating organisations and individuals

1.4 Describe the role and scope of procurement and supply in the not-for-profit and third sector

Defining the not-for-profit and third sector
Public accountability for the not-for-profit and third sector
Define the role of procurement and supply in the not-for-profit and third sector

2.1 Explain how pricing arrangements are used in commercial agreements to ensure effective price and cost management

Pricing schedules
Fixed pricing arrangements
Cost plus and cost reimbursable pricing arrangements
Indexation and price adjustment formulae
Incentivised gain share pricing
Payment terms
The use of open book costing and adjustments

3.1 Identify the impact of the external environment on procurement and supply

The use of environmental scanning
The use of PEST (political, economic, social and technological) criteria or STEEPLED (social, technological, economic, environmental, political, legislation, ethical and demographic) criteria that impacts on organisations’ external environment
The five forces model
Competitive market forces
Demand and supply
Market factors
Product life cycles

3.2 Describe how the implications of economic criteria impact on procurement and supply

Macro-economic criteria such as interest rates, inflation, exchange rates, level of economic activity (GDP/ GNP) that impacts on organisations
Micro-economic criteria such as demand and supply that impacts on organisations

3.3 Describe how the implications of political and legislative criteria that impact on procurement and supply

Political criteria such as stability and instability that impacts on organisations, different economic sectors and on countries
- Legislation that impacts on organisations such as on standards, health and safety, environmental standards and employment law

3.4 Describe how the implications of environmental and ethical criteria impact on procurement and supply

Environmental criteria such as natural risks, waste emissions, pollution and energy efficiency that impact on organisations
Ethical and social criteria such as ethical codes, employment rights, community benefits, working conditions and standards that impact on organisations

3.5 Describe how the implications of social criteria impact on procurement and supply

Changing societal preferences, tastes and fashions, demographics, labour and fair-trade standards and how these can impact on organisations
Corporate social responsibility

4.1 Describe the types of documentation used in procurement and supply

Requisitions
Orders
Delivery notes
Invoices
Other documents typically used in procurement and supply

4.2 Explain how documented policies and procedures are used within procurement and supply

The responsibilities for procurement
Regulations relating to competition
Levels of delegated authority
Responsibilities for the stages of the sourcing process
Responsibilities for ensuring invoice clearance and payment
Responsibilities for ensuring that requisitions, orders and invoices are clear and correct and clarify requirements for stakeholders
Corporate governance