CIPS Contexts of Procurement and Supply

The CIPS Diploma focuses on those who have had a few years experience under their belt and are keen to progress their careers with the MCIPS qualification. The Diploma (previously called Level 4) is the entry level for the majority working in a Buying, Contracting or Supply Chain role.

The Contexts module (starting this August) is the first module in the five part series in the Diploma stage. However, candidates can pick up at any point throughout the course.

The focus on this module is understanding the value that procurement and S.C.M (Supply Chain Management) can bring to an organisation, understanding the sourcing process (which the other four modules focus on), understanding the inter-dependencies (context) between the organisation and Procurement/ Supply Chain function along with the compliance requirements when undertaking Procurement activities.

Creating value from Procurement and S.C.M is now currently more important than ever in the Oil and Gas industry and it's important to determine the approach used. Value can be gained differently depending on what is being procured. Using various tools, all an organisations materials and services can be categorised and different value strategies formed. Many see 'value' as merely requesting discounts from suppliers, this may work for certain areas such as consumables but will this strategy work for more complex purchases where the TCO (Total Cost of Ownership) needs to be more fully assessed? Probably not as many further costs have not been identified, as shown in the 'Price Iceberg'  below.  For example, the seemingly cheapest option could well have other costs such as transport, replacement from poor quality and disposal thrown in which may well add up to be the least competitive of all the options..

 

Think of the online pricing of budget airways and other transport where the advertised price seems too good to be true. This certainly grabs your attention at first only to see other costs added during the online process, dramatically increasing the price. Fortunately these costs are visible before committing to purchase, unlike receiving a supplier invoice with 'hidden' costs thrown in. A knowledgeable buyer will address these risks at the outset and accurately compare quotations to deliver the best value for the organisation.

Outcome 1 explores the value concept much further than this very brief overview, gaining just a small insight into the theory will enable the learner to look at things differently and give suggestions to initiate improvements within their own workplace.

Further insights will be posted over the coming weeks for Purchasing Contexts along with the Advanced Diploma and Professional Diploma modules, also starting in August.