CIPS Level 2 Unit: Procurement and Supply Operations (L2M2)
The CIPS Level 2 Unit: Procurement and Supply Operations (L2M2) provides a foundational understanding of procurement processes, organizational structures, contractual agreements, supplier relationships, and pricing methods. This unit helps learners develop a strong grasp of how procurement functions within different organizational contexts and the key factors influencing supply chain operations.
This unit is essential for procurement professionals, supply chain practitioners, and aspiring buyers, enabling them to understand the fundamentals of procurement operations, contract management, supplier evaluation, and pricing mechanisms. By mastering these concepts, learners will be well-equipped to contribute effectively to procurement functions within their organizations.
Unit Objectives
The key objectives of learning CIPS Level 2 Unit Procurement and Supply Operations (L2M2) are:
- To develop an understanding of different types of organizations and how they operate in various sectors.
- To provide knowledge of contractual agreements, including contract types, pricing mechanisms, and legal considerations.
- To equip learners with skills to identify credible sources of supplier and customer information for effective decision-making.
- To ensure learners comprehend different pricing methods and their impact on procurement decisions.
Learning Outcomes
The significant learning outcomes of the unit CIPS Level 2 Procurement and Supply Operations (L2M2) are demonstrated below:
LO1: Know the types of organisations and how they operate
This learning outcome focuses on developing an understanding of different types of business organisations, including private, public, and third-sector entities. Learners will explore the operational structures of organisations, including formal and informal frameworks, and how different departments function. The outcome ensures that learners can differentiate between production-based and service-based organisations while recognising the role of procurement and supply chain management in achieving organisational objectives. By mastering this learning outcome, learners will gain insights into organisational structures, key functions, and how procurement fits within a business environment.
LO2: Know the components of contractual agreements
Learners will develop an understanding of different types of contracts used in procurement, including spot purchases, term contracts, and framework agreements. This learning outcome also covers various pricing arrangements such as fixed pricing, cost-plus, target pricing, and risk-reward pricing models. Learners will identify the key contract documents, including specifications, key performance indicators (KPIs), pricing schedules, and terms of agreement. By achieving this learning outcome, learners will enhance their ability to structure and interpret procurement contracts effectively, ensuring compliance and value for money.
LO3: Understand sources of information on suppliers and customers
This learning outcome focuses on how learners can identify, evaluate, and use supplier and customer information effectively in procurement. It covers the use of Internet search engines, supplier databases, and e-commerce platforms to locate supplier and customer details. Learners will also explore the role of credit rating agencies in assessing supplier financial stability and risk. Additionally, learners will understand procurement systems, including purchase ordering, expenditure tracking, and supplier databases. By mastering this outcome, learners will enhance their supplier evaluation and risk assessment skills, ensuring better decision-making in procurement operations.
LO4: Understand pricing methods used for the purchasing of goods or services
The focus of this learning outcome is to equip learners with knowledge of various pricing strategies used in procurement, including fixed pricing, variable pricing, cost-plus arrangements, and risk-reward pricing. Learners will evaluate the advantages and disadvantages of each pricing method and how they impact cost management and supplier relationships. By attaining this outcome, learners will be able to select appropriate pricing strategies that align with business objectives, procurement goals, and supplier capabilities, ensuring cost-effective and risk-aware purchasing decisions.
Assessment Criteria
The assessment of CIPS Level 2 Unit: Procurement and Supply Operations (L2M2) is based on evaluating the learner’s ability to:
LO1 Know the Types of Organisations and How They Operate
1.1 Identify the Types of Business Organisations
- Understanding the private, public, and third-sector organizations, their characteristics, and roles in the economy.
- Differentiating between production-based organizations (manufacturing) and service-oriented businesses.
1.2 Describe How Organisations Operate
- Analyzing organizational structures and how they impact decision-making and efficiency.
- Understanding the role of people, objectives, and formal/informal structures in organizations.
1.3 Identify the Key Operating Functions within Organisations
- Understanding differentiation and integration in organizations.
- Recognizing key operational functions such as production, operations, marketing, sales, customer support, human resources, finance, IT, and procurement.
- Distinguishing the role of procurement and supply chain management within organizations.
LO2 Know the Components of Contractual Agreements
2.1 Identify Types of Contracts
- Understanding different contract types, including spot purchases, term contracts, framework agreements, panel contracts, and call-off orders.
2.2 Identify the Kind of Pricing Arrangements Applied in Commercial Contracts
- Examining various pricing strategies, such as fixed pricing, lump sum pricing, cost-plus arrangements, variable pricing, target pricing, and risk-reward pricing.
2.3 Define the Different Documents that Compose a Contract for the Purchase or Supply of Goods or Services
- Understanding contract formation and the importance of tendering and quotations in procurement.
- Identifying essential contract components such as specifications, key performance indicators (KPIs), pricing terms, and contractual obligations.
- Differentiating between contracts for goods and services and their unique requirements.
LO3 Understand Sources of Information on Suppliers and Customers
3.1 Explain the Use of the Internet to Locate Details About Suppliers and Customers
- Utilizing Internet search engines and business directories to find supplier and customer details.
- Understanding B2B (Business-to-Business) and B2C (Business-to-Consumer) e-commerce models.
3.2 Explain the Use of Credit Rating Agencies
- Understanding the role of credit rating agencies and how they assess financial stability.
- Utilizing credit scores and financial publications to evaluate supplier credibility.
3.3 Describe Systems Used in Procurement and Supply
- Understanding procurement systems for purchase ordering and expenditure tracking.
- Utilizing supplier database systems and procurement portals for supplier evaluation and selection.
LO4 Understand Pricing Methods Used for the Purchasing of Goods or Services
4.1 Explain the Advantages and Disadvantages of a Range of Pricing Methods
- Evaluating the pros and cons of different pricing structures, including fixed pricing, cost-plus arrangements, variable pricing, and risk-reward pricing models.
- Assessing how pricing methods impact supplier relationships, cost efficiency, and risk management.
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