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CIPS Level 3: Procurement and Supply Environments (L3M1)

The Procurement and Supply Environments (L3M1) unit is designed to provide learners with a comprehensive understanding of the various sectors involved in procurement and supply. It explores the role of procurement in private, public, and not-for-profit sectors, different pricing strategies in commercial agreements, and external environmental factors influencing procurement decisions. Additionally, this unit covers the procedures and regulations governing procurement and supply functions.

By studying this unit, learners will gain the necessary knowledge and skills to assess procurement strategies, manage pricing arrangements, and analyze external factors affecting procurement and supply chain management. The unit is particularly valuable for procurement professionals aiming to enhance their decision-making abilities in competitive business environments.

Unit Objectives

The core objectives of this unit include:

• Developing a strong understanding of procurement and supply across different business sectors.
• Identifying pricing arrangements and their impact on cost management.
• Recognizing the role of external environmental factors in procurement and supply.
• Understanding the documentation and policies that regulate procurement processes.

Learning Outcomes

The significant learning outcomes of the unit CIPS Level 3 Procurement and Supply Environments (L3M1) are demonstrated below:

LO1: Know the different sectors of procurement and supply

This learning outcome focuses on understanding the different sectors involved in procurement and supply, including the private, public, and third sectors. Learners will explore the types of private sector organisations, such as sole traders, partnerships, SMEs, and multinational corporations, along with their functions, including profit generation, market growth, and corporate social responsibility. Additionally, learners will examine the role of procurement and supply in different sectors, including commissioning, budget management, and regulatory compliance in the public sector and public accountability and service provision in the third sector. By mastering this outcome, learners will develop a comprehensive understanding of procurement and supply chain operations across different organisational environments.

LO2: Understand types of pricing arrangements in commercial agreements

Learners will gain insight into the various pricing arrangements used in procurement to ensure effective cost and price management. This outcome covers fixed pricing, cost-plus pricing, indexation, incentivised gain-share pricing, and open-book costing. Learners will also explore the importance of payment terms and pricing schedules in procurement contracts. By achieving this learning outcome, learners will enhance their ability to select appropriate pricing strategies that align with financial goals, risk management, and supplier relationships.

LO3: Know the external environment and its impact on procurement and supply

This learning outcome enables learners to evaluate external factors that influence procurement and supply operations. Learners will explore environmental scanning techniques such as PEST (Political, Economic, Social, and Technological) and STEEPLED (Social, Technological, Economic, Environmental, Political, Legal, Ethical, and Demographic) analysis to assess external risks. The Five Forces Model will help learners understand competitive market forces, demand and supply, and product life cycles. Additionally, learners will examine economic, political, legislative, environmental, and ethical criteria, assessing their implications on procurement strategies. By mastering this outcome, learners will develop strategic decision-making skills to adapt to external challenges and ensure sustainable procurement practices.

LO4: Understand procedures that regulate procurement and supply

This learning outcome focuses on the key procedures and documentation used in procurement and supply. Learners will explore essential procurement documents, including requisitions, orders, delivery notes, invoices, and contracts. The outcome also covers procurement policies and procedures, such as competition regulations, levels of delegated authority, governance responsibilities, and invoice processing. By achieving this learning outcome, learners will develop a strong understanding of regulatory compliance, corporate governance, and best practices in procurement documentation and procedures.

Assessment Criteria

The assessment for this unit is based on evaluating learners’ ability to:

LO1: Know the different sectors of procurement and supply

This learning outcome enables learners to understand how procurement and supply operate in different sectors, including private, public, and not-for-profit sectors.

1.1 Define the different types and functions of the private sector

• Understanding different types of private sector organizations, including sole traders, partnerships, registered companies, SMEs, and multinational corporations.
• Examining the size and scope of the private sector in different economies.
• Analyzing the functions of private sector organizations, such as profit maximization, market expansion, corporate social responsibility (CSR), and financial growth.

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

• Understanding procurement operations in private organizations, including SMEs and multinational corporations.
• Identifying the roles of procurement and supply in achieving business objectives and ensuring efficiency.

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

• Understanding public sector procurement in central and local government institutions.
• Exploring the functions of public sector organizations and their procurement responsibilities.
• Evaluating procurement’s role in cost savings, regulatory compliance, and public service delivery.

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

• Understanding procurement in non-profit organizations and third-sector entities.
• Analyzing public accountability requirements for procurement in charitable organizations.
• Defining procurement’s role in supporting social objectives and value-driven initiatives.

LO2: Understand types of pricing arrangements in commercial agreements

This focuses on different pricing structures used in procurement agreements to optimize cost management.

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

• Understanding different pricing models, including fixed pricing, cost-plus pricing, and indexation.
• Exploring gain-sharing pricing and payment terms to incentivize suppliers.
• Assessing the role of open-book costing and price adjustments.

LO3: Know the external environment and its impact on procurement and supply

This learning outcome covers external environmental factors that influence procurement and supply operations.

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

• Using PESTLE (Political, Economic, Social, Technological, Legal, Environmental) analysis for external assessment.
• Applying Porter’s Five Forces Model to understand competitive pressures.
• Evaluating demand and supply fluctuations, market conditions, and product life cycles.

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

• Understanding macroeconomic factors such as GDP, interest rates, inflation, and exchange rates.
• Examining microeconomic factors like supply chain disruptions, cost variations, and demand fluctuations.

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

• Evaluating the effects of government policies, trade regulations, and political stability on procurement.
• Understanding legal aspects such as employment laws, health and safety standards, and environmental regulations.

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

• Examining sustainability practices, energy efficiency, and pollution control in procurement.
• Understanding ethical sourcing, fair labor practices, and social responsibility.

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

• Analyzing changing consumer preferences, demographic shifts, and labor standards.
• Evaluating corporate social responsibility (CSR) initiatives in procurement.

LO4: Understand procedures that regulate procurement and supply

This explores the documentation, policies, and procedures that govern procurement and supply functions.

4.1 Describe the types of documentation used in procurement and supply

• Understanding essential procurement documents, including requisitions, purchase orders, delivery notes, and invoices.

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

• Exploring procurement responsibilities, competition regulations, and levels of delegated authority.
• Understanding corporate governance and the importance of clear procurement policies.

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