Defıning Business Need (L4M2)

Module Purpose
On completion of this module, learners will be able to devise a business case for requirements to be externally sourced and will understand the role of market managementand competitive forces as they specify goods and services in procurement and supply.

Module aim(s)
The development of a business case and the ability to analyse markets are key if an organisation is to successfully source activity from external suppliers. Similarly, the clear definition of specifications for through life contracts is crucial to overall business achievement. This module is designed for those who are expected to analyse, interpret and evaluate information on the different types of markets utilised by procurement and supply. It explores a variety of elements that underpin the development of business cases and specifications and considers the options that should be explored when procurement and supply personnel are involved in defining requirements.

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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.

Learning outcomes

1.0 Understand how to devise a business case for requirements to be sourced from external suppliers

1.1 Analyse how business needs influence procurement decisions

Type of purchase such as new purchase, modified re-buy, straight re-buy
Implications of the business needs on the types of purchase
Procurement’s role in developing a business case

1.2 Identify how costs and prices can be estimated for procurement activities

Types of market data that can provide informationon costs and prices
Direct and indirect costs
Producing estimated costs and budgets
Approaches to total costs of ownership/whole life cycle costing

1.3 Analyse the criteria that can be applied in the creation of a business case

Examples of criteria typically applied in the production of a business case: costs, benefits,options, alignment with organisational needs andtimescales
Benchmarking requirements

1.4 Interpret financial budgets for the control of purchases

The purpose of financial budgets
Cost entries and timings of cash flows
Performance and control of budgets
Dealing with variances to budget

2.0 Understand market management in procurement and supply

2.1 Analyse the different types of markets utilised byprocurement and supply

Such as:

Manufacturing
Construction
Retail
Financial
Agriculture
Services

2.2 Compare the competitive forces that influence markets

Bargaining strength of suppliers and buyers,
Availability of substitutes and threat of entry

2.3 Contrast the breakdown between direct and indirect costs and the types of data that can provide information on cost and price

Collate sources of information to estimate the breakdown of costs between direct and indirect costs for purchased goods and services
Use information to prepare budgets or to negotiate prices
Research market data and use to estimate and negotiate current and future prices and costs for purchased goods and services

3.0 Understand the use of specifications in procurement and supply

3.1 Analyse different types of specifications used inprocurement and supply and sources of informationthat can be used to create specifications

Drawings, samples, branded, technical
Conformance specifications
Output or outcome, statement of work based specifications
Standards
The internet
Suppliers
Directories

3.2 Identify sections of specifications for through life contracts

Scope
Definition
Description of requirement
Testing and acceptance
Change control mechanisms and remedies
Social and environmental criteria

3.3 Identify the risks that can result from inadequate specifications and mitigation approaches

Under or over specified need
Monitor specification creation by colleagues and other internal stakeholders

3.4 Identify opportunities to regulate short and longer term specifications

Implement standardisation
Value analysis
Value engineering
Provide guidance to internal stakeholders onimplementation

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Defıning Business Need (L4M2)

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