cpspkrevision.co.ke sustainable procurement · complete and comprehensive study notes in accordance...

CPSPKREVISION.CO.KE –Sustainable Procurement

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Complete and comprehensive study notes in accordance to the syllabus.


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Vendor negotiation has also been streamlined through the use of IT. This includes bargaining,

renegotiation, price and term agreements.

It is also used to provide vendors with information, the processing of returns and damaged goods

and the receipt of queries from vendors.

IT is also used in order processing operations; it’s prevalent in order placement and order status.

This reduces costs of order processing as well as the error rate involved in order processing,

a) Technology on Operations

IT is employed in inventory management. It’s used to communicate stock outs by customers to

vendors. It has enabled companies to institute EDI information programs with their customers.

IT allows for proactive inventory management where firms can notify customers of order

shipping delays and inventory emergencies, this facilitates decrease in inventory lead time and

inventory.

b) Technology on Logistics

IT helps in transport management, one the highest cost component in the supply chain. It is used

in monitoring of pickups at distribution centres by carriers.

IT is employed in production and logistics across all processes involved in fulfilling customer’s

orders: manufacturers, suppliers of parts and subassemblies, material managers, logistics

managers, transportation carriers, customer service representatives, quality assurance staffs and

others. It helps to reduce cycle time used to fill a customer’s order, reduce inventory of parts,

work in process and finished goods in the pipeline, increase the accuracy and completeness of

filling a customer’s order and of billing him for it and accelerate the payment for the delivered

items.

c) Technology on Customer Relationships

IT provides firms with the ability to offer customers another way to contact the firm regarding

service issues and integrates customer information and firm information to bring great benefit to

both customers and firms.


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d) Technology on Vendor Relationships

IT leads to closer buyer-supplier relationships; it encourages commitment to establishing

relational behaviour. It helps decrease transactional costs between buyer and suppliers and

creates a more relational/cooperative governance structure.

IT allows for sharing of critical and proprietary information among supply chain partners.

e) Technology on Firm

IT helps coordinate the provision of services to a multinational customer in different countries or

regions. It helps share new knowledge as it is developed among members of the team and to

individuals in other parts of a larger organisation.

Technology Life Cycle

The technology life cycle shows the journey your technology takes. From its exciting birth and

growth; to its inevitable decline and eventual death.

Either a new product enters the fray and forces you to adapt, or the demands on the current

model increase and pushes you to introduce incremental updates of the current offering. In any

case, understanding the technology life cycle helps you predict when you’ll be able to recover

the investment you put into it development, and when to plan for new projects.

Technology undergoes 4 stages:

Introduction Stage

It is the buildup stage of technology where it is being tested by early adopters.

A lot of revenue is used to develop the technology.

At this stage get early adopters on board and get as much feedback as possible.

Growth Stage

You will want to take advantage of newness of the technology and start creating extra customers.

Maturity Stage

The technology is fully accepted by the public. The market has reached a saturation point and

competitors are now catching up. Revenues begin to slow down.

The strategy at this stage is:

to maintain public interest in your technology.


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Trade upwards (increase more features of the technology)

Decline Stage

This is a stage where you’ll see a decrease in sales or the emergence of a replacement

technology.

Further development is not profitable.

The strategy here is to phase out the current technology and move resources to a new project that

yields more profits.

Technology life cycle seeks to predict the adoption, acceptance and decline of a new technology

innovation. This allows for a more accurate reading of whether more research and development

is needed.

Technology Adoption

This is the differentiation in consumer adoption of new technological innovations. These have

been distributed into phases which effectively summarize the demographic groups presented

during each stage:

Innovators – These are risk-oriented, leading-edge minded individuals who are extremely

interested in technological developments. They make a fractional segment of the overall

consumer population.

Early Adopters – A larger but still relatively small demographic, these individuals are

generally risk-oriented and highly adaptable to new technology. Early adopters follow the

innovators in embracing new technology.

Early Majority – Much larger and more careful than the previous two groups, the early

majority are open to new ideas but generally wait to see how they are received before

investing.

Late Majority – Slightly conservative and risk-averse, the late majority is a large group of

potential customers who need convincing before investing in something new.

Laggards – Extremely frugal, conservative, and often technology-averse, laggards are a

small population who avoid risks and only invest in new ideas once they are extremely

well-established.


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The ability of the balanced score card to integrate the three dimensions of sustainability offers

the possibility of a value-based approach to the management of environmental and social aspects.

A value-based approach to sustainability management aims at a simultaneous achievement of

ecological, social and economic goals. These three pillars of sustainability need to be integrated

by a value-oriented approach for three reasons:

1. Sustainability management that reduces the business value is endangered because it is

carried out by firms only as long as the company is successful and can afford this

“luxury”. If firms find themselves under financial distress, those costs are cut down first

which do not contribute to the financial bottom line. Sustainability management which

does not create business value will thus be practiced only as long as firms are successful.

2. Non-value-oriented sustainability management is an inappropriate role model for other

business. As forms which want to promote or reinforce their environmental and social

management often orientate themselves towards competitors, it is improbable that they

adopt sustainability management which create losses rather than benefits.

Balanced Scorecard quadrants


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3. Non-value-oriented sustainability management is by definition not sustainable.

According to the 3-pillar-concept sustainability involves economic, ecological and social

aspects. Usually, it is implicitly assumed that these aspects bear a complementary relation

to each other. Sustainability is only achieved if ecological, social and economic goals are

reached simultaneously. Only a business which improves with regard to all the three

dimensions of sustainability demonstrates clearly a sustainable performance.

The balanced score card assists the identification and the management of those social and

environmental aspects, which contribute to financial business goals. Therefore, a sustainability

balanced score card fulfills the central requirement of the sustainability concept for a permanent

improvement of the business’ performance in economic, ecological, and social terms. The

business score card is particularly suitable for value-based sustainability management because of

two reasons:

First ensure the integration of all three sustainability dimensions because it allows

considering soft factors which cannot be monetized. Environmental and social aspects

often show precisely these characteristics.

Second, conceptually the balanced scorecard approach is open to implementing different

kinds of strategies. As a consequence the sustainability balanced scorecard is open not

only to niche players with an explicit sustainability strategy but also to many mainstream

firms whose strategy it is to move gradually towards sustainability by integrating

environmental and social key success factors.

The process of formulating sustainability balanced scorecard

The process of formulating a sustainability score card has to meet a few basic requirements.

The process must lead to a value-based management of environmental and social aspects

In order to ensure their value-based management environmental and social aspects must

be integrated with the general management system of the firms.

A sustainability scorecard should be business unit-specific and not generic.

Environmental and social aspects of a business unit must be integrated according to their

strategic relevance. This includes the questions whether the introduction of an additional

non-market perspective is necessary.


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1. Choice of strategic business-unit.

For small and medium sized enterprises the business unit level may be identical with the

corporate level, while in large companies or groups there are often several business units which

aim at different customers segments often organised as independent profit centres. The business

scorecard serves to describe and translate an existing strategy consistently in order to enhance the

successful execution of the strategy.

Thus business unit should already have a strategy

2. Identification of the environmental and social exposure of the business unit.

In order to ensure the sustainable business scorecard is tailored to the specific needs of the

business unit chosen, the environmental and social aspects that affect the business unit must be

identified in a second step. The result is a profile of the environmental and social exposure of the

business unit. This step helps identify all pertinent environmental and social aspects.

3. Determination of the strategic relevance of environmental and social aspects.

It aims to translate the verbally formulated strategy of a business unit into causally linked

objectives and indicators. The balances score card identifies 15-25 strategically most relevant

aspects and to link them casually and hierarchically towards the long term success measured by

the financial perspective.

Sustainability programmes and their benefits in supply chain management

These are programs that help a supply chain to reduce uncertainty, identify and manage risk, and

generate business value. They can also be used to manage and improve environmental, social and

economic performance throughout supply chains, conservation of resources, optimize processes,

uncover product innovations, save costs, increase productivity and promote corporate values.

Sustainable programs help organisations in:

controlling costs by adopting a wider approach to whole life costs

achieving internal and external standards

complying with environmental and social legislation

managing risk and reputation of the organization

CPSPKREVISION.CO.KE –International Procurement

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Importance of international markets

1. Important to expand target market – Target market of a marketing organisation will be

limited if it just concentrate on domestic market. When an organisation thinks globally, it looks

for overseas opportunities to increase its market share and customer base.

2. Important to boost brand reputation – International marketing may give boost to a brand’s

reputation. Brand that sold internationally is perceived to be better than the brand that sold

locally. People like to purchase products that are widely available. Hence, international

marketing is important to boost brand reputation.

3. Important to connect business with the world – Expanding business into an international

market gives a business an advantage to connect with new customers and new business partners.

Apple - the tech giant designs its iPhone in California; outsources its manufacturing jobs to

different countries like - Mongolia, China, Korea, and Taiwan; and markets them across the

world. Apple have not restricted its business to a nation, rather expanded it to throughout the

world. The opportunities for networking internationally are limitless. The more "places" a

business is, the more connections it can make with the world.

4. Important to open door for future opportunities – International marketing can also open

door for future business opportunities. International marketing not only increases market share

and customer base, it also helps the business to connect to new vendors, a larger workforce and

new technologies and ways of doing business. For example – American organisations investing

in Japan have found programs like – Six Sigma and Theory Z which are helpful in shaping their

business strategies.

International Market entry Evaluation Process

International market entry evaluation process gauge international business areas which offer the

best opportunities for business operators in line with their distinct products/services. The five

steps are: Country Identification, Preliminary Screening, In-Depth screening, Final selection and

Direct Experience.

i. Country Identification

Business proprietors have the autonomy to choose any specific country to go into and start their

business. To this extent therefore, business operators should conduct country identification -

which means that they undertake a general overview of potential new markets. There might be a


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simple match - for example two countries might share a similar heritage e.g. the United Kingdom

and Australia, a similar language e.g. the United States and Australia, or even a similar culture,

political ideology or religion e.g. China and Cuba. Alternatively one may choose a country from

the basis of being in the same trading zone e.g. the European Union.

ii. Preliminary Screening

At this second stage, one takes a broad look at those countries remaining after undergoing

preliminary screening. The business proprietors are duty bound to rank nations based upon

macro-economic factors such as currency stability, exchange rates, level of domestic

consumption and so on. From the basis of these attributes one can start calculating the nature of

market entry costs. Some countries such as China require that some fraction of the company

entering the market is owned domestically - this would need to be taken into account. There are

some nations that are experiencing political instability and any company entering such a market

would need to be rewarded for the risk that they would take. At this point the marketing manager

could decide upon a shorter list of countries that he or she would wish to enter.

iii. In-depth Screening

The countries that make it to stage three would all be considered feasible for market entry. So it

is vital that detailed information on the target market is obtained so that marketing decision-

making can be accurate. Business operators can deal with not only micro-economic factors but

also local conditions such as marketing research in relation to the marketing mix i.e. what prices

can be charged in the nation? - How does one distribute a product or service? How should one

communicate with are target segments in the nation? How does one’s product or service need to

be adapted for the nation? All of this information will form the basis of segmentation, targeting

and positioning. One could also take into account the value of the nation's market, any tariffs or

quotas in operation, and similar opportunities or threats to new entrants.

iv. Final Selection

In this step a final shortlist of potential nations is decided upon. Managers would reflect upon

strategic goals and look for a match in the nations at hand. The company could look at close

competitors or similar domestic companies that have already entered the market to get firm costs

in relation to market entry. Managers could also look at other nations that it has entered to see if


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there are any similarities, or learning that can be used to assist with decision-making in this

instance. A final scoring, ranking and weighting can be undertaken based upon more focused

criteria. After this exercise the marketing manager should probably try to visit the final handful

of nations remaining on shortlist.

v. Direct Experience

Personal experience is important. Marketing/purchasing managers or the company’s

representatives should travel to a particular nation to experience firsthand nation's culture and

business practices. On a first impression basis at least one can ascertain in what ways the nation

is similar or dissimilar to his own domestic market or the other nations where the company

already trades. The distinct market entry methods comprise exporting, licensing, franchising,

management contracting, manufacturing subcontracting, strategic alliances, joint ventures and

wholly owned subsidiary operations.

Foreign Markets

Foreign markets exist outside of your home nation’s political borders. Global markets introduce

increased populations that can be targeted for higher sales and profits. Overseas markets also

might offer a more accommodating sales environment because of fewer entrenched competitors.

Foreign markets can be categorized into developed and emerging markets. Industrialized nations,

such as the United States, Germany and Japan, represent mature markets, with relatively stable

political regimes and commercial environments. Emerging markets are identified by their higher

profit potential and heightened risk levels. For example, Nigeria is an emerging market where

portions of its abundant oil reserves are often shut out from the global economy because of rebel

warfare.

Larger businesses gain entry into foreign markets by establishing overseas operations. Coca-Cola

and McDonald’s are examples of multinational corporations that maintain formidable global

presences. Multinational companies can thrive overseas by making small cultural adjustments to

their current brand. For example, in the United States Nike focuses on football and basketball

advertisements, but it often rolls out expansive soccer advertising campaigns in Europe.

Smaller investors can enter foreign markets through financial exchanges. These savers can buy

shares of stock in multinational firms such as Coca-Cola, or can buy into global mutual fund

shares for international exposure.


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Foreign exchange facilitates global commerce. Foreign exchange describes the process of trading

domestic currency for international banknotes to make and receive payments. Foreign exchange

rates describe currency valuations, and they calculate the amount of one currency that is required

to trade for one unit of a competing currency.

Consumers prefer higher exchange rates for domestic currency, which increases their buying

power for foreign goods. However, businesses want lower domestic exchange rates. At that

point, their exported wares become cheaper to overseas buyers, and profits denominated in

foreign exchange translate into higher cash flow at home.


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transport, provided the volume to be transported is large. But the cost of installation and

maintenance requires large capital investment.

a) Ropeway transport

Ropeway refers to a mode of transport, which connects two places on the hills, or across a valley

or river. In the hilly areas, trolleys move on wheels connected to a rope and are used for carrying

passengers or goods, especially building materials, food, etc.

1. Water transport

Water transport refers to movement of goods and passengers on waterways by using various

means like boats, steamers, launches, ships, etc. With the help of these means goods and

passengers are carried to different places, both within as well as outside the country. Within the

country, rivers and canals facilitate the movement of boats, launches, etc. Since the goods and

passengers move inside the country, this type of transport is called inland water transport. When

the different means of transport are used to carry goods and passengers on the sea route it is

termed as ocean transport.

a) Inland water transport

Inland water transport use boats, launches, barges, streamers, etc., to carry goods and passengers

on river and canal routes. These routes are called inland waterways and are used in domestic or

home trade to carry bulky goods. Passenger transport through waterways can also be used.

b) Ocean transport

Ocean transport refers to movement of goods and passengers with the help of ships through sea

or ocean waterways. It plays an important role in the development of international trade. It is also

used for transporting goods and passengers in the coastal areas. Ocean transport has its fixed

route, which links almost all the countries of the world.

Sea transport may be of the following two types.

i. Coastal Shipping - In this transport, ships ply between the main ports of a country. This

helps in home trade, and also in carrying passengers within the country.

ii. Overseas shipping - In this transport, ships ply between different countries separated by

sea or ocean. It is mainly used for promotion and development of international trade. It is


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economical means of transport to carry heavy machines and goods in bulk. Overseas

transport is carried out on fixed routes, which connect almost all the countries. In ocean

transport, different types of ships are used to carry passengers and goods. These may be

classified under.

a. Liners - A liner is a passenger or cargo vessel, which belongs to a regular shipping

company. These ships ply over a fixed route according to a prescribed schedule or

timetable.

b. Tramps - A tramp is a cargo ship, which does not make regular trips but plies

whenever cargo is offered to it. It does not follow a fixed route or prescribed

timetable like that of liners.

Advantages of water transport

Water Transport has the following advantages:

i. It is a relatively economical mode of transport for bulky and heavy goods.

ii. It is a safe mode of transport with respect to occurrence of accidents.

iii. The cost of maintaining and constructing routes is very low as most of them are naturally

made.

iv. It promotes international trade.

Limitations of water transport

Water transport has the following limitations:

i. The depth and navigability of rivers and canals vary and thus, affect operations of

different transport vessels.

ii. It is a slow moving mode of transport and therefore not suitable for transport of

perishable goods.

iii. It is adversely affected by weather conditions.

iv. Sea transport requires large investment on ships and their maintenance.

2. Air transport

This is the fastest mode of transport. It carries goods and passengers through airways by using

different aircrafts like passenger aircraft, cargo aircraft, helicopters, etc. Besides passengers it


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generally carries goods that are less bulky or of high value. In hilly and mountainous areas where

other mode of transport is not accessible, air transport is an important as well as convenient

mode. It is mostly used for transporting goods and passengers during natural calamities like

earthquake and floods, etc. During war, air transport plays an important role in carrying soldiers

as well as supplies to the required areas. Air transport may be classified as domestic and

international air transport. While domestic air transport mainly facilitates movement within the

country, international air transport is used for carrying goods and passengers between different

countries. Air transport is carried out in fixed air routes, which connect almost all the countries.

Advantages of Air transport

It has the following advantages.

i. It is the fastest mode of transport.

ii. It is very useful in transporting goods and passengers to the area, which are not accessible

by any other means.

iii. It is the most convenient mode of transport during natural calamities.

iv. It provides vital support to the national security and defense.

Limitations of air transport

It has the following limitations.

i. It is a relatively more expensive mode of transport.

ii. It is not suitable for transporting heavy and bulky goods.

iii. It is affected by adverse weather conditions.

iv. It is not suitable for short distance travel.

v. In case of accidents, it results in heavy losses of goods, property and life.

Multimodal transport in international transactions

It is a transport service offering more than one transport mode. Multimodalism is the process of

operating/providing a door to door/warehouse to warehouse service to the shipper embracing two

or more transport and involving merchandise being conveyed in a utilized form in the same unit

form throughout the transit. It involves a scheduled/dedicated service. Forms of multimodal

include containerization- Full container load (FCL), less than container load (LCL)/road/sea/rail;

land bridge- trailer truck-road/sea/road; land air bridge etc.

CPSPKREVISION.CO.KE –Logistics and Inventory Mngt

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The diagram above illustrates the holistic activities included within logistics management. Inputs

to the logistics process include natural, human, financial and information resources. Logistics

practitioners plan, implement and control these inputs in various forms including raw materials

(e.g. subassemblies, parts packaging materials, basic commodities); in- process inventory (i.e.

products partially completed and not yet ready for sale); and finished goods (i.e. completed

products ready for sale to intermediate or final customers). The outputs of the logistics system

include competitive advantage for the organization resulting from a marketing orientation and

operational efficiencies and effectiveness, time and place utility and efficient movement to the

customer. Another output occurs when the logistics service mix is such that logistics becomes a

proprietary asset of the organization. The outputs are made possible by the effective and efficient

performance of the logistics activities shown at the bottom of the diagram.

Logistics functions

1. Customer service

Customer service acts as the binding and unifying force for all of the logistics management

activities. Each component of the logistics system can affect whether a customer receives the

right product at the right place, in the right condition, for the right cost at the right time.

Customer service involves successful implementation of the integrated logistics management

concept in order to provide the necessary level of customer satisfaction at the lowest possible

cost.

2. Order processing:

The starting point of physical distribution activities is the processing of customers’ orders. In

order to provide quicker customer service, the orders received from customers should be

processed within the least possible time.

Order processing includes receiving the order, recording the order, filling the order, and

assembling all such orders for transportation, etc. the company and the customers benefit when

these steps are carried out quickly and accurately.


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The error committed at this stage at times can prove to be very costly. For example, if a wrong

product or the same product with different specifications is supplied to the customer, it may lead

to cancellation of the original order (apart from loss in the credibility of the firm).

Similarly, if the order is not executed within a reasonable time, it may lead serious consequences.

High speed data processing techniques are now available which allow for rapid processing of the

orders like EDI.

3. Warehousing:

Warehousing refers to the storing and assorting products in order to create time utility.

The basic purpose of the warehousing activity is to arrange placement of goods, provide storage

facility to store them, consolidate them with other similar products, divide them into smaller

quantities and build up assortment of products.

Generally, the larger the number of warehouses a firm has the lesser would be the time taken in

serving customers at different locations, but the greater would be the cost of warehousing.

Thus, the firm has to strike a balance between the cost of warehousing and the level of customer

service.

4. Inventory Control and Management:

Linked to warehousing decisions are the inventory decisions which hold the key to success of

physical distribution especially where the inventory costs may be as high as 30-40 per cent (e.g.,

steel and automobiles).

Thus, the new concept of Just-in-Time-Inventory decision is increasingly becoming popular with

a number of companies.

The decision regarding level of inventory involves estimate of demand for the product. A correct

estimate of the demand helps to hold proper inventory level and control the inventory costs.

This is not only helps the firm in terms of the cost of inventory and supply to customers in time

but also to maintain production at a consistent level.

The major factors determining the inventory levels are:

-The firm’s policy regarding the customer service level, degree of accuracy of the sales forecasts,


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-Responsiveness of the distribution system i.e., ability of the system to transmit inventory needs

to the factory and get the products in the market.

-The cost inventory consists of holding cost (such as cost of warehousing, tied up capital and

obsolescence) and replenishment cost (including the manufacturing cost).

5. Transportation:

Transportation seeks to move goods from points of production and sale to points of consumption

in the quantities required at times needed and at a reasonable cost.

The transportation system adds time and place utilities to the goods handled and thus, increase

their economic value.

To achieve these goals, transportation facilities must be adequate, regular, dependable and

equitable in terms of costs and benefits of the facilities and service provided.

6. Information monitoring:

The physical distribution managers continuously need up-to-date information about inventory,

transportation and warehousing.

For example, in respect on inventory, information about present stock position at each location,

future commitment and replenishment capabilities are constantly required.

Similarly, before choosing a carrier, information about the availability

of various modes of transport, their costs, services and suitability for a particular product

is needed.

About warehousing, information with respect to space utilization, work schedules, etc., is

required.

In order to receive all the information stated above, an efficient management information system

would be of immense use in controlling costs, improving services and determining the overall

effectiveness of distribution.

Of course, it is difficult to correctly assess the cost of physical distribution operations. But if

correct information is available it can be analyzed systematically and a great deal of saving

can be ensured.

CPSPKREVISION.CO.KE – Logistics and Inventory Mngt

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SCOPE AND CONCEPT OF STORES MANAGEMENT

Definition of terms used in stores management

Shrinkage: Reductions of actual quantities of items in stock, in process, or in transit. The

loss may be caused by scrap, theft, deterioration, evaporation, etc.

Spot demand: Demand with a short lead time that’s difficult to estimate. Usually supply for

this demand is provided at a premium price. An example of spot demand would be when

there’s a spiked demand for building materials as a result of a hurricane.

Stock cycle: sequence of repeated events for stock holdings; the time between consecutive

replenishments

Stock-Keeping Unit (SKU): A category of unit with a unique combination of form, fit, and

function (i.e., unique components held in stock).

Stocktaking: periodic checks to find differences between recorded and actual stock levels

Stock out: a situation where you have inadequate inventory levels to meet current demand.

Stocktaking: periodic checks to find differences between recorded and actual stock levels

Slotting: Store slotting is defined as the placement of products within a store. Its objective is

to increase picking efficiency and reduce handling costs through optimizing product location

and balancing the workload.

Role of Stores Management in an Organisation

The store plays several crucial roles in an organisation which include:

Receipt is the process of checking and accepting, from all sources (vendors, production

units, repair units etc.), all materials and parts which are used in the organisation. These

include supplies for manufacturing or operating processes, plant maintenance, offices and

capital installations.

Identification is the process of systematically defining and describing all items of materials

in stock. It includes the preparation of a Stores Code or Vocabulary, the adoption of materials

specifications and the introduction of a degree of standardization. In certain cases, part of this

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work may be done by the design, planning or standards departments or sometimes the

purchase department.

Inspection involves the examination of incoming consignments for quality. Very often there

is a separate quality control or inspection department, which undertakes this work for most,

materials. Otherwise goods are inspected by stores to ensure that the inspection procedures

laid down are carried out before materials are accepted into stock.

Storage and preservation involves items to be binged and kept in storage bins and

impounds; as usually indicated in the yard. The location is usually indicated in the

transaction card. The storage period may vary between one day and one year or more,

depending upon recoupment procedures/safety stock required, etc. storage is the physical act

of storing the materials. The general rule is: "A place for everything in its place".

Presentation involves the maintenance, of materials to retain their quality. Quite often,

temperature, humidity, dust and other factors cause deterioration of materials.

Materials handling involves movement and handling. This can be manual or mechanical

(e.g. by use of forklifts) heavy items, dangerous or inflammable goods, and delicate

merchandise have all to be handled differently.

Packaging: Materials dispatched to customers from the finished goods store or from one

store to another at different location require to be packed. Materials required packing

according to their nature and this may vary from heavy wooden crates to ordinary paper

cartons.

Issue and Dispatch is the process of receiving demands, selecting the items required and

handling them over to users, or dispatching them to customers.

Stock Records are the documents which record, form day to day, full particulars of

individual receipts, issues and balances of materials in stock.

Stores accounting is the process of recording details of stock movements and balances in

terms of financial value. It is sometimes undertaken by accounts department, but there is

much to be said for it being handled by stores. In practice, it is often found that such an

arrangement saves a good deal of work and duplication. It has the added advantage of


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making Stores personnel responsible for providing their own financial information, which

they require for the purpose of inventory control

Rationale for Holding Stock and Effective Stores Management

1. To stabilize production: The demand for an item fluctuates because of the number of factors,

e.g., seasonality, production schedule etc. The inventories (raw materials and components)

should be made available to the production as per the demand failing which results in stock out

and the production stoppage takes place for want of materials. Hence, the inventory is kept to

take care of this fluctuation so that the production is smooth.

2. To take advantage of price discounts: Usually the manufacturers offer discount for bulk

buying and to gain this price advantage the materials are bought in bulk even though it is not

required immediately. Thus, inventory is maintained to gain economy in purchasing.

3. To meet the demand during the replenishment period: The lead time for procurement of

materials depends upon many factors like location of the source, demand supply condition, etc.

So inventory is maintained to meet the demand during the procurement (replenishment) period.

4. To prevent loss of orders (sales): In this competitive scenario, one has to meet the delivery

schedules at 100 per cent service level, means they cannot afford to miss the delivery schedule

which may result in loss of sales. To avoid the organizations have to maintain inventory.

5. To keep pace with changing market conditions: The organizations have to anticipate the

changing market sentiments and they have to stock materials in anticipation of non-availability

of materials or sudden increase in prices.

6. Sometimes the organizations have to stock materials due to other reasons like suppliers

minimum quantity condition, seasonal availability of materials or sudden increase in prices.

Carrying Inventory can be classified under four heads depending on the need:

Cycle Inventory: Raw materials, components, parts are required for production. This is

cycle plays a crucial role in keeping the production cycle continuous. The work in

progress

CPSPKREVISION.CO.KE –Research in Procurement

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College students who must undertake research to satisfy the requirements of a course in

research methods.

Characteristics of Research:

The main distinguishing characteristics of scientific research include:

i) Purposiveness

Any good scientific research must have a definite aim or purpose, i.e., it must be focused;

otherwise it will fail to be systematic and directed. A statement of the purpose of study guides in

the achievement of the research objectives, a practical research design and valid reliable results.

Without such a focus it will be difficult for the research to achieve its objectives or test

hypothesis.

ii) Rigor

A good theoretical base and a sound methodology would add rigor to a purposive study,

Conclusions drawn from an investigation that lacks a good theoretical foundation would be

unscientific. Therefore, rigorous research involves a good theory base and a carefully thought out

methodology, factors which enable the researcher to collect the right kind of information for an

appropriate data analysis, arriving at valid conclusions.

iii) Testability

Scientific research blends itself to testing logically developed hypothesis to see whether or not

the data supports the proposed hypothesis.

This means that the hypothesis must be developed after a careful study of the problem.

Hypothesis is tested by applying certain statistical tests to the data collected for that purpose. If

the hypothesis developed is not quite testable, it weakens a scientific investigation. This happens

when the variables developed are too abstract and difficult to measure or observe i.e. personality,

obedience, understanding, job interest, commitment, etc.

iv) Replicability

Replicability in scientific research cohorts that the results of the research or the tests of the

hypothesis should be supported again and again when the research is repeated in other similar

circumstances, the Replicability gives confidence in our research design and hence makes it

scientific.


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v) Precision and confidence

Precision refers to how close the findings based on a sample are to the reality. Precision reflects

the degree of exactitude of the results based on the sample to the phenomena studies on they

exist in the universe or the actual population. The closer your results are to the expected or

predicted phenomena the higher the precision.

Confidence refers to the probability that our estimates are correct. It is not merely enough to be

precise but that it is important to be 95% sure or confident that our estimates are correct and that

there is only a 5% chance of our being wrong. This is also known as the confidence level that

given perfection we would like to be 100% correct, imaging that if you have too much error for

someone who has to take a rocket to the moon, then your research leaves a lot to be desired.

The narrower the gap within which we can estimate the range of our predictions, and the greater

the confidence we have in our research results, the more useful and scientific the findings

become. Precision and confidence can therefore be obtained by only appropriate scientific

sampling designs.

vi) Objectivity

The conclusions drawn through the interpretation of the results of our data analysis should be

objective and based on facts resulting from the actual data and not from our own subjective or

emotional values. The more objective the interpretation of the data, the more scientific the

research investigation

vii) Generalisability

This refers to the (scope) of applicability of the research findings. The wider the range of

applicability of the solutions generated by research the more useful the research is.

Generalisability will depend on how elaborate the sampling design was. The kind of instruments

used in data collection and objectivity shown in the interpretation of data.

viii) Parsimony

This refers to the simplicity of explaining the phenomena or problems that occur and in the

applications of solutions to the problems. Being simple in explaining the outcomes of the

research is always preferred to complex research frameworks that consider an imaginable

number of factors. Being scientific does not mean that we have to be complicated, we come up

with too many variables that cannot be analyzed and thus end up making the whole research

invalid.


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Classification of Research

In the fields of general education, health education, physical education, recreation, etc. there

exists different kinds of problems, consequently, different types of research are used to solve

these problems. Research in general can be classified or categorized in many ways. The

following are the basic modes of classification:

The field of study in which the research is conducted. i.e. discipline; for example

educational research, sociological research, marketing research etc.

The place where the research is conducted. Hence we talk in forms of field research,

laboratory research, community research etc.

Application of the research – the way/mode in which the findings of the research will be

used e.g., Action research, service research etc.

Purpose of the research i.e. basic research, action research, applied research and

evaluation research.

By methods of analysis, i.e., descriptive research and empirical research

Character of data collected i.e. qualitative research and quantitative research.

Procedure/Design used – experimental research, survey research etc.

Types of research

1. Basic research

It is also referred to as pure or fundamental research. It is a type of research which is

characterized by a desire to know or to expound the frontiers of knowledge. It is research based

on the creation of new knowledge. It is mainly theoretical and for advancement of knowledge.

Basic researchers are interested in deriving scientific knowledge which will be a broad base for

further research. The main purpose for conducting this research is to generate more information

and understanding the phenomena that operate in a situation. The aim is not usually to apply

findings, to solve an immediate problem but rather to understand more about a certain

phenomenon and expound that knowledge.

Another focus of basic research is to generate new knowledge in order to refine or expand

existing theories. However, there is no consideration of the practical applications of the findings


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PROCESSING AND ANALYSING OF DATA

Data processing and analysis tools

The data, after collection, has to be processed and analysed in accordance with the outline laid

down for the purpose at the time of developing the research plan. This is essential for a scientific

study and for ensuring that we have all relevant data for making contemplated comparisons and

analysis. Technically speaking, processing implies editing, coding, classification and tabulation

of collected data so that they are amenable to analysis. The term analysis refers to the

computation of certain measures along with searching for patterns of relationship that exist

among data-groups. Thus, ―in the process of analysis, relationships or differences supporting or

conflicting with original or new hypotheses should be subjected to statistical tests of significance

to determine with what validity data can be said to indicate any conclusions‖.

Data processing operations

1. Editing: Editing of data is a process of examining the collected raw data (specially in surveys)

to detect errors and omissions and to correct these when possible. As a matter of fact, editing

involves a careful scrutiny of the completed questionnaires and/or schedules. Editing is done to

assure that the data are accurate, consistent with other facts gathered, uniformly entered, as

completed as possible and have been well arranged to facilitate coding and tabulation. With

regard to points or stages at which editing should be done, one can talk of field editing and

central editing. Field editing consists in the review of the reporting forms by the investigator for

completing (translating or rewriting) what the latter has written in abbreviated and/or in illegible

form at the time of recording the respondents‘ responses. This type of editing is necessary in

view of the fact that individual writing styles often can be difficult for others to decipher. This

sort of editing should be done as soon as possible after the interview, preferably on the very day

or on the next day. While doing field editing, the investigator must restrain himself and must not

correct errors of omission by simply guessing what the informant would have said if the question

had been asked. Central editing should take place when all forms or schedules have been

completed and returned to the office. This type of editing implies that all forms should get a

thorough editing by a single editor in a small study and by a team of editors in case of a large

inquiry. Editor(s) may correct the obvious errors such as an entry in the wrong place, entry

recorded in months when it should have been recorded in weeks, and the like. In case of

inappropriate on missing replies, the editor can sometimes determine the proper answer by


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reviewing the other information in the schedule. At times, the respondent can be contacted for

clarification. The editor must strike out the answer if the same is inappropriate and he has no

basis for determining the correct answer or the response. In such a case an editing entry of ‗no

answer‘ is called for. All the wrong replies, which are quite obvious, must be dropped from the

final results, especially in the context of mail surveys. Editors must keep in view several points

while performing their work:

(a) They should be familiar with instructions given to the interviewers and coders as well as with

the editing instructions supplied to them for the purpose.

(b) While crossing out an original entry for one reason or another, they should just draw a single

line on it so that the same may remain legible.

(c) They must make entries (if any) on the form in some distinctive colour and that too in a

standardised form.

(d) They should initial all answers which they change or supply.

(e) Editor‘s initials and the date of editing should be placed on each completed form or schedule.

2. Coding: Coding refers to the process of assigning numerals or other symbols to answers so

that responses can be put into a limited number of categories or classes. Such classes should be

appropriate to the research problem under consideration. They must also possess the

characteristic of exhaustiveness (i.e., there must be a class for every data item) and also that of

mutual exclusively which means that a specific answer can be placed in one and only one cell in

a given category set. Another rule to be observed is that of unidimensionality by which is meant

that every class is defined in terms of only one concept. Coding is necessary for efficient analysis

and through it the several replies may be reduced to a small number of classes which contain the

critical information required for analysis. Coding decisions should usually be taken at the

designing stage of the questionnaire. This makes it possible to precode the questionnaire choices

and which in turn is helpful for computer tabulation as one can straight forward key punch from

the original questionnaires. But in case of hand coding some standard method may be used. One

such standard method is to code in the margin with a coloured pencil. The other method can be

to transcribe the data from the questionnaire to a coding sheet. Whatever method is adopted, one

should see that coding errors are altogether eliminated or reduced to the minimum level.

3. Classification: Most research studies result in a large volume of raw data which must be

reduced into homogeneous groups if we are to get meaningful relationships. This fact


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necessitates classification of data which happens to be the process of arranging data in groups or

classes on the basis of common characteristics. Data having a common characteristic are placed

in one class and in this way the entire data get divided into a number of groups or classes.

Classification can be one of the following two types, depending upon the nature of the

phenomenon involved:

(a) Classification according to attributes: As stated above, data are classified on the basis of

common characteristics which can either be descriptive (such as literacy, sex, honesty, etc.) or

numerical (such as weight, height, income, etc.). Descriptive characteristics refer to qualitative

phenomenon which cannot be measured quantitatively; only their presence or absence in an

individual item can be noticed. Data obtained this way on the basis of certain attributes are

known as statistics of attributes and their classification is said to be classification according to

attributes. Such classification can be simple classification or manifold classification. In simple

classification we consider only one attribute and divide the universe into two classes—one class

consisting of items possessing the given attribute and the other class consisting of items which

do not possess the given attribute. But in manifold classification we consider two or more

attributes simultaneously, and divide that data into a number of classes (total number of classes

of final order is given by 2n , where n = number of attributes considered). * Whenever data are

classified according to attributes, the researcher must see that the attributes are defined in such a

manner that there is least possibility of any doubt/ambiguity concerning the said attributes.

(b) Classification according to class-intervals: Unlike descriptive characteristics, the numerical

characteristics refer to quantitative phenomenon which can be measured through some statistical

units. Data relating to income, production, age, weight, etc. come under this category. Such data

are known as statistics of variables and are classified on the basis of class intervals. For instance,

persons whose incomes, say, are within Rs 201 to Rs 400 can form one group, those whose

incomes are within Rs 401 to Rs 600 can form another group and so on. In this way the entire

data may be divided into a number of groups or classes or what are usually called, ‗class-

intervals.‘ Each group of class-interval, thus, has an upper limit as well as a lower limit which

are known as class limits. The difference between the two class limits is known as class

magnitude. We may have classes with equal class magnitudes or with unequal class magnitudes.

The number of items which fall in a given class is known as the frequency of the given class. All

CPSPKREVISION.CO.KE –Operations Management

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Transformation and Value Adding Activities

The objective of combining resources under controlled conditions is to transform them into

goods and services having a higher value than the original inputs. The transformation process

applied will be in the form of technology to the inputs. The effectiveness of the production

factors in the transformation process is known as productivity. The productivity refers to the

ratio between values of output per work hour to the cost of inputs. The firms overall ratio must

be greater than 1, then we can say value is added to the product. Operations manager should

concentrate improving the transformation efficiency and to increase the ratio.

Elements of operations management

The operations function can be connected to other functional operations within organization such

as marketing, finance, human resource and etc. so it can be described that all functional areas

undertake operations activities because they all produce the services and goods. Thus, today

every company realized that operations management is important and also agreed that is the main

core function to organize their organization. The key elements of Operations Management are;

Product selection and design: The right kind of products and good designs of the products

are crucial for the success of an organizing. Products/services, therefore, must be chosen

after detailed evaluation of the product/services alternatives in conformity with the

organization’s objectives. Techniques like value engineering may be employed in creating


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alternate designs, which are free from unnecessary features and meet the intended functions

at the lowest cost.

Process selection and planning: Process selection decisions include decisions concerning

choice of technology, equipment, machines, material handling systems, mechanization and

automation. Process planning involves detailing of processes if resource conversion

required and their sequence.

Facilities (Plant) location: Plant location decisions are strategic decisions and once plant

is set up at a location, it is comparatively immobile and can be shifted later only at a

considerable cost and interruption of production. Although problem of location choice does

not fall within preview the production function and it occurs infrequently, yet it is of

crucial importance because of its major effect on the performance of every department

including production. Therefore, it is important to choose the right location, which will

minimize total “delivered customer” cost (Production and distribution cost).

Facilities (Plant) layout and materials handling: Plant layout is concerned with relative

location of one department (Work center) with another in order to facilitate material flow

and processing of a product in the most efficient manner through the shortest possible

time. A good layout reduces material handling cost, eliminates delays and congestion,

improves co-ordination, provide good housekeeping etc. while a poor layout results in

congestion, waste, frustration, inefficiency and loss of profit.

Capacity Planning: Capacity planning concerns determination and acquisition of

productive resource to ensure that their availability matches the demand. Capacity

decisions have a direct influence on performance of production system in respect of both

resource productivity and customer service (i.e. delivery performance). Excess capacity

results in low resource productivity while inadequate capacity leads to poor customer

service. Capacity planning decisions can be short-term decisions. Long-term capacity

planning decisions concern expansion/contraction of major facilities required in the

conversion process, economics of multiple shift operation, development of vendors for

major components etc. Short-term capacity planning decisions concern issues like overtime

working, sub-contracting, shift adjustments etc. Break-even analysis is a valuable tool for

capacity planning.


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Production Planning and Control (PPC): Production planning is the system for

specifying the production procedure to obtain the desired output in a given time at optimum

cost in conformance with specified standard of quality, and control is essential to ensure

that manufacturing takes place in the manner stated in the plan.

Inventory control: Inventory control deals with determination of optimal inventory levels

of raw materials, components, parts, tools; finished goods, spares and supplies to ensure

their availability with minimum capital lock up. Material requirement planning (MRP) and

Just in time (JIT) are the latest techniques that can help the firm to reduce inventory.

Quality assurance and control: Quality is an important aspect of production system and it

must ensure that services and products produced by the company conform to the declared

quality standards at the minimum cost. A total quality assurance system includes such

aspects as setting standards of quality, inspection of purchased and sub-contracted parts,

control of quality during manufacture and inspection of finished product including

performance testing etc.

Work-study and job design: Work-study, also called time and motion study, is concerned

with improvement of productivity in the existing jobs and the maximization of productivity

in the design of new jobs. Two principal component of work-study are: Method study and

Work measurement.

Maintenance and replacement: Maintenance and replacement involve selection of

optimal maintenance (preventive and/or breakdown) policy to ensure higher equipment

availability at minimum maintenance and repair cost. Preventive maintenance, which

includes preventive inspection, planned lubrication, periodic cleaning and upkeep, planned

replacement of parts, condition monitoring of the equipment and machines, etc. is most

appropriate for critical machines.

Cost reduction and cost control: Effective production management must ensure

minimum cost of production and in this context cost reduction and cost control acquires

significant importance. There are large numbers of tools and techniques available that can

help to make a heavy dent on the production cost.

Responsibilities of operations manager

Operations managers are essential to any large business organization. The core responsibilities of

operations managers tend to be similar across many industries.

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Making it easier for changeover to take place through simplification of procedures or

eliminating the unnecessary ones

Feedback mechanisms that prevent out-of-spec situations as well as clear indications of

the correct specifications for quality products

Increased safety features

Though the machines may be designed and manufactured with all the above considerations in

mind, it is still possible that there will be bugs that will need to be removed before full

commissioning.

Early management is a system that addresses these concerns and uses input from the staff who

will be using the equipment before installation.

Pillar 6: Education and Training

This pillar is concerned with filling the knowledge gap that exists in an organization when it

comes to total productive maintenance.

Lack of knowledge in the tools can stand in the way of proper implementation leading to

mediocre results at best and failure at worst.

Without proper training, tools such as TPM can be misunderstood by the staff which can result in

disastrous results for the company.

Ensuring that employees are trained gives the organization a reliable pool of knowledgeable staff

that can drive the initiative competently.

TPM education and training pillar is a company-wide initiative that does not leave out any

employee cadre. In fact, all levels in the organization – from the operators to senior managers –

get involved in the TPM training as well projects.

Through training, operators’ skills levels are raised to the point where they are able to carry-out

basic maintenance activities that were previously the preserve of maintenance staff.

The technical staff are then taught higher level skills such as preventive maintenance and

analytical skills to help become more proactive to problem solving.

At the managerial level, managers also learn the TPM skills so as to become competent mentors

to their juniors as well as be involved in coaching programs.


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Pillar 7: Health, Safety & Environment

That workers must be able to perform their functions in a safe environment devoid of health risks

cannot be gainsaid.

The health, safety and environment pillar of total productive maintenance ensures that all

workers are provided with an environment that is safe and that all conditions that are harmful to

their well-being are eliminated.

While the goal of any organization is to produce value for the customer in an efficient and

productive manner, this should be done in a way that is does not put to risk the safety of workers.

It is therefore important that any solutions which are put in place should consider the well-being

of the worker above all else.

When workers are in a safe environment, their attitude towards work changes dramatically with a

resultant increase in important metrics such as productivity. This is because injuries or fatalities

reduce when there is a concerted effort to make the workplace an accident-free environment.

The cross-functional teams will work towards making machines safe to use by the operators by

putting in place such features as guards, works standards, use of personal protective equipment

and first-aid kits in the work-area. Each of these measures are aimed at improving the safety of

the machines so as to have a more productive work-force.

Pillar 8: TPM in Office Functions

Taking TPM to the administrative functions is the next logical step in the total productive

maintenance program so as to have the whole organization speaking from the same page.

As these are supportive functions, making them understand and apply the principles of lean in

their own operations makes it easy for them to provide efficient service to the main value-

creating processes.

In addition, spreading the initiative into other functions removes the silo mentality and

encourages horizontal cooperation within the workforce. The organization will also benefit by

having a larger pool of workers who understand the principles of TPM and can easily be called

upon to play a positive role in its implementation.

The TPM principles can also be applied as stand-alone techniques to improve the efficiency of

these supportive functions. For example, if the administrative functions are able to improve their


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order processing procedures, then material will get to the shop-floor in a flawless manner which

will have a positive effect on the workflow.

If suppliers are paid on time, they will have the ability to provide the services that they have been

contracted to give without any problem.

As we conclude with this pillar, it is important to note that each has its role in the greater scheme

of things and should be employed at the appropriate time.

While each TPM pillar has can be applied as a stand-alone component, the aim should be to

sequentially implement each of the pillars so as to get the full benefits of a complete system.

Benefits of Total Productive Maintenance (TPM)

1. Productivity Improvement - Productivity is improved through fewer losses in the company

2. Quality Improvement - Quality is improved as a result, that the failures and malfunctions

are reduced

3. Employee Ownership - Ownership of equipment by operators through

4. Autonomous Maintenance

5. Employee Confidence - "Zero failure", "zero defect" and "zero accident" conditions builds

employee self-confidence

6. Improved working environment - Clean working conditions provides a good working

environment

7. Increased Plant Reliability

8. Customer Satisfaction - TPM leads to high delivery performance and customer satisfaction

Nine Essentials of Total Productive Maintenance (TPM)

1. Self-maintained work place

2. Elimination of the 6 big losses

3. Zero Breakdowns

4. Zero Defects

5. Optimal life and availability of tools

6. Self-improvement

7. Short production-development time and low machine life cost

8. Productivity in indirect departments

9. Zero Accidents

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