Purchasing Management — 2022

KNEC Diploma in Supply Chain Management, Module II. Original theory examination questions with explained model answers for revision.

July 2022

Paper codes: 2903/201
Time: Not shown in supplied scan
Instructions: Not shown in supplied scan

Question 1(a) — 10 marks

A purchasing manager in a certain organisation intends to conduct a debriefing exercise to its tenderer. Outline five guidelines he should observe when conducting the exercise.

Model answer

  1. Use the published evaluation criteria: explain the tenderer’s own strengths and weaknesses objectively.
  2. Protect confidentiality: do not disclose competitors’ trade secrets, detailed bid information or protected evaluation material.
  3. Be accurate and factual: rely on the evaluation record rather than personal opinions or promises.
  4. Treat tenderers consistently: use authorised staff, suitable timing and a clear opportunity to ask relevant questions.
  5. Keep a record: document the issues raised and answers given, including any proper review or complaint route.

Question 1(b) — 10 marks

Explain five factors that may influence the elevation of the purchasing function to the strategic level in an organisation.

Model answer

  1. High purchased-input expenditure: a large share of total cost makes sourcing decisions important to profitability.
  2. Supply risk: scarce or critical materials require long-term supplier and continuity strategies.
  3. Competitive pressure: purchasing can improve cost, innovation, quality and time to market.
  4. Complex external markets: global sourcing, technology change and regulation require coordinated senior-level decisions.
  5. Management recognition: leadership support and capable purchasing staff enable the function to contribute to organisational strategy.

Question 2(a) — 10 marks

Outline five purposes that a purchase contract document serves in the purchasing operations of an organisation.

Model answer

  1. Records the parties’ agreed rights and obligations.
  2. Defines specifications, quantities and quality standards against which performance is measured.
  3. Sets the price, payment arrangements and delivery responsibilities.
  4. Provides evidence for resolving disputes and enforcing valid contractual remedies.
  5. Supports planning, approvals, accountability and audit of the purchasing transaction.

Question 2(b) — 10 marks

Explain five benefits that a manufacturing firm may derive form using the Computer Aided Design (CAD) technology in controlling the quality of its purchased goods.

Model answer

  1. Precise specifications: digital drawings communicate accurate dimensions and tolerances to suppliers.
  2. Early error detection: designs can be checked before materials are ordered, avoiding costly purchasing mistakes.
  3. Faster revision: controlled digital updates allow suppliers to work from the correct design version.
  4. Better visualisation: three-dimensional models help buyers and suppliers understand fit and performance requirements.
  5. Standardisation: reusable design libraries promote consistent components and reduce unnecessary variety and defects.

Question 3(a) — 10 marks

Explain five factors that an organisation may take into account when determining contract price with a supplier.

Model answer

  1. Supplier cost structure: materials, labour, overheads and a reasonable margin influence a sustainable price.
  2. Market conditions: competing offers, demand, scarcity and substitutes affect the obtainable price.
  3. Quantity and commitment: larger or predictable orders may justify discounts and lower unit transaction costs.
  4. Contract risks: delivery uncertainty, currency exposure and price-adjustment terms influence the risk allowance.
  5. Total commercial terms: payment timing, transport, warranty, service and quality obligations must be considered with the quoted price.

Question 3(b) — 10 marks

Outline five advantages to an organisation of using teams when negotiating purchase contracts.

Model answer

  1. Combines commercial, technical, financial and legal expertise.
  2. Permits division of roles such as leading, observing and recording the negotiation.
  3. Improves analysis because members can challenge assumptions and check proposals.
  4. Strengthens continuity when an individual negotiator is unavailable.
  5. Increases internal acceptance because affected departments participate in developing the agreement.

Question 4(a) — 10 marks

Outline five reasons that may influence a buyer to use trade exhibitions as a source of information about potential suppliers in the market.

Model answer

  1. Several suppliers can be compared at one place and within a short period.
  2. Products can be inspected or demonstrated directly.
  3. Technical staff can answer detailed questions about capability and specifications.
  4. Exhibitions reveal new products, technology and market trends.
  5. Face-to-face contact helps establish relationships and arrange follow-up supplier assessments.

Question 4(b) — 10 marks

Explain five factors that may influence purchasing officers to indulge in unethical behaviours when carrying out their duties.

Model answer

  1. Weak internal controls: an officer able to request, award and approve payment without review has greater opportunity for abuse.
  2. Personal financial pressure or greed: private gain may be placed ahead of professional responsibilities.
  3. Improper influence: pressure from managers, political actors or suppliers can bias specifications and awards.
  4. Low accountability: poor monitoring and inconsistent sanctions make misconduct appear unlikely to have consequences.
  5. Unethical workplace culture: tolerated gifts, favouritism and collusion can normalise behaviour that violates professional standards.

Question 5(a) — 10 marks

Many purchasing organisations require their suppliers to be ISO certified. Outline five advantages to the organisations of this requirement.

Model answer

ISO management-system certification provides assurance about the certified system and scope; it is not a guarantee that every supplied unit is defect-free.

  1. Greater confidence that the supplier operates a documented and audited management system.
  2. More consistent processes and clearer handling of non-conformities.
  3. Easier supplier comparison using recognised management-system requirements.
  4. Better traceability and records to support audits and corrective action.
  5. Reduced assessment effort where credible, relevant certification supplements the buyer’s own checks.

Question 5(b) — 10 marks

Outline five operational features of the horizontal purchasing organisational structure.

Model answer

  1. Few hierarchical levels between purchasing staff and senior management.
  2. Wide spans of control for managers.
  3. Substantial delegation of day-to-day purchasing authority.
  4. Direct communication between employees and management.
  5. Cross-functional teamwork and flexible coordination of purchasing activities.

Question 6(a) — 10 marks

Explain five reasons that may influence an organisation to use model form contracts in its purchasing operations.

Model answer

  1. Faster preparation: standard clauses reduce repeated drafting of routine contractual provisions.
  2. Lower transaction cost: less legal and administrative work is required for similar purchases.
  3. Consistency: common terms make contract administration and staff training easier.
  4. Balanced risk coverage: established forms prompt consideration of obligations, remedies and common risks.
  5. Fewer omissions: a structured document reduces the chance of leaving out important conditions, provided it is adapted to the actual purchase.

Question 6(b) — 10 marks

As a newly employed purchasing manager in a certain organisation, you have been tasked to plan for an upcoming negotiation exercise with one of the suppliers. Outline five aspects that you should cover when carrying out the task.

Model answer

  1. Objectives, priorities, target outcomes and acceptable limits.
  2. Supplier, market, cost and alternative-source information.
  3. Negotiation team membership, roles and delegated authority.
  4. Strategy, bargaining variables, concessions and the alternative if no agreement is reached.
  5. Agenda, supporting documents, venue, timing and arrangements for recording agreed terms.

Question 7(a) — 10 marks

Explain five measures that an organisation may take to eradicate unethical practices in its purchasing operations.

Model answer

  1. Leadership example: managers should follow procurement rules themselves and refuse improper gifts or preferential treatment.
  2. Practical ethics training: staff should learn how to recognise conflicts, bribery and confidential information risks.
  3. Effective controls: segregation of duties, documented approvals and audit trails make concealed misconduct harder.
  4. Protected reporting: confidential channels and protection against retaliation encourage early reporting of suspected abuse.
  5. Fair enforcement: investigate complaints promptly and apply consistent sanctions and recognition for ethical conduct.

Question 7(b) — 10 marks

As a purchasing manager at Koma Limited, you have realised that users are contributing to poor quality of goods delivered by suppliers. Explain five ways in which you would address this problem.

Model answer

  1. Train users: explain how clear requirements, correct requisitions and prompt feedback affect purchased quality.
  2. Develop specifications jointly: procurement, technical staff and users should agree measurable needs before ordering.
  3. Control changes: require authorised specification revisions so suppliers do not receive conflicting informal instructions.
  4. Involve users in acceptance: qualified users should test fitness for purpose and report defects with evidence.
  5. Enforce accountability: review repeated errors, clarify responsibilities and use performance feedback to improve user compliance.

November 2022

Paper codes: 2903/201
Time: Not shown in supplied scan
Instructions: Not shown in supplied scan

Question 1(a) — 10 marks

Explain five reasons that may make it necessary to have an effective purchasing department in an organization.

Model answer

  1. Specialist expertise: trained buyers can analyse markets, negotiate terms and choose capable suppliers.
  2. Continuity of supply: coordinated planning secures the materials needed to keep operations running.
  3. Cost control: consolidated requirements and disciplined evaluation help obtain value for money.
  4. Quality assurance: the department works with users and suppliers to specify and obtain suitable materials.
  5. Accountability: defined purchasing authority, records and controls reduce unauthorised buying and enable performance review.

Question 1(b) — 10 marks

Outline five purchasing decisions that are made at the tactical level of management in an organization.

Model answer

  1. Selecting suppliers within the organisation’s approved sourcing strategy.
  2. Negotiating medium-term prices, service levels and payment terms.
  3. Setting order quantities and replenishment arrangements for groups of materials.
  4. Allocating purchasing work, staff and operating budgets.
  5. Establishing supplier evaluation, expediting and quality-control procedures.

Question 2(a) — 10 marks

Explain five measures that a supply chain manager should take for quality assurance in an organization.

Model answer

  1. Use clear specifications: agree measurable performance and acceptance requirements with user departments before sourcing.
  2. Qualify suppliers: assess technical capability, quality systems and previous performance before award.
  3. Build quality into contracts: state inspection, testing, traceability, warranty and corrective-action responsibilities.
  4. Verify performance: inspect risk-sensitive deliveries and review defects, complaints and supplier process evidence.
  5. Improve continuously: investigate root causes with suppliers, implement corrective actions and monitor whether defects recur.

Question 2(b) — 10 marks

The supply chain manager at Kapi Limited intends to conduct an appraisal of its suppliers. Explain the criteria that may be used when carrying out the exercise.

Model answer

  1. Quality capability: ability to meet the required specifications consistently.
  2. Total cost: competitive price together with transport, maintenance, financing and disposal costs.
  3. Delivery reliability: capacity to supply the right quantities at the agreed time and place.
  4. Financial and operational capacity: resources, facilities and solvency sufficient to complete the order.
  5. Integrity and past performance: ethical conduct, references, compliance and a dependable service record.

Question 3(a) — 10 marks

Explain five ways in which benchmarking may enhance quality assurance in supply chain operations.

Model answer

  1. Identifies gaps: comparing defect, delivery and process results with strong performers reveals where quality is weak.
  2. Sets realistic targets: external performance evidence provides a basis for measurable improvement goals.
  3. Reveals better practices: studying successful processes helps the organisation adopt suitable preventive controls.
  4. Encourages continuous improvement: repeated comparison motivates teams and suppliers to raise standards over time.
  5. Tests improvement results: subsequent measurements show whether changes have narrowed the quality-performance gap.

Question 3(b) — 10 marks

Explain five key performance indicators that may provide a measure of overall supplier performance.

Model answer

  1. On-time delivery rate: percentage of deliveries received by the agreed date.
  2. Defect or rejection rate: proportion of supplied units failing the specification.
  3. Order fulfilment rate: proportion of orders delivered complete and in the correct quantity.
  4. Cost performance: actual total cost compared with agreed prices and cost-reduction targets.
  5. Responsiveness: time taken to acknowledge orders, solve problems and provide technical support.

Question 4(a) — 10 marks

Taliki Limited purchases its materials requirements from a monopolistic market. Outline five characteristics of such a market structure.

Model answer

“Monopolistic market” is interpreted here as monopoly. Monopolistic competition instead has many sellers and differentiated products.

  1. A single dominant supplier serves the relevant market.
  2. The product has no close substitute available to buyers.
  3. Strong barriers restrict the entry of competing suppliers.
  4. The supplier has substantial influence over price, subject to demand and regulation.
  5. The supplier and the industry effectively coincide, so buyers have little opportunity to switch to a rival source.

Question 4(b) — 10 marks

Explain five circumstances under which a purchase contract may be void.

Model answer

A void agreement has no legal effect from the outset. Fraud, undue influence or duress generally make a contract voidable at the affected party’s option; they should not automatically be described as making every contract void.

  1. Illegal purpose: an agreement to purchase prohibited goods or perform an unlawful act cannot be enforced as a lawful contract.
  2. Fundamental common mistake: where both parties are mistaken about an essential fact, such as goods already destroyed, the apparent agreement may be void.
  3. Uncertain essential terms: an agreement with no ascertainable subject matter or price mechanism may fail for uncertainty.
  4. Absence of genuine agreement: no contract arises where there is no matching offer and acceptance on the essential terms.
  5. Failure of mandatory legal requirements: a purported agreement may be invalid where a statute makes compliance with a required form or approval a condition of validity.

Question 5(a) — 10 marks

Explain five reasons why it is important for a supply chain officer to debrief suppliers in an organization.

Model answer

  1. Improve future bids: feedback helps suppliers understand where their offers failed to meet requirements.
  2. Promote transparency: explaining the evaluation gives tenderers confidence that the process followed stated criteria.
  3. Reduce misunderstandings: factual clarification can prevent avoidable disputes and unsupported complaints.
  4. Preserve relationships: respectful feedback encourages capable suppliers to bid again.
  5. Improve buyer performance: questions and feedback can reveal unclear specifications or weaknesses in the tender process.

Question 5(b) — 10 marks

Explain five strategies that a buyer may adopt to break through a deadlock when negotiating with a supplier.

Model answer

  1. Take a short adjournment: allow both teams to reconsider positions without further confrontation.
  2. Reframe the problem: move from fixed demands to the underlying interests that each party needs to satisfy.
  3. Trade across issues: exchange concessions on price, delivery, payment or service rather than bargaining on price alone.
  4. Use objective evidence: market data, technical standards or agreed costing can provide a fair basis for settlement.
  5. Seek authorised help: involve a senior decision-maker or neutral facilitator where appropriate, while retaining the option to use a credible alternative supplier.

Question 6(a) — 10 marks

Explain five challenges that the Ethics and Anti-Corruption Commission may face when dealing with unethical purchasing practices in the public sector.

Model answer

  1. Concealed evidence: collusive parties may falsify records or hide payments, making investigations difficult.
  2. Witness intimidation: fear of victimisation discourages officers and suppliers from providing evidence.
  3. Resource constraints: limited investigators, specialist skills and funds restrict the number and speed of investigations.
  4. Institutional resistance: uncooperative officials and improper external pressure may delay access to information.
  5. Lengthy enforcement processes: complex cases and delays in prosecution or adjudication can postpone accountability and asset recovery.

Question 6(b) — 10 marks

Explain five benefits that may accrue to an organization from adopting the open tendering method in its purchasing operations.

Model answer

  1. Wider supplier participation increases the chance of finding capable and competitive sources.
  2. Competitive offers can improve price, quality and overall value for money.
  3. Public advertisement and stated criteria make the process more transparent.
  4. Equal opportunity reduces unjustified favouritism and strengthens supplier confidence.
  5. A documented evaluation and award process improves accountability and provides evidence for review.

Question 7(a) — 10 marks

Explain five factors that may contribute to unethical practices among supply chain professionals in the public sector.

Model answer

  1. Weak internal controls: an officer able to request, award and approve payment without review has greater opportunity for abuse.
  2. Personal financial pressure or greed: private gain may be placed ahead of professional responsibilities.
  3. Improper influence: pressure from managers, political actors or suppliers can bias specifications and awards.
  4. Low accountability: poor monitoring and inconsistent sanctions make misconduct appear unlikely to have consequences.
  5. Unethical workplace culture: tolerated gifts, favouritism and collusion can normalise behaviour that violates professional standards.

Question 7(b) — 10 marks

Explain five limitations of adopting the delphi technique when forecasting demand for materials in an organization.

Model answer

  1. Time-consuming rounds: collecting, summarising and recirculating expert opinions can delay the forecast.
  2. Expert-selection bias: an unbalanced panel may overlook important demand influences.
  3. Subjective judgement: agreement between experts does not guarantee an accurate prediction.
  4. Administrative cost: skilled coordination and repeated consultation require resources.
  5. Attrition and weak feedback: experts may withdraw or revise answers towards consensus without sufficient new evidence.
PreviousNext