DIPLOMA COURSE IN MANAGEMENT SECTION III

(PURCHASING & SUPPLIES MANAGEMENT)

DECEMBER 2013 EXAMINATION

SUBJECT NAME: STRATEGIC PURCHASING AND SUPPLY
MANAGEMENT
SUBJECT CODE: PSM 203
DATE:

25TH NOVEMBER 2013

TIME:

3 HOURS

INSTRUCTIONS:
1.
2.
3.
4.
5.

Write your index number in the space provided in the answer booklet.
Answer question Number 1 (Compulsory) and any other four questions.
Question number 1 carries (28 Marks) while the other questions carry
(18 Marks) each.
NO writing should be done on this question paper.
Candidates who commit exam malpractice will be DISQUALIFIED.

1. SHANKLY
Shankly Electronics PLC is a manufacturer of electronic components. The company
has enjoyed rapid growth since its inception 30 years ago. Despite healthy annual
increases in turnover profits have only been modest in recent years. For the next two
years, forecasts indicate that major losses could be suffered.
Shanklys products are supplied to a number of diverse industry sectors. A new Chief
Executive Officer has recently been appointed. His first step was to conduct a
strategic review of the companys position during which the following problems were
identified:
i. The company does not have a mission statement
ii. The companys development of new products and markets has been
haphazard.
iii. There is little centralization within the major functional areas.
iv. Quality problems have been evident in a number of the companys product
lines.
v. The purchasing function plays no strategic role within the company.
Required:
a) Using appropriate strategic analysis tools present a review of the challenges facing
Shankly.
(10 marks)
b) Discuss the alternative strategies open to Shankly for restoring profitability in the
long term.
(10 marks)
c) Outline the contribution that a more developed purchasing function could make to
the company.
(8 marks)
2. Explain what is meant by, Best in class benchmarking and describe its advantages
and disadvantages as compared to other forms of benchmarking.
(18 marks)
3. How can the concept of empowerment enhance the ability of a purchasing and supply
function to contribute to the strategic objectives of an organization?
(18 marks)
4. One method of selecting suppliers is that of competitive tendering.
a) Identify and discuss the factors that must be present to ensure that this method
works successfully.
(10 marks)
b) How could this method conflict with the objectives of total quality, lowest cost of
supply and control of the supplier base?
(8 marks)
5. Much has been written in recent years about the desirability of partnership relations
between buyers and suppliers. However, experience has shown that such an ideal is
not always attained in practice. Identify and discuss the reasons for this failure.
(18 marks)
6. a) A large organizations effectiveness could be reduced by pursuing separate
functions and conflicting objectives. Discuss.
(10 marks)
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b) Explain the potential for conflict between the objectives of the purchasing function
and other organizational functions. What steps can be taken to avoid or minimize
such conflict?
(8 marks)
7. a) Describe a typical organization statement within a commercial enterprise adopting
a materials management structure.
(10 marks)
b) What are the likely effects on purchasing structure and on the status of the
purchasing function; if such a structure as in 7 a) above is adopted?
(8 marks)
8. Briefly describe the ideas of Professor Michael Porter on securing competitive
advantage by means of value chain analysis. What is the role of the purchasing
function in this process?
(18 marks)

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