1stTechnicalQuestionsforProcurementCompetency

1. PleaseexplaintheFIVERIGHTandthebuyersroleinestablishingtheseFIVERIGHT(10
Point)

2. Explain the ways in which the purchaser can obtain, analyze and interpret the necessary
priceandcostinformationbeforeanegotiation(5Point)

3. Identify issues which may be discussed between a buyer and a seller in reaching an
agreementonpaymentterms.(5Point)

4. Identifyfactorsthatshouldbecontainedinatechnicalspecification.(10Point)

5. TotalCostofOwnership(TCO)ismadeupofvariouscostandimportancevariabletotake
decision in procurement. The cost equation is consist of four costs of which is purchase
price.Pleaseexplainthreeoftheothercosts.(15Point)

6. Toobtainthepossibilitytoreducecostsandmaintainhighstandards,ithasbeenexamining
the advantages and possible pitfalls of sourcing many of its supplies from some of the
emerging economies of the world. After a time it becomes apparent that you are able to
negotiatesuchissuesasthepriceanddeliverytimeofthesupplies,butdonotknowhowto
go about agreeing contracts/purchase order with international suppliers with regard to
packagingandtransport,aswellascustomsandotherdutiespayable.Youareawareofthe
natureandpurposesofIncotermsduringdealwiththoseinternationalsuppliers.Youalso
haveinmindsomespecificIncotermsthatyoubelievewouldbeusefulfortheorganisation.

TASKS:
ExplainthepurposeofIncotermsandthewaysinwhichtheirusebenefitsboth
buyerandseller.(5Point)
OutlinetheprovisionsofExworks(EXW)(5Point)
OutlinetheprovisionsofCostandFreight(CFR)(5Point)
Suggest which Incoterms you would use for the company and provide reasons
foryourchoice.(5Point)

7. As an Assistance of Procurement Analyst, you have been asked to prepare commercial

recommendationfortendertopurchase1unitAirVentc/wmotor.
Theproposalsthatwerereceivedasfollow:

SupplierAinCanada:
TheunitpriceisUSD125,000EXWorkCanada
Recommended for commissioning and 2 year operating spares parts USD
10,000
Term of payment nett 30 days after received invoice against equipment
delivered
On site technical assistance to supervise during installation and
commissioningisUSD15,000lumpsump
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SupplierBinAustralia:
TheunitpriceisUSD130,000CFRSurabayaPort
Recommended for commissioning and 2 year operating spares parts USD
10,000
Term of payment nett 30 days after received invoice against equipment
delivered
On site technical assistance to supervise during installation and
commissioningisUSD10,000lumpsump

SupplierCinJakarta:
TheunitpriceisUSD145,000FCASurabayaWarehouse
Recommended for commissioning and 2 year operating spares parts USD
12,500
Term of payment nett 30 days after received invoice against equipment
delivered
On site technical assistance to supervise during installation and
commissioningisUSD5,000lumpsump

Otherinformation:
Base on technical information from suppliers, shipping & traffic section advise the
followingcost:
EstimateshippingandhandlingcostfromCanadatoSurabayaPortisUSD
10,000andfreightinsurancecostapproximatelyUSD1,900
EstimateshippingandhandlingcostfromAustraliatoSurabayaPortisUSD
5,000andfreightinsurancecostapproximatelyUSD1,000
EstimateShippingandhandlingcostfromJakartatoSurabayaisUSD1,500
andfreightinsurancecostisUSD400
Estimate charge internally to handling the equipment from Surabaya to
SoroakoisapproxUSD1,500
Applicable Import Duty for this equipment is 5 % from CIF basis and VAT Import/
VATis10%
All Air Vent (s) proposed by suppliers have same delivery time and technically
complywithuserrequirements

TASK:Pleaseprovideyourcommercialrecommendationandexplainthereason.(20Point)

8. Youhavebeenaskedtomakeapresentationtoyourmanagementabouttheimportanceof
ethicalstandardsinprocurementarea.Youhavebeengiventwoheadingswhichyoumust
address.
TASKS:
Foreachheadinglistthemainpointsthatyouwouldincludeinyourpresentation
a) Personalethicsanddealingwithsuppliers(10point)
b) Ethicalsourcing(5Point)

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