Diploma in Procurement

and Supply
Module (L4M4)
Ethical and Responsible Sourcing

Leading global excellence in procurement and supply

 Learning outcomes

Further reading

Session introduction

Activities

Case study, questions, etc

Session summary

CIPS Global Standard for Procurement and

Supply
Segments: 6.4, 6.5, 11.3

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 1

Leading global excellence in procurement and supply

Module Content Overview
This is a core module in the Diploma in Procurement and Supply

Module purpose: On completion of this module, learners will be able to explain the options and associated
processes available for sourcing with external suppliers. They will also examine the legal and ethical impact
and the implications of corporate social responsibility, on the final sourcing decision.

Module aims: In any organisation, a significant element of procurement and supply activity is based around
decisions to internally conduct activity or to source from an external supplier. Hence, the selection of the
correct external suppliers is a vital contributor to overall organisational success. This module enables
personnel with roles in procurement and supply to formulate selection criteria and sourcing strategies to
ensure that the organisation will make the correct choice of external suppliers. It explains options for sourcing
and examines the key processes that can be applied to the analysis of potential external suppliers and to
ensure the development of ethically and socially responsible sourcing agreements.

Final overall knowledge and skills: the holder of the Diploma in Procurement and Supply will
demonstrate:
Knowledge Descriptor (the holder….) Skills Descriptor (the holder will….)
Has practical, theoretical or technical knowledge and Identify, adapt and use appropriate cognitive and
understanding of a subject or field of work to address practical skills to inform actions and address
problems that are well defined but complex and non- problems that are complex and non-routine
routine. while normally fairly well-defined.
Can analyse, interpret and evaluate relevant information Review the effectiveness and appropriateness of
and ideas. methods, actions and results.
Is aware of the nature of approximate scope of the area
of study or work.
Has an informed awareness of different perspectives or
approaches within the area of study or work?

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 2

Leading global excellence in procurement and supply

Module Learning Time
In arriving at a final number of learning hours, CIPS applies the TQT Criteria 1 (equal to 10 x credit value
rounded to nearest whole number) and split learning hours for each module into:

• Guided Learning Hours (GLH): which CIPS define as a measure of the amount of input time required
to achieve the qualification. This includes lectures, tutorials and practicals, as well as supervised study
in, for example, learning centres and workshops. GLH also includes the time required for learners to
complete external assessment under examination or supervised conditions.

• Self-Study Requirement (SSR): which CIPS define as other required learning as directed by tutors will
include private study, preparation for assessment and undertaking assessment when not under
supervision, such as preparatory reading, revision and independent research and wider reading of the
subject areas.

For this module:

• 6 Credits
• Module Learning Time (inc Assessment) = 60 hours
• GLH = 25 hours
• SSR = 35 hours
• Assessment = 1.5 hours

Assessment

• Objective Response Exam – 1.5 hours

• Pass mark – 70 %

1
Ofqual: Total Qualification Time criteria Condition E7 available at: [Link]
qualification-time-criteria
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 3

Leading global excellence in procurement and supply

Learning outcomes, assessment criteria and
indicative content
Learning outcomes help to define the scope, style and depth of learning within a module. Delivery
organisations, tutors and learners can see where development should be taking place and the areas and
disciplines that should be actively researched and/or reviewed during the associated study. The student will
be assessed against each learning outcome during the final assessment.

Assessment criteria are the key areas that will be assessed on the module. Learners and delivery
organisations and tutors should have these in mind during study and CIPS assessors will utilise them during
the final writing and marking of assessments.

Indicative content is an indication of the key areas that should be covered during the modular learning. This
should not be regarded as an exhaustive list and delivery organisations and tutors are encouraged to include
more content by way of regional cases and/or examples. Similarly, learners should not see this as a final
listing and should be encouraged to develop their knowledge through further reading around the indicative
areas of content.

Module Content Overview

Learning outcomes, assessment criteria and indicative content
1.0 Understand options for sourcing of requirements from suppliers Session Chapter
1.1 Identify the sourcing process in relation to procurement
• Definitions of sourcing and outsourcing 1 1
• Make or buy decisions 1 1
• Strategic and tactical sourcing costs and benefits of outsourcing 1 1
• Outsourcing non-core and core work or services 1 1
• Supplier pre-qualification or criteria for supplier appraisal 1 1
• Vendor or supplier performance management 1 1
• Risks in outsourcing 1 1
• The market development and growth of outsourcing 1 1
• Regulations affecting employees’ terms of employment 1 1
Differentiate between approaches to the sourcing of requirements from
1.2
suppliers
• Single, dual and multiple sourcing arrangements 2 1
• The use of tendering: open, restricted and negotiated approaches to
2 1
tendering
• Direct negotiations with suppliers 2 1
• Intra company trading and transfer pricing arrangement 2 1
• Implications of international sourcing 2 1
Define selection criteria that can be commonly applied when sourcing
1.3
requirements from external suppliers
• Typical selection criteria such as; quality assurance, environmental and
sustainability, technical capabilities, systems capabilities, labour 2 1
standards, financial capabilities and credit rating agencies
• The importance of supplier financial stability and due diligence checks 2 1
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 4

Leading global excellence in procurement and supply

 • Ratio analysis to make conclusions on profitability, liquidity, gearing and
3 1
investment
• The limitations of ratio analysis 3 1
Define award criteria that can be commonly applied when sourcing
1.4
requirements from external suppliers
• Typical award criteria such as; price, total life cycle costs, technical merit,
3 1
added value solutions, systems and resources
• Balancing commercial and technical award criteria 3 1
Understand the key processes that can be applied to the analysis of
2.0 Session Chapter
potential external suppliers
Analyse commonly used sources of information on market data that can
2.1
impact on the sourcing of requirements from external suppliers
• Compiling data on expenditures on suppliers 4 2
• Indices that measure economic data 4 2
• Secondary data on markets and suppliers 4 2
• Commodity pricing 4 2
• Analysing potential sales 4 2
• Financial reports and supplier financial stability 4 2
• The role of credit rating agencies 4 2
2.2 Identify the key processes used for obtaining quotations and tenders
• Advertising requirements 4 2
• Requests for information or quotations 4 2
• The operation of tendering 4 2
• Formalised arrangements for tendering 4 2
• Decision criteria for dispensing with tendering 4 2
Identify the criteria that can be commonly applied to the assessment of
2.3
quotations or tenders
• Assessment of supplier’s proposals 5 2
• The use of weighted points systems for assessment 5 2
• Recommending sources of supply 5 2
• Financial statements such as the profit and loss, balance sheet and cash
5 2
flow statements
• Measures and ratios of profitability, liquidity, gearing and investment 5 2
• The limitations of ratio analysis 5 2
• Added value 5 2
Analyse how electronic systems can be used to help the sourcing of
2.4
requirements from external suppliers
• E-requisitioning and purchase ordering systems 5 2
• E-catalogues on intranets and the internet 5 2
• The use of e-auctions and reverse auctions 5 2
• E-tendering systems 5 2
3.0 Understand compliance issues when sourcing from suppliers Session Chapter
Compare the key legislative, regulatory and organisational requirements
3.1
when sourcing in the not-for-profit, private and public sectors
• The use of competitive tendering processes 6 3
• The impact of timescales on tendering processes 6 3
• Procedures for contract award 6 3
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 5

Leading global excellence in procurement and supply

 • Regulatory bodies that impact on the private sector 6 3
• Regulations that impact on product and safety standards 6 3
Compare the key legislative, regulatory and organisational requirements
3.2
when sourcing from international suppliers
• Documentation relating to imports 7 3
• Import duties and tariffs 7 3
• Payment mechanisms 7 3
• The use of INCOTERMS 7 3
• Customs control and clearance 7 3
• Currency regulations 7 3
• Applicable law 7 3
4.0 Understand ethical and responsible sourcing Session Chapter
Describe the impact of international ethical standards on procurement and
4.1
supply
• Bribery 8 4
• Corruption 8 4
• Fraud 8 4
• Human rights 8 4
• Modern slavery 8 4
4.2 Identify practices that support ethical procurement
• Application of the CIPS Code of Conduct 8 4
• Ethical codes of practice 8 4
• Prequalification and assessment criteria 8 4
• Due diligence on suppliers and risk assessment 8 4
• Supporting information on ethical practices in supplier quotations and
8 4
tenders
• Contractual clauses 8 4
• Supplier monitoring 8 4
• KPIs 8 4
Compare the use of audits and other feedback mechanisms to evaluate
4.3
ethical standards in the workplace
• Monitor supplier performance 9 4
• Encourage dialogue with suppliers on improvements to process 9 4
• Recommend remedial actions where appropriate 9 4
• Identify and address potential conflicts of interest 9 4
Contrast processes and practices that the organisation could adopt to meet
4.4
the requirements of Corporate Social Responsibility (CSR)
• The triple bottom line – profit, people and planet 9 4
• Adopt sustainable practices, standards and specifications in the supply
9 4
chain
• Consider the social impact of the organisation’s behaviours 9 4
• Design procurement processes to deliver social outcomes as well as, or as
9 4
an alternative to, normal economic measures of value
• Expand reporting frameworks to include ecological and social
9 4
performance
• Define organisational value for money to include social outcomes - use of
9 4
local labour, participation of disadvantaged groups
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 6

Leading global excellence in procurement and supply

 Final module recap and discussion Session Chapter
10 1, 2, 3, 4

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 7

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 1
Understand options for sourcing of requirements from Assessment Criteria
suppliers 1.1

Understand options for sourcing of requirements from suppliers

• Identify the sourcing process in relation to procurement

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Identify the sourcing process in relation to procurement

• Sourcing is a key element of procurement and so should be carried out responsibly
and in accordance with an organisation’s ethical conduct
• Different sourcing strategies require different approaches
• One of the main aims of procurement is to award and manage contracts to the most
suitable supplier in order to achieve best value for money
• Suitability can be judged on many factors, from price to CSR to ethical accountability

Identify the sourcing process in relation to procurement:

Definitions of sourcing and outsourcing (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Types and aims of sourcing
o Tactical and operational sourcing
o Strategic sourcing
• Factors that represent value to the procurement organisation
o Price
o Delivery
o Quality
o Ethics
o Sustainability
o Availability
• The sourcing process
o Novak and Simco’s (1991) 11-stage sourcing process
 Stage 1 – Identify or re-evaluate needs
 Stage 2 – Define or evaluate user requirements
 Stage 3 – Decide to make or buy
 Stage 4 – Identify type of purchase
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 8

Leading global excellence in procurement and supply

  Stage 5 – Conduct market analysis
 Stage 6 – Identify possible suppliers
 Stage 7 – Pre-screen suppliers and reduce to selected few
 Stage 8 – Evaluate remaining suppliers
 Stage 9 – Select supplier
 Stage 10 – Product/service delivered
 Stage 11 – Analyse supplier performance
o The CIPS procurement cycle
• What is outsourcing
o Contracting an external supplier to manage and run a function that was
previously handled in-house
o Reasons for outsourcing
o Not all functions or processes can be outsourced – core activities reman in-
house

Make or buy decisions (cover each of the following using examples to illustrate advantages
and disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Whether to manufacture a product or service in-house or to source it to an external
supplier
• Factors to consider
o The product or service (core)
o The organisation’s current position
o The current market situation
o The amount of competition
• Porter’s Five Forces – helps to understand the levels of competition to inform a
make or buy decision
o Threat of new entrants
o Bargaining power of buyers
o Threat of substitutes
o Bargaining power of suppliers
o Rivalry among existing competitors
• Benefits of make decisions
• Benefits of buy decisions

Strategic and tactical sourcing costs and benefits of outsourcing (cover each of the
following using examples to illustrate advantages and disadvantages and their typical uses –
use locally based examples wherever possible and where each would be typically used or
appropriate and their characteristics):
• Costs associated with sourcing
o Procurement professionals’ wages
o Resources (i.e. computers and telephones)
o Training
o Development of policies and procedures
o Time
• Kraljic matrix – category positioning to help establish the amount of cost that should
be attributed to a product or service
o Non-critical – tactical and arms-length
o Leverage – tactical and transactional
o Strategic – strategic and collaborative
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 9

Leading global excellence in procurement and supply

  Usually higher costs allocated
o Bottleneck – tactical and closer tactical
• Costs associated with outsourcing are very different from the costs when producing
in-house
• Costs of outsourcing
• Benefits of outsourcing

Outsourcing non-core and core work or services (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• Outsourcing core functions is not usually recommended as it poses too much risk to
an organisation
• Outsourcing decision matrix
o Measures strategic importance of a function, activity or product against its
contribution towards operational performance
o Outcomes
 Eliminate
 Form a strategic alliance
 Retain
 Outsource
• Outsourcing non-core work or services
o Examples
o Reversing an outsourcing decision is known as ‘insourcing’

Supplier pre-qualification or criteria for supplier appraisal (cover each of the following
using examples to illustrate advantages and disadvantages and their typical uses – use
locally based examples wherever possible and where each would be typically used or
appropriate and their characteristics):
• Carried out whether a supplier is being considered for a standard sourcing or
outsourcing solution
• Compiling a list of potential suppliers through
o Previous knowledge
o Recommendations
o Internet research
o Market publications
o Trade shows
o Networking
• Often a legal requirement to advertise the contract opportunity (i.e. EU or UK public
sector)
• Pre-qualification questionnaire (PQQ)
o Assesses suitability of a supplier against a buyer’s minimum standards of
performance
o Carter’s 10 Cs supplier/contractor evaluation model
 Competency
 Capacity
 Commitment
 Control
 Cash
 Cost
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 10

Leading global excellence in procurement and supply

  Consistency
 Culture
 Clean
 Communication
o Appraisal of shortlisted suppliers against more specific criteria
 Send out invitations to tender (ITT) or requests for quotation (RFQ)
o Risks of not conducting the pre-qualification or appraisal process
o Consideration of macro (STEEPLE) and micro factors which would affect a
supplier
o Monitor supplier performance against pre-determined objectives (i.e. KPIs
and SLAs)

Vendor or supplier performance management (cover each of the following using examples
to illustrate advantages and disadvantages and their typical uses – use locally based
examples wherever possible and where each would be typically used or appropriate and
their characteristics):
• Performance of suppliers is integral to the success of an organisation
• KPIs can be qualitative or quantitative - SMART
o Specific
o Measurable
o Achievable
o Relevant
o Time bound

Risks in outsourcing (cover each of the following using examples to illustrate advantages
and disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Loss of control
• Supplier reliance
• Confidentiality
• Quality
• Intellectual property
• Reputation
• Loss of expertise
• Inflexibility
• Cultural differences

The market development and growth of outsourcing (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• Through outsourcing, markets are developing in low cost countries
• Mutual benefits of developed countries engaging with developing countries
o Cost saving to developed country
o Ability to further grow organisations
o Increased employment in developing countries
o Ethical and sustainable behaviour promoted in developing countries

Regulations affecting employees’ terms of employment (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 11

Leading global excellence in procurement and supply

 based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• In most countries there are regulations in place to ensure fair treatment of
employees when outsourcing
o Transfer of Undertakings (Protection of Employment) (TUPE) in UK
o Advantages of TUPE
 Continuity of supply for the buyer
 Continuity of employment for the workers
o International Labour Organisation (ILO)
 Protects global workers
 Regulates acceptable working conditions

See final case study for the module

• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

Students should leave this session with an overall understanding of the different sourcing
options available to an organisation, including the benefits and limitations that each
brings. They should also know why it is important to pre-qualify potential suppliers and
how outsourcing can bring benefits to both the individual organisations, but also to the
countries involved

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 12

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 2
Understand options for sourcing of requirements from Assessment Criteria
suppliers 1.2, 1.3
Understand options for sourcing of requirements from suppliers
• Differentiate between approaches to the sourcing of requirements from suppliers
• Define selection criteria that can be commonly applied when sourcing
requirements from external suppliers

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Differentiate between approaches to the sourcing of requirements from suppliers

• Sourcing can take many different approaches related to:
o Category of product or service
o Quantity of product or service
o Supplier relationship
o Supply and demand
o Skill of procurement professional
o Culture of organisation
• Sourcing arrangements can be single, dual or multiple, each with their own
advantages and disadvantages, suited to specific situations

Define selection criteria that can be commonly applied when sourcing requirements from
external suppliers
• In order for procurement professionals to award contracts that give the best value,
they must use strict selection criteria
• The criteria against which suppliers are evaluated will depend on the organisation
and the need
• Conducting evaluation on pre-selected criteria is valuable and an essential part of
the sourcing process

Identify the sourcing process in relation to procurement:

Single, dual and multiple sourcing arrangements (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• Single sourcing
o One supplier contracted by the buyer to supply all the needs for an item
o Monopoly supplier
o Economies of scale can be achieved
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 13

Leading global excellence in procurement and supply

 o Order quantities are small
o One supplier offers outstanding value for money against the competition
• Dual sourcing
o Two suppliers are responsible for supplying all the needs for an item to the
buying organisation
o Used when
 There is a risk of one supplier not being able to supply
 Product or service is critical to an organisation
• Multiple sourcing
o Many suppliers are responsible for supplying all the needs for an item to an
organisation
o Used when
 Supplier competition is vast
 Supplier relationship is not critical
 Constant supply is critical
• Supplier relationships
o Relationships vary depending on the sourcing approach
o Advantages of
 Single sourcing
 Dual/multiple sourcing
o Disadvantages of
 Single sourcing
 Dual/multiple sourcing

The use of tendering: open, restricted and negotiated approaches to tendering (cover each
of the following using examples to illustrate advantages and disadvantages and their typical
uses – use locally based examples wherever possible and where each would be typically
used or appropriate and their characteristics):
• The tendering process
• Approaches to tendering
o Open tendering
o Restricted tendering
o Negotiated tendering

Direct negotiations with suppliers (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Outcomes of negotiation
o Buyer wins, supplier loses
o Supplier wins, buyer loses
o Buyer wins, supplier wins
 Theoretically the best outcome
 Appropriate in collaborative relationships
o Buyer loses, supplier loses
o Neither wins (compromise)
• Styles of negotiation
o Competitive
o Collaborative
o Avoiding
o Accommodating
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 14

Leading global excellence in procurement and supply

 o Compromising
• The negotiating process
o Stage 1 – Preparation
o Stage 2 – Information exchange
o Stage 3 – Bargaining
o Stage 4 – Closing

Intra company trading and transfer pricing arrangement (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• Intra-company trading
o Business conducted between two or more companies that are owned by the
same entity
o All transactions occur internally within the business
o Can take advantage of centralised procurement functions
 Economies of scale
 Profit margins
• Transfer pricing
o Amount of money payable between divisions of the same organisation that
have conducted business with each other (i.e. supplying labour)
o Closely audited
o Feature heavily within global intra-company trading due to variation in taxes
o Benefits
o Regulation
o Organisation for Economic Co-operation and Development (OECD) guidance
and regulation
o Advantages
o Disadvantages

Implications of international sourcing (cover each of the following using examples to

illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• The supplier is from a different country to the buying organisation
o Standard product sourcing
o Outsourcing
o Offshoring
• Benefits of international sourcing
o Reduced costs
o Exposure to world class technology
o Availability of materials not readily available in home country
o Improved quality
o Wider selection of international suppliers
• Risks of international sourcing
o Extended lead times
o Importation/exportation rules and regulations
o Currency exchange fluctuations
o Payment methods and guarantees
o Cultural differences, language barriers and differing time zones
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 15

Leading global excellence in procurement and supply

 o Quality issues, different standards and ethical behaviour
o Logistical problems
o Infringement of IPR
o Conflict is harder to resolve

Define selection criteria that can be commonly applied when sourcing requirements from
external suppliers:

Typical selection criteria such as; quality assurance, environmental and sustainability,
technical capabilities, systems capabilities, labour standards, financial capabilities and
credit rating agencies (cover each of the following using examples to illustrate advantages
and disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Typical selection criteria
o PQQs to cover
 Quality assurance
• Performance specification
• Conformance specification
• ISO 9001
• Continuous improvement/Kaizen
o Identify, plan, execute, review
o Ohno’s seven key wastes
• TQM
o Includes continuous improvement
 Environmental awareness and sustainability
• CSR
• Features of a preferred supplier
o Positive contribution to the environment
o Do not pollute the atmosphere
o Replace any natural resources used in the supply
chain
 Technical capabilities
• Tested through samples
 Systems capabilities
• Tested through samples
 Labour standards
• Modern slavery
• ILO standards and policies
 Financial capabilities
 Credit rating scores

The importance of supplier financial stability and due diligence checks (cover each of the
following using examples to illustrate advantages and disadvantages and their typical uses –
use locally based examples wherever possible and where each would be typically used or
appropriate and their characteristics):
• Due diligence checks
o Evaluate against Carter’s 10 Cs
• Delay or failure to supply
o Often as the result of poor cash flow
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 16

Leading global excellence in procurement and supply

 • Inability to invest
• Supplier dependency on the buying organisation

See final case study for the module

• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

Students should leave this session with an overall understanding of the differences
between single, dual and multiple sourcing arrangements and when each might be used in
a given situation. They should also have an appreciation of why different tender
approaches are used and which is the most appropriate in different scenarios. Finally, they
should know the implications of sourcing internationally and which selection criteria
should be applied when considering the most suitable supplier

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 17

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 3
Understand options for sourcing of requirements from Assessment Criteria
suppliers 1.3, 1.4
Understand options for sourcing of requirements from suppliers
• Define selection criteria that can be commonly applied when sourcing
requirements from external suppliers
• Define award criteria that can be commonly applied when sourcing requirements
from external suppliers

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Define selection criteria that can be commonly applied when sourcing requirements from
external suppliers
• In order for procurement professionals to award contracts that give the best value,
they must use strict selection criteria
• The criteria against which suppliers are evaluated will depend on the organisation
and the need
• Conducting evaluation on pre-selected criteria is valuable and an essential part of
the sourcing process

Define selection criteria that can be commonly applied when sourcing requirements from
external suppliers
• When a list of suitable suppliers has been selected, procurement professionals can
send out the ITT or RFQ
• Once bids or quotations have been received, the offers should be analysed to
establish which supplier offers the best value for money

Define selection criteria that can be commonly applied when sourcing requirements from
external suppliers:

Ratio analysis to make conclusions on profitability, liquidity, gearing and investment

The limitations of ratio analysis (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Provides an overview of an organisation’s profitability, liquidity, gearing and
investment
• Main objectives
o To track company performance to track trends and highlight potential issues
o To compare supplier’s performance against others to achieve competitive
advantage
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 18

Leading global excellence in procurement and supply

 • Can be used alongside credit scores
• Information required to calculate ratios comes from the key financial
documentation
o Statement of comprehensive income (profit and loss statement)
o Cash flow forecast
o Statement of financial position (balance sheet)
• Profitability ratios
o Measure the extent to which an organisation has traded profitability over
time
 Gross profit margin
 Operating profit
 Net profit margin
 EBITDA
 Return on assets
 Return on equity
 Return on capital
• Liquidity ratios
o Calculate if an organisation has sufficient assets to meet its liabilities
 Current ratio
 Acid test (quick) ratio
• Gearing ratio
o Measures how much of an organisation’s long term funding is represented
by long term debt or loans, in relation to the equity in the business
• ROI ratio
o Evaluates the financial strength and sustainability of an organisation

The limitations of ratio analysis (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Data is historic
• Current rates of inflation are not taken into account
• Do not show the reasons for trends
• Operational changes not always considered
• Economic situation not always taken into account
• Not all organisations operate the same strategy
• Information is purely numeric
• Not very effective as a short-term tool
• Accountancy methods may vary
• Ambiguity of results

Define award criteria that can be commonly applied when sourcing requirements from
external suppliers:

Typical award criteria such as; price, total life cycle costs, technical merit, added value
solutions, systems and resources (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Price
o Total life-cycle costs (total cost of ownership (TCO))
 Price of product
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 19

Leading global excellence in procurement and supply

 Transport/delivery
Packaging
Insurance
Cost of installation
Other associated costs of TCO
• Acquisition
• Tooling
• Insurance
• Operating
• Maintenance
• Training
• Storage
• Disposal
 INCOTERMS need to be considered when sourcing from overseas
o Technical merit
 Will the supplier be a good functional fit with the buying
organisation?
o Added value through
 Innovation
 On-time and in-full deliveries
 Strong supplier relationships and management
 Sustainability
 Good ethical practices
 CSR policies
 Shorter lead times
 Improved quality
 Support and training
 Good reputation
 Environmental responsibility
 Strong communication
 Positive brand awareness
o Systems and resources
o A fair analysis must be undertaken

Balancing commercial and technical award criteria (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• When awarding a contract, the criteria can be split into
• Technical criteria
o Specification
o Delivery
o Quality
• Commercial criteria
o Cultural fit
o Ethical standards
o Sustainability
• The technical and commercial criteria must be balanced to make an informed
decision
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 20

Leading global excellence in procurement and supply

 o Weighted scorecards
o Evaluation matrices

See final case study for the module

• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

Students should leave this session with an overall understanding of the selection and
award criteria that are applied when sourcing requirements from external suppliers. They
should have a clear understanding and know how to use and interpret the results of ratio
analysis and also any limitations of their use. Finally, they should be aware of why it is
important to balance commercial and technical award criteria to ensure that an informed
and fair decision is made when awarding a contract

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 21

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 4
Understand the key processes that can be applied to
Assessment Criteria
the analysis of potential external suppliers
2.1, 2.2
Understand the key processes that can be applied to the analysis of potential external
suppliers
• Analyse commonly used sources of information on market data that can impact on
the sourcing of requirements from external suppliers
• Identify the key processes used for obtaining quotations and tenders

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Analyse commonly used sources of information on market data that can impact on the
sourcing of requirements from external suppliers
• There is a huge amount of varied data available for procurement professionals to
review in order to make informed decisions on which external suppliers they wish to
work with

Identify the key processes used for obtaining quotations and tenders
• Following due diligence, the next stage within the procurement cycle is to issue the
RFQ or ITT
• Although different in approach, both RFQ and ITT have the same aim: to establish
which supplier can offer the goods or services for the best value for money
• There is no rule about when to use RFQ or ITT

Analyse commonly used sources of information on market data that can impact on the
sourcing of requirements from external suppliers:

Compiling data on expenditures on suppliers (cover each of the following using examples
to illustrate advantages and disadvantages and their typical uses – use locally based
examples wherever possible and where each would be typically used or appropriate and
their characteristics):
• A procurement professional should be aware of the total amount of spend they are
responsible for and how it is broken down
• Pareto principle (80:20)
• ABC analysis (against Kraljic matrix)
o A – strategic relationship
o B – closer tactical relationship
o C – transactional relationship
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 22

Leading global excellence in procurement and supply

 Indices that measure economic data (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Provides insight into how profitable a supplier might be and whether supply is
plentiful
• Example indices
o Stock markets (i.e. FTSE 100)
o Gross Domestic Product
o Producer Price Index
o Consumer Price Index
o Commodity indices
o Small Business Lending Index
o CIPS Purchasing Managers’ Index

Secondary data on markets and suppliers (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Researching data on markets and suppliers helps procurement professionals with
pre- qualification, through
o Primary data
 Examples
 Information gained
o Secondary data
 Sources
• Economic indices
• Websites
• Financial journals
• Professional magazines
• Published surveys
• Professional bodies
• Third party comparison websites
• Published price lists
• Organisations promoting trade
 Examples
o Distortion of and conflict between primary and secondary data

Commodity pricing (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Commodities traded on a stock exchange
o Energy (i.e. oil, gas)
o Agricultural (i.e. wheat, cotton, cocoa)
o Metals )i.e. steel, gold)
o Livestock (i.e. live cattle, lean pigs)
• Commodities are monitored to establish any trends
• Helps procurement professionals to arrange contracts when process are favourable
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 23

Leading global excellence in procurement and supply

 o Fixed price contracts
• Factors that affect commodity prices
o Supply and demand
o Currency fluctuations
o Political situation
o Conflict
o Force majeure
o Severe or unseasonable weather conditions
o Prices of competitors
o Prices of substitutes
o Speculation
• Hedging to remove or reduce risk of adverse fluctuations
• Forecasting prices through
o Historical data
o Supply and demand
o The state of the economy
o Global events
• Futures exchange
o A centralised financial trading exchange where contracts for delivery at a
later date are agreed, based on estimated prices
o Examples

Analysing potential sales (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• How to analyse potential sales
• Tools and methods for analysing potential sales
o Porter’s Five Forces
o Supply and demand
o Historical sales data analysis
o Trends
o Expert opinions
• Impact of competition in the marketplace

Financial reports and supplier financial stability (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• Signs of potential supplier financial instability
o Reduced levels of quality and performance
o High staff churn
o A change of bank
o Rumours
o Requested payment before the agreed due date
• Review of financial documentation

The role of credit rating agencies (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 24

Leading global excellence in procurement and supply

 • Use of credit scores
• Weighted scores elements
o Payment history
o Amounts owed
o Length of credit history
o New credit
o Credit mix
• Cybercrime and credit checks
o Indication of strength of cybersecurity

Identify the key processes used for obtaining quotations and tenders:

Advertising requirements (cover each of the following using examples to illustrate

advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Advertising the opportunity to work with a buying organisation is likely to increase
the number of suppliers expressing an interest
• Factors that influence the way organisations influence their requirements
• Examples of where advertisements are placed (private and public sector)
• Detail that should be included in advertisements

Requests for information or quotations (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• RFI
o Collects information from potential suppliers to help the buyer evaluate
their suitability to work with them
o Sent to many potential suppliers across the market
o PQQ is a form of RFI
o Information from RFIs generates useful data for the procurement
professional
• RFQ
o RFI/PQQ does not need to be used before issuing a RFQ
o RFQ information
o Attempts to assess which supplier can achieve the ‘Five Rights of
Procurement’
o Purposes of RFQ
 Align corporate strategy
 Ensure a fair and transparent process
 Allow opportunities for many suppliers to bid
 Enable procurement professionals to evaluate the market and
obtain best value for money

The operation of tendering (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Generally, the higher the value and more complex the contract, the more likely that
tendering will be used
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 25

Leading global excellence in procurement and supply

 • Examples of services often put out to tender
• Tender process diagram
• Factors that influence the type of tendering process used
• Public sector – OIEU approach to tendering
• Involves cross-functional teams

Formalised arrangements for tendering (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• To ensure that tendering is carried out in an ethical, responsible and transparent
way, organisations should have formalised arrangements in place which reflect best
practice
• Example of a best-practice formalised tender arrangement

Decision criteria for dispensing with tendering (cover each of the following using examples
to illustrate advantages and disadvantages and their typical uses – use locally based
examples wherever possible and where each would be typically used or appropriate and
their characteristics):
• Understand which of the potential suppliers can offer the most economically
advantageous tender (MEAT) through
o Creation of spreadsheet to compare data
o Use of weighted points systems/scorecards
• Decision may need to be made at a higher level, so recommendations are made (i.e.
email, business case)
• Business cases
o Used to justify a proposed decision for the awarding of a contract
o Contents

See final case study for the module

• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 26

Leading global excellence in procurement and supply

 Students should leave this session with an overall understanding of the sources of
information on market data that are used when sourcing from external suppliers, both
from primary and secondary sources. They should be able to interpret the data to evaluate
which supplier offers the MEAT, but also identify any limitations from using the different
sources. Finally, they should understand where and why advertisements are placed to
attract potential suppliers and the process for requesting information and quotations,
followed by how tendering is undertaken

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 27

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 5
Understand the key processes that can be applied to Assessment Criteria
the analysis of potential external suppliers 2.3, 2.4
Understand the key processes that can be applied to the analysis of potential external
suppliers
• Identify the criteria that can be commonly applied to the assessment of quotations
or tenders
• Analyse how electronic systems can be used to help the sourcing of requirements
from external suppliers

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Identify the criteria that can be commonly applied to the assessment of quotations or
tenders
• In order to achieve the MEAT outcome in the tender process, the assessment
criteria have to be decided from the start, including
o Price
o TCO
o Total cost of acquisition
o Supplier compatibility
o Environmental activities
o Ethical conduct
o Sustainable practices
o Method of contract delivery

Analyse how electronic systems can be used to help the sourcing of requirements from
external suppliers
• As industry becomes more reliant on technology, procurement is moving more
towards using electronic forms of sourcing
• E-sourcing can include
o E-requisitioning
o E-catalogues
o E-auctions
o E-tenders

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 28

Leading global excellence in procurement and supply

 Identify the criteria that can be commonly applied to the assessment of quotations or
tenders:

Assessment of supplier’s proposals (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• The assessment process is usually declared to bidders at the start and will reflect the
buyer’s priorities and needs of the stakeholders
• Should consider the following
o Value of the product/service
o Positioning (i.e. strategic, routine)
o Existing supplier relationships
o Economies of scale
o Risk of moving suppliers
• Time spent assessing proposals increases with the value of the item to the
organisation (i.e. strategic)

The use of weighted points systems for assessment (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• One method to help keep decision making fair and transparent
• An evaluation procedure that enables fair comparison of set criteria
• The process of creating and conducting a weighted points system for assessment
• Advantages of a weighted pointed system
• Disadvantages of a weighted pointed system

Recommending sources of supply (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Use of a spreadsheet or SWOT analysis to understand the sourcing
recommendations

Financial statements such as the profit and loss, balance sheet and cash flow statements
(cover each of the following using examples to illustrate advantages and disadvantages and
their typical uses – use locally based examples wherever possible and where each would be
typically used or appropriate and their characteristics):
• Ways to evaluate suppliers financially
o Credit rating
o Annual financial accounts
 Profit and loss account (income statement)
• Helps to understand whether a supplier or potential
supplier is generating a profit
 Balance sheet
• Provides information on an organisation’s financial position
at a particular point in time
• Shows assets, liabilities and shareholder funds/equity
 Cash flow statement
• Contain details about the amount of money that came into
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 29

Leading global excellence in procurement and supply

 and went out of an organisation during its accounting period
• Assesses how well an organisation is managing its cash in
relation to paying its creditors and funding new investments
(I.e. fixed assets)
o Operating activities
o Investing activities
o Financing activities
• A range of methods should be used to gain a full view of the position of a supplier

Measures and ratios of profitability, liquidity, gearing and investment (cover each of the
following using examples to illustrate advantages and disadvantages and their typical uses –
use locally based examples wherever possible and where each would be typically used or
appropriate and their characteristics):
• Liquidity – having enough money to pay for short- to medium-term liabilities or
debts
• Gearing – how much long-term debt an organisation has
• Categories of financial ratios
o Profitability ratios
 Gross profit margin
 Operating profit
 Net profit
o Liquidity and gearing ratios
 Current ratio
 Quick ratio
o Investment ratios
 A measure of the attractiveness of an organisation to a potential
investor

The limitations of ratio analysis (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Figures are historic
• Inflation/interest rates/exchange rates
• Operational changes
• Variation

Added value (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Good quality
• Short lead time
• CSR policy
• Environmental responsibility
• Sustainability
• Strong communication
• Positive relationship management
• Good reputation
• Positive brand awareness

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 30

Leading global excellence in procurement and supply

 Analyse how electronic systems can be used to help the sourcing of requirements from
external suppliers:

E-requisitioning and purchase ordering systems (cover each of the following using examples
to illustrate advantages and disadvantages and their typical uses – use locally based
examples wherever possible and where each would be typically used or appropriate and
their characteristics):
• The use of electronic systems to raise and approve requisitions
• Advantages
o Speed
o Access to more suppliers
o Exposure to more information
o Fewer restrictions on working hours
o Easier to work globally
o Promotes environmental practices (paper-free)
o Traceability
o Saves time
• Disadvantages
o Less personal
o Misinterpretation of communication
o Reliant on technology
o Can promote negative work/life balance
• E-purchase orders
• Linkage of e-requisitioning and e-purchase orders through electronic MRP (Materials
Requirement Planning)
o Reduce human intervention in processes and so reduce the likelihood of
errors
• E-approval process

E-catalogues on intranets and the internet (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Feature on intranet and internet
• Advantages
o Accessibility
o Multi-perspective
o Live information
o More detail

The use of e-auctions and reverse auctions (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Formats of online auctions
o Standard auction (e-auction)
 A supplier offers goods for sale on the internet and potential
customers place bids against the item
 Highest bidder wins the goods
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 31

Leading global excellence in procurement and supply

  eBay
o Reverse auction (most common)
 Buyer states its requirements or needs, and the suppliers respond
 Bidding reduces as times passes
 Advantages
 Disadvantages

E-tendering systems (cover each of the following using examples to illustrate advantages
and disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Follows the same process as standard tendering
o Documentation and communication are conducted electronically
o Benefits
• Within procurement, the relationship between suppliers and buyers is important
and should not be forfeited in favour of the savings that technology can generate
• Needs to be a balance between the use of technology and interpersonal contact

See final case study for the module

• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

Students should leave this session with an overall understanding of the criteria that are
used when assessing suppliers’ proposals. They should have a clear understanding of how
the outcomes and results are weighted, so that the most appropriate supplier is selected.
They should also have an appreciation of the different electronic systems available within
sourcing, how these are used and are limitations that may need to be considered

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 32

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 6
Understand compliance issues when sourcing from Assessment Criteria
suppliers 3.1
Understand compliance issues when sourcing from suppliers
• Compare the key legislative, regulatory and organisational requirements when
sourcing in the not-for-profit, private and public sectors

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Compare the key legislative, regulatory and organisational requirements when sourcing in
the not-for-profit, private and public sectors
• An effective supply chain depends on a number of complex factors all successfully
operating together
• Poor sourcing decisions can lead to the selection of unsuitable suppliers which could
ultimately damage the procurement organisation’s brand
• Key regulations that affect the public, private and not-for-profit sectors
o All organisations are subject to the laws of a country (or countries) where
they are based
o There are a number of areas of regulation

Compare the key legislative, regulatory and organisational requirements when sourcing in
the not-for-profit, private and public sectors:

The use of competitive tendering processes (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Competitive tendering within the public, private and not-for-profit sectors
o It is important that procurement professionals take an approach that is fair
and reasonable, avoiding discrimination, treat suppliers equally and
respectfully and adopt a transparent approach to sourcing
o CIPS Code of Conduct, 2013
o It is not mandatory to run competitive tenders in all sectors, but there are
strong reasons for carrying them out
o Advantages of competitive tendering
o Disadvantages of competitive tendering

The impact of timescales on tendering processes (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 33

Leading global excellence in procurement and supply

 based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• Public sector
o A number of rules that define what timescales are appropriate when
tendering (vary between countries)
o UK Public Contract Regulations 2015
 Specify the minimum time periods within which the buyer must
accept tender submissions
 UK timescales for open procedure
 UK timescales for restricted procedure
 UK timescales for competitive procedure with negotiation
 UK timescales for competitive dialogue
 UK timescales for open procedure
 UK timescales for innovation partnerships

Procedures for contract award (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Public sector
o Subject to audit and public scrutiny, so the application of equal treatment,
fair competition and transparency are key
o Audit trail must be clear
o The buyer should seek the best possible deal and prove value for money
o EU 2014 Public Sector Directives support MEAT
o Abnormally low tenders should be investigated or discarded
• Private sector
o Main aim is to make a profit, which allows them to grow and make more
profit
o Buyer should seek the lowest possible process whilst preserving quality
o May chose not to carry out competitive tendering
 May issue a contract to a supplier that is chosen outright if it meets
their business need
• Not-for profit sector
o Look to support causes that people consider important, based on their social
and ethical values
o Non-governmental organisations (NGOs) – examples
o Funded almost entirely by donations from fundraising
 Cashflow can fluctuate and be difficult to predict
 Reputational damage can be critical and so strong leadership is
essential

Regulatory bodies that impact on the private sector (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• Public sector
o UK law affecting public sector sourcing
 The Freedom of Information Act 2000 (public interest test)
 UK Public Contract Regulations 2015 (implement the EU 2014 Public
Procurement Directives)
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 34

Leading global excellence in procurement and supply

 Public sector tendering within the EU and the EEA
o
 Governed by the European Parliament through the 2014 Public
Procurement Directives
 The Public Contracts Regulations 2015
• Rules for public sector sourcing
 OJEU
• Prior Information Notice (PIN)
o Procedures available for public sector tendering under the EU 2014 Public
Procurement Directives
 Open procedure
 Restricted procedure
 Competitive procedure with negotiation
 Competitive dialogue
 Innovation partnership
o Stages in the procurement process under the UK Public Contract Regulations
2015
 Specification stage
 Selection stage
 Award stage
• Private sector
o Not bound by the same strict sourcing process as the UK public sector
o Can still use the UK Public Contract Regulations 2015 if they are beneficial or
considered best practice
• Not-for-profit sector
o Examples of regulatory bodies
 Australian Charities and Not-for-profits Commission
 Charity Commission for England and Wales
 International Revenue Service (USA)

Regulations that impact on product and safety standards (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• Data protection
o Data Protection Act 2018
o GDPR 2018
• Ethical practice
o Bribery Act 2010
o Unfair Contract Terms Act 1977
o The Modern Slavery Act 2015
• Health, safety and environment and worker rights
o Enterprise Act 2016
o The Equality Act 2010
o The Working Time Regulations 1998
o Health and Safety at Work Act 1974
o Environmental Protection Act 1990
o Environment Act 2000
o Environmental Damage (Prevention and Remediation) Regulations 2009
• Marketplace competition
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 35

Leading global excellence in procurement and supply

 o Treaty of Rome (Section 7)
o Competition Act 1998
o Competition Act No 89 of 1998
o Competition and Consumer Act 2010
o The Sherman Antitrust Act
o The Clayton Act
o The Federal Trade Commission Act
o Enterprise Act 2002
• Product safety standards
o Consumer Rights Act 2015
o The General Product Safety Regulations 2005
o The General Product Safety Directive 2001/95/EC
o Consumer Product Safety Act 2011
o Conformite Europeene (CE) – 21 categories of product
o British Standards Institution (BSI Group) - kitemark

See final case study for the module

• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

Students should leave this session with an overall understanding of the key legislation,
regulation and organisational requirements for the public, private and no-for-profit
organisations when sourcing. They should understand the unique differences of each of
the sectors and why this presents challenges or opportunities for each, and how these are
overcome

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 36

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 7
Understand compliance issues when sourcing from Assessment Criteria
suppliers 3.2
Understand compliance issues when sourcing from suppliers
• Compare the key legislative, regulatory and organisational requirements when
sourcing from international suppliers

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Compare the key legislative, regulatory and organisational requirements when sourcing
from international suppliers
• International trade has taken place for centuries
• Over time, the risks that once slowed down cross-boundary business have been
reduced, through
o The formation of international regulators
o The development of globally used standards to support supply chains
o Improvements in transport
o Improvements in communications technology

Compare the key legislative, regulatory and organisational requirements when sourcing
from international suppliers:

Documentation relating to imports (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Importing goods can be complicated so it is important that the process is closely
managed with suitable documentation
• Documents and systems that allow the movement of goods within the EU
o T1 Document
o Import/Export Licence
o Single Administrative Document
o New Computerised Transit System
o Customs Declaration Service
• The origin of goods relating to imports within the EU and EEA
o Binding Origin Information (BOI)
o Non-preferential origin
o Preferential origin
• Documents that facilitate international imports and exports
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 37

Leading global excellence in procurement and supply

 o Purchase orders
o Bill of lading
o Insurance certificate
o Certificate of origin
o Carnet

Import duties and tariffs (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Buyers and suppliers should have a good understanding of import duties and tariffs
before contracts are awarded
• Import duty is a tax charge that may be applied where items ae imported into a
country
• Duty charges can be found in tariffs, which are rules set by a country that determine
the quantities of goods that can be imported into that country’s borders
• Reasons for limiting imported goods
o Protection of end users
o Protection of ‘infant industries’
o More strictly monitor goods from a previously problematic importer
o National defence products
• Free movement of goods within the EU
o Single European Act 1986
• Legislation affecting the importing of goods into the UK
o Integrated Tariff of the United Kingdom
 Volume 1: duty relief schemes, details of key contacts and guidance
on topics such as tariff quotas and excise duties
 Volume 2: duty rates schedule and trade commodity codes
 Volume 3: customs freight producers’ guidance
• Duty and VAT reliefs in the UK
o Examples

Payment mechanisms (cover each of the following using examples to illustrate advantages
and disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Aim to reduce payment and delivery risks in international trade
o Open account
o Term/time draft
o Sight draft
o Letter of credit
o Cash in advance

The use of INCOTERMS (cover each of the following using examples to illustrate advantages
and disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Produced by the International Chamber of Commerce (ICC)
• Used to provide a recognised standard of trade understanding and terminology
between buyers and suppliers
• Largely covers trade via any means of transport
• Used to describe the point when responsibility (and risk) for a deliverable is
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 38

Leading global excellence in procurement and supply

 transferred to the supplier
• Rules
o EXW – Ex Works
o FCA – Free Carrier
o CPT – Carriage Paid To
o CIP – Carriage and Insurance Paid to
o DAT – Delivered at Terminal
o DAP – Delivered at Place
o DDP – Delivery Duty Paid
o FAS – Free Alongside Ship
o FOB – Free on Board
o CFR – Cost and Freight
o CIF – Cost, Insurance and Freight

Customs control and clearance (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Trade blocs (or preferential trade areas)
o Formed with a number of nation states with the member countries receiving
benefits for internal trading
 Common market
 Free trade areas
o Advantages of international trade
o Disadvantages of international trade
• The regulation of international trade
o World Trade Organisation (WTO) 1995
• The role of customs organisations
o Ensure that quotas are not exceeded
o Prevent prohibited items entering a country illegally

Currency regulations (cover each of the following using examples to illustrate advantages
and disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• The impact of currency on sourcing
o The Foreign Exchange Market
o Currency management for supply chains
 Currency hedging

Applicable law (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):

See final case study for the module

• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 39

Leading global excellence in procurement and supply

 relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

Students should leave this session with an overall understanding of the key legislation,
regulation and organisational requirements when sourcing with international suppliers. In
particular, they should have an appreciation of the use of tariffs, quotas, INCOTERMS and
how currency fluctuations can be a challenge and how this is overcome

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 40

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 8
Assessment Criteria
Understand ethical and responsible sourcing
4.1, 4.2
Understand ethical and responsible sourcing
• Describe the impact of international ethical standards on procurement and supply
• Identify practices that support ethical procurement

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Describe the impact of international ethical standards on procurement and supply

• Supply chains are exposed to a number of unethical or corrupt practices in
international business
• The buyer is responsible for defencing the organisation against these
• The buyer should aim to focus on protecting the human rights of others and ensure
that suppliers support the ethics of the organisation
• Considerations of ethics may vary from culture to culture and person to person, and
this may cause conflicts

Identify practices that support ethical procurement

• Through supplier due diligence, pre-assessment and auditing, buyers can monitor
their suppliers in a number of ways
• A procurement professional may be presented with situations where they are
offered a bribe or asked to tolerate other corrupt behaviours, but it is important to
be resilient and not to accept or give in to unethical practice in any form
• Procurement professionals should be prepared with knowledge of best practice
from within their profession
• Procurement professional should use tools available to understand more about the
potential and current suppliers

Describe the impact of international ethical standards on procurement and supply:

Bribery (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• When someone gives something of value to another party in order to influence a
more desirable outcome from that party
• Examples (including money, political favour, company shares etc.)
• Also referred to as facilitation (or grease) payments
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 41

Leading global excellence in procurement and supply

 • Industries most affected by foreign bribery
o Defence
o Property development
o Mining
o Medical
• Gifting and hospitality
o Normal business practices in some cultures, so rejection may risk offence
and therefore tact, knowledge of cultural norms and a good understanding
of acceptable ethical practices is essential
o To protect the procurement team, organisations may have a gifting and
hospitality policy
 Situations where it is acceptable to accept a gift
 Types of gifts that are unacceptable
 How to proceed, depending on the value of the goods
 How gifts should be used when received
 Treatment of gifting in line with other conflicts of interest

Corruption (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• The impact of corruption
o Use of the Corruption Perceptions Index
o Cultural considerations with corruption
 Cultural relativism (i.e. facilitation payments)
o Anti-corruption legislation (i.e. UK Bribery Act 2010, CIPS Code of Conduct)
• Corruption includes Bribery and Fraud

Fraud (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Unlawfully obtaining funds or resources for your own benefit
• Workplace fraud
• Why individuals commit fraud
o Perceived pressure
o Perceived opportunity
o Rationalisation
• Forms of fraud
o Advance fee fraud
o Corporate fraud
o Identity fraud
o Individual fraud
• Cybercrime
o Phishing
o Account takeover
o Money muling
o Official request
• Impact of fraud on the supply chain
o Transparency
o Exploitation of trust
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 42

Leading global excellence in procurement and supply

 Human rights (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• The Universal Declaration of Human Rights 1948, including
o Article 1: The right to freedom
o Article 2 and 30: The right to have human rights and for those not to be
removed
o Article 7: The right to be treated equally and receive equal protection of the
law
o Article 18: The right to belief and changes in belief
o Article 19: The right to free speech and expression
• CIPS Code of Conduct
• Examples of supporting organisations
o Local law enforcement organisations
o Amnesty International
o Human Rights Watch
o Equality and Human Rights Commission (UK)
o Australian Human Rights Commission

Modern slavery (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Abolition of slavery in the UK in 1833 (1865 in USA), but it is still widespread
• 40.3 million estimated modern slaves in 2016
• People who are forced into carrying out labour against their will, often through
threats of violence
• Examples of signs of modern slavery in the supply chain
o Suppliers in countries with poor CPI scores
o Suspiciously low labour costs in sub-tier suppliers and not accredited to the
Fair Trade Foundation
o Variations in product quality
o Evidence of workers living on-site or held against their will elsewhere
o Lack of eye contact from workers
o Poor quality workstations and workshops
o Few labourers, but long shifts
o UK-based supplier without a published anti-slavery statement
• Actions to take on suspicion of modern slavery

Identify practices that support ethical procurement:

Application of the CIPS Code of Conduct (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• CIPS learning should be supported by CPD
• The CIPS Code of Conduct sets out the values, behaviours and actions that CIPS
requires its members to uphold in the delivery of their professional practice
• Benefits of following the CIPS Code of Conduct
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 43

Leading global excellence in procurement and supply

 • The CIPS Code of Conduct
o Section 1: Enhance and protect the standing of the profession
o Section 2: Maintain the highest standard of integrity in all business
relationships
o Section 3: Promote the eradication of unethical business practices
o Section 4: Enhance the proficiency and stature of the profession
o Section 5: Ensure full compliance with laws and regulations

Ethical codes of practice (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• A document that outlines the values of an organisation, highlighting its commitment
to upholding ethical behaviours in business
• Demonstrates an organisation’s commitment to carrying out ethical business and
rejecting corrupt practices
• In place across a number of levels of an organisation
o Profession level
o Sector level
o Company level

Prequalification and assessment criteria (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Important to understand whether or not a supplier’s organisation shares certain
ethical values
• PQQ criteria can test the extent of compatibility
• At RFQ or ITT stage, further assessment can be undertaken
• Examples of ethical assessment criteria
o Social
o Environmental
o Economic

Due diligence on suppliers and risk assessment (cover each of the following using examples
to illustrate advantages and disadvantages and their typical uses – use locally based
examples wherever possible and where each would be typically used or appropriate and
their characteristics):
• Due diligence – a key principle of the UK Bribery Act 2010
o CIPS Code of Conduct specifies that due diligence should be undertaken by
procurement professionals worldwide when conducting business with
potential or current suppliers
o Helps improve understanding of a supplier’s quality, performance and
ethical make-up, revealing any risks
o Ways to conduct due diligence
o Examples of common due diligence factors
 First impressions of the supplier
 Product or service quality
 Qualifications of product or service providers
 Background check
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 44

Leading global excellence in procurement and supply

 o Key barrier to successful due diligence is language
• Risk assessment
o Should be recorded, reviewed regularly and maintained in a risk register

Supporting information on ethical practices in supplier quotations and tenders (cover each
of the following using examples to illustrate advantages and disadvantages and their typical
uses – use locally based examples wherever possible and where each would be typically
used or appropriate and their characteristics):
• Typical questions to ask suppliers from an ethical perspective
• Pass/fail criteria need to be set ahead of release of questions
• Weighting of questions and criteria to agree the more important elements
• Weighted evaluation matrix

Contractual clauses (cover each of the following using examples to illustrate advantages and
disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• To record the requirements for work carried out to be ethical, with specific and
explicit detail
• ‘Boilerplate’ terms (England and Wales) and CIPS Standard Terms and Conditions
can be used

Supplier monitoring (cover each of the following using examples to illustrate advantages
and disadvantages and their typical uses – use locally based examples wherever possible and
where each would be typically used or appropriate and their characteristics):
• Due diligence processes and tools allows buyers to understand how a supplier
currently operates and to carry out ongoing monitoring
• Regular contract status reviews with suppliers
• It is the buyer’s responsibility to ensure that the contract is managed to its full
delivery

KPIs (cover each of the following using examples to illustrate advantages and disadvantages
and their typical uses – use locally based examples wherever possible and where each would
be typically used or appropriate and their characteristics):
• The ethics questions outlined in the PQQ are a natural starting point for outlining
KPIs
• Examples of sustainability KPIs

See final case study for the module

• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 45

Leading global excellence in procurement and supply

 • Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

Students should leave this session with an overall understanding of the impact of
international ethical standards and why these might arise. They should also know which
practices support ethical procurement and how the CIPS Code of Conduct can be used to
promote ethical sourcing. Finally, they should be able to describe how due diligence and
contract development and monitoring can ensure that ethical and responsible sourcing is
promoted across the procurement cycle

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 46

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 9
Assessment Criteria
Understand ethical and responsible sourcing
4.2, 4.3
Understand ethical and responsible sourcing
• Compare the use of audits and other feedback mechanisms to evaluate ethical
standards in the workplace
• Contrast processes and practices that the organisation could adopt to meet the
requirements of Corporate Social Responsibility (CSR)

CIPS Global Standard for Procurement and Supply

Segments: 6.4, 6.5, 11.3

Compare the use of audits and other feedback mechanisms to evaluate ethical standards
in the workplace
• Buyers often need to work closely with suppliers to ensure that the goods and
services delivered are being provided as required; ethical practices should be equally
as promoted
• Working with suppliers where some of the practices are not governed by the
supplier’s home nation can prove a challenge
• Suppliers can state verbally that they are committed to ethical and sustainable
practices, but can also demonstrate this explicitly through various attributes
• Ensuring activities are ethical and sustainable through
o Monitoring suppliers’ ethical performance
o Encouraging dialogue with suppliers to encourage improvements to
processes
o Identifying and addressing potential conflicts of interest

Contrast processes and practices that the organisation could adopt to meet the
requirements of Corporate Social Responsibility (CSR)
• CSR is the demonstration of the ethical behaviours carried out by an organisation
and can be closely scrutinised by external stakeholders
• CSR recognises that an organisation has additional responsibilities for which it
should be held accountable, beyond the main considerations such as making profit
• One of the best ways to display a strong commitment to CSR is an organisation’s
understanding of sustainable development and the ways in which it applies CSR
principles

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 47

Leading global excellence in procurement and supply

 Compare the use of audits and other feedback mechanisms to evaluate ethical standards
in the workplace:

Monitor supplier performance (cover each of the following using examples to illustrate
advantages and disadvantages and their typical uses – use locally based examples wherever
possible and where each would be typically used or appropriate and their characteristics):
• Monitoring suppliers’ ethical performance through auditing
o Used in addition to due diligence
o Can be carried out by external or internal auditors
o Can be carried out
 Face-to-face at the supplier’s premises
 A structured series of questions
 A tour of the supplier’s workplace
 Interview with members of staff
o Audit planning and scope development
 Length of audit
 Review period
 Focus of audit
• Teams or functions
• Extent of work or activities
• Processes
 Seeks to avoid scope creep
o Details required within an audit plan and scope
o Audit execution
 Preferably unannounced
• Avoids precautionary measures or preparation being
undertaken by supplier
 Should be objective and respectful, with a fair opportunity for
questions to be answered

Encourage dialogue with suppliers on improvements to process (cover each of the

following using examples to illustrate advantages and disadvantages and their typical uses –
use locally based examples wherever possible and where each would be typically used or
appropriate and their characteristics):
• Post audit report of findings may or may not be shared with the supplier
• Regular monitoring the progress of any actions recorded
• Two-way feedback is important for encouraging suppliers to make improvements
• Good practice to communicate any non-conformance or opportunities for
improvement
o SMART

Recommend remedial actions where appropriate (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• The purchasing company’s quality management system will include formal
corrective action plan policies and procedures for both parties
• Supplier will be responsible for identifying the root cause of non-compliance
identified and for developing corrective and preventative actions against it
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 48

Leading global excellence in procurement and supply

 • Root cause analysis and corrective action
• Taking timely, effective and direct action
• Supplier development programmes

Identify and address potential conflicts of interest (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• There is always the potential for conflict of interest (COI) to arise (i.e. nepotism)
• Examples of relationships that could be seen to cause a COI
• COI do not always relate to the buyer working with the supplier
• COI may not always be from one business to another, i.e. could be internal
• The most effective way to prevent issues arising from a perceived COI is to openly
declare it
• A good audit trail is important should a legal dispute arise as a result of damaging
behaviour arising from a COI
• COI logs and registers
• COI between businesses must be declared and understood

Contrast processes and practices that the organisation could adopt to meet the
requirements of Corporate Social Responsibility (CSR):

The triple bottom line – profit, people and planet (cover each of the following using
examples to illustrate advantages and disadvantages and their typical uses – use locally
based examples wherever possible and where each would be typically used or appropriate
and their characteristics):
• An economic term that follows the principles of sustainability, made up of the 3 Ps
o Profit
o People
o Planet
• An organisation that actively monitors and promotes the 3 Ps will demonstrate its
commitment to CSR, which may be attractive to investors and customers

Adopt sustainable practices, standards and specifications in the supply chain (cover each
of the following using examples to illustrate advantages and disadvantages and their typical
uses – use locally based examples wherever possible and where each would be typically
used or appropriate and their characteristics):
• Sustainable developments are those that meet the requirements of the people using
them at a given point in time, but also take care that they do not have a negative
impact on future generations
• Three main pillars
o Social
o Environmental
o Economic
• Accreditation to standards
o ISO 20400:2017 (International Organization for Standardization) covers the
process of sustainable procurement
 Contributes to achieving 8 of the 17 UN Sustainable Development
Goals
All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 49

Leading global excellence in procurement and supply

 o Sustainable Agricultural Standard (Rainforest Alliance)
o Standard for Hired Labour (Fairtrade International)

Consider the social impact of the organisation’s behaviours (cover each of the following
using examples to illustrate advantages and disadvantages and their typical uses – use
locally based examples wherever possible and where each would be typically used or
appropriate and their characteristics):
• Examples of social impacts (often not intentional)
• Direct and indirect impacts
• External and internal impacts

Design procurement processes to deliver social outcomes as well as, or as an alternative

to, normal economic measures of value (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Socio-environmental factors are often intangible and difficult to measure
o Control points can help employees understand their personal contribution
to targets in preventing negative social or environmental impacts
 Inputs and outputs
• Controls and measures protect an organisation as well as provide structure and a
monitoring system

Expand reporting frameworks to include ecological and social performance (cover each of
the following using examples to illustrate advantages and disadvantages and their typical
uses – use locally based examples wherever possible and where each would be typically
used or appropriate and their characteristics):
• Benefits of monitoring ecological and social impacts
• Requires additional resources, but if managed and implemented correctly, could
lead to efficiencies for an organisation

Define organisational value for money to include social outcomes - use of local labour,
participation of disadvantaged groups (cover each of the following using examples to
illustrate advantages and disadvantages and their typical uses – use locally based examples
wherever possible and where each would be typically used or appropriate and their
characteristics):
• Offset or industrial participation – an agreement that a foreign organisation will
invest into the country of the procuring government as part of its contractual
obligations
o Use of local labour
 Examples
 Benefits of using local sub-tier suppliers
 Criticisms of offsetting
o Participation of disadvantaged groups
 World Health Organisation categories
 Benefits

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 50

Leading global excellence in procurement and supply

 See final case study for the module
• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

Students should leave this session with an overall understanding of how and why audits
are used as a mechanism to evaluate ethical and sustainable practices and standards
within the workplace. They should be able to explain how supplier’s performance in these
areas can be monitored and how remedial actions should be undertaken where
appropriate. They should also understand why identification of potential COI is important
and how this can be managed. Finally, they should understand the concept of the Triple
Bottom Line and how/why organisation’s strive for sustainable procurement

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 51

Leading global excellence in procurement and supply

Diploma in Procurement and Supply
Module L4M4 – Ethical and Responsible Sourcing

Session 10
Assessment Criteria
Final module recap and discussion All assessment criteria
for module

All learning outcomes for the module as discussed in sessions 1 to 9

CIPS Module Study Guide for Module L4M4 – Chapters 1, 2, 3 and 4

CIPS Global Standard for Procurement and Supply
Segments: 6.4, 6.5, 11.3

Discuss the overall aims of the module:

Module aim:

In any organisation, a significant element of procurement and supply activity is based

around decisions to internally conduct activity or to source from an external supplier.
Hence, the selection of the correct external suppliers is a vital contributor to overall
organisational success. This module enables personnel with roles in procurement and
supply to formulate selection criteria and sourcing strategies to ensure that the
organisation will make the correct choice of external suppliers. It explains options for
sourcing, and examines the key processes that can be applied to the analysis of potential
external suppliers and to ensure the development of ethically and socially responsible
sourcing agreements

Discuss the final assessment

Format
• Objective Response exam – 1.5 hours
• Pass mark = 70%

Content and question types

• Use the sample questions provided for types and formats of questions

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 52

Leading global excellence in procurement and supply

 See final case study for the module
• Use this to pull together all of the key elements discussed within sessions 1 to 9 of
this module, highlighting associated assessment criteria

Offer contextual case studies relevant to the region and industrial focus of the area
• Give students the opportunity to apply knowledge to areas of practical interest
relevant to their international region
• Help students to cement ideas and concepts through practical application of ideas,
theories and models

See short case studies within the associated Chapter of the CIPS Study Guide
• Use these to highlight key learning against assessment criteria

Student Exercises
 Use these to highlight key learning against associated learning outcomes for the
module

On completion of this module, learners will be able to explain the options and associated
processes available for sourcing with external suppliers. They will also examine the legal
and ethical impact and the implications of corporate social responsibility, on the final
sourcing decision

All rights reserved. Copyright© 2018 CIPS. Content may not be copied, reproduced, published, altered
or transmitted in any form or by any means, in whole or in part, without the prior written permission of CIPS. 53

Leading global excellence in procurement and supply