KENYA METHODIST UNIVERSITY

END OF 3'RD 'TRIMESTER 2015 (PT) EXAMINATION

SCHOOL : BUSINESS AND ECONOMICS

DEPARTMENT : ACCOUNTING, FINANCE & INVESTMENT
UNIT CODE : PSCM 210
UNIT TITLE : PRINCIPLES OF PURCHASING

TIME: 2 HOURS

INSTRUCTIONS

Answer three questions. Question one is compulsory

Question One (30 Marks)

Read the case study below and answer the questions that follow;

You have been hired as a procurement assistant of Upishi Bora Limited. The company deals with
milk products and gets its supplies both locally and internationally and over the years it has been
multi sourcing from various suppliers, recently it has been facing a lot of problems in
maintaining the relationship within its supply base especially for strategic items. The quality of
the products from many of its suppliers has been wanting and so the company has discovered
that one of the major problems has been specification of the products as well as the relationships
with the suppliers this compromising on quality.

Required:

 Explain some of the challenges that Upishi Bora could be having with
(4
its specifications.
Marks)
 Advice the management of Upishi Bora on the importance of involving
(6
purchasing department in the development of specification.
marks)
 Using an example from the above case define a strategic
(3
buy/spend.
Marks)
  Explain some of the strategies that the purchasing manager can
use to improve the relationship with the suppliers of the strategic (5
items. Marks)

 Quality is conformity to requirements and not goodness. From the

above case discuss the dimensions of quality and why they are (7
important to an organization. Marks)

 Multiple sourcing seems not to work for Upishi Bora limited. Explain to
(5
management why they should consider single sourcing.
Marks)

Question Two

 Explain the reasons that are making executives to regard purchasing

(10
with increasing importance.
Marks)
 Discuss the factors that have contributed to the growth of
(6
procurement in organizations.
Marks)
 Distinguish between purchasing and procurement. (4
Marks)

Question Three

 Define the term "professional code of ethics."

(2 Marks)
 Discuss the possible areas of concern for ethical issues in
purchasing. (8 Marks)

 Explain the indicators of fraud in a purchasing organization. (10

Marks)

Question Four

 Suppliers play a critical role to an organization that is involved in

purchasing. Discuss the factors that the buyers should consider when (10
selecting a supplier. marks)

 Discuss the benefits of negotiations to any buying organization. (10

Marks)

Question five
  Discuss the main characteristics of capital equipment.
(5 Marks)
 Identify any five needs of a manufacturing organization.
(5 Marks)
 List and explain any five documents used in purchasing
(5 Marks)
 Explain any five benefits of decentralization of purchasing
(5
department.
Marks)

KENYA METHODIST UNIVERSITY

END OF 2'ND 'TRIMESTER 2015 (PT) EXAMINATION

SCHOOL : BUSINESS AND ECONOMICS

DEPARTMENT : ACCOUNTING, FINANCE AND INVESTMENTS
UNIT CODE : PSCM 210
UNIT TITLE : PRINCIPLES OF PURCHASING

TIME: 2 HOURS

Instructions: Answer question one and any other two questions.

Question One

As the purchasing manager for Jikoni Poa ltd a manufacture of domestic appliances, you are to
source for a door seal for a new model of microwave oven. The component that has caused
problems in the past but the design has now been overcome. The market is increasingly
becoming competitive and any problems in the new model could be disastrous. Preliminary
sourcing indicates that permiseal ltd has substantially lower prices than other potential suppliers,
including your current supplier. However the last time you did business with permiseal was six
years ago and at that time you experienced some quality and delivery problems.

Required

 Explain ways in which Jikoni Poa and permseal limited can overcome quality
and delivery challenges previously experienced. (10mks)

 Quality management is an important concept in strategic planning and

(10mks)
attainment of organizational objective. Discuss ways in which Jikoni
 Poa can use quality as a competitive strategy considering that they are
operating in a very tight market.

 Briefly explain the process that Jikoni Poa used to source for the supplier
of the door beal microwave oven. (10mks)

Question Two

 Companies today are paying a great deal attention to ethical issues in the
supply chain. Explain any ten ethical issues that are likely to have an impact
(10mks)
on commercial relationship with suppliers.

 As a manager of a manufacturing firm, explain the factors you

would consider for producing products in-house as opposed to
(10mks)
outsourcing.

Question Three

 Define the concept of materials management in the context of an

organization that is producing in nature. (10mks)

 Discuss the various ways that you would describe quality in an

organization of your choice. (10mks)

Question Four

 Define the term standardization as used in purchasing.

(3mks)
 Explain any five advantages that an organization can accrue from
standardization. (5mks)

 Discuss the key points that a buying firm should take into
consideration when they are selecting a supplier of strategic items
(12mks)
(products) in an organization.

Question Five

 List some of the indicators of fraudulent activities in a purchasing

department. (5mks)
  Distinguish between adversarial and partnership negotiations. (4mks)

 Define price analysis and show how its applied to purchasing

management. (5mks)

 Explain the importance of partnerships to a procuring organization. (6mks)



KENYA METHODIST UNIVERSITY

END OF 2ND TRIMESTER 2015 (FT) EXAMINATION

SCHOOL : BUSINESS AND ECONOMICS

DEPARTMENT : ACCOUNTING, FINANCE AND INVESTMENT
UNIT CODE : PSCM 210
UNIT TITLE : PRINCIPLES OF PURCHASING

TIME: 2 HOURS

INSTRUCTIONS

Question one is compulsory; answer any other two

Question One

Read the following case and answer the question

Amina-link is a small chain animal feeds store located in Makutano area of Meru town. It is part
of a large animal feed group Welcome foods and veterinary services (WFVS) which owns more
than 100 stores and vet services in the Mount Kenya Region WFVS has centralized
administration in the greater Meru region and all requirements are ordered from there and then
delivered to the sites. Individual local managers are responsible for the maintenance and
equipment purchasing. Amina-link requires a grain/seed mixer machines for chicken in order to
deliver a quality product to its growing number of customers;

 Explain the meaning of a purchasing task.

(6 Marks)
 Describe the process that WFVS should follow to purchase the
(12
seed mixer.
Marks)
  Explain at least three types of tendering process that Amina-link
might use. (6 Marks)

 Explain the roles of purchasing and supply in business

organizations. (6 Marks)

Question Two

 You are a consultant involved in delivering of training services to multinational firms in

Kenya. Explain some of the documents specific to procurement of services that will be
involved in the transactions. (7 marks)

 Explain any five factors an organization must consider before

(6
outsourcing.
Marks)
 Briefly explain some of the ethical practices a procurement entity must
(7
exhibit during procurement process
marks)

Question Three

 Briefly compare and contrast centralized and decentralized procurement

(7
in a typical organization.
marks)
 Both buyers and sellers gain from a good quality control and
assurance. Discuss how the government of Kenya has fostered (8
quality control and assurance. marks)

 Explain briefly the factors to consider when procuring capital

(5
equipment.
Marks)

Question Four

 Explain the role of the following technologies and how they could be
(8
used in the procurement process;
marks)

 Email
 EDI
 E-business
 ERP
  Explain five benefits of standardization to an organization and
(8
product consumers.
marks)
 Explain the post ordering phase of procurement. (4
marks)

Question Five

 Explain any five criteria for evaluation or appraisal of a vendor that seeks to
(8
supply an organization with goods and services.
marks)
 Discuss the relevance of negotiation in a purchasing function. Use
(8
practical examples to support your answer.
marks)
 Recommend the style of relationship that is appropriate in a supply
agreement.

KENYA METHODIST UNIVERSITY

END OF 1'ST 'TRIMESTER 2015 (FT) EXAMINATION

SCHOOL : BUSINESS AND ECONOMICS

DEPARTMENT : ACCOUNTING FINANCE AND INVESTMENT
UNIT CODE : PSCM 210
UNIT TITLE : PRINCIPLES OF PURCHASING

TIME: 2 HOURS

Instructions: Answer question one and any other two questions.

Question One

Dettic PLC produces a wide range of industrial products. One of the product range is a
specialized plastic molding produced for a customer who is very demanding on quality
requirements. Unfortunately none of the current suppliers is performing consistently to a
satisfactory quality standards as you have some space capacity available internally it may be
viable to manufacture it in house.
  As a procurement manager discuss the factors you would consider for in
house manufacturing. (10mks)

 Assuming that this challenge of quality is not addressed on time, discuss the
cost of quality the organization may incur. (10mks)

 Explain the process through which the organization will

undertake to ensure suppliers of their raw materials in order to
(10mks)
avoid quality challenges.

Question Two

 Standards are relevant to Kenyans. Discuss using practical

examples. (10mks)

 Explain the areas of cost analysis in organization.

(10mks)

Question Three

 Explain the main principles of the just-in-time (JIT) approach to

inventory management. (10mks)

 Many organizations find themselves in the apparently contradictory

position of having high levels of financial investment in inventory,
but at the same time frequently running out of stocks of important
(10mks)
components and materials. Explain how this situation could arise and
how you will deal with the situation.

Question Four

 Why is it important to carry out a price analysis for an

organization. (5mks)

 Discuss the different types of cost that can be incurred by a

procuring entity. (10mks)

 List the characteristics of a friendly kind of negotiations.

(5mks)

Question Five
  Explain the benefits of using E-procurement process in purchasing
function. (10mks)

 Explain five methods of specifying a product or service.

(10mks)

KENYA METHODIST UNIVERSITY

END OF 1'st 'TRIMESTER 2015 (PT) EXAMINATION

SCHOOL : BUSINESS AND ECONOMICS

DEPARTMENT : ACCOUNTING FINANCE & INVESTMENT
UNIT CODE : PSCM 210
UNIT TITLE : PRINCIPLES OF PURCHASING

TIME: 2 HOURS

INSTRUCTIONS:

 Answer question One and any other Two

Question One

 Company XY has been having challenges in its procurement section that has led to
serious losses. The managing director is concerned about the numerous complaints from
the various departments about the procurement section. The managing director has
decided to call a meeting to discuss the challenges that the procurement section might be
facing. He is also interested in finding out how to overcome the losses and complaints.
During the meeting, the head of procurement simply indicates that controls, tendering
issues, and logistical nightmares are the core problems. Using procurement principles
advice company XY.

(10marks)

 Government and Institutional purchasing is critical in any society. Explain the difference
between these two forms in purchasing. (4marks)
 Write short notes on the following:
 Decentralized purchasing
 Cost analysis
 Purchasing requisition
 Consignment note
  Outsourcing.
(10marks)

 Differentiate the following terms:

 Ordering Vs identification phase
 Make Vs Buy decisions

 Supplier quotation Vs delivery note.

(6marks)

Question Two

a) You are working in the purchasing department of your organization and

you have noticed the following:

 Too many orders are going to one supplier

 Two of your colleagues have refused to go on leave
 Invoices are being received via postal address without a return address
 Stocktaking process is a mess. Records are missing with no explanation.

Write a report to the management explaining the

situation, why you think it needs to be addressed (15marks)
urgently and the reasons for the above issues.
Highlight any FIVE
b) objectives of the (5marks)
purchasing function.

Question Three

Quality cannot be product from the on

quality as a
inspected into a set. Explain how an
a) competitive (10marks)
product, it has to organization can
advantage.
be built in the use
Discuss the
importance of
b) negotiation for any
procuring
organization.
(10marks)

Question Four

a) Define capital equipment and explain the characteristics of a capital

 equipment. (8marks)
b) Discuss the key factors that the purchasing manager must put in

account when evaluating a supplier for the organization. (12marks)

Question Five

What is supply partnerships and which

a)
areas in an organization require
partnership
(15marks)
sourcing?
Discuss FIVE strategic
b) (5marks)
procurement concepts.