CIPS L5M4 – LO4 Questions and Sample Answers

Question 1: Apart from financial measures, what other measures can an organisation use to
measure the performance of their supply chain? Describe THREE. (25 points)

There are a range of ways that an organisation can measure performance, for micro/small
organisations it can be by issuing customer surveys, and SLAs with suppliers, for larger organisation
there may be a detailed Performance Management, Tracking and Reporting system in place. Which
system is used will depend on the size and requirement of the business.

A performance management system is one of the ways a buying organisation can hold supply chain
partners to account and can be helpful in ensuring that its suppliers are meeting the 5 rights of
procurement, KPIs will be fully incorporated within the contract, and be enforceable between the
parties. Depending on the contract, they can be linked to the Contract Management Schedule, the
Performance Management Schedule and/or a detailed performance matrix which details any
deductions or credits linked to performance.

While performance will be captured within the contract itself, it will be important that performance
is actively and regularly managed, in order for them to have operational impact.

While performance measures will vary according to the purpose and requirements of the underlying
contract. They will usually link in some way to the 5 Rights of Procurement, in other words ‘Right’ –
Quality, Quantity, Price, Place and Time. Apart from financial measures (linking to price) these could
include: -

For the purpose of this essay I will look at: -

1. Timescales (Time) – this will be important to any business, but in particular a requirement
that requires interaction with a long or complex supply chain, as there will be a high degree
of interdependence between different links in the chain. Failure with any link will have knock
on effects. Timescale KPIs will relate to the achievement of anything which is time bound,
within a specified timeframe. Whether or not a tolerance is allowed, will depend on how
important timeliness is to the particular element of the contract. Where the business
operates on JIT principles, the tolerance will be nil. Example time related KPIs could include:
- Perfect delivery (under LEAN), on time in full, with correct paperwork, damage free. Lead
time relative to order cycle time. Cash to Cash Cycle time, or inventory days of supply.
2. Delivery (Place) – KPIs can be introduced that measure timeliness, efficiency, and
effectiveness of delivery. Common delivery based KPIs include On-Time Delivery (OTD),
Delivery Time Variance, Order Accuracy, Cost per Delivery, Return Rates, and Customer
Satisfaction.
a. OTD – would be likely where JIT systems being used because timely delivery will be
critical to the businesses overall objectives.
b. Delivery Time Variance – this measures the difference between the promised
delivery time and the actual delivery time.
c. Order Accuracy – looks at ensuring that the delivered items correspond to the
requested items.
3. Quality – Examples of KPIs relating to the quality of the services or products being purchased
could include: - number of defects, number of customer returns, rate of customer
complaints, rework costs, customer churn rate. All are linked to the delivery of a quality
product or service and are measuring not only defects themselves, but also customer service
 and return rates. For the Service Industry SERVQUAL can be used to look at 5 key dimensions
including: -
a. Tangibles – which considers physical characteristics like look and feel.
b. Reliability – how reliable and dependable is the service.
c. Responsiveness – how responsive and prompt when dealing with queries or
resolving issues.
d. Assurance – relates to how trustworthy the service is… feeds into customer loyalty,
reputation and repeat business.
e. Empathy – relates to customer service which understands and responds
appropriately to customer needs.

It’s important an organisation takes a holistic view and considers other performance measures as
well as financial. Even the best metrics will not pick up everything, some elements of what is ‘going
wrong’ is not tangible or measurable. On ‘paper’ a supplier could be meeting their KPIs, but
sales/satisfaction are still on the decline. Financial metrics can provide an insight that operational
KPIs cannot.

Question 2: Describe the SERVQUAL model that can be used to assess quality in the service
industry (15 points) What are the advantages of using the model? (10 points)

There’s a difference between goods and services i.e, services are: Intangible, Inseparable,
Heterogeneous (always different), Perishable (as soon as you use it it’s gone/ can’t store) and There
is no transfer of ownership, for these reasons ‘quality’ is measured differently in this industry. This is
why the SERVQUAL model was developed. (This could be a good way to introduce your essay.)

SERVQUAL as a model identifies 5 gaps that cause unsuccessful service delivery (the Gap Model)
these are: -

1. Gap between customer expectation and management thinking

2. Gap between perception of management and the specification
3. Gap between the specification and the service delivered.
4. Gap between service delivered and external communications.
5. Gap between service expected and service perceived.

SERVQUAL then goes on to utilize the RATER method to measure quality which is based on: -

A. Reliability – relates to how reliable the service is

B. Assurance – related to how trusted the service or the brand is
C. Tangibles (physical facilities and products) – relates to the tangible aspects of the service like
premises, and service-related products)
D. Empathy – relates to how understanding the service is of their customers needs, and how
the service can understand and meet the needs of its customers.
E. Responsiveness – relates to how responsive the service is, for example call response times,
resolution time frames when dealing with customer complaints etc.

SERVQUAL measures the expectations of these and the service delivered on a scale 1-7. E.g. how
important is reliability (6/7) and what level of reliability are we providing (2/7). There can be either
positive or negative gaps between the expectation score and the perception score. You can then give
each area a weighting of importance, so you know where to focus on. The aim should be to achieve a
quality gap score should be less than 5%.
Benefits of SERVQUAL include: -

i) It assesses quality from the customer’s perspective, and involves collection of real time
customer data.
ii) Can be tracked and compared over time – leading to quality improvement.
iii) Can compare different customer groups (including internal/ external)
iv) Can compare against competitors or industry best practice by using a standardised
measurement and scoring system.
v) Customer priorities can be ranked in order of importance.

Question 3: With reference to the SCOR Model, how can an organisation integrate operational
processes throughout the supply chain? What are the benefits of doing this? (25 points)

SCOR – Supply Chain Operations Reference Model. Developed by the Supply Chain Council. Is a
management tool that integrates business process engineering, benchmarking, process
measurements and organisational design into one cross-functional framework.

There are 5 core processes- this is how you integrate it within the supply chain including: -

1. Plan – Assess demand & supply, inventory levels, transport, asset management.
2. Source – Look at the acquisition of materials, supplier relationships, and powers of
negotiation.
3. Make - examination of each task; made to order / stock etc.
4. Deliver - order capture, warehousing, distribution, invoicing.
5. Return - managing return of pallets, reverse logistics, defective products.

The main benefit is that SCOR can calculate the following costs:

- Value at Risk (which is based on calculating the probability of an event x the financial
impact)
- Total Cost to Serve (includes delivery costs, helps differentiate between profitable and
unprofitable customers, which increases opportunity to recover profit)
- Cost of Goods Sold (used to calculate gross profit margin)
- Return on supply chain fixed assets (ensuring a return on investment, and takes into
consideration factors like depreciation, preventative maintenance and sunk costs)

A further benefits of SCOR is that it focuses on Activity Based Costing and identifies processes that
provide poor value, thereby minimizing waste and increasing efficiency.
Question 4: Organisational Strategies can be formed at three different levels within a business.
Outline these three levels and explain the benefits of strategy alignment within an organisation (25
points)

Strategy is the formation of the goals and objectives of the organisation. This includes the vision,
values and tactics the organisation will use to achieve those goals.

There are three levels of strategy – corporate, business and functional: -

1) Corporate strategy – this is the master plan, includes visions and aims. Set by senior leadership
and trickles down the organisation. High level (so not a lot of detail). Influences the other strategies.

2) Business strategy – this is the strategy at operational level – it’s about developing competitive
advantage – can be split into regions or product types. The overall Business Strategy must be
articulated before a supply chain strategy can be formulated. Provides higher level of detail than
corporate strategy.

3) Functional / Supply Chain Strategy- relates to a particular business function such as procurement.
Not typically shared with anyone other than key suppliers. This provides the highest level of detail.

Benefits of strategy alignment include, but are not limited to: -

i) Everyone in the organisation is working to the same goals, where strategic direction is
built into corporate and functional objectives and is clearly communicated. This
increases motivation, as it gives individuals a clear sense of direction.
ii) Higher margins through efficient management and alignment of goals, which in turn
leads to increased revenue, less waste and increased efficiency, because strategic
alignment requires evidence-based decision making.
iii) Reduces risks, also result from evidence-based decision making.
iv) Develops relationships, through a better understanding of the market within which the
business operates and there positioning in relation to their suppliers withing these
markets. This helps them to better adapt to market conditions and supplier positioning.
v) Increases capacity through innovation, and also leads to the business being able to
identify new opportunities, and new avenues of revenue generation.

In order for Organisational strategies to realise the benefits as outlined, these strategies have to be
clearly communicated, fully aligned, and embedded in the organisations processes and procedures.
The main 4 Criteria for a good supply chain strategy are: - aligns to business strategy, aligns to
customer needs, aligned to your power position and is adaptive.

Horizontal vs vertical alignment of strategies.

- Vertical alignment = Is where there is alignment between corporate strategy, business strategy and
supply chain strategy

- Horizontal alignment = relates to alignment between supply chain strategy and strategies of other
functions e.g. sales
Question 5: Describe three categories of stakeholders and a method for how you could map
different types of stakeholders within an organisation (25 points)

A stakeholder is someone who has a legitimate or vested interest or stake in the business. They can
both affect the business and be affected by it.

Name the three categories; internal, connected, and external – briefly explain what these are and
give an example e.g. staff are internal stakeholders, banks are connected etc.

1) Internal – are those individuals that work within the organisation e.g. Employees,
managers.
2) Connected – are those that are not internal to the organisation, but who have a link
to the organisation – e.g., they may depend on the organisation for business, like a
supplier/supply chain partner, or they may have lent the business money like a bank.
3) External – these stakeholders don’t have a direct link to the company but are still
affected by the decisions the company makes. E.g. The local community.

There are a variety of ways in which you can map stakeholders including: - Mendelow’s Stakeholder
Management Matrix, mapping stakeholders by their type of power (status, personality, expert,
resource, network), RACI model or the Performance Cube.

There are different levels of stakeholders- not everyone will be affected to the same degree, or in the
same way.

One useful way of mapping or ranking Stakeholders in terms of interest, influence and power, is to
use the Mendelow’s Matrix.

Mendelow recommends analysing stakeholder groups based on their Power (the ability to influence
our organisation strategy or project resources) and their Interest (how interested they are in the
organisation or project succeeding).

- High power, high interest (Manage Closely): aim to fully engage these people, making the
greatest efforts to satisfy them.
- High power, low interest (Keep Satisfied): put enough work in with these stakeholders to
keep them satisfied, but not so much that they become bored with your message.
- Low power, high interest (Keep Informed): adequately inform these people, and talk to
them to ensure that no major issues are arising.
- Low power, low interest (Minimal Effort): don’t bore these stakeholder groups with
excessive communication, keep an eye out to check if their levels of interest or power
change. They need minimal engagement.

Stakeholders can move between the quadrants however, e.g., someone who was originally low
interest may suddenly become interested in the project, e.g., a senior manager will not be too
interested when a project is running smoothly, but if an issue emerges, may suddenly become very
interested. It’s therefore important to continuously monitor and remap your stakeholders to catch
any changes.

Stakeholders may also be characterised differently for different projects. For example a group of
employees may be classed as ‘keep informed’ for one project and ‘key players’ for another.
Stakeholder mapping isn’t a one-off event- you need to do it for each project.
Different stakeholders need managing in different ways- you could provide examples of this. E.g.
Manage Closely stakeholders may require monthly in person meetings, whereas keep informed
stakeholders just need quarterly emails.

There are some limitations of Mendelow in that, it can be overly simplistic and doesn't take account
of subjective factors like the stakeholder's stance on the project (e.g. are they for it or against it?
There may be several key players, some that support the project and some that don’t, and they
would need to be managed slightly differently.

Question 6: Outline three methods an organisation could use to gain feedback from stakeholders
(25 points)

Feedback is a communication tool, used to update and inform. Which feedback method would be
used with stakeholders would depend on the type of stakeholder the organisation is dealing with
(e.g. whether customer or supplier) and what information the organisation seeks. Feedback is
important e.g. To understand stakeholder requirements and levels of satisfaction and to inform on
business processes.

Three methods of collecting meaningful information from stakeholders includes: -

1. Complaints process- used to gain feedback from customers. Helps an organisation

understand where they have gone wrong, and how to improve. Important to remember that
information gained this way will be biased- only negative feedback is likely to be collected, so
this may make it look like the organisation is doing worse than it is. Only a minority of
stakeholders may have a complaint.
a. An advantage of having a complaints process is that it gives customers an avenue to
share their honest opinions on the organisation or their services/products. While
uncomfortable at times, honest is always the best policy… and will lead to
opportunities for improvement and help to build positive relationships with
customers and build loyalty and trust.
b. A disadvantage however, it that it can create an extra layer of administration for the
organisation, who will need to appoint and individual/team to manage the complaint
process.
2. Questionnaires- this will provide more rounded feedback as it allows stakeholders to leave
both positive and negative feedback. Could be delivered in person or via email. Important to
carefully construct questions so they aren’t leading. You may not have a high response rate
to a questionnaire as stakeholders may see no benefit in completing it. Consider rewards for
completion.
a. An advantage of questionnaires is there are cheap and easy to develop and issue,
Microsoft Forms can be used to develop a simple questionnaire which can be
emailed in the form of a link to participants, and the application will also provide
tools to gather, analyse and present this information. Most people are familiar with
questionnaires and will find them relatively easy to complete.
b. A disadvantage however is that the organisation may not get everyone they need to,
to complete the forms, which can lead to the resulting data being skewed and not
entirely representative of their full customer base. Also, if the customer doesn’t take
the questionnaire seriously, they may not respond entirely truthfully which could
further skew results.
 3. Audits – a way to gain feedback on a supplier. Provides accurate data but may only represent
a snapshot. Stakeholder could be given notice so they can prepare, or it could be an on-the-
spot audit with no notice – this may provide more accurate data.
a. An advantage to an audit, particularly where it is independent, is that it should lead
to a completely objective analysis of how things are going.
b. However, audits can be a difficult process to go through and create a lot of extra
work for individuals in the organisation. Also, if the audited stakeholder is aware of
the audit, they may not present themselves in an entirely honest way, if they have
time to ‘put on their best’ prior to audit.

Question 7: ABC Ltd wish to implement a new communication plan with various stakeholders. How
could ABC go about doing this? (25 points)

A Communication plan is a plan devised to better inform stakeholders, to better understand

stakeholders, and to encourage stakeholders to think or act a certain way (persuade), and the way to
co-ordinate this activity.

How this is formulated, and constructed can vary, but one way in which this can be done is by listing
them into categories such as internal/ connected / external. E.g. determine which communication
method to use based on their relative power/ interest base on a stakeholder map. (Mendelow).

Using Mendelow’s stakeholder mapping technique, ABC could map it’s stakeholders according to the
following: -

- Those with High power, high interest (Manage Closely): aim to fully engage these people,
making the greatest efforts to satisfy them. For these stakeholders ABC may wish to conduct
market engagement events or meetings, ensuring that these stakeholders are fully informed
and have an opportunity to voice any concerns or needs they may have. This could be done
periodically, together with regular updates and newsletters. Communication with this group
should be transparent and respectful.
- High power, low interest (Keep Satisfied): put enough work in with these stakeholders to
keep them satisfied, but not so much that they become bored with your message.
Communication with this group needs to be informative and effective, but not too detailed
and not too frequent. This group has power, but all they need to know is a high-level
account of progress, so that they are aware, and satisfied that everything is at it should be.
This group can become a ‘Manage Closely’ stakeholder if not managed effectively. So
communication will need to be reasonably regular.
- Low power, high interest (Keep Informed): adequately inform these people and talk to them
to ensure that no major issues are arising. This group can’t influence any outcome, but they
may have a stake in the project. It will be important to keep this group informed, but it will
not need to be particularly frequent, and it can be at a high level, enough to ensure that they
are informed about what is going on.
- Low power, low interest (Minimal Effort): don’t bore these stakeholder groups with
excessive communication, keep an eye out to check if their levels of interest or power
change. They need minimal engagement. These stakeholders are neither interested or
influential. An occasional email with a high level update would be sufficient, or website
based newsletters, which this group can access (should they want to) would be more than
sufficient.
Question 8: What is meant by the term benchmarking? (10 points) Describe two forms of
benchmarking (15 points)

Benchmarking is a systematic comparison of an organisation’s methods or performance with another

relevant organisation. The aim of benchmarking is to compare an organisations methods or activities,
with other organisations methods/activities, in order to better assess their methods. It’s a tool for
continuous improvement that can be used to understand industry best practice or how someone else
achieves a specific result and it can be used for comparing and establishing any potential gaps.
Benchmarking when used effectively can be a form of Competitive Advantage

There are 2 main forms, internal and external. Or external benchmarking can be further broken down
into different categories such as functional, competitive, and generic.

1) Internal benchmarking- the process of comparing internal results in a systematic and

standard way. Could be comparing two different departments in the same
organisation, or a retail company with shops in different locations. It could also be
comparing results from this year against last year. The advantage is it’s simple to do,
and the results are directly comparable. Can help an organisation work out ‘best
practice’ e.g. if you’re comparing two departments and one is outperforming the
other- benchmarking is a way to discover why this may be.

This form of benchmarking can be used to improve an organisation's systems or

processes, or where an organisation is seeking to streamline and standardise its
processes. carrying out a benchmarking exercise across departments will help the
organisation to identify best practice, and consolidate the best of what the company
has to offer as a whole.
2) Competitive Benchmarking- this is the process of comparing your organisation
against a business competitor. For example, Iphone and Samsung. Harder to do as
you may not have full access to the information you require to do a full analysis.
Results from this type of benchmarking could lead to improvements and innovations
and increased competitive advantage. May be expensive and time consuming.

While it may be a more challenging undertaking and can be very valuable to an

organisation who has ambitions to become a market leader in their field, as it allows
the organisation to identify industry standards, industry best practices, and in
particular what their competitors are doing. Being in a position to identify any gaps
in competitors practices, would be particularly valuable.

Question 9: XYZ Ltd is a retail organisation that is conducting a competitive benchmarking project.
What are the advantages and disadvantages of this? (25 points)
How confident do you feel answering this question?

Explanation

A basic response would

- Explain what competitive benchmarking is

- Name 2 advantages

- Name 2 disadvantages

A good response would mention:

Introduction: explanation of competitive benchmarking- comparing your organisation against a

similar business in the same industry. This could be comparing a number of areas including; sales,
processes, customer satisfaction, strategy. Remember to mention XYZ Ltd to tie this back to the
question. For example the last sentence of your introduction could be ‘There are several advantages
and disadvantages of using this form of benchmarking that XYZ Ltd should be aware of. These will be
discussed in detail below’.

Competitive benchmarking advantages (3-4 of these, some ideas below)

- Compares like-for-like processes

- Determines if your organisation is competitive

- Spurs competition and growth

- Gives you a better understanding of competitors and marketplace

- May provide foundation for innovation and improvements

Competitive benchmarking disadvantages (3-4 of these, some ideas below)

- Cost (both financially and in terms of time)

- Legal issues- confidentiality, trade secrets, intellectual property (you may not be able to compare to
a competitor if you don’t have access to this information, or you may have to pay extortionately for
access to it!)

- Your organisation may have relatively low performance improvement if competitors aren’t
significantly better, or if you’re not comparing to best in class. Risk of selecting the wrong person to
compare to.

- Competitors may see no value in taking part – it will be hard to convince them.

- Data sharing could enable a competitor to understand your weaknesses and they can capitalise on
this

- Benchmarking is intrinsically backwards looking- data collected would be historic and may not be
that useful

- You could put each of the above in a separate, short paragraph. Explain briefly what it is and explain
how this would be an advantage / disadvantage to XYZ Ltd. The question mentions XYZ is a retail
organisation so you can focus on this. For example, if XYZ Ltd completes a competitive benchmarking
exercise against a similar retail outlet and discovers that the competitor has excellent sales with a
particular demographic (say under 18s) that XYZ hadn’t previously considered important, this may
spur XYZ to invest more heavily in marketing and product design for this demographic which would
lead to market growth for XYZ.

Conclusion – relate this back to the question. For example, there are advantages and disadvantages
to XYZ completing the exercise, but overall the benefits may outweigh the costs as retail is an
extremely competitive industry.

An excellent response may also mention:

- Competitive benchmarking helps XYZ to discover what ‘best practice’ looks like.

- The exercise could involve one or several competitors (more competitors may give you more
information but may be more difficult and costly to do)

- There is no set approach to benchmarking but a good start would be to look at the organisation’s
strategic objectives. If, for XYZ, this is market growth then the benchmarking exercise should revolve
around this. The benchmarking process should be reviewed afterwards to see if it achieved this
information. If it did, and then this would be a huge benefit of conducting the benchmarking
exercise.

- It's important that XYZ doesn't get too hung up on what its competitors are doing- there needs to
be a balance between this and focusing on internal growth and strategies.

Question 10: Skipped

A manufacturing organisation is looking into the option of benchmarking. Describe how a

benchmarking exercise can be conducted and common reasons for benchmarking failure that the
organisation should be aware of (25 points)

How confident do you feel answering this question?

Explanation

A basic response would:

- Quickly define what benchmarking is

- Explain the steps of how to conduct a benchmarking exercise

- Describe a couple of reasons why this may fail

- Relate the response back to the manufacturing organisation mentioned in the question

A good response may include:

- Benchmarking is a systematic comparison of an organisation’s methods or performance with

another relevant organisation. Relate this to the question – a manufacturing organisation – e.g. the
organisation could complete benchmarking with another organisation that makes the same product
they do, or someone who sells to the same buyer.

- The aim is for the manufacturing organisation to better assess its own methods and can be used for
continuous improvement, to contextualise the organisation’s performance against industry standards
or to understand how someone else achieves a certain result. Failure would be not achieving these
aims.

- How to conduct benchmarking: you could use the model explained in the study guide which is the
‘Benchmarking Model’ by Constructing Excellence. It has the following stages: plan – analyse – action
– review – repeat. It’s very similar to Deming’s PDCA Plan > Do > Check > Act cycle. You don’t HAVE to
use a known model- you can provide a step-by-step guide in your own words.
- Description of around 3 reasons why benchmarking might fail (remember to relate this to the
manufacturing organisation and provide examples where you can):

o lack of sponsorship / support/ commitment e.g. from senior leadership

o lack of appropriate resources such as money and people

o employee resistance- some staff members may be reluctant to take part because they think
problems will be found or they’ll be forced to change

o failure to position benchmarking within the larger corporate strategy

o failure to monitor progress – or failure to view it as an ongoing process

o process is done badly e.g. wrong competitor is selected, process is rushed or looks at the wrong
thing

An excellent response may also mention

- The Benchmarking Effort Return Matrix – this could be an important part of the process of
conducting the exercise. It is drawn up at the start and helps the manufacturing organisation identify
the effort involved and the possible benefits of doing the benchmarking project. Using this mitigates
the risk of XYZ completing a benchmarking exercise that doesn’t provide any benefits. XYZ’s
benchmarking may fail if a Returns Matrix isn’t drawn up as they may be completing an exercise that
is high in effort and low in return.

- The importance of reviewing the benchmarking process after its done and completing ‘lessons
learned’ – one big way a company can fail is to complete the same benchmarking exercise several
times without making improvements, or considering how the industry has evolved.