Studying Methodology

Use the funnel studying methodology

 The top of the funnel is the 185 Page Study Guide

 Your job is to consolidate the information
 You’re left with a drop in the volume from the entire Study Guide
 Enough to get well over the pass mark for the assessment

The flow is the following from top to bottom

 Reading the study guide over the last few weeks (185 pages)
 More focus on the slides that have been created and delivered in class (approx. 100 slides)
 Creation of summary notes similar to these on this document (7 pages Chapter 1)
 Mind map (1 for each chapter)
Chapter 3 Summary

Assessment Criteria 3 Understand the use of specifications in procurement and supply

3.1 Analyse the different types of specifications used and sourcing of information to create the spec

Section looks at the different types of specification.

The trick to understanding this section is from a practical perspective; WHAT are the different types of
specification categories are available and HOW can they be applied given a particular scenario. Knowing
the pros and cons of each type is also important to know.

The specification is the NEED, as in ‘Business NEEDS’ – what the business need for their purposes (and
possibly customers)

Three types of specification

 Technical specification
 Conformance specification
 Output or outcome specification

3.1 (a) Drawings/ samples/ branded/ technical

 Not a specification per se but is complementary of the ‘design specification’ outlined in

‘conformance specification’
 Can be created by a standards body, e.g. ISO and BSI
 Need to know examples of a technical specification
o Drawings
o Samples
o Brands
o Chemical compositions
 Get an idea of which one, possibly you’ve dealt with them before, idea is that they’re specific
and exact – everything has to be accurately defined. You may be asked for examples.
 All of these specifics are aligned to a conformance specification - this is important!

3.1 (b) Conformance/ input specification

 A combination of the specifics outlined above

 Often called an input specification because the spec describes what is needed to design/ make
rather than WHY it wants the spec
 Costs can be very high due to the detail – risk of overspecification
 More detail the higher the length of time and cost to create
 All risk is created by the buying organisation (what they receive may be unfit for purpose but
what they asked for)
 Doesn’t create any innovation from the supplier, possibly lost opportunities
 From the examples above think of areas where a specific specification is required; e.g. spare
part on an engine, ingredients in a recipe!
 Risk of having too tight a conformance specification as this will reduce the level of suppliers
available and increase security of supply, reduced negotiation leverage etc
 Often end users can make a product too tight a specification to influence the sourcing route
3.1 (c) Output or outcome, SOW specifications

 This is where the WHAT and WHY comes in

 Often called a ‘performance’ specification because you’re describing the specification to WHAT
you want to achieve (output)
 Outcome specification goes a stage further and states ‘WHY’ you want what you want
 Tells the supplier what you want and let them figure out how to achieve it – increases
innovation
 Business Requirements Definition (URD) document states what the product or service needs to
be delivered
 The outcome needs to be measured, often using KPI’s
 There is a risk of putting too much emphasis on the supplier skills, especially when buying
organisation does not have those skill, contract management needed

Example of input/ output/ outcome specification

Scenario – Kitchen sink is broken

Input specification

 Assess capability and skills, if I can repair the sink I’ll pop along with B&Q for a 3” wooden
handled plunger – P/N QSDJ123 along with a 10 foot length of stainless steel 316/ 3mm wire
 I’ll go home and repair the sink

Output specification

 I phone up a plumber and tell him my sink is broken, I haven’t a clue how to fix it, I just know it’s
broken as water isn’t going down the plughole
 The plumber come in the next day and fixes the sink, don’t know how he did it but it’s not
working

Outcome specification

 I phone up the plumber and tell him WHY I want the sink repaired
 I tell him that I have guests coming for dinner later in the day and need the kitchen sink working
as soon as possible
 The plumber comes over immediately and fixes the kitchen sink in time for the guests coming
round

You can see in each scenario what the pros and cons may be

 Whether I can fix the sink or rely on a provider

 The urgency of obtaining what I want
 The timescale to find out what I need to fix it myself and go to the shops
 The availability of the provider
 The benefits of telling the provider WHY I want what I want
 Cost implications – input spec is certainly the cheapest, outcome maybe the dearest
 Need to take into account other factors such as issues not having a kitchen with guests arriving

The key thing here is being able to understand the situation and work out which type is better in which
scenario – focus on the input and output specification.
Scope of Work

 Similar to the technical drawings etc supporting the input/ conformance specification, the scope of
work supports the output/ performance specification
 Defines the activities, deliverables and timelines in more detail
 Three main types
o Design SOW (buyer tell how to perform (presumably after solution is made)
o Level of effort (short term contracts)
o Performance based (purpose of the project is given)

3.1 (d) Standards

 Measures showing the expectations have been met – performance, quality etc
 Advantage that they can be relied on and often approved by a standards authority, e.g. ISO
 Linked to conformance specification
 Some can be rigid and not in line with procurement requirement
 From the above a standard specification can be changed to become an output/ outcome
specification
 Often makes it easier for the buyer and end-user to identify

Next few sections are not really a type of specification, just sources of information where you can reach
suppliers and engage with them to arrive at a specification

3.1 (e) The Internet

 Advantages - easily accessible, quick, often reliable, access to a lot of information, good for lower
specification product direct purchase, for higher level can still be used to source product
 Downside – Should check authenticity of the information presented, often not all the information is
presented

3.1 (f) Suppliers

 Very helpful for outcome/ performance specification to advise on the final specification
 Have access to information, further contacts and market intelligence
 Information from suppliers should be researched and understanding of the suppliers own drivers,
i.e. what do they get from it
 Can apply to processes, overall supply chain improvements as well as product
 Early Supplier Involvement can be used for innovation – can be expensive and trust is required

3.1 (g) Directories

 FPAL in the Oil and Gas example of directories, products categorised

 Shows contact information on supplier categories

3.1 Analyse the different types of specifications used and sourcing of information to create the spec

3.2 Identify sections of specifications for through life contracts

  Link this section to your studies of Chapter 3 in L4M7 as much as you can
 Remember that a specification includes the ‘whole’ description of the product, not just a
summary line item – with a high level product the specification will play a big part in each stage
of:
o Design
o Manufacture
o Installation
o In-service support
o Decom and disposal

For through life contracts the specification will be complex and you need to know the specification
requirements for

 Scope
 Definition
 Description of requirement
 Testing and acceptance
 Change control mechanisms and remedies
 Social and environmental criteria

3.2 (a) Scope

Need to know WHY through-life is important

 Lower cost
 Lower
 Risk
 Better deliverables
 Better asset capability

From a specification perspective all I can state is that a good and clear scope will lead to a better
specification and is the highest level generalisation in this series; e.g we need a new generator because
the old one has broken down.

3.2 (b) Definition (what the user wants)

 Think of this section as a framework for the description in the next section
 Broad statement/ summary of what the user requirements are (User requirement document –
similar to a BRD)
 Functions, attributes, preferences and expectations should be explored with the supplier
 Documentation, roles, responsibilities and contract terms should be included
 Important to identify risks at specification change, makes it easier than for later on
 Right level of detail – not too much and not too little

3.2 (c) Description of requirement (what is being offered)

  Describes what the user wants (previous section) in more detail
 Often through-life costs look at a performance/ output specification
 Gets down to the specifics of what the requirement actually is
 Think of the ‘who’, ‘what’ ‘why’ etc

3.2 (d) Testing and acceptance of the requirement

 Testing and acceptance needs to be built into the specification

 Think along the lines of what would happen if no testing was done or testing in the specification
is incorrectly stated
 Testing makes sure the asset is fit for the users requirement, can be stipulated by manufacturer
or user
 Acceptance testing is a form of validation testing – is this what the customer wanted (output
spec)
 Functional testing – no user required, only whether they built a product that worked
(conformance spec)

3.2 (e) Change control mechanisms and remedies

 Section looks at variations to the specification and how they’re handled

 Know some reasons why a spec can be changed; market changes, lack of resources, new
information being realised etc
 Important to have a change control process in place
 Process should include (think any change process, not just specification)
o Describing the change
o Reviewing the change
o Looking at all options
o Final approval

3.2 (f) Social and environmental criteria

This criteria is focusing heavily in though life costings, think the disposal stage of the asset

Social

 From a specification perspective (not too clear in the book) the criteria can directly influence
social habits, e.g. a company creating software that will enable their customers employees to
access securely their works intranet in locations without network access. This will enable the
workers to have more flexibility in their working locations.
 Really anything to do with how a specification can impact people
 Know some of the factors why general social views are important; reputation, brand loyalty etc

Environmental
 Book states four areas

 Natural disaster recovery (security of supply, supply options, stock, communication)

 Management of waste emissions (sustainable inputs, regulation)
 Pollution
 Energy efficiency

For natural disasters from a specification perspective it is better to have options so an output
specification may well be better – tighter the spec the tighter the sources. Remember there is often
the option of sourcing locally.

For the others it is a case of supplier management and ensuring supplier selection have these factors
in their selection/ award criteria (which should have environmental criteria included)

3.3 Identify the risks that can result from inadequate specification and mitigation approaches
3.3 (a) Under and over specified need

Book looks at the human factor as a reason why there is a poor specification

 Poor training
 Not enough time in project schedule for correct detail of specification
 Junior personnel often do it and wrongly

Under-specified need

 Not suitable for user needs

 Impact – money and time wasted for rework
 Impact - Loss of reputation

Over-specified need

 Higher expense and time than needed

 Higher spec usually means less suppliers can delivery – loss of leverage, locking in etc
 Due to complexity possibly suppliers cannot offer exactly all you want

Misinterpreted spend

 Risk of misinterpretation isn’t specifically in the learning criteria but good to know it can happen
 Specification may be correctly identified but not communicated well
 Runs the same risks as above – essentially the user doesn’t get what they want

Think what makes a ‘good’ specification – timely, clear, unambiguous, right level of detail etc

The above is the main message of this section, the other areas are supportive looking how the
specification risks for the above are dealt with.

 Risk identification (e.g under/ over/ misinterpreted spend)

 Risk assessment (can use the same likelihood/ probability here)
 Risk control (the 4 T’s – Tolerate, Treat, Transfer and Terminate)
 Risk monitoring (use of risk register)

3.3 (b) How to monitor specification creation by colleagues and other internal stakeholders

 Focuses on the benefit of multiple stakeholder in an organisation in specification development

 Think of it as similar to a project
 Define the success of a project – what do we want to achieve
 Project Initiation Document (PID) can be used to give an outline on roles, background,
communication, risks, benefits etc
 Measurables for measuring the project are
o Schedule variance (time)
o Cost variance
o Stakeholder satisfaction (internal stakeholders about the specification development)
 Monitoring needs to be carried out to ensure the above stays on track

3.4 (a) Identify opportunities to regulate short and longer term specifications
Section looks at how to control (identified in last section) the specification using rules and regulations,
can be internal and external. Books states two main areas of study

 Standardisation
 Value Analysis/ Value Engineering (VA/ VE)

Standardisation

Important – standardisation can take place in three ways

 Standardise the parts and components (inputs)

 Standard the end product (output)
 Standard how they’re made (the process)

In the exam you may be given a short scenario on what type of rule/ regulation that can be applied, It is
important you understand the differences between each one.

Need to know the benefits of overall standardisation

 Reduced costs from being able to buy more of the same (volume discount)
 Lead to inventory cost reductions and floor space (similar items overall saves space)
 BOM/ MRP efficiencies (remember what you’ve learned from L4M7 here
 Better quality - familiarity more with less variety parts
 Supplier reduction from less variety
 Flexibility in production (less reason to switch machines for example)
 Quicker responsiveness

The benefits should be quite easy to determine, think of the advantages with trying to buy the same
brand of something over and over again, may well have it logged on your shopping app for example and
know exactly how long it will take to be delivered.

Overall think when buying a ‘special’ compared to a ‘standard’ item in your workplace or at home

Process standardisation

 Think of the two extremes here; a manufacturer making only the one product and nothing else
(similar to Henry Ford’s black cars). The variety is very low and the volume is high (be careful of
the diagram in the book as the Y axis has ‘low’ at the top – dedicated lines.
 In this case the customer receives limited choices and production standardisation is high in all
the inputs, outputs and the process in which they are made. Often this is a very inflexible
production process but good in getting the costs down as large quantities are made quickly.
 The other extreme is ‘made to order’ or ‘job shop’. This is flexible and increases customer
choice but has long lead times and costs are high.
 Flexible Manufacturing Systems attempt to bridge this gap

You may be asked in the exam what type of production is suited to the question asked, think of volumes
and variety of parts and/ or outputs

Lean concept – max value and reduce waste through standardisation through
 Quicker lead times and processes
  Reduction of inventory in WIP
 Reduction of delays in production
 Identification of where the value is in the process as a &
 Identification of where waste is in the process

The concept of Lean in this context is to try and standardise all processes to go from the expensive ‘job
shop’ model to the cheaper and efficient ‘dedicated lines’ model.

For example, a small furniture company may make tables, chairs desks. They’ve found after identifying
where the value and non-value is in the process that they make each item very differently; own stores,
own dedicated lathes, one person each for each item. The company decides to create a single store for
the raw materials, buy new lathes that is flexible to create all item and train each of the three personnel
to operate the machinery. This results in a reduction of inventory as some of the wood can be made to
make all the items, the manufacturing time is quicker and customers are happier, especially during the
Summer holidays when some of the personnel go on holiday.

The 7 Wastes of Lean are

 Over-production
 Unnecessary motion
 Waiting
 Transport
 Over-processing
 Inventory
 Defects

Product standardisation
 Focuses on the output, what the customer receives
 Variations in the product will result in an increase in production cost
 Customers want variety but this costs money – need the balance
 Linked to inputs as the more variety of outputs the more the variety of inputs
 Service outputs can also be standardised (think the McDonalds example)

Parts standardisation
 Relates to the inputs
 Zero based approach – throw everything out and only take in what you need
 Categorising similar product and identifying their purpose will assist
 Don’t get confused with the book stating that this is the ‘third level’, it’s a third method of
standardisation

3.4 (b) Value Analysis

Increases the value of a product by

 1. Identifying where the value is
2. See if there’s any cost savings

This is quite similar to the Lean methodology mentioned in the standardisation section, same purpose.

 Looks at what the function is for the item and breaks it down into the components
 Assesses where costs can be reduced by still giving the same function

In practice, there’s many examples that can be taken as well as the bike bell example.

Remember they changed the Toblerone chocolate to include less chocolate at the same price?

 Same function but..

 Misinterpreted what the customer valued where they were prepared to pay more for the same
size rather than less chocolate for the same price

 Target costing assists in giving a benchmark to arrive at to aid value analysis (target costing is NOT a
VA tool)
 Helpful in creating a specification to ensure costs are reasonable but still bear in mind what the
customer actually wants – often balance again is required

Process involves

 Gathering information
 Carry out functional analysis
 Be creative
 Evaluate
 Develop

Information to help the process can come in the form of drawings, site visits, reports etc

Carrying out functional analysis

Need to know

 Primary function – Main reason for product (car for getting to work)
 Secondary function – Other benefits (listen to music, radio etc)

Can relate the function of a product to an output specification, what is the purpose of the product

Quality function deployment (QPD) – tools to link customer requirement/ functions and their
importance

Be creative
  This section is more of a supportive section on how you can generate ideas for the value
analysis, essentially it’s brainstorming and the old adage ‘thinking outside the box’. It’s
essentially looking at things in a different way, probably a specific criteria in any research and
development department.
 Need to look at the ‘problem’ differently from various perspectives
 Intention is to provide several options to how to balance functionality and cost

Evaluate

 Simply evaluating the options from the creative stage

 Best option will be the one that provides the needs to the customer and the best cost and
lowest risk

Develop

 Puts some flesh on the bones from the best option selected
 Shows that sufficient detail has been put forward

3.4 (c) Value Engineering

 VE looks at new products

 VA looks at existing products
 Still looks at product functionality
 Book looks at the Kano model to decide what functionality a new product should have (get an
idea of what this is trying to achieve)
o What does the customer want in terms of functionality
o Is it a case of the more the customer gets the happier they are
o What functions does the customer must have
o What functions does the customer not really bother about
o What functions does the customer not want
 This can be obtained from market research

For this section, think of a product that you’ve been delighted with – why? Also, a product (or service)
that didn’t make you happy at all (relate it to functionality).

3.4 (d) How to provide guidance to internal stakeholders on implementation plan

Need to know who the stakeholders are and their contribution to assist specification creation

 What role will they play

 Need to prioritise the stakeholders (stakeholder matrix)
 Communication important z`(email, face to face etc)