L4M2 LO1 is about developing a business case for requirements sourced from external suppliers. The starting point is recognising that the nature of the business need shapes every downstream procurement decision. Aligned to AC 1.1.
1. The role of procurement and how a need arrives
The task of procurement is to fulfil the Five Rights — Price, Place, Quality, Quantity and Time. Business needs are considered at all stages of the procurement cycle, with the early stages the focus of this module. A business need may be notified to procurement through a:
- Requisition form
- Bill of Materials (BOM)
- Feasibility study / cost-benefit analysis / business case
The need is then defined using specifications, service level agreements (SLAs), contract terms and key performance indicators (KPIs). The earlier the need is understood, the more procurement can shape it — through demand and supply-market analysis, value engineering, and early buyer/supplier involvement — rather than simply processing a requisition that has already fixed the solution.
2. Types of purchase — Robinson, Faris and Wind (1967) (AC 1.1)
The authors divide organisational purchasing into three categories, and the examiner expects you to match the right effort to each:
- New task — the need is perceived as totally different from previous experience, so significant information is required to explore alternative solutions and suppliers. There is a need for purchase research (demand, vendor and supply-market analysis), value engineering (eliminating waste and non-value-adding features), possibly early buyer involvement (EBI) and early supplier involvement (ESI), and the development of specifications, KPIs and contract terms.
- Straight rebuy — a continuing or recurring requirement where buyers have substantial experience and need little or no new information. Activity focuses on optimising replenishment, periodically reopening the contract for competition, reviewing the specification and taking part in value analysis.
- Modified rebuy — buyers have experience of the recurring requirement but believe a re-evaluation of alternatives could yield significant benefits. Activity includes reviewing and challenging the modified specification, re-opening existing contracts for competition and re-negotiating contract terms.
Risk and routine are the key variables. Consider too the stakeholders and their needs and involvement — they are less involved in rebuys.
3. Other ways of classifying the purchase (AC 1.1)
Purchases can also be characterised as:
- MRO (maintenance, repair and operating) — supply availability is crucial, as absence could disrupt operations and involve high costs.
- Capital equipment — high cost, needing long-term value for money; whole-life costs need to be established.
- Commodities (minerals, food crops, metals) — needing continuity of supply and management of prices through forward buying and hedging tools.
4. The Kraljic matrix (AC 1.1)
The Kraljic matrix classifies items as strategic, leverage, bottleneck or non-critical, plotting profit impact (spend/importance) against complexity of supply market (supply risk):
- Non-critical (low value / low risk) — efficient processing and standardisation.
- Leverage (high value / low risk) — exploit the buyer's purchasing power through tough negotiation.
- Bottleneck (low value / high risk) — control over short-term continuity and security of supply.
- Strategic (high value / high risk) — long-term, mutually beneficial supplier relationships.
5. The RAQSCI model of requirements (AC 1.1)
The RAQSCI model ranks six themes of user requirements in order: Regulatory (legal/regulatory requirements), Assurance of supply (continuing availability, based on capacity, financial stability and risk), Quality (consistency, repeatability and fitness for purpose), Service (flexibility, availability, support such as help desks), Cost (only considered after the other factors are met) and Innovation (improving the customer experience). The deliberate ordering — cost comes after regulatory, supply, quality and service — is the most-tested feature.
Currency note: business-need classification is commercial/analytical, not procurement-regime law — no currency exclusion applies. Where a need feeds a public-sector requirement, the procurement procedures sit under the Procurement Act 2023 (commenced 24 Feb 2025). (PA-2023 framing trainer-supplied.)
§12 trap box: (1) In RAQSCI, cost is ranked last — only after regulatory, supply, quality and service are met. (2) Buyers/stakeholders are less involved in rebuys — treating every purchase as a new task wastes effort. (3) Kraljic axes are profit impact × supply risk, not 'price × quality'.