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The major distinctions between goods and services are as follows:
• Goods are tangible, services are intangible: therefore, services cannot be measured, weighed
or otherwise inspected: an SLA is usually needed.
• Services cannot be separated from their supplier: goods can be delivered and stored before
they are required, whereas, services are produced and consumed simultaneously.
• Heterogeneity: goods are usually uniform in nature while services are unique at each delivery
because the personnel and circumstances are always different, making them difficult to
• Services ‘perish’ immediately on delivery whereas goods can be stored until required. Planning
ahead is required so that the service is available when needed.
• Products are easier to specify, being tangible. Services are harder to prescribe because of their
intangible and heterogeneous nature.
• Ownership: services have no transfer of ownership making it difficult to define when a service
has been fulfilled and when risk and liability have passed from seller to buyer.
• Services require a higher level of human involvement and interaction especially services carried
out for people (e.g. travel services). Quality will depend, to some extent, on the behaviour of
the recipient as well as the service provider.
• Goods are usually purchased for immediate use whereas services may be purchased for long
periods of time.
2 marks should be awarded for each of five differences explained. A pass mark would be gained if
candidates merely mentioned each distinction without explaining them, for which 1 mark should be
The ‘5 rights of procurement’ are quality, quantity, price, time and place and answers should
select any three of these. The importance of each is as follows:
• Quality: goods which are of satisfactory quality and fit for their intended purpose (2 marks) e.g.
ensuring an accurate specification of the requirement and its quality standards.
• Quantity: sufficient to meet demand and maintain service levels while minimising stock holding
(2 marks): e.g. by ensuring that there is accurate demand forecasting and efficient inventory
• Place: goods delivered to the appropriate delivery point, packaged and transported so as to
secure their safe arrival in good condition (2 marks): e.g. by including transport instructions
including packaging requirements as part of purchase orders.
• Time: delivery of goods at the right time to meet demand, i.e. not too late but not so early as to
incur unnecessary inventory costs (2 marks): e.g. by ensuring accurate demand management,
placing orders in time for suppliers to provide timely delivery and ensuring that suppliers are
aware of delivery requirements.
• Price: securing all of the above at a reasonable, fair, competitive and affordable price. Ideally,
minimising procurement costs in order to maximise profit (2 marks): e.g. by carrying out price
and supplier cost analysis and/or by carrying out competitive tendering and negotiation. The
‘right’ price is one that represents good value for money.
5 marks should be awarded for descriptions similar to the above for each of the three ‘rights’ selected. If answers merely list any three without explanation, 1 mark should be awarded for each.
Up to 5 marks for each description as above or similar and relevant.
CIPS study guide reference:
(a): Chapter 1 page 18 – 19
(b): Chapter 2 page 34
This response will be reviewed and graded after submission.