L4M6 Sample Questions Answers

Explanation

The correct answer is 'arms length'. This is a tactical purchase (as it is low value) and keeping the supplier at arms-length means that Red Manufacturing could possibly exploit them to reduce their prices (think back to the Kraljic matrix and where Blue Business would likely fall). A Partnership or Single- Source relationship requires investment into the relationship, and as the products are low value and Red Manufacturing have a lot of other suppliers, they should not be investing time in developing that relationship with Blue Business. An adversarial relationship wouldn't be advantageous as it may lower the performance of the supplier. See the relationship spectrum on p.5 - this is a hot topic for the exam

Comprehensive and Detailed Explanation:

In the Kraljic Matrix, products are categorized based on supply risk and profit impact:

Leverage items:These have a high profit impact but low supply risk. They are often high-expenditure items available from multiple suppliers, allowing the buyer to leverage purchasing power to negotiate better terms.

Given the product has high expenditure and is available from many suppliers, it fits into the 'Leverage' category.

Explanation

Internal stakeholders are those who work within the business so include the legal department, employees and end-users. End-users mean those people and departments who will be using the product or service. For example if Gabriel is procuring new software- an end-user would be anyone who would be using that software (whether they're employees, volunteers or agencies). CIPS outlines types of stakeholders on p.64

Explanation

The correct answer is ‘It can lead to a lack of trust’ – this is a quote from p.162. The other answers are all incorrect; in a partnership KPIs are joint between the parties– so there wouldn’t be a situation where one party doesn’t fulfil their KPIs. Commitment doesn’t necessarily have a direct correlation with profit so that answer is incorrect. ‘Sufficient time and resources are put in’ is a positive thing, so can’t be a reason who a partnership fails.

Economic factors such as unemployment rates affect labor availability, wages, and consumer purchasing power, directly impacting business operations and supply chains.

Value for money is achieved through a balance of quality and cost, ensuring that the goods meet performance requirements while being cost-effective, as per procurement best practices.

Explanation

The correct answer is ‘no- as this was not the lollypop sticks intended purpose’. When deciding if something is fit for purpose, you must consider its intended and common purpose. In this case it would be for making lollypops. As the garden centre is using them for something other than their intended purpose, they can’t complain if it doesn’t work. Fit for purpose is discussed on p.65 p.s. there’s a QUESTION NO: like this in the real exam – it’s just not lollypop sticks ; )

Explanation

This is based on a real exam question- it's looking to see if you can remember Carter's 10 Cs. These are; cash, cost, consistency, culture, clean, communication, competency, capacity, commitment and control. (p.12 in the text book)

Price management is crucial for low-cost retailers to maintain profitability. This includes negotiating better pricing, managing costs effectively, and ensuring competitive pricing for volume sales.

Explanation

The correct answer is Measurable, achievable and time-bound. This is from SMART KPIs on p. 151. Smart stands for specific, measurable, achievable, relevant, time-bound. In the exam they come up in different orders so be careful.

Explanation

The reason for outsourcing in this example is that the IT firm is an expert in their field. The requirement is complex and important and this is the reason why it is not being delivered in-house. The other answers given CAN be reasons for out-sourcing, but don't relate to this example. For a full list of reasons a company could use outsourcing see p. 4-5

Comprehensive and Detailed Explanation:

Effective conflict resolution involves:

Individual Meetings:Understanding the root cause of the conflict by discussing with each individual separately to determine if issues are personal or work-related.

Joint Meetings with Mutual Targets:Bringing the individuals together to set mutual goals can foster collaboration and reduce friction.

Avoiding the issue (Option D) or moving a team member (Option C) are not proactive solutions and may not address the underlying problem.

High expenditure levels and the complexity of requirements justify partnership sourcing, as it allows for collaborative problem-solving, innovation, and cost-efficiency. CIPS emphasizes that partnerships are ideal when requirements are complex and require expertise from the supplier.

Explanation

The correct answer is ‘keep satisfied’ because the stakeholder is high power and low interest. This is the top left corner of Mendelow’s Stakeholder Matrix – see p.81

Explanation

The correct answer is ‘Reduced waste in the supply chain’ – this is not a risk, this is a benefit P.134

Drivers for partnership include a high spend with the supplier, criticality of the product, and technical complexity. These factors encourage collaboration for cost efficiency, quality improvement, and risk management. Partnerships are less likely when there are many suppliers or the product is a commodity, as competition and standardization reduce the need for close collaboration.

Explanation

The correct answer is ‘Sudden changes in the marketplace’ – this is a reason a buyer would be reactive. Reactive is when something happens to you and it forces you to act in a certain way. The other options would be strategic rather than reactive. P. 163

Cost modeling helps in understanding supplier pricing strategies, identifying cost drivers, and opportunities for negotiation or cost reduction, which supports profitability improvements.

In the Norming stage of Tuckman’s model of team development, teams begin to resolve their differences, appreciate each other's strengths, and respect authority. Agreement on design and role assignment indicates the team has moved past conflict (Storming) and is now functioning collaboratively, although not yet fully productive (Performing).

Explanation

The correct answer is ‘reduced product life-cycles’. In this example the reason for entering a partnership is to be able to produce new models of phones more quickly- this is likely because consumers are wanting to change mobile phones more often than they did in the past, so in order to keep up withdemand, Phone Maker Incorporated need to produce more phones, more quickly. Drivers of Partnership Sourcing is a key topic in the exam – you can revise these by looking at p.127 in the Study Guide

Explanation

The correct answer is ‘Intellectual Property Rights’. Grey Stone will need to share its idea for the vaccine with the pharmaceutical company and this is risky if there is no trust between the parties. See p.134 for more information on Risks of Partnerships.

Explanation

This is a leverage supplier on the Kraljic Matrix; high cost impact and low risk impact. The diagram on p.20 gives the example of utility services such as electricity as a common leverage supplier. There are lots of questions on Kraljic in the exam - do revise this topic and ensure you understand each of the four quadrants of the matrix

Comprehensive and Detailed Explanation:

In the context of portfolio analysis, particularly using the Kraljic Matrix, procurement items are categorized based on their profit impact and supply risk.Strategic criticalitems are those with high profit impact and high supply risk. These items are vital to the organization's operations and often have limited suppliers, making them critical to secure.

For such items, developing apartnership relationshipis appropriate. This involves close collaboration, mutual trust, and long-term commitment between the buyer and supplier to ensure reliability, innovation, and continuous improvement.

Early Supplier Involvement (ESI) offers several advantages to buyers:

Shared expertise for problem solving: Engaging suppliers early allows for collaborative problem-solving, leveraging the supplier's specialized knowledge to enhance product development.

Improved understanding of seller capabilities: Early engagement provides insights into the supplier's capabilities, facilitating better alignment with project requirements.

Lower development costs: Collaborative efforts in the early stages can lead to cost savings by identifying efficiencies and reducing the need for later-stage modifications.

These benefits are highlighted in the CIPS Intelligence Hub:

"ESI can bring significant benefits to your organisation, due to the involvement of suppliers in the initial stages of product development... Here are some additional benefits that your organisation will see when adopting ESI... Helps to reduce cost... Integrates supplier capabilities in the manufacturers supply chain..."

— CIPS Intelligence Hub: Early Supplier Involvement

Partnering supports supply chain consolidation and continual improvement by fostering collaboration and shared objectives. These benefits align with the strategic goals of building resilient and efficient supply chains.

Explanation

STEEPLE is what is used to analyse the macro-environment; the factors are; social, technological, economic, environmental, political, legislative and ethical. Details of this can be found on p.43-44. Note in the exam they won't necessarily be given in this order.

Explanation

The definition of value mapping is given on p.69 this is; ‘a process in which value is created through the elimination of waste and operational inefficiencies’. It ties into JIT / Lean.

Early supplier involvement ensures the supplier understands process timelines and allows the buyer to leverage supplier capabilities. This improves product development efficiency and enhances outcomes.

Comprehensive and Detailed Explanation:

The accommodating conflict management style is characterized by a low concern for self and a high concern for others. This approach involves yielding to others' needs and maintaining harmony, which can be appropriate in situations where preserving relationships is more important than achieving personal goals.

In the context of a commercially sensitive outsourcing project, adopting an accommodating approach may be suitable to ensure stakeholder cooperation and minimize conflict.

Explanation

partnerships are always win: win p.7

Comprehensive and Detailed Explanation:

In Michael Porter's Value Chain model, primary activities are those that are directly involved in the creation and delivery of a product or service. These include:

Inbound Logistics:Activities related to receiving, storing, and distributing inputs internally.

Operations:Transforming inputs into the final product.

Outbound Logistics:Distributing the final product to customers.

Marketing and Sales:Activities that inform buyers about products and services, induce buyers to purchase them, and facilitate their purchase.

Service:Activities that maintain and enhance the product's value, such as customer support and repair services.

Firm infrastructure and technology development are considered support activities, as they assist the primary activities in helping the organization achieve its competitive advantage.

Substitute products pose a competitive threat by offering alternative solutions to customers, potentially eroding market share. Effective differentiation and customer retention strategies are essential.

Comprehensive and Detailed Explanation:

Collaborative partnering relationships are characterized by high levels of trust, mutual objectives, shared information, and long-term commitment. Among the options provided:

Co-destiny: This represents the highest level of collaboration, where both parties' futures are closely linked, and decisions are made jointly for mutual benefit.

Strategic alliance: This involves a formal agreement between organizations to pursue shared objectives while remaining independent entities.

These relationship types are positioned on the collaborative end of the relationship spectrum, emphasizing joint efforts and shared success.

Comprehensive and Detailed Explanation:

A restricted market is characterized by high barriers to entry, often due to stringent government regulations and the need for substantial financial investment. These factors limit the number of new entrants, resulting in a market dominated by a few established suppliers. While existing suppliers may offer excellent services, the key defining features of a restricted market are the regulatory constraints and the significant capital required to compete.

Defining standards ensures clear expectations and provides a foundation for accountability and alignment, which are critical for the success of any partnership.

Explanation

The correct answer is “A mechanism for performance management where the buyer has the right to deduct money from payments owed for under performance”. A definition is provided on p.113 and states “If a supplier fails to meet the standard set in the service credits, the buyer has the right to deduct set amounts of money from payments owed to the supplier”

When procuring critical components essential for the continuity of manufacturing processes, timely delivery becomes paramount. Delays can halt production lines, leading to significant financial losses.Therefore, the supplier's ability to meet delivery deadlines is the key selection criterion, as emphasized in the CIPS L4M6 study guide.

Early engagement with the whole market is crucial when entering a new technical domain. It allows the company to assess the capabilities, innovations, and fit of various suppliers before locking down specifications. CIPS guidance emphasizes the value of market engagement in developing effective specifications and selecting the right partner.

Explanation

The logistics risk can be reduced by ‘Sharing up-to-date information’. If the Pub tells the supplier when it’s running low, they can then time the deliveries more accurately. P. 136. A lot of the questions on the ‘Partnerships’ chapters of the book are common-sense questions like this. It involves reading thequestion and using logic, rather than relying on your knowledge of procurement. If you found this question easy – that’s a good sign for the exam.

Explanation

The correct answers are; They are likely to be able to gain price stability and There may be greater continuity of supply. The other options are an advantage for the supplier rather than the buyer (They will gain an increased volume of business) and a disadvantage of entering into a partnership (The supplier may become complacent). As you may have guessed from these questions – Partnerships come up a LOT in the exam. See p.130 for info on pros and cons of partnerships.

Explanation

The correct answer is ‘Yes- IPR is a valid concern for both parties but will survive the termination of the agreement’ (p.112). See the section on ‘Legal considerations’ in chapter 2.4

Explanation

In a 'perfect competition' there are no barriers to entry or exit, and competition is at its highest possible level. For more information on different types of market see p.40

Explanation

Intellectual Property Rights include; Patents, Copywrite, Trademarks and Trade Secrets. P.114

Comprehensive and Detailed Explanation:

In scenarios requiring specialized expertise and collaborative input, apartnering relationshipis most appropriate. This type of relationship fosters close cooperation, shared goals, and mutual trust, enabling both parties to contribute effectively to the project's success.

Explanation

Value for money is not a principle of EU procurement. The four key principles are; transparency, non-discrimination, proportionality and equality of treatment. The principles are basically about ensuring the procurement process is fair. See p.75

Comprehensive and Detailed Explanation:

A performance specification outlines the desired outcomes or results without prescribing the exact methods to achieve them. This approach allows suppliers the flexibility to use their expertise and creativity to meet the buyer's requirements, thereby encouraging innovation.

Explanation

You would expect a supplier to submit full pricing information, risk assessments and method statements. However, depending on what you’re procuring, you might not need to see risk assessments or method statements. Liquidity and Gearing may be looked at during the Pre-Qualification stage, but wouldn’t form part of a RFP. See p.76

Comprehensive and Detailed Explanation:

By acquiring an Australian office furniture manufacturer, COFM can:

Access the Restricted Local Market:Acquisition allows COFM to operate as a local entity, thereby overcoming barriers to entry and benefiting from any local government support available to domestic manufacturers.

Improve Knowledge of the Local Market:The acquired company brings with it an understanding of local customer preferences, regulatory requirements, and market dynamics, which is invaluable for successful operations.

However, the acquisition does not remove government support for other local manufacturers, nor does it necessarily decrease competition.

Leverage products are characterized by high spend and low complexity, giving buyers the ability to negotiate favorable terms due to supplier competition and standardization.

Explanation

Victoria should use a ‘request for proposal’ – this allows the security firms to submit ideas on how best to serve the hotel. They might come up with some ideas that Victoria hasn’t thought about and can price against their own ideas. As Victoria doesn’t have a concrete specification, an ITT or RFQ are not appropriate. A PIN tells suppliers that a tender opportunity is coming up and is used in the Public Sector. A hotel is not a Public Sector organisation. See p.76 for more information on when to issue a Request for Proposal

Profitability is impacted when product costs rise without corresponding price adjustments. Understanding cost-price relationships is key to managing profitability in procurement.

Explanation

Friendly Flour Ltd is a strategic supplier; this is a critical supplier, responsible for core products. They represent a high risk impact and a high cost impact. This is the top-right hand corner of the Kraljic matrix. There are lots of questions on Kraljic in the exam - do revise this topic and ensure you understand each of the four quadrants of the matrix (see p.20)

Confidentiality is critical in professional relationships, especially for law firms, as they handle sensitive client information. Ensuring that all legal obligations to protect this information are met aligns with ethical and legal best practices.

Explanation

The correct answer is Forming, storming, norming, performing (p.91). Note; some people add on two additional stages to this; mourning and adjourning. The study guide forgets to mention this, but theexam may ask you about these additional stages. So I strongly recommend doing some further reading on this (it’s called the Tuckman Group Development Model)

Comprehensive and Detailed Explanation:

Forward buyinginvolves purchasing goods in advance of actual need, often in larger quantities, to take advantage of favorable pricing or to hedge against anticipated price increases. This strategy is commonly used in volatile markets to stabilize costs and ensure supply continuity.

Explanation

This question is very, very similar to a real exam QUESTION NO: and is a really mean one. The CIPS study guide describes stages of team development as forming, storming, norming and performing. Of those listed in the book only forming is listed above. What the textbook fails to tell you is that some people add on two additional stages to this model which are mourning and adjourning. I strongly recommend doing some further reading on this (it’s called the Tuckman Group Development Model) as it comes up a lot in the exam and the study guide doesn’t really go into enough detail.

Comprehensive and Detailed Explanation:

Leverage products are characterized by:

High profit impact:They significantly affect the company's bottom line.

Low supply risk:They are available from multiple suppliers, making it easy to switch if necessary.

These products often have standardized quality, and the competitive supply market allows buyers to negotiate favorable terms.

Explanation

Two invalid reasons are; one late delivery and a change in senior management. Valid reasons to terminate a relationship are listed on p.107 and include the three listed here, as well as a material breach, damage to reputation and the supplier merges or is acquired by another company.

Comprehensive and Detailed Explanation:

For high-value and high-risk contracts, such as facilities management services for multiple schools,competitive tenderingis the most appropriate sourcing approach. This process involves inviting multiple suppliers to submit bids, ensuring transparency, fairness, and the opportunity to assess various proposals to select the most suitable supplier. It helps in mitigating risks and achieving value for money.

Explanation

The correct answers are; The marketplace has become more volatile, Working together will create synergies and The need to improve performance to satisfy the end customer. Further Drivers ofPartnership Sourcing can be found on p.127. The other answers are incorrect as entering a partnership won’t protect intellectual property rights- in fact that’s one of the big risks of entering into a partnership. Partnerships won’t increase costs and lead-times, they’re likely to decrease them.

Explanation

The correct answer is ‘run a restricted competition – send out a PQQ’. This QUESTION NO: tests both your understanding of when to run open and restricted competitions (which is explained on p.75) and your understanding of tender documents. Mandy should run a restricted competition- there are a lot of options in the marketplace and this will allow her to pre-qualify those who best suit her requirements. Running an open competition when there are lots of suppliers would be too time-consuming- you need a way of making a short-list. When you run a restricted competition, the first stage is sending out a PQQ- pre-qualification questionnaire; this document is sent to suppliers asking for necessary information to support their qualification as an approved supplier.

Comprehensive and Detailed Explanation:

Partnerships between buyers and suppliers are often driven by:

High Spend:Significant expenditure justifies the investment in developing a closer relationship to achieve cost savings and efficiencies.

Critical Products:Items that are essential to the buyer's operations necessitate a reliable and collaborative supplier relationship.

Technical Complexity:Complex products benefit from joint development efforts, shared expertise, and coordinated problem-solving.

Conversely, commodities and markets with many suppliers typically lend themselves to transactional relationships rather than partnerships.

Explanation

The correct answer is ‘Yes-partnerships do not have end dates because they involve significant investment’. This is explained on p.126. Partnerships can involve contracts – so the other ‘yes’ answer is incorrect.

Explanation

This is based on a real exam question- it's looking to see if you can remember Carter's 10 Cs. These are; cash, cost, consistency, culture, clean, communication, competency, capacity, commitment and control. (p.12 in the text book)