Test Online Free CIPS L4M2 Exam Questions and Answers
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Which of the following problems may be identified as closed problems? Select TWO that apply:
Answer: Explanation:
Closed problem is something happens that should not have happened. To solve this type of prob-lem, procurement professional should find a way to correct the situation or try to adapt to it. On the other hand, open ended problem is a obstacle to your short-term objective. You will need to overcome this obstacle.
Shortage of key medicines is a situation in which procurement must find a substitution or try to save the current stock.
In case of cyber attack, procurement should find a way to recover the IT system as soon as possible.
Otherwise, 'There are not enough data for procurement analytics' is an open-ended problem be-cause it prevents company to conduct procurement analytics (an objective). 'Logistics costs incur a large portion in wholesale prices': In this situation, logistics costs are hur-dles that prevent companies to reach lower wholesale.
'The suppliers don’t comply with the company’s policy on underage labour': In this situation, pro-curement should seek ways to help supplier comply with the company's labour policy. LO 1, AC 1.1
Question 17Selectable Answer
A company is planning the procurement of an IT system and wants to agree a through-life contract with the supplier to ensure ongoing system support.
The first step in producing that specification should be to:
Answer: Explanation:
Writing a high-quality specification is very crucial in every purchase. In through-life management, it is even more important since the assets often have very high value. Defining user requirement is the first step to write a specification. Without doing this right, many problems may arise in later stages.
Reference: CIPS study guide page 132
LO 3, AC 3.2
Question 18Selectable Answer
Which of the following agencies can produce a technical standard?
Answer: Explanation:
Technical standards are often produced by a national or international body such as British Standard Institute (BSI)
LO 3, AC 3.1
Question 19Selectable Answer
Daytona Ltd is developing a new product which is more environmental friendly. Though the objectives are set, the project team has no idea on which functions will be customers' favourites.
Which of the following will help them decide the 'should-have' functions of the new product?
Answer: Explanation:
The Kano model is useful in gaining a thorough understanding of a customer’s needs. You can translate and transform the resulting verbatims using the voice of the customer table that, subse-quently, becomes an excellent input as the whatsin a quality function deployment (QFD) House of Quality.
The model involves two dimensions:
Achievement (the horizontal axis), which goes from the supplier didn’t do it at all to the supplier did it very well.
Satisfaction (the vertical axis), which goes from total dissatisfaction with the product or service to total satisfaction with the product or service.
Dr. Noriaki Kano isolated and identified three levels of customer expectations: that is, what it takes to positively impact customer satisfaction. The figure below portrays the three levels of need: expected, normal, and exciting.
The ThomasCKilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.
Genichi Taguchi, a Japanese engineer, proposed several approaches to experimental designs that are sometimes called "Taguchi Methods." These methods utilize two-, three-, and mixed-level fractional factorial designs. Large screening designs seem to be particularly favored by Taguchi adherents.
Six Sigma is a method that provides organizations tools to improve the capability of their business processes. This increase in performance and decrease in process variation helps lead to defect re-duction and improvement in profits, employee morale, and quality of products or services.
Source:
- CIPS study guide page 171-172
- WHAT IS THE KANO MODEL? LO 3, AC 3.4
Question 20Selectable Answer
Which of the following factors are likely to be direct barriers to a new entrant in a supply market?
Answer: Explanation:
There are many types of barriers to entry into a market. Some of these include:
- Economies of Scale: When manufacturing or selling at a large scale, companies are able to avail cost advantages because per unit costs of the product fall. So the more the company produces in quantity the more the benefit. When existing companies have this advantage, it can act as a barrier to entry because a new entrant will have to try to match the scale to achieve the same cost ad-vantage as the existing company. This may not be possible at the initial stage.
- A Differentiated Product: If the product being sold by the existing company or companies is highly differentiated or enjoys strong brand loyalty, then this can act as a strong barrier to entry. The new entrant will have to invest in creating a product with newer and unique features and bene-fits that surpass those offered by the old company. In addition, there will need to be strong efforts to break existing brand loyalties and shift them to a new untested company.
- High Capital Costs: If an industry requires huge capital investments at the onset, then this will act as a barrier to entry for many of the potential entrants. Only those will attempt to enter the competitive fray who have the resources to make this high initial investment.
- Other Cost Advantages: Apart from those cost benefits that come from economies of scale, there are other advantages that an existing firm may enjoy. These include access to the best suppliers, an understanding of existing materials and knowledge of their quality, possession of any necessary and important patents, and proprietary information and technological knowledge. There are also learning advantages, achieved over years of business and experience.
- Cost of Switching: The cost associated with a consumer’s move from one company or product or another is called the switching cost. If there are significant switching costs, then a new entrant may not be able to create means of removing these. Or, they may have to offer significant advantage to counter these switching costs at their own expense.
- Distribution Network: Often, distribution relationships are well established and may prove to be a strong barrier to entry for a new company. A new entrant will obviously need access to these dis-tribution channels but will need to invest extra in order to engage distributors who have established relations with existing competitors.
- Suppliers: As with distributors, suppliers may be vital to the operations of a new business. Exist-ing suppliers may have contracts or loyalties with existing companies and may prove to be difficult to form relationships with.
- Legal and Government Created Barriers: Government and regulatory requirements such as permits and licenses may be a strong barrier to entry. There may also be laws governing ways to conduct business that may conflict with a company’s practices in other countries.
- Barriers to Exit: Interestingly, barriers to exit may act as a deterrent to entry by new companies. If a company is unable to easily leave a competitive environment in case business does not work out, then it will have to stay and compete even if that is a detrimental business practice. In this case, the company may choose to not enter the market in the first place.
Reference: CIPS study guide page 96
LO 2, AC 2.2
Question 21Selectable Answer
Datong is a defence and law enforcement equipment supplier. They are developing new product but largely concerns about the detailed specifications of components and the capability of supply market.
Which of the following approach should Datong adopt in order to optimise the specification and shorten time to market?
Answer: Explanation:
To improve production process and reduce supply risk, Datong should collaborate with suppliers early in procurement cycle. Collaborating with suppliers in this way is often referred as Early Supplier Involvement (ESI)
'Request for quotation from potential suppliers': Quotations should only be requested if the buyer know exactly what they need. In this scenario, Datong is not yet sure about the specifications of product's components, request for quotation is not a good idea.
'Mapping out business plan': A business plan, as defined by Entrepreneur, is a “written document describing the nature of the business, the sales and marketing strategy, and the financial back-ground, and containing a projected profit and loss statement.” A business plan is not appropriate with improving production process and reducing supply risk.
'Budget controlling': Budget controlling largely concerns with dealing with budget variances.
Tighter budget alone cannot lead to improved processes and fewer risks.
LO 3, AC 3.1
Question 22Selectable Answer
Which of the following are typical environmental considerations throughout the contract life cycle? Select the TWO that apply.
Answer: Explanation:
All procurement has some level of impact on the environment that needs to be minimised to ensure sustainable procurement practices.
The greatest opportunity to influence environmental outcomes is by selecting products and services with the least ongoing environmental impacts, such as use of water, electricity and fuel, waste/disposal management, and impact on human health over the life of the product or service.
Lifecycle stages that impact on the environment:
Diagram
Description automatically generated
Most goods and services will have an element of environment impact in a number of areas.
The five main impact areas are listed in the following table.
Graphical user interface, text, application, email
Description automatically generated
Source: Buying for Victoria
Reference: CIPS study guide page 137-139
LO 3, AC 3.2
Question 23Selectable Answer
To strengthen its market presence, ABC Group decided to develop a new product. A cross-functional team was formed to discuss the scope and the functions of the product. They will also survey the potential customers to see what they like, what they love, and what they dislike.
What is this process called?
Answer: Explanation:
As you can see from the scenario, ABC Group is developing the new product. It might be using value engineering. The latter sentences confirm this: the cross-functional team in ABC is mapping the functions and surveying the customers. Their method is known as Kano model.
Reference: CIPS study guide page 171-172
LO 3, AC 3.4
Question 24Selectable Answer
A CPO is analyzing whole life cycle costing of a machinery. He realises that cost elements are not specific but come from a range of values.
Which whole-life costing model should the CPO use to get the most accurate total cost of ownership?
Answer: Explanation:
There are three basic groups of WLC (whole life-cycle costing) models:
- Decision support models
- Simulation models: Life cycle cost is an essential approach to decide on alternative rehabilitation strategies for infrastructure systems. Monte Carlo simulation approach is used to develop a stochastic life cycle cost (SLCC) model and methodology in order to compare different rehabilitation scenarios/alternatives for infrastructures, such as water mains. This method assumes that some inputs are randomly variable in a range of values. - Optimisation models
Reference: CIPS study guide page 38-39
LO 1, AC 1.2
Question 25Selectable Answer
Which of the following specific markets is most likely to have the lowest entry barrier?
Answer: Explanation:
Start-up costs are generally low in service industries, and the main requirement is a level of knowledge and skill in that particular service.
LO 2, AC 2.1
Question 26Selectable Answer
Which of the following factors is most likely to be a barrier to new entrant in agriculture?
Answer: Explanation:
Barriers to Entry to Agriculture: If stakeholders are going to address the need for new, conserva-tion-minded farmers, they must understand the barriers these farmers encounter when transitioning into the profession. A review of the literature revealed a number of barriers―most of them structural―to entry to agriculture. While each barrier is distinct, they are all interconnected.
Though not an exhaustive list, the following barriers are ones that were most frequently mentioned in the literature:
- Access to Affordable Land
- Startup Capital
- Lack of Agricultural Knowledge and Experience
- Lack of Knowledge about Farm Business Planning
- Discrimination
- Student Loans
- Limited Access to Markets
- Affordable Housing and Affordable Healthcare
Source: Exploring the Barriers to Entry to Agriculture: Challenges Facing Beginning Farmers in North Carolina - Kelley Robbins-Thompson
Reference: CIPS study guide page 80-81
LO 2, AC 2.2
Question 27Selectable Answer
At which stage of product life cycle, price competition between sellers will be the most intense?
Answer: Explanation:
The term product life cycle refers to the length of time a product is introduced to consumers into the market until it's removed from the shelves. The life cycle of a product is broken into four stages―introduction, growth, maturity, and decline.
Chart, line chart
Description automatically generated
Source: https://blueoceanoutsource.co.ke/the-product-life-cycle-concept/
At maturity stage, price competition sets in as more and more supply capacity has been added by new entrants, then the competition will be the most intense.
Reference: CIPS study guide page 90-91
LO 2, AC 2.2
Question 28Selectable Answer
Which of the following is a risk to buying organization when using conformance specification?
Answer: Explanation:
When using conformance specification, the buying organisation is responsible for the performance of the purchase. If the product fails due to poorly designed specification, the buyer is wholly responsible for it. It cannot blame the supplier for the failure because they still provided 'fit for purpose' product.
'Time to produce specification is shortened': Conformance specification requires details on dimen-sion, materials, design, etc. With such requirements, time to produce a complete conformance specification is often longer than producing performance specification.
'Buyer cannot control the inputs': Conformance specification is a list of inputs from buyer, so buyer has control over the inputs that will make the product. It also means that buyer is responsible for any product failure.
'Buyer may face liquidity risks': Liquidity means that how quick a business turns its assets into cash. This is a financial term, it does not link directly with specification failure.
Reference: CIPS study guide page 118-119
LO 3, AC 3.1
Question 29Selectable Answer
Which of the following activities are considered as primary activities of an organization according to Porter's value chain? Select TWO that apply:
Answer: Explanation:
Primary activities consist of inbound logistics, operations, outbound logistics, sales & marketing, service.
Second activities consist of firm infrastructure, human resource management, technology development and procurement
The following graph illustrate the value chain (Source: Smartsheet)
Graphical user interface, diagram
Description automatically generated
Picking and delivery components is inbound logistics.
Maintenance is an example of operations activity.
Sourcing transportation services is an activity of procurement
Assembly design is an activity in research and development (Technology) Recruiting is an activity of human resource management
Reference: CIPS study guide page 71
LO 2, AC 2.1
Question 30Selectable Answer
Which of the following methods will enable a company to eliminate waste, lost time and lost material from its processes?
Answer: Explanation:
Lean design is about maximising the value that a customer receives and at the same time minimis-ing waste in delivering that value.
For an organisation to be ‘lean’ it must have had all non-essential resources removed (ie. anything that does not add value, see below). This is efficient and cost effective, in that the value/supply chain can theoretically do exactly what is needed of it and no more, but requires sound forecasting and planning of demand and supply. It is most suitable for industries with stable product specifications, long lead times and few impulse purchases. Organisations which are ‘agile’ react as quickly as is practicable to provide a cost effective response to customer demand. This is based on flexibility in design, supply, production and distribution. It is most appropriate for products such as fast fashion and foodstuffs which must be on display and available when wanted by the customer.
Reference:
- CIPS study guide page 153-156
- Agile Supply (cips.org)
LO 3, AC 3.3
