CIPS Procurement and Supply in Practice - L4M8 Exam Practice Test
When benchmarking what other factors, apart from price should be considered to find the total cost of acquisition?
Correct Answer:
See the answer in explanation.
Explanation:
When evaluating potential suppliers, procurement professionals can carry out bench-marking. Benchmarking is the process of comparing a function, a process performance with another which is best in-class.
Other factors, apart from price that can be considered to find the total cost of acquisi-tion include the product or service quality, lead time, supplier culture, its environmental awareness and sustainability.
Explanation:
When evaluating potential suppliers, procurement professionals can carry out bench-marking. Benchmarking is the process of comparing a function, a process performance with another which is best in-class.
Other factors, apart from price that can be considered to find the total cost of acquisi-tion include the product or service quality, lead time, supplier culture, its environmental awareness and sustainability.
What are the four methods that can be used to try to resolve dispute?
Correct Answer:
See the answer in explanation.
Explanation:
Conflict or dispute is the final area a procurement professional considers when creating terms for a contract with a supplier. If conflict or dispute arises, there must be a process put in place in the contract to try to resolve it and these includes; a) Negotiation, b) mediation, c) arbitration and d) litigation.
Negotiation is usually carried out between senior people within organization that are in conflict, if they cannot reach an agreement through negotiation, mediation is the next stage, mediation is when a third party tries to help find a resolution among the parties in dispute. If mediation fails arbitration can start, arbitration involve independent professionals (arbitrators) working with all the party to try to reach an agreement. Parties do not have a formal or legal obligation to follow the arbitrator's recommendation. Arbitration is expensive. If arbitration fails to resolve the conflict, the final stage is litigation, litigation takes time and money, and most people avoid it. It is a legal process where a court decides on the outcome of the dispute. The judge's ruling is final.
* Refer to the question column for response
Explanation:
Conflict or dispute is the final area a procurement professional considers when creating terms for a contract with a supplier. If conflict or dispute arises, there must be a process put in place in the contract to try to resolve it and these includes; a) Negotiation, b) mediation, c) arbitration and d) litigation.
Negotiation is usually carried out between senior people within organization that are in conflict, if they cannot reach an agreement through negotiation, mediation is the next stage, mediation is when a third party tries to help find a resolution among the parties in dispute. If mediation fails arbitration can start, arbitration involve independent professionals (arbitrators) working with all the party to try to reach an agreement. Parties do not have a formal or legal obligation to follow the arbitrator's recommendation. Arbitration is expensive. If arbitration fails to resolve the conflict, the final stage is litigation, litigation takes time and money, and most people avoid it. It is a legal process where a court decides on the outcome of the dispute. The judge's ruling is final.
* Refer to the question column for response
Write down a list of assets that belong to an organization with which you are familiar.
Correct Answer:
See the answer in explanation.
Explanation:
Assets are things that an organization owns regarded as having value and available to meet debt and generate revenue. The following are list of assets owned by Fullpower project, a shoe manufacturing firm;
1) Machinery,
2) a factory,
3) an innovative software,
4) skills of its personnel,
5) land,
6) Distribution network.
7) Its long time relationship with experienced suppliers of raw materials and Distributors of finished shoes.
Explanation:
Assets are things that an organization owns regarded as having value and available to meet debt and generate revenue. The following are list of assets owned by Fullpower project, a shoe manufacturing firm;
1) Machinery,
2) a factory,
3) an innovative software,
4) skills of its personnel,
5) land,
6) Distribution network.
7) Its long time relationship with experienced suppliers of raw materials and Distributors of finished shoes.
What two areas of an organization do the Kraljic Portfolio matrix uses to establish the category of a product or service?
Correct Answer:
See the answer in explanation.
Explanation:
The Kraljic Portfolio Matrix shows where a product or services fits into in an organization. It is based on two areas 1) the risk of supply (Risk Impact). 2) Effect it has on profit (cost impact).
Explanation:
The Kraljic Portfolio Matrix shows where a product or services fits into in an organization. It is based on two areas 1) the risk of supply (Risk Impact). 2) Effect it has on profit (cost impact).
What Incoterm applies here?
The supplier is responsible for delivering the goods to a carrier or to an intermediate agreed place. From this point, the buyer is responsible for ensuring these goods reach their named destination.
The supplier is responsible for delivering the goods to a carrier or to an intermediate agreed place. From this point, the buyer is responsible for ensuring these goods reach their named destination.
Correct Answer: A
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Research the values and ethical code of practice of an organization with which you are familiar.
Correct Answer:
See the answer in explanation.
Explanation:
Fullpower projects is a training firm that trains on project management and procurement. It has the following values and ethical code of practice
1) Accountability
2) selflessness
3) openness
4) integrity
5) objectives
6) Honesty
7) Leadership
Explanation:
Fullpower projects is a training firm that trains on project management and procurement. It has the following values and ethical code of practice
1) Accountability
2) selflessness
3) openness
4) integrity
5) objectives
6) Honesty
7) Leadership
What happens in the public sector, regarding providing feedback?
Correct Answer:
See the answer in explanation.
Explanation:
A sector is an area of an industry, e.g., private, public or third sector.
A public sector is a sector of the economy that is owned, finance and run by the government. This sector is financed with tax payer's money. And therefore owe the general public an ethical explanation towards all investment and decision.
Once the supplier that is awarded the contract has accepted, the buyer can tell the unsuccessful bidders. This usually happens through email or letter. The public sector is more likely to give feedback to unsuccessful bidders and also have to respond to any stakeholders that request information on why a supplier is not successful.
* Refer to the question column for response
Explanation:
A sector is an area of an industry, e.g., private, public or third sector.
A public sector is a sector of the economy that is owned, finance and run by the government. This sector is financed with tax payer's money. And therefore owe the general public an ethical explanation towards all investment and decision.
Once the supplier that is awarded the contract has accepted, the buyer can tell the unsuccessful bidders. This usually happens through email or letter. The public sector is more likely to give feedback to unsuccessful bidders and also have to respond to any stakeholders that request information on why a supplier is not successful.
* Refer to the question column for response
Analyse FIVE ways that structured procurement processes could help TechFab mitigate the loss of a vital supplier.
(25 marks)
TechFab Industries
TechFab industries is a leading manufacturer of high-tech components for its clients' manufacturing of advanced electronic systems, its flagship Quantumchip product is in high demand due to its leading-edge technology and superior performance. However, the production of Quantumchips relies heavily on a rare material called Neotanium. which is difficult to source.
Recently. RareMetals Inc., the primary supplier of Neotanium, unexpectedly stopped trading. This sudden disruption left TechFab with a significant challenge, as they had no backup supplier or contingency plan in place. TechFab had relied on RareMetals inc. due to its long-standing relationship and had not formalised its procurement processes. The lack of a structured procurement strategy has now become a significant issue.
Without Neotanium. TechFab cannot meet the soaring demand for its Quantum chips, risking delays, damage to its reputation and potential loss of market share.
The management team is now urgently seeking alternative suppliers, but the process is slow and challenging due to the rarity of the material, in response to this crisis. the Chief Operations Officer (COO) has called for an emergency meeting to address the supply chain vulnerability. The COO proposes the establishment of a dedicated procurement team to develop and implement formal procurement policies and procedures. This team would be responsible for diversifying the supplier base, conducting risk assessments, reducing reliance on single-source approaches, improving access to innovative materials and ensuring that TechFab is never again caught unprepared.
(25 marks)
TechFab Industries
TechFab industries is a leading manufacturer of high-tech components for its clients' manufacturing of advanced electronic systems, its flagship Quantumchip product is in high demand due to its leading-edge technology and superior performance. However, the production of Quantumchips relies heavily on a rare material called Neotanium. which is difficult to source.
Recently. RareMetals Inc., the primary supplier of Neotanium, unexpectedly stopped trading. This sudden disruption left TechFab with a significant challenge, as they had no backup supplier or contingency plan in place. TechFab had relied on RareMetals inc. due to its long-standing relationship and had not formalised its procurement processes. The lack of a structured procurement strategy has now become a significant issue.
Without Neotanium. TechFab cannot meet the soaring demand for its Quantum chips, risking delays, damage to its reputation and potential loss of market share.
The management team is now urgently seeking alternative suppliers, but the process is slow and challenging due to the rarity of the material, in response to this crisis. the Chief Operations Officer (COO) has called for an emergency meeting to address the supply chain vulnerability. The COO proposes the establishment of a dedicated procurement team to develop and implement formal procurement policies and procedures. This team would be responsible for diversifying the supplier base, conducting risk assessments, reducing reliance on single-source approaches, improving access to innovative materials and ensuring that TechFab is never again caught unprepared.
Correct Answer:
See the answer in explanation.below.
Explanation:
Analyse FIVE ways that structured procurement processes could help TechFab mitigate the loss of a vital supplier. (25 marks) Structured procurement processes are formal policies, procedures and controls used to manage sourcing, supplier selection, contracting and risk. CIPS explains that procurement covers identifying needs, tendering, evaluating suppliers, negotiating contracts and managing supplier relationships, while procurement policies and procedures create accountability and control. In TechFab's case, the absence of formal procurement has increased its vulnerability after the collapse of RareMetals Inc.
1. Supplier diversification and reduced single-source dependency
The first way structured procurement could help is by creating a formal policy to avoid over-reliance on one supplier for a critical material. The case shows that TechFab depended heavily on RareMetals Inc. and had no backup source for Neotanium. A structured sourcing process would require market analysis, supplier appraisal and, where possible, the approval of more than one qualified supplier. CIPS describes sourcing as assessing the market to identify viable suppliers that can meet organisational needs, and this supports a more resilient supply base.
This would mitigate future supplier loss because TechFab would not be left with a complete supply interruption if one supplier failed. Even if Neotanium is difficult to source, a structured process could still identify alternative suppliers, substitute options, or at least pre-qualified emergency sources. Therefore, diversification reduces supply risk and improves business continuity.
2. Formal supplier risk assessment
A second way is through systematic supplier risk assessment. Structured procurement would require TechFab to assess suppliers not only on quality and price, but also on financial stability, capacity, geopolitical exposure, ethical risk and supply continuity. CIPS states that supplier risk assessment involves identifying and assessing risks associated with working with a supplier, such as delivery issues and financial instability.
If this had been done earlier, TechFab may have identified warning signs around RareMetals Inc. or at least recognised the high risk of depending on a single critical supplier. Risk assessment would also help the company categorise Neotanium as a strategic or bottleneck item requiring closer monitoring. This means structured procurement helps mitigate supplier loss by making risk visible earlier and allowing preventive action before disruption occurs.
3. Contingency planning and business continuity arrangements
The third way is by building contingency planning into procurement procedures. The case clearly states that TechFab had no backup supplier or contingency plan. A structured procurement process would normally require contingency actions for critical materials, such as safety stock, framework agreements with alternative suppliers, emergency sourcing procedures, or predefined escalation routes if supply fails. CIPS notes that supply chain risk management is about understanding risks and implementing strategies to manage them proactively.
This would help TechFab because the business could respond faster if a supplier stopped trading. Instead of scrambling to search the market after the disruption, the company would already know what steps to take. As a result, production delays, reputational damage and loss of market share could be reduced. So, structured procurement mitigates supplier loss by improving preparedness rather than relying on reaction after the event.
4. Better supplier evaluation and market intelligence
A fourth way is through stronger supplier evaluation and ongoing market monitoring. CIPS explains that supplier evaluation is a continual process used to approve suppliers, monitor performance, mitigate risk and drive improvement. Evaluation may include desk appraisal, questionnaires, interviews and site visits.
For TechFab, this would mean not only selecting suppliers more carefully, but also regularly reviewing the supply market for innovative materials, new entrants and alternative sources of Neotanium. Because the material is rare, market intelligence is especially important. Structured procurement would make supplier evaluation a continuous activity rather than a one-off decision based on a long-standing relationship. This reduces the likelihood of being trapped with one source and improves TechFab's ability to react when market conditions change.
5. Stronger supplier relationship management and strategic oversight
The fifth way is through formal supplier relationship management (SRM). CIPS defines SRM as the management and maintenance of the relationship between buyer and supplier, with the type of relationship depending on the criticality of the goods or services supplied. For critical inputs such as Neotanium, structured procurement would ensure senior attention, regular performance reviews, strategic meetings and clearer communication with key suppliers.
This would help mitigate supplier loss because TechFab would have better visibility of supplier problems and a stronger basis for collaborative planning. In addition, formal SRM often encourages supplier development and closer understanding of capacity, innovation opportunities and future risks. This is important because the COO wants procurement to improve access to innovative materials as well as reduce reliance on single-source approaches. Therefore, structured procurement does not only control risk; it also strengthens strategic supplier management and improves resilience over time.
Conclusion
In conclusion, structured procurement could help TechFab mitigate the loss of a vital supplier in five main ways: supplier diversification, formal risk assessment, contingency planning, continuous supplier evaluation, and stronger supplier relationship management . Together, these processes would reduce dependency, improve preparedness and give TechFab a more resilient sourcing strategy for critical materials such as Neotanium. This shows why the COO's proposal for a dedicated procurement team is an important response to the current supply crisis.
Explanation:
Analyse FIVE ways that structured procurement processes could help TechFab mitigate the loss of a vital supplier. (25 marks) Structured procurement processes are formal policies, procedures and controls used to manage sourcing, supplier selection, contracting and risk. CIPS explains that procurement covers identifying needs, tendering, evaluating suppliers, negotiating contracts and managing supplier relationships, while procurement policies and procedures create accountability and control. In TechFab's case, the absence of formal procurement has increased its vulnerability after the collapse of RareMetals Inc.
1. Supplier diversification and reduced single-source dependency
The first way structured procurement could help is by creating a formal policy to avoid over-reliance on one supplier for a critical material. The case shows that TechFab depended heavily on RareMetals Inc. and had no backup source for Neotanium. A structured sourcing process would require market analysis, supplier appraisal and, where possible, the approval of more than one qualified supplier. CIPS describes sourcing as assessing the market to identify viable suppliers that can meet organisational needs, and this supports a more resilient supply base.
This would mitigate future supplier loss because TechFab would not be left with a complete supply interruption if one supplier failed. Even if Neotanium is difficult to source, a structured process could still identify alternative suppliers, substitute options, or at least pre-qualified emergency sources. Therefore, diversification reduces supply risk and improves business continuity.
2. Formal supplier risk assessment
A second way is through systematic supplier risk assessment. Structured procurement would require TechFab to assess suppliers not only on quality and price, but also on financial stability, capacity, geopolitical exposure, ethical risk and supply continuity. CIPS states that supplier risk assessment involves identifying and assessing risks associated with working with a supplier, such as delivery issues and financial instability.
If this had been done earlier, TechFab may have identified warning signs around RareMetals Inc. or at least recognised the high risk of depending on a single critical supplier. Risk assessment would also help the company categorise Neotanium as a strategic or bottleneck item requiring closer monitoring. This means structured procurement helps mitigate supplier loss by making risk visible earlier and allowing preventive action before disruption occurs.
3. Contingency planning and business continuity arrangements
The third way is by building contingency planning into procurement procedures. The case clearly states that TechFab had no backup supplier or contingency plan. A structured procurement process would normally require contingency actions for critical materials, such as safety stock, framework agreements with alternative suppliers, emergency sourcing procedures, or predefined escalation routes if supply fails. CIPS notes that supply chain risk management is about understanding risks and implementing strategies to manage them proactively.
This would help TechFab because the business could respond faster if a supplier stopped trading. Instead of scrambling to search the market after the disruption, the company would already know what steps to take. As a result, production delays, reputational damage and loss of market share could be reduced. So, structured procurement mitigates supplier loss by improving preparedness rather than relying on reaction after the event.
4. Better supplier evaluation and market intelligence
A fourth way is through stronger supplier evaluation and ongoing market monitoring. CIPS explains that supplier evaluation is a continual process used to approve suppliers, monitor performance, mitigate risk and drive improvement. Evaluation may include desk appraisal, questionnaires, interviews and site visits.
For TechFab, this would mean not only selecting suppliers more carefully, but also regularly reviewing the supply market for innovative materials, new entrants and alternative sources of Neotanium. Because the material is rare, market intelligence is especially important. Structured procurement would make supplier evaluation a continuous activity rather than a one-off decision based on a long-standing relationship. This reduces the likelihood of being trapped with one source and improves TechFab's ability to react when market conditions change.
5. Stronger supplier relationship management and strategic oversight
The fifth way is through formal supplier relationship management (SRM). CIPS defines SRM as the management and maintenance of the relationship between buyer and supplier, with the type of relationship depending on the criticality of the goods or services supplied. For critical inputs such as Neotanium, structured procurement would ensure senior attention, regular performance reviews, strategic meetings and clearer communication with key suppliers.
This would help mitigate supplier loss because TechFab would have better visibility of supplier problems and a stronger basis for collaborative planning. In addition, formal SRM often encourages supplier development and closer understanding of capacity, innovation opportunities and future risks. This is important because the COO wants procurement to improve access to innovative materials as well as reduce reliance on single-source approaches. Therefore, structured procurement does not only control risk; it also strengthens strategic supplier management and improves resilience over time.
Conclusion
In conclusion, structured procurement could help TechFab mitigate the loss of a vital supplier in five main ways: supplier diversification, formal risk assessment, contingency planning, continuous supplier evaluation, and stronger supplier relationship management . Together, these processes would reduce dependency, improve preparedness and give TechFab a more resilient sourcing strategy for critical materials such as Neotanium. This shows why the COO's proposal for a dedicated procurement team is an important response to the current supply crisis.
Which Incoterm applies here?
The supplier is responsible for delivering the goods directly onto the vessel that will transport them to their named destination, covering the cost of both the transport and the insurance to cover this. Again, the supplier bears all risks until the goods are delivered to the buyer at their named place.
The supplier is responsible for delivering the goods directly onto the vessel that will transport them to their named destination, covering the cost of both the transport and the insurance to cover this. Again, the supplier bears all risks until the goods are delivered to the buyer at their named place.
Correct Answer: A
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What potential costs could an organization face if it fails to conduct Due diligence effectively?
Correct Answer:
See the answer in explanation.
Explanation:
Though strong due diligence procurement professionals can assess which suppliers or potential suppliers appear to meet the criteria associated with ethical practice.
Prior to the contract being awarded, strong due diligence can save the organization from the following cost:
1) Cost of reputation
2) Environmental damage
3) Stakeholders dissatisfaction,
4) poor quality and rework
5) Breach of contract
6) Ethical concerns
Explanation:
Though strong due diligence procurement professionals can assess which suppliers or potential suppliers appear to meet the criteria associated with ethical practice.
Prior to the contract being awarded, strong due diligence can save the organization from the following cost:
1) Cost of reputation
2) Environmental damage
3) Stakeholders dissatisfaction,
4) poor quality and rework
5) Breach of contract
6) Ethical concerns
What is a cross function team?
Correct Answer:
See the answer in explanation.
Explanation:
A cross-function Team is the involvement of all departments that are in an organization to contribute knowledge, skills and innovation towards adding value to achieving the organization's strategic goal.
Example, procurement, maintenance, marketing, finance, human resources working together in procurement activity to come up with the best strategy or selecting the supplier that best suit the organization.
When working in a cross-functional team, members of the organization give support by believing in the end goal, assist during difficult time, help troubleshoot any issue, providing the required resources and sharing information
Explanation:
A cross-function Team is the involvement of all departments that are in an organization to contribute knowledge, skills and innovation towards adding value to achieving the organization's strategic goal.
Example, procurement, maintenance, marketing, finance, human resources working together in procurement activity to come up with the best strategy or selecting the supplier that best suit the organization.
When working in a cross-functional team, members of the organization give support by believing in the end goal, assist during difficult time, help troubleshoot any issue, providing the required resources and sharing information
Why is it important to have adequate procedures in place within an organization in relation to bribery?
Correct Answer:
See the answer in explanation.
Explanation:
Bribery is the act of giving someone something of value to persuade them to do something that benefits you.
Ethical and responsible sourcing requires conducting due diligence on bribery before going into contractual relationship because failure to this might lead to loss in reputation.
In other for an organization to defend itself against a case of suspected bribery, the United Kingdom bribery Act introduced in 2010 suggests that organizations should have adequate procedures' in place.
The following are six procedures an organization should have in place to be able to defend itself against bribery
1) Proportionate procedure
2) Top level commitment
3) risk assessment
4) due diligence
5) communication
6) monitoring and reviewing
Explanation:
Bribery is the act of giving someone something of value to persuade them to do something that benefits you.
Ethical and responsible sourcing requires conducting due diligence on bribery before going into contractual relationship because failure to this might lead to loss in reputation.
In other for an organization to defend itself against a case of suspected bribery, the United Kingdom bribery Act introduced in 2010 suggests that organizations should have adequate procedures' in place.
The following are six procedures an organization should have in place to be able to defend itself against bribery
1) Proportionate procedure
2) Top level commitment
3) risk assessment
4) due diligence
5) communication
6) monitoring and reviewing
What Incoterm applies here?
The supplier is responsible of placing the goods in the hands of a chosen carrier by the buyer, at which point the buyer takes on the risk.
The supplier is responsible of placing the goods in the hands of a chosen carrier by the buyer, at which point the buyer takes on the risk.
Correct Answer: D
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Describe three ways in which a buyer could or test the market in other to assist with determining a need.
Correct Answer:
See the answer in explanation.
Explanation:
Once the need has been understood, defined, justified and authorized, the next stages are to analyze and test the market. Analyzing and testing the market includes looking at the following
1. STEEPLE analysis
2. SWOT analysis
3. Porter's five forces
4. Level of suppliers competition
5. Supply and demand
6. Push and pull
7. Supplier segmentation
8. Product life cycle
9. Ansoff matrix
10. Early supplier involvement
11. Make or buy
12. Offshoring
1. Porter's five forces: The use of porter's five forces helps the procurement professional to understand the level of competition within the marketplace. Whether it is a monopoly, oligopoly, imperfect or perfect market.
Knowing these will equip the organization to better negotiate a favorable price.
2. Supply and Demand: the procurement professional must also think about supply and demand as part of their market analysis when they receive a requisition. This economic factor has a significant effect on the prices charged and on the cost incurred.
3. Supplier segmentation: in this the procurement professional start to form an opinion of potential suppliers..
They can segment current suppliers into four categories, depending on their level of integration into an organization. This can help to inform the procurement professional of which type of supplier relationship that would be most appropriate.
Explanation:
Once the need has been understood, defined, justified and authorized, the next stages are to analyze and test the market. Analyzing and testing the market includes looking at the following
1. STEEPLE analysis
2. SWOT analysis
3. Porter's five forces
4. Level of suppliers competition
5. Supply and demand
6. Push and pull
7. Supplier segmentation
8. Product life cycle
9. Ansoff matrix
10. Early supplier involvement
11. Make or buy
12. Offshoring
1. Porter's five forces: The use of porter's five forces helps the procurement professional to understand the level of competition within the marketplace. Whether it is a monopoly, oligopoly, imperfect or perfect market.
Knowing these will equip the organization to better negotiate a favorable price.
2. Supply and Demand: the procurement professional must also think about supply and demand as part of their market analysis when they receive a requisition. This economic factor has a significant effect on the prices charged and on the cost incurred.
3. Supplier segmentation: in this the procurement professional start to form an opinion of potential suppliers..
They can segment current suppliers into four categories, depending on their level of integration into an organization. This can help to inform the procurement professional of which type of supplier relationship that would be most appropriate.