When developing a supplier partnership, a buyer can take either a strategic or reactive approach .
What would be a reason for a reactive approach?
- A . You discover that the supplier has a high profit margin
- B . The buyer wishes to create a new product and requires input from a supplier
- C . Sudden changes in the marketplace
- D . It will allow for consolidation in the supply chain
C
Explanation:
The correct answer is ‘Sudden changes in the marketplace’ C 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
What is a disadvantage of including qualitative KPIs into a contract?
- A . They can lead to poor supplier performance
- B . They pull focus from the more important quantitative KPIs
- C . They are hard to measure
- D . They make the buyer seem weak
C
Explanation:
The correct answer is ‘They are hard to measure’ p.103
In Public Sector procurement a PIN is sent out to inform suppliers of an upcoming tender opportunity .
What does PIN stand for?
- A . Prior Information Notice
- B . Procurement Information Number
- C . Procurement Identification Number
- D . Possibilities Identified Notice
A
Explanation:
A PIN is a ‘prior information notice’ C it is sent out before the ITT to let suppliers know that an opportunity is coming up and they should look out for it. See p 72 “supplier identification-public sector” for more details.
Brian Air is a company that is trying to break into the air transport market .
Which of the following could be barriers to entry for Brian Air? Select THREE
- A . economies of scale
- B . access to capital
- C . licences and permits
- D . health and safety
- E . ethical sourcing
A,B,C
Explanation:
Barriers to entry are economies of scale (in the air travel industry you can’t just start off small and grow), access to capital (you need to already have a lot of money to buy airplanes) and licences and permits (you need to ensure you have the correct licences to fly planes). These are listed on p.41. Other barriers include; strong brand identity already dominant in the market, high switching costs for buyers, access to distribution networks and government policy.
Which of the following documents would you expect a supplier to submit as part of a Request for Proposal? Select THREE
- A . Full pricing information
- B . Liquidity Ratio
- C . Risk Assessments
- D . Method Statements
- E . Gearing Ratio
A,C,D
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
Mendelow’s Stakeholder Matrix categorises stakeholders into four groups and provides insight into how these stakeholders should be managed .
What is a limitation to using this Matrix to categorise stakeholders?
- A . Nowadays, Stakeholders fall into more than four categories
- B . The Matrix doesn’t consider the power these stakeholders have
- C . The Matrix doesn’t consider whether the stakeholder is for or against the activity
- D . The categories are hard to remember
C
Explanation:
The correct answer is ‘The Matrix doesn’t consider whether the stakeholder is for or against the activity’. For a list of other limitations of using Mendelow’s Stakeholder Matrix see p.82
Which of the following are possible drivers for partnership sourcing? Select THREE.
- A . The protection of intellectual property rights
- B . The marketplace has become more volatile
- C . Working together will create synergies
- D . The need to improve performance to satisfy the end customer
To increase production costs and lead-times
B,C,D
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 of Partnership 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.
A doctor’s surgery requires a complex database system to manage all of its patients data, which is highly sensitive. The system also needs to link to other departments of the health service such as physiotherapy and intensive care. The Manager of the surgery is considering outsourcing the management of the database to an IT company .
What is the Manager’s main motivation for doing this?
- A . The supplier is an expert in their field
- B . This will result in economies of scale
- C . This will free-up internal resources
- D . This will result in cost-savings
A
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
What is the correct order of the stages of team development?
- A . Forming, storming, norming, performing
- B . Forming, norming, performing, storming
- C . Storming, forming, performing, norming
- D . Storming, forming, norming, performing
A
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 the exam 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)
Which of the following statements are true of a market place which is considered a ‘perfect competition’? Select TWO.
- A . there are no barriers to entry
- B . suppliers are selling differentiated products
- C . competition is at its highest level possible
- D . competition is not strong
A,C
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
Beyond Say is a manufacturer of diamond rings. It sources a lot of different parts to create its products including diamonds, gold, cardboard boxes for the rings to go in, as well as stationary and copier paper for the offices. Although it doesn’t buy many diamonds, these represent a large part of Beyond Say’s spend .
Which category of spend would diamonds represent?
- A . Option
- B . Option
- C . Option
- D . It isn’t possible to tell
A
Explanation:
This is category ‘A’ spend in the ABC model – they represent a large value and a small number of purchases / suppliers. See p.17 for more information on the ABC Analysis
Early Supplier Involvement can be described as a collaborative relationship between a buyer and a supplier to develop a new project. Handfield’s model describes four different levels of supplier involvement ranging from none to ‘black box’ (which is when the design is primarily driven by the supplier .
What other level features on this model?
- A . Blue Box C when the buyer creates the product without input from the supplier
- B . Red Box- when the supplier provides legal advice to the buyer on areas such as copywrite
- C . White Box C when there is informal integration and the buyer consults with a supplier on a design
- D . Grey Box C when the involvement is buyer driven
C
Explanation:
The Handfield ESI model is on p.98 and comprises of Black Box, Grey Box, White Box and None. Therefore Red and Blue can be automatically discounted. The correct answer is White Box as the definition given is correct. Grey Box is a formalised supplier integration; joint development activity between buyer and supplier. I have no idea why Handfield calls his system after coloured boxes- but it’s only briefly mentioned in the study guide and is not likely to be a big topic in the exam.
Grey Stone Memorial Hospital is a private medical facility which has an idea for a vaccine to a deadly disease, but does not have the capacity to make the vaccine itself. It is
considering partnering with a well-known pharmaceutical company in order to bring the vaccine to market .
What is the biggest risk to Grey Stone?
- A . Intellectual Property Rights
- B . Increased Costs
- C . Low quality product
- D . Uninformed stakeholders
A
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.
Danny is procuring a new IT software, which he doesn’t know much about. He has done a bit of research on the internet but is still unsure how much he can expect to pay .
What should be Danny’s next step?
- A . Issue a RFI
- B . Issue a RFQ
- C . Issue an ITT
- D . Issue an OJEU
A
Explanation:
Danny should issue a RFI (Request for Information). His next step would be to find out more about the products available by asking suppliers for information- this will help him put a spec together before he goes out to tender. The other options mean; RFQ – request for quotation- when you ask suppliers to submit a price. ITT- Invitation to tender C a document you send out to suppliers which details all the information about the tender (this usually involves both price and quality components of assessment). OJEU- Official Journal of the European Union- where tenders for the Public Sector are published. For more info on RFI see p.74
According to Mendelow, there are four ways stakeholders can be managed, depending on the amount of power they have, and how interested they are in your project .
What are these four categories?
- A . Keep satisfied, keep informed, minimal effort, no effort
- B . Manage closely, manage loosely, keep satisfied, keep informed
- C . Minimal effort, manage closely, keep informed, keep satisfied
- D . Keep informed, keep happy, keep satisfied, keep notified
C
Explanation:
The four categories are; Minimal effort, manage closely, keep informed, keep satisfied. You can see the Matrix on p.81. An easy way to remember this is there are 2 Ms and 2 Keeps. And these sit on opposite sides of the matrix.
In public sector procurement, tenders are advertised with CPV codes, which provide a reference to describe the product or service being tendered .
What does CPV stand for?
- A . Condensed Procurement Vocabulary
- B . Common Procurement Vocabulary
- C . Complete Procurement Vocabulary
- D . Clear Procurement Vocabulary
B
Explanation:
CPV stands for Common Procurement Vocabulary. This is explained briefly on p.72 but it doesn’t really go into much detail as to what CPVs are or how they work. CPVs are a string of numbers which refer to an object that is being procured. For example the CPV for Fire Doors is 44221220. When a Tender gets advertised for Fire Doors, it will have this CPV code on, and any suppliers who provide fire doors will get a notification if they have this CPV code on their profile. It’s basically a code that links suppliers with tender opportunities.
Which of the following would you use to qualify new suppliers? Select THREE.
- A . commitment
- B . clean
- C . collection
- D . cost
- E . call
A,B,D
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)
Intellectual Property Rights (IPR) include items such as copywrite and trademarks. A buyer is considering entering into a partnership with their supplier to create a new product which will be released in two years’ time. Should IPR be included into a contract between partners?
- A . Yes- IPR should always remain with the buyer- this will protect those rights
- B . Yes- IPR is a valid concern for both parties but will survive the termination of the agreement
- C . No- a separate legal agreement should be created to cover IPR
- D . No- a contract is not necessary if it is a partnership.
B
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
Which of the following are advantages for the buyer of entering into a partnership? Select
TWO.
- A . They are likely to be able to gain price stability
- B . There may be greater continuity of supply
- C . They will gain an increased volume of business
- D . The supplier may become complacent
A,B
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 C Partnerships come up a LOT in the exam. See p.130 for info on pros and cons of partnerships.
David is sourcing a new cleaning contract as he is not impressed with his current cleaning company’s performance. He believes that his current supplier has been overcharging him, and due to budget cuts, he is keen to secure a lower price than what he is paying now. His Manager has suggested using an e-auction as the procurement method.
Is this the correct way forward?
- A . Yes- an e-auction is an electronic system so it will be easy for David to compare bids
- B . Yes- an e-auction will allow David to secure the lowest possible price
- C . No- a reverse e-auction would be more suitable as it will secure the lowest price
- D . No- a reverse e-auction will ensure only high quality suppliers bid for the opportunity
C
Explanation:
The correct answer is ‘No- a reverse e-auction would be more suitable as it will secure the lowest price’. An E-auction is something like eBay- where bids go up in price. If David wants to secure a lower price, he should use a Reverse E-Auction- where suppliers bid lower than the previous bid in order to win. For example, Supplier 1 offers to fulfil the contract at £50k per year, Supplier 2 can offer to beat this price by bidding £48k per year. Although Reverse E-Auctions may ensure cheaper prices, there are a lot of disadvantages to using this method. See p.21 and p.76 for more information
A competitive advantage can be gained by doing what?
- A . Increasing your prices
- B . Engaging in market research
- C . Building better relationships with primary stakeholders
- D . Completing formal tenders for all buying requirements
C
Explanation:
The correct answer is ‘Building better relationships with primary stakeholders’. This is a direct quote from the start of chapter 2.2: ‘building better relationships with primary stakeholders such as employees, customers, suppliers and communities could lead to increased shareholder wealth by developing a competitive advantage’. The other three options wouldn’t give you a competitive advantage; increasing prices would do the opposite, engaging in market research won’t give you a competitive advantage unless you do something with that research such as implement a change to your business, and completing formal tenders for everything would be a waste of time and resources- there’s no need to tender for low value, low risk items. See p.80
Which of the following are considered ‘wastes’ which can be removed from a business? Select THREE.
- A . Over-processing
- B . Stockout
- C . Equity
- D . Transportation
- E . Inventory
A,D,E
Explanation:
The seven wastes (as defined by Taiichi Ohno) can be remembered as Tim Wood; transportation, inventory, motion, waiting, over-processing, over-production, defects. Some
people add an S onto the end of Tim Wood to make Tim Woods (the s is for skills). In some modules of CIPS, they refer to 8 wastes and include skills, but in M6 they’ve only put the 7 on p.70.
Agile Cars Ltd is creating a ‘lean’ business model which involves receiving deliveries of components only when they are required .
Which of the following ‘wastes’ is being removed from the business?
- A . Transportation
- B . Defects
- C . Over-production
- D . Inventory
D
Explanation:
This would reduce inventory (holding stock). Inventory is considered a business waste because it costs money to store stuff (e.g. paying the rent on a warehouse, electricity to light it up etc). If you can reduce the need to store materials and components on site- you reduce costs. You also save time because you get deliveries when you need them- you don’t need to allow for staff unpacking things, storing them away, then going back to them later when they need them. For more information on the 7 Business Wastes see p.70. This comes up in a couple of modules, so it’s worth remembering.
Gabriel is a procurement manager who wishes to explore a new avenue to procure products for his company. His manager has told him that he should invite internal stakeholders to a meeting to get their feedback. Who should Gabriel invite? Select THREE.
- A . end-users
- B . legal department
- C . customers
- D . suppliers
- E . employees
A,B,E
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
The Queen Victoria is a traditional British pub which serves a range of alcoholic beverages. It has a partnership relationship with a local brewery which supplies several types of beer and cider. Logistics is a key concern for the Queen Victoria as deliveries must be made when there is room in the cellar to store the barrels of beer and cider. In what ways could the logistics risk be reduced?
- A . Using several suppliers instead of one
- B . Batch ordering
- C . Sharing up-to-date information
- D . Issuing POs electronically.
C
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 the question and using logic, rather than relying on your knowledge of procurement. If you found this question easy C that’s a good sign for the exam.
One of the fist stages of designing a Partnership is to come up with joint KPIs. These
should be:
- A . Measurable, achievable and time-bound
- B . Relatable, specific and measurable
- C . Time bound, difficult and relevant
- D . Significant, measurable and achievable
A
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.
Which of the following are not stages of team development? Select TWO.
- A . Forming
- B . Mourning
- C . Achieving
- D . Adjourning
- E . Accepting
C,E
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.
Varying levels of commitment is one reason why many partnerships fail .
Why is this?
- A . It can lead to a lack of trust
- B . One party doesn’t fulfil their KPIs
- C . Sufficient time and resources are put in
- D . Less profit is made.
A
Explanation:
The correct answer is ‘It can lead to a lack of trust’ C this is a quote from p.162. The other answers are all incorrect; in a partnership KPIs are joint between the partiesC 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.
The CEO of a business has asked his procurement manager to source new machinery for the factory. This machinery will help create a new line of products which will give the company a competitive edge. The CEO is heavily invested in this procurement activity as profits have been lower than expected this year and this new line of products could help increase profitability .
How should the procurement manager include the CEO in the procurement activity?
- A . It is important to keep the CEO informed of all decisions that are made
- B . It is important to keep the CEO satisfied as he runs the business
- C . The CEO is a key player- so it is important he is involved early in the process
- D . The CEO is a key player- so should be given regular updates on progress
C
Explanation:
The correct answer is ‘The CEO is a key player- so it is important he is involved early in the process’. The CEO has high power and high interest which puts him in the top right-hand corner of Mendelow’s Stakeholder Matrix (p.81). CIPS says Key Players should be involved early in the procurement process (p.82).
In the public sector, there are many sources of information that a buyer can use to identify a suitable supplier .
Which of the following could be used? Select THREE
- A . Intranet
- B . Tradeshows
- C . OJEU
- D . Internal stakeholders’ knowledge
- E . Procurement Platforms
B,D,E
Explanation:
The correct answers are; tradeshows, internal stakeholders’ knowledge and e-procurement platforms. Intranet is incorrect as this is an internal system so you wouldn’t find information on external suppliers on here the careful not to confuse intranet with internet). OJEU is also incorrect; this is the platform on which tender opportunities in the public sector are published- its not a list of suppliers.
The Kraljic Model is most useful for which aspect of procurement?
- A . category management
- B . cost analysis
- C . risk management
- D . cost reduction
A
Explanation:
The Kraljic model "plays a key part in category management" p.19 of the textbook. Category Management = the spend in an organisation, broken down into categories of related products (e.g. IT, facilities management, marketing). Each of these categories could be plotted on the Kraljic Matrix.
The Public Sector in the UK is unable to enter into formal partnership relationships with any supplier. Is this statement TRUE?
- A . Yes- the Public Sector is regulated by EU procurement regulations which prohibits this
- B . Yes- the Public Sector is unable to enter partnerships because they operate in a monopoly market
- C . No- the Public Sector can enter into partnership relationships with suppliers providing they have tendered the opportunity
- D . No- the Public Sector can enter into partnership relationships when contracts are over the threshold value.
A
Explanation:
The correct answer is ‘Yes- the Public Sector is regulated by EU procurement regulations which prohibits this’. This is stated on p.122. Please note that this study guide and exam were written before Brexit. Once Brexit happens, nobody knows what will happen with this.
Which of the following is an advantage for the suppler of entering into a partnership with a buyer?
- A . They may gain an increased volume of business
- B . There is more flexibility when selling the product
- C . The Intellectual Property Rights of the buyer become yours
- D . They no longer have to try as hard to win business.
A
Explanation:
The correct answer is ‘They may gain an increased volume of business’. The other options are just not true. See p.130 for advantages and disadvantages of partnerships from both the buyer and supplier’s perspective. This is a hot topic for the exam.
What is value mapping?
- A . Analysing the costs that go into making a product
- B . Creating value through the elimination of waste and operational inefficiencies
- C . Segmenting suppliers based on the value they bring to the company
- D . Make vs Buy decision
B
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.
Which of the following are valid strategies for dealing with conflict? Select THREE
- A . Competing
- B . Collecting
- C . Contesting
- D . Compromising
- E . Collaborating
A,D,E
Explanation:
The three right answers are competing, collaborating and compromising. See the Thomas Kilmann Model on p.87. There are quite a few questions on this in the exam.
Harry runs a hotel and has recently decided to contract an external supplier to provide the cleaning of the rooms .
What is a disadvantage of doing this?
- A . This allows staff to focus on other areas
- B . There is dependency on the supplier, which increases risk
- C . The supplier will not perform as well as an internal team
- D . This will be more expensive than providing the service in house
B
Explanation:
Using an external supplier always comes with increased risk, as you become dependant upon them, and have less control over their performance (compared to an in-house team). In this example Harry will have the increased risk that the contract cleaners turn up late to their shifts, or don’t do a good job. However, there is no reason to believe that the supplier will not perform as well as an internal team- we don’t have enough information from the QUESTION NO: for this to be true .
What is true is the RISK is greater. The other answers are incorrect; the QUESTION NO: doesn’t indicate whether outsourcing the cleaning will be more or less expensive for Harry. Allowing staff to focus on other areas is an advantage not a disadvantage. See p.4 for more information on ‘External Suppliers’
Which of the following macro-environmental factors can affect supply chains?
- A . social, economic and cost
- B . environmental, ethical and cost
- C . political, economic and social
- D . environmental, ergonomic and social
C
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.
Polly Manufacturing is a company which manufactures bicycle parts. It has several factories around the country and is one of the leading suppliers of wheels, bells and pedals.
Which of the following is Polly Manufacturing likely to outsource? Select TWO options.
- A . Manufacturing of all bicycle parts
- B . Manufacturing of bells only
- C . Facilities Management
- D . Cleaning
C,D
Explanation:
They could outsource cleaning and facilities management. These are auxiliary services. The manufacturing of bike parts is their ‘core’ business so they should retain this in-house
Which of the following factors would you use to analyse the macro-environment? Select THREE.
- A . social
- B . cultural
- C . political
- D . philosophical
- E . legislative
A,C,E
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
Which of the following are primary activities, according to Porter’s Value Chain? Select THREE.
- A . Procurement
- B . Operations
- C . Marketing and Sales
- D . Human Resources
- E . Inbound Logistics
B,C,E
Explanation:
This QUESTION NO: refers to Porter’s Value Chain (p.35). There’s a couple of questions on this in the exam so try to learn it. Primary activities are; inbound logistics, operations, outbound logistics, marketing and sales, after sales- service