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The Chartered Institute of Procurement and Supply (CIPS) Level 4 Management Module 2 (L4M2) certification exam is designed to test the ability of professionals to identify and define business needs. L4M2 exam is ideal for procurement and supply chain professionals who want to improve their skills and knowledge in identifying the needs of their organizations. CIPS L4M2 is a globally recognized qualification that demonstrates an individual's competence and expertise in analyzing business requirements.
NEW QUESTION # 140
Which of the following is the purpose of benchmarking?
- A. To resist continuous improvement
- B. To identify and adapt the best practices to improve organisation's performance
- C. To coerce all suppliers to sacrifice their profit
- D. To copy other organisation's intellectual properties, processes and practices
Answer: B
Explanation:
According to US Department of the Navy, Benchmarking is a strategic and analytic process of continuously measuring an organisation's products, services, and practices against a recognised leader in the studied area.
Successful benchmarking will help you:
- Find who does the process best and close the gap
- Recognise the leading organisations in a process or activity
- Create performance standards derived from an analysis of the best in business
- Ensure that comparisons are relevant
- Measure your performance, your processes, and your strategies against best in business
- Measure business processes
- Assess performance over time
- Accelerate continuous process improvement (CPI)
- Establish more credible goals for CPI
- Establish actionable objectives
- Discover and clarify new goals
- Establish customer expectations of business standards set by the best suppliers in industry
- Help your organisation achieve breakthrough improvements
- Create a sense of urgency for change
- Increase customer satisfaction
- Become direction setting
- Provide a positive, proactive structured process
Benchmarking does not:
- Copy the other's processes
- Steal other business confidentiality
- Stop. Benchmarking is a continuous process.
NEW QUESTION # 141
What will be the result of retaliation between business rivals in an industry?
- A. Greater bargaining power of suppliers
- B. Lower profit
- C. More new entrants
- D. Higher exit barrier
Answer: B
Explanation:
Industry rivalry-or rivalry among existing firms-is one of Porter's five forces used to deter-mine the intensity of competition in an industry. Other factors in this competitive analysis are:
- Barriers to entry
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of substitutes
Industry rivalry usually takes the form of jockeying for position using various tactics (for example, price competition, advertising battles, product introductions). This rivalry tends to increase in intensity when companies either feel competitive pressure or see an opportunity to improve their position.
In most industries, one company's competitive moves will have a noticeable impact on the competition, who will then retaliate to counter those efforts. Companies are mutually dependent, so the pattern of action and reaction may harm all companies and the industry.
Some types of competition (for example, price competition) are very unstable and negatively influence industry profitability. Other tactics (for example, advertising battles) may positively influence the industry, as they increase demand or enhance product differentiation.
References
Porter, M. (1998). Competitive Strategy. New York: Free Press. pp. 17-23.
CIPS study guide page 86-87
LO 2, AC 2.2
NEW QUESTION # 142
Which of the following are main focuses of ISO 27001:2013 standard?
1. Confidentiality
2. Logistics
3. Process
4. Life cycle
- A. 2 and 3 only
- B. 2 and 4 only
- C. 3 and 4 only
- D. 1 and 3 only
Answer: D
Explanation:
This International Standard (ISO 27001:2013) has been prepared to provide requirements for establishing, implementing, maintaining and continually improving an information security management system. The adoption of an information security management system is a strategic decision for an organization. The establishment and implementation of an organization's information security management system is influenced by the organization's needs and objectives, security requirements, the organizational processes used and the size and structure of the organization. All of these influencing factors are expected to change over time.
The information security management system preserves the confidentiality, integrity and availability of information by applying a risk management process and gives confidence to interested parties that risks are adequately managed.
It is important that the information security management system is part of and integrated with the organization's processes and overall management structure and that information security is considered in the design of processes, information systems, and controls. It is expected that an information security management system implementation will be scaled in accordance with the needs of the organization.
This International Standard can be used by internal and external parties to assess the organization's ability to meet the organization's own information security requirements.
The order in which requirements are presented in this International Standard does not reflect their importance or imply the order in which they are to be implemented. The list items are enumerated for reference purpose only.
ISO/IEC 27000 describes the overview and the vocabulary of information security management systems, referencing the information security management system family of standards (includ-ing ISO/IEC 27003[2], ISO/IEC 27004[3] and ISO/IEC 27005[4]), with related terms and defini-tions.
NEW QUESTION # 143
ABC Ltd has enormous investment in facilities and machinery. It also employs skilled workforce. To be profitable, the company has to produce at massive quantity. Which sector does ABC Ltd belong to?
- A. Finance
- B. Manufacturing
- C. Retail
- D. Construction
- E. Agriculture
Answer: B
Explanation:
In the scenario, ABC Ltd has the following characteristics:
- Large investment in facilities and machinery
- Access to skilled workforce
- Mass production.
This company is a manufacturer. Manufacturing is an industry that makes products from raw ma-terials by the use of manual labour or machinery and that is usually carried out systematically with a division of labour.
Manufacturing requires investment in machinery and access to a suitably skilled workforce as well as materials and components.
NEW QUESTION # 144
Which of these are advantages of using a conformance specification? Select TWO that apply.
- A. It enables supplier flexibility and product innovation
- B. It enables value-for-money solutions
- C. It forces consideration of actual product needs
- D. There is a smaller supplier base to select from
- E. It provides evidence of requirements if there is a dispute
Answer: C,E
NEW QUESTION # 145
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:
- A. Define the user requirements
- B. Build a design
- C. Prepare tendering documents
- D. Identify the IT system supplier
Answer: A
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:
LO 3, AC 3.2
NEW QUESTION # 146
Which of the following is the disadvantage of embedding standards in a specification?
- A. Standards are too static and discourage innovation
- B. Standards are too flexible and may cause ambiguity in the specification
- C. Embedding standards into specification requires enormous time and effort
- D. Standards do not improving buyer's bargaining power
Answer: A
Explanation:
"Standards are often produced by professional bodies (maybe national or international bodies). Standards tend to be stable for a period of time, therefore, they are likely to be static and discourage innovation." Reference:
LO 3, AC 3.1
NEW QUESTION # 147
Which of the following are main focuses of ISO 27001:2013 standard?
1. Confidentiality
2. Logistics
3. Process
4. Life cycle
- A. 2 and 3 only
- B. 2 and 4 only
- C. 3 and 4 only
- D. 1 and 3 only
Answer: D
Explanation:
This International Standard (ISO 27001:2013) has been prepared to provide requirements for establishing, implementing, maintaining and continually improving an information security management system. The adoption of an information security management system is a strategic decision for an organization. The establishment and implementation of an organization's information security management system is influenced by the organization's needs and objectives, security requirements, the organizational processes used and the size and structure of the organization. All of these influencing factors are expected to change over time.
The information security management system preserves the confidentiality, integrity and availability of information by applying a risk management process and gives confidence to interested parties that risks are adequately managed.
It is important that the information security management system is part of and integrated with the organization's processes and overall management structure and that information security is considered in the design of processes, information systems, and controls. It is expected that an information security management system implementation will be scaled in accordance with the needs of the organization.
This International Standard can be used by internal and external parties to assess the organization's ability to meet the organization's own information security requirements.
The order in which requirements are presented in this International Standard does not reflect their importance or imply the order in which they are to be implemented. The list items are enumerated for reference purpose only.
ISO/IEC 27000 describes the overview and the vocabulary of information security management systems, referencing the information security management system family of standards (includ-ing ISO/IEC 27003[2], ISO/IEC 27004[3] and ISO/IEC 27005[4]), with related terms and defini-tions.
Reference:
- ISO/IEC 27001:2013 Information technology - Security techniques - Information security management systems - Requirements LO 3, AC 3.1
NEW QUESTION # 148
Which of the following statements is the best definition of 'value engineering?
- A. Value achieved by an engineering department
- B. Producing good value products right first time.
- C. Building value into a new product from design stage onwards
- D. Analysing perceived value after the product is available for sale
Answer: C
Explanation:
Value Engineering (VE) is concerned with new products. It is applied during product development. The focus is on reducing costs, improving function or both, by way of teamwork-based product evaluation and analysis. This takes place before any capital is invested in tooling, plant or equipment.
This is very significant, because according to many reports, up to 80% of a product's costs (throughout the rest of its life-cycle), are locked in at the design development stage. This is under-standable when you consider the design of any product determines many factors, such as tooling, plant and equipment, labour and skills, training costs, materials, shipping, installation, maintenance, as well as decommissioning and recycle costs.
LO 3, AC 3.4
NEW QUESTION # 149
FSB Group is developing a specification for the construction of a new building. The project stakeholders need the specification to set specific criteria to ensure fair labour practices and local employment opportunities are prioritised. Which of the following describes this type of sustainability criteria?
- A. Profit Sustainability
- B. Economic Sustainability
- C. Social Sustainability
- D. Environmental Sustainability
Answer: C
Explanation:
Detailed Explanation:Social sustainability focuses on ethical considerations like fair labour practices, inclusivity, and community development. By addressing these criteria, FSB Group aligns with responsible business practices. Reference: CIPS Level 4, Sustainability in Procurement.
NEW QUESTION # 150
Procurement should work closely with colleagues in accounts when creating an annual budget. This is because the budget will help the company ...
- A. Process supplier invoices quicker
- B. Plan its functional strategy for the next year
- C. Define terms and conditions of the contract
- D. Plan its finances for the next year
Answer: D
NEW QUESTION # 151
Which of the following statements is true about product life cycle?
- A. Sale volume will be the highest at the introductory stage
- B. If price skimming is adopted, the supplier will gradually lower the price when it attracts enough buyers
- C. The price remains static throughout the product life cycle
- D. The price competition will be the fiercest at the declining stage because the inventories are plentiful
Answer: B
Explanation:
A product's life cycle portrays the length of time a product is in the market; from the beginning of its introduction to consumers until it is removed from shelves and phased out. This cycle is often divided into four phases: introduction, growth, maturity, and decline. Depending on the relevant stage, companies will set an according strategy to achieve their desired targets. Pricing and promotions play a pivotal role in the design of these product life cycle strategies. Therefore, product life cycle management, the process of strategizing ways to continuously support and maintain a product, is seen more and more at pricing mature players and could bring real value to your company.
Introduction phase: during the introduction phase, the new product is introduced to consumers and a substantial amount of money is invested in advertising and marketing campaigns to bring awareness of the product to the customer. In this phase competition is low, but units sold will also correspondingly be quite low as well still. Consumers need to be convinced of the benefits of the product. Lots of articles never make it beyond this phase: e.g. 3D televisions.
Profits in the introduction stage tend to be low or there may even be a loss. This is because the cost of marketing to establish product awareness plus distribution costs can be far higher than the revenue received from sales. This can be offset to a degree by 'skimming' price in the very early stages. Skimming a price is where a business charges the highest price that it thinks the market will bear initially until product recognition brings in other buyers and then the price drop.
Growth phase: when it's shown there is proven demand for the product and consumers are buying it, the next stage will be its growth phase. This phase is punctuated by increasing demand, increas-ing production and an increase in the competitive landscape. Availability of the product is under-standably paramount during this phase, going out of stock is unthinkable during the growth period.
The electric car is an example of a product that is currently in the midst of the growth phase.
Maturity phase: normally the maturity phase is the phase that is characterized by declining production and marketing costs due to synergies and economies of scale. During this phase the first signs of market saturation occur and most consumers or households already own the product. Sales numbers still grow, but at a slower pace. In the maturity phase, price competition becomes intense, a broader range of distribution channels are deployed and competition is more focused on competitive pricing, marginal product differences or the difference in services or promotions. This period in the PLC is often said to be the 'cash-cow period'.
That being said, the idea of 'Maturity from the start' also exists. This occurs when a brand decides to launch a product extension and directly follows up the maturity phase of an earlier version of the product. For example, the iPhoneX followed up from the 'normal' iPhone-series and therefore the iPhoneX never had to undergo the introduction or growth phase, but immediately started in its maturity phase.
Decline phase: the final phase of the PLC is entered once the product loses market share to other, newer products and the competitive landscape becomes too hard to survive. During this stage, de-mand declines, companies are left with overstock with prices and margins getting depressed. Therefore retailers and brands normally start stunting with promotions during the decline of the PLC to sell their final stock.
A well-known example of a product that has been through the decline phase were the Nokia phones; sales results dramatically decreased after the introduction of the iPhone.
NEW QUESTION # 152
Which of the following are typical examples of secondary sources of market data? Select TWO that apply.
- A. Published market analysis
- B. Communication with suppliers
- C. Supplier marketing publications
- D. Price comparison websites
- E. Trade fairs and exhibitions
Answer: A,D
NEW QUESTION # 153
What issue is a buyer most likely to experience if the technical specification sent to suppliers as part of a Request For Quotation (RFQ) is insufficient?
- A. The buyer will receive costs from suppliers in different formats, which will make it difficult to compare costs on a like-for-like basis
- B. The buyer will receive quotes at different times from suppliers, which will require greater coordination with other members of the sourcing team
- C. The buyer will not be able to compare different suppliers' costs directly as the suppliers will have had to make assumptions on the specification
- D. The buyer will need to work with their finance colleagues and business stakeholders to adjust the budget available for the project
Answer: C
NEW QUESTION # 154
A hospital extensively spends on medical and implantable devices, medical, surgical and pharma-ceutical supplies, costs of supplies related to buildings and maintenance operations. Hospital's procurement manager suggests that the hospital has an opportunity to reduce operational costs by reducing variation of medical devices and pharmaceutical supplies. Which of the following best describe the procurement manager's suggestion?
- A. Process re-engineering
- B. Product standardisation
- C. Process standardisation
- D. Value engineering
Answer: B
Explanation:
The hospital is buying too many product variants. This may cause bottleneck in its operation and increase operational expense. So procurement manager suggests to standardise products.
This is an example of the benefits of product standardisation:
Saint Thomas Health, a system of 5 hospitals, needed to find a way to reduce costs. They were purchasing different SKUs for products that were very similar, in this case, labels. They bought label rolls for $3 and a very similar product for $1. This oversight in product purchases impacted the overall costs of the system.
After partnering with a sole source vendor it was able to save $200,000 over a four year span. They accomplished this simply by standardizing label products. These savings, however, only account for the immediate savings from standardizing products. The saving that are not factored into that number are the savings from soft or hidden costs.
On a national scale, hospitals lose millions of dollars per year in hidden expenses due to missed opportunities for cost containment and incorporation. Some of the hidden elements that increase overall costs for a healthcare provider include the following:
- Redundant purchasing
- Freight
- Excessive purchase orders
- Multiple vendor relations
- Low efficiency
- Joint commission fines
- HAI
By implementing product standardization, hospitals and health systems reduce vendors, are able to reduce SKUs, purchase orders, inefficiency, freight costs, fines, and off-contract spending. All of this adds up to large savings for the organization as a whole.
96% of the respondents in the survey agree that consolidating suppliers and standardizing product purchases across organization would reduce hidden costs.
NEW QUESTION # 155
ABC Ltd has recently set up a stationery contract with a large stationery provider, obtaining fixed prices on core stationery items. The brochures have been distributed within ABC Ltd and one of the key users wants to order a corner desk and office chair from the brochure. Is this within scope?
- A. No, because the corner desk wouldn't match existing furniture
- B. No, because the contract is for stationery only and not furniture
- C. Yes, because the office equipment is in the brochure and must be covered
- D. Yes, because the contract is with the company and not just stationery
Answer: B
NEW QUESTION # 156
A company has installed a new piece of capital equipment but needs to arrange a maintenance contract for three years. The company wants to know as accurately as possible what this price will be for the full contract. What would be an appropriate type of pricing mechanism to use when asking suppliers to quote prices?
- A. Fixed price with adjustment for inflation
- B. Cost plus fixed fee
- C. Cost plus percentage fee
- D. Fixed price
Answer: A
Explanation:
Detailed Explanation:A fixed price with adjustment for inflation provides cost predictability while accounting for potential increases due to inflation. This strikes a balance between fixed costs and market realities. Reference: CIPS Level 4, Pricing Strategies.
NEW QUESTION # 157
Halfords is a major bicycle and car parts retailer with long history in the market. Its suppliers are plentiful and there is no threat of forward integration. Some other smaller retailers are applying 3D-printing technology to make personalized bicycle parts but their market share is relatively low. 3D-printing technology is an example of which competitive force?
- A. Rivalry within the industry
- B. New entrants may enter the market
- C. Threat of substitute
- D. Bargaining power of buyer
Answer: C
Explanation:
3D-printed parts can replace traditional metal parts. They are also more easily customised to fit customer's needs. This technology is an example of threat of substitute in Porter's Five Forces model.
Substitute goods or services that can be used in place of a company's products or services pose a threat.
Companies that produce goods or services for which there are no close substitutes will have more power to increase prices and lock in favorable terms. When close substitutes are available, customers will have the option to forgo buying a company's product, and a company's power can be weakened.
NEW QUESTION # 158
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