CIPS L4M2 Exam Practice Test Instant Access

Question 1

Which of the following are typically included in a conformance specification? Select TWO that apply.

AProduct functions

BProduct dimensions

CBrand name

DList of outcome

EPackaging requirements

Answer : B, E

A conformance specification is a specification that defines the technical and physical characteristics and/or measurements of a product, such as physical aspects (e.g. dimensions, colour, and surface finish), design details, material properties, energy requirements, processes, maintenance requirements and operational requirements.

On the other hand, performance specification typically includes list of output or outcome or func-tional requirements. Brand name can be a part of performance specification because brand is a re-minder of quality that customers remember. For example, when talking about Roll Royce, people will think about an elegant car.

LO 3, AC 3.1

Question 2

Dana is an automobile manufacturer. It has a new electrification strategy that aims at making eco-friendly electric pick-up trucks. To implement this strategy, the procurement department must source new categories of parts that make motors, sensors, solenoids and stators. He starts to analyse the market by identifying specific supply market segments for those parts and finding suppliers who have the best capabilities in those segment. He intends to segment the market based on specific features of the products. Which variable is used by Dana procurement manager to shape and manage supply market?

ABuyer segments

BChannel segments

CGeographical segments

DProduct segments

Answer : D

In sales and marketing, market segmentation is the process of trying to understand clusters of cus-tomers in terms of their buying behavior and their buying characteristics. There are some traditional segmentation approaches: geography, demography, types of industry and the benefits. Then there are newer segmentation approaches: behavioral, situational, and psychographic.

Procurement professionals can learn market segmentation from sales and marketing. Segmenting the market can help them to shape and manage the supply market effectively. According to Michael Porter, a market can be segment with array of products and buyers.

Source: Porter, Michael E.. Competitive Advantage: Creating and Sustaining Superior Performance (p. 234). Free Press. Kindle Edition.

In the scenario, the products that Dana needs to source is distinct in their features. The best way is to segment the market by product varieties.

LO 2, AC 2.1

Question 3

A buyer can use sources of information to review indirect costs associated with the manufacture of goods to support supplier negotiations. Is this statement true?

AYes, because indirect costs are always variable

BNo, because the only information available is for direct costs

CNo, because the supplier's quotation is the only source of information

DYes, because the buyer can understand the cost build-up of the goods

Answer : D

Analyzing both direct and indirect costs helps buyers understand cost structures and negotiate effectively. Indirect costs, like overheads, can be identified through supplier data and market benchmarks, aiding in cost transparency. Reference: CIPS Level 4, Cost Management and Negotiation.

Question 4

A state school has a procurement requirement to buy new art materials for the next school semester and needs to forecast purchases against its restricted budget. What would be the key business requirement in this purchasing decision?

ATotal cost of goods

BQuality of materials

CTimescales of delivery

DSocial impact

Answer : A

Question 5

A buying organisation may not have technical capability to produce a highly complex specification. Which of the following are sources of information that can be used to create the specification? Select TWO that apply

AStandard terms and conditions

BName cards

CIndustry standards

DSuppliers' know-how

EConstitution

Answer : C, D

If an organisation doesn't have capability to produce a technical specification, they can draft one based on standards or consulting the suppliers.

LO 3, AC 3.1

Question 6

To calculate the estimated annual payback period, a buyer will need to know the estimated annual savings made from implementing the option, and also the estimated costs. Is this statement correct?

AYes, the calculation will be the estimated total costs divided by the estimated annual savings

BNo, the calculation will be the estimated total costs multiplied by twelve

CYes, the calculation will be the estimated annual savings added to the estimated total costs

DNo, the calculation will be the estimated annual savings multiplied by the rate of inflation

Answer : A

Question 7

Thani Ltd is a fast growing logistics company with a fleet of 20 tractors. To meet Net Zero objec-tive, the company needs to electrify its fleet. Angelica is assigned to investigate the market price of electrifying services. After the investigation, she realises that the current market price is very expensive and unsustainable for her company. She decides to break down the costs before negotiating with the suppliers. Which internal stakeholders may help Angelica estimate the breakdown of costs? Select TWO that apply.

ASales and Marketing department

BEngineering department

CFinance department

DCommercial agency

ESuppliers

Answer : B, C

Despite of its importance, cost analysis is often a daunting task for procurement professionals. In order to analyse supplier's costs effectively, procurement may need the input from other depart-ments. Normally, technical (or engineering) department may help them to identify the direct costs of the product/service (how much material is required to make the product, or how many people are needed to perform the job, etc), while finance (or accounting) department may have ideas on the overheads of the supplier.

In this scenario, engineering department may provide insights on the components needed and the tasks to perform. Similarly, finance may know how much supplier pays for the overheads.

On the other hand, while commercial agency and suppliers are external stakeholders, Sales and marketing is unlikely to provide valuable information in this case.

LO 2, AC 2.3

CIPS Defining Business Needs L4M2 Exam Practice Test