CIPS Supplier Relationships L4M6 Exam Questions

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Total 243 questions
Question 1

The Pareto Principle is sometimes also known as what?



Answer : C

Pareto is the 80:20 rule- this can be adapted to talk about supplier relationships, where instead of having 2 categories there are now 3 (A B and C). CIPS use the terms Pareto and ABC interchangeably. See p.16 for further information


Question 2

What are the relationship characteristics of a Partnership?



Answer : C

Partnerships emphasize collaboration, shared risks, and mutual benefits. Unlike adversarial or transactional relationships, they focus on long-term goals and joint value creation.


Question 3

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?



Answer : A

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


Question 4

In a monopoly market, which of the following statements is true?



Answer : A

In a monopoly there is only one supplier- therefore their power is strong. Buyers in this market are price takers and their power is weak. There is generally a strong barrier to entry into a monopoly market so the threat of new entrants is low. There is no rivalry. There are many questions in the exam on Porter's 5 Forces - see p. 39


Question 5

A low-cost fashion retailer based in Europe is looking at adding value in their procurement activities. The retailer buys clothing for re-sale with a very small profit margin applied, relying on volume salesto make profit. Which of the following added-value approaches will be the most critical for the procurement team of the retailer to focus on with their supply chain?



Answer : B

For low-cost, high-volume business models, maintaining profitability depends on tightly controlled procurement costs. Price management is critical for ensuring competitive pricing while safeguarding slim margins. CIPS L4M6 highlights that effective cost management and price negotiation are essential in such scenarios.


Question 6

Which of the following is characteristic of an adversarial relationship?



Answer : D

In an adversarial relationship 'the outcome of the deal... is more important than maintaining the relationship over a long-term period' p.7. They can be characterised by poor communication and can be used for one-off purchases but be careful for words in answers such as 'only' and 'always', as these can be misleading; adversarial relationships aren't always for one-off purchases, and communication isn't always poor. The other answer is incorrect (price is more important) because it doesn't describe the relationship, which is what the question asked.


Question 7

A hospital awarded a contract to an IT consultancy to build and maintain their payroll and patient information systems. After a successful implementation, problems started to appear, with poor maintenance and accuracy of information, and slow response times from the supplier. After repeated problems, the decision to terminate the contract was agreed. Which of the following would be the priority legal concern for the hospital?



Answer : B

In IT consultancy contracts, the ownership and control of data, systems, and intellectual property rights (IPR) are critical. If the hospital terminates the supplier relationship, it must ensure continued access to patient records and payroll systems. Confidentiality and service quality are important, but IPR is the priority legal concern.


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