CIPS Category Management L5M6 Exam Practice Test

Answer : D

This situation represents a Threat within SWOT analysis. SWOT distinguishes between internal and external factors. Strengths and weaknesses are internal to the organisation, while opportunities and threats are external.

Here, the short-term spike in demand is external to Callie's business. It is also potentially harmful because increased competition for raw materials [rubber, metal, etc.] can lead to higher prices, longer lead times, and supply shortages. Therefore, this is categorised as a threat.

It cannot be an opportunity, as the increase in demand benefits suppliers rather than Callie's firm. Nor is it a strength or weakness, as those describe factors within the company such as production capabilities or financial resources.

Using SWOT in category management allows managers to anticipate and mitigate external risks while leveraging internal strengths. Recognising this threat means Callie may develop strategies such as dual sourcing, supplier collaboration, or forward buying to reduce exposure.

[Ref: CIPS L5M6 Study Guide, p.122 -- SWOT analysis in category management]

Answer : D

Risk assessments in procurement often use a likelihood severity matrix. Risks are scored on scales from 1--5, and the scores are multiplied. A score of 2 indicates a minor risk with low impact and/or low probability. For comparison, risks with scores in the upper range (e.g., 20--25) are considered major risks that demand immediate mitigation. Minor risks, although not ignored, are often monitored rather than heavily resourced. This structured approach ensures procurement teams focus resources on the most significant threats while still maintaining oversight of low-level risks. By categorising risks this way, category managers create clarity for decision-makers and align procurement risk management with enterprise-wide frameworks.

Answer : A

This is a bottleneck item. According to the Kraljic Matrix, bottleneck items are characterized by high supply risk and low profit impact, which makes them difficult to source. Holding contingency stock is a recommended strategy for such items.

Answer : D

CIPS highlights that the review stage of the Procurement Cycle offers the greatest opportunity to add value. This is because it involves assessing whether objectives have been met, identifying lessons learned, and capturing continuous improvement opportunities. While specifying requirements and supplier selection are critical, the review stage ensures that outcomes are measured against expectations and future strategies are refined. For example, reviewing contract performance may reveal contract leakage or highlight areas where better supplier engagement could drive innovation. This feedback loop transforms procurement from a transactional process into a learning system. By institutionalising review mechanisms, organisations improve their resilience and ensure that procurement strategies evolve with business needs and market changes.

Answer : D

Kearney's 7 Step Strategic Sourcing Model provides a structured, step-by-step approach for managing sourcing activities. The steps include profiling the category, assessing the supply market, developing sourcing strategies, and implementing them. This model ensures that sourcing is systematic, evidence-based, and aligned with strategic objectives. Unlike tools such as the Kraljic Matrix, which classifies items by risk and impact, Kearney's model provides an end-to-end process framework for sourcing execution. Similarly, Pareto and Porter's 5 Forces are useful analytical tools but not procedural sourcing frameworks. For category managers, the Kearney Model is valuable because it emphasises cross-functional collaboration, data-driven decision-making, and continuous improvement. Its structured approach reduces risks of ad-hoc decision-making and ensures alignment with organisational goals. This is why it is a central feature of L5M6 study material and often tested in exams.

Answer : C

Items such as servers, hardware, and licences fall under the IT (Information Technology) category of spend. Categories are organised into direct and indirect spend, and IT is a common example of indirect spend, which includes goods and services that do not directly contribute to production but are essential to operations. IT spend is strategically important as it supports digital transformation, efficiency, and business continuity. Effective management of IT categories involves considering licensing agreements, hardware refresh cycles, cybersecurity, and vendor lock-in risks. Poor IT procurement strategies can lead to high costs, inefficiencies, and security vulnerabilities. Category managers in IT must also keep up with fast-changing technology markets, cloud adoption trends, and vendor consolidation. Recognising IT as a distinct category ensures that procurement strategies address unique risk factors and maximise value.

Answer : A

A Bull Industry is one that is experiencing strong growth, with positive demand and market expansion expected in the future. In financial terms, ''bull'' markets are characterised by optimism, rising investment, and business confidence.

For ABC Ltd, operating in a high-growth IT sector, this categorisation is appropriate because demand is projected to increase. This means opportunities exist for innovation, supplier partnerships, and long-term strategic sourcing.

By contrast:

Bear industries represent declining markets, where firms face shrinking demand.

Dog and Cow industries are not recognised terms within category management; they are distractors in this question.

Identifying whether an industry is in a bull or bear phase helps Category Managers assess market risks, supplier relationships, and investment priorities.

[Ref: CIPS L5M6 Study Guide, p.150 -- Market classifications: bull vs bear industries]