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CIPS L4M2 exam is an excellent choice for procurement professionals who are looking to take their career to the next level. Whether you are looking to progress within your current organisation, or to explore new opportunities in the industry, this qualification will provide you with the knowledge and skills necessary to succeed. With its focus on defining business needs and developing effective procurement strategies, the CIPS L4M2 exam is an essential qualification for anyone working in procurement and supply chain management.
NEW QUESTION # 142
Due to the growth of consumer electronics market, semiconductor industry develops exponentially. However, the industry is dominated by a dozens of manufacturer. Chipset need to be built in factories with highly controlled environments. New chip factories cost billions of dollars and can take two years to build. Right now, factories are running at full capacity, which produce almost perfect yields, meaning basic chipset can be made for less than a dollar and more advanced versions for not much more. What are the barriers to new entrants in the semiconductor industry?
1. Poor industry growth
2. High set-up costs
3. Economies of scale
4. Low switching costs
- A. 3 and 4 only
- B. 2 and 3 only
- C. 2 and 4 only
- D. 1 and 4 only
Answer: B
Explanation:
Barriers to entry is an economics and business term describing factors that can prevent or impede newcomers into a market or industry sector, and so limit competition. The most obvious barriers to entry are high start-up costs and regulatory hurdles which include the need for new companies to obtain licenses or regulatory clearance before operation. Also, industries heavily regulated by the government are usually the most difficult to penetrate. Other forms of barrier to entry that prevent new competitors from easily entering a business sector include special tax benefits to existing firms, patent protections, strong brand identity, customer loyalty, and high customer switching costs.
In the scenario, the new factory for chipset manufacturing costs billions of dollars, which indicates high set-up costs. Also, the incumbent manufacturers have reached economies of scale, allowing them to produce the components at optimal price.
The above descriptions are compiled from recent reports on current chip shortage (2021).
NEW QUESTION # 143
Buyers can ascertain the prices by examining information provided by primary and secondary sources of market data. Which of the following is a secondary source of market data?
- A. Historical records of supplier prices on the buyer's database
- B. Price brochures provided by the supplier's sales team
- C. Suppliers' prices provided on the buyer's request for quotation
- D. Supplier prices provided on price comparison websites
Answer: D
Explanation:
Detailed Explanation:Price comparison websites are secondary sources as they aggregate data collected from multiple suppliers. Primary sources (like RFQs and brochures) come directly from the supplier.
Reference: CIPS Level 4, Market Data Analysis.
NEW QUESTION # 144
Daytona Ltd is developing a new product which is more environmental friendly. Though the objectives are set, the project team has no idea on which functions will be customers' favourites. Which of the following will help them decide the 'should-have' functions of the new product?
- A. Thomas-Kilmann model
- B. Kano model
- C. Taguchi method
- D. Six Sigma
Answer: B
Explanation:
The Kano model is useful in gaining a thorough understanding of a customer's needs. You can translate and transform the resulting verbatims using the voice of the customer table that, subse-quently, becomes an excellent input as the whatsin a quality function deployment (QFD) House of Quality.
The model involves two dimensions:
Achievement (the horizontal axis), which goes from the supplier didn't do it at all to the supplier did it very well.
Satisfaction (the vertical axis), which goes from total dissatisfaction with the product or service to total satisfaction with the product or service.
Dr. Noriaki Kano isolated and identified three levels of customer expectations: that is, what it takes to positively impact customer satisfaction. The figure below portrays the three levels of need: expected, normal, and exciting.
The Thomas-Kilmann Conflict Mode Instrument (TKI) is a conflict style inventory, which is a tool developed to measure an individual's response to conflict situations.
Genichi Taguchi, a Japanese engineer, proposed several approaches to experimental designs that are sometimes called "Taguchi Methods." These methods utilize two-, three-, and mixed-level fractional factorial designs. Large screening designs seem to be particularly favored by Taguchi adherents.
Six Sigma is a method that provides organizations tools to improve the capability of their business processes. This increase in performance and decrease in process variation helps lead to defect re-duction and improvement in profits, employee morale, and quality of products or services.
Source:
- CIPS study guide page 171-172
- WHAT IS THE KANO MODEL?
LO 3, AC 3.4
NEW QUESTION # 145
What would provide the best method to ensure a car manufacturer can make adjustments to vehicle production to meet future market demands, such as the inclusion of an additional battery to make a hybrid model?
- A. Adequate labour contracts in place to meet changing demand
- B. Correct product specification in place to allow variations
- C. Investment in innovation to predict future trends
- D. Investment in versatile robotics to meet changing demand
Answer: D
NEW QUESTION # 146
Andrew is responsible for procurement of capital assets at Lumber Ltd. He is devising new business case for the purchase of a new band saw. The purchase price of the saw is $50,000. Andrew estimates that the machine will generate $10,000 per year of net cash flow. What is the payback period of this band saw?
- A. 3 years
- B. 4 years
- C. 5 years
- D. 10 years
Answer: C
Explanation:
Payback period is the time in which the initial outlay of an investment is expected to be recovered through the cash inflows generated by the investment. It is one of the simplest investment apprais-al techniques.
Since cash flow estimates are quite accurate for periods in the near future and relatively inaccurate for periods in distant future due to economic and operational uncertainties, payback period is an indicator of risk inherent in a project because it takes initial inflows into account and ignores the cash flows after the point at which the initial investment is recovered.
The formula to calculate the payback period of an investment depends on whether the periodic cash inflows from the project are even or uneven.
If the cash inflows are even (such as for investments in annuities), the formula to calculate payback period is:
Payback Period = Initial Investment / Net Cash Flow per Period
When cash inflows are uneven, we need to calculate the cumulative net cash flow for each period and then use the following formula:
Payback Period =A + (B/C)
Where,
A is the last period number with a negative cumulative cash flow;
B is the absolute value (i.e. value without negative sign) of cumulative net cash flow at the end of the period A; and C is the total cash inflow during the period following period A Cumulative net cash flow is the sum of inflows to date, minus the initial outflow.
NEW QUESTION # 147
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?
- A. Total cost of goods
- B. Timescales of delivery
- C. Quality of materials
- D. Social impact
Answer: A
NEW QUESTION # 148
Which of the following are likely to be disadvantages of using outcome-based specifications? Select THREE that apply
- A. Responsibility for product failure falling to buyer
- B. Time consuming to produce
- C. Ambiguity of outcome
- D. Long time delay between action and result
- E. Difficulty to measure performance
- F. Stifling innovation
Answer: C,D,E
Explanation:
An Outcome Based Specification (OBS) focuses on the desired outcome of a service in business terms, rather than a detailed technical specification of how the service is to be provided; this allows providers scope to propose innovative solutions that might not have occurred to the procurement team. Outcome should be distinguished from output, which is the measurable results of a set of inputs. The example of difference between outcome and output is written at the bottom of page 123 in the study guide.
Outcomes should be the starting point in making new specification. However, using outcome-based specification has some setbacks:
- First, it is not easy to measure the outcomes. Usually, outcome of a project is a statement like 'increase customer satisfaction', 'maintain ambient temperature' or 'provide a convenient way to do something'. They are not easy to measure as output.
- Second, sometimes the desired outcomes require time to be materialised
- Third, outcomes can be ambiguous
Reference:
LO3, AC 3.1
NEW QUESTION # 149
Warwickshire Ambulance Service (WAS) is an NHS Trust. It operates throughout Warwickshire and the neighbouring areas. It has three core areas of activity, namely the provision of Emergency Ambulance Services, routine Patient Transport Services, and Logistic Medical Services. The agency is working towards higher service level through benchmarking. Which of the following is the benefit of benchmarking to WAS?
- A. It will help WAS analyse the competitors in the industry
- B. It helps WAS identify better ways to deliver service through a cookbook process
- C. It will help WAS create performance standards derived from an analysis of the best in business
- D. Benchmarking is a panacea for all WAS's problems
Answer: C
Explanation:
Benchmarking is 'the pursuit by organisations of enhanced performance by learning from the suc-cessful practices of others. Benchmarking is a continuous activity; key internal processes are adjusted, performance is monitored, new comparisons are made with the current best performers and further changes are explored. Where information about these key processes is obtained through a co-operative partnership with specific organisations (rather than via a third party such as an independently-maintained database), there is an expectation of mutual benefit over a period of time.
Reference:
- The Department of Navy Benchmarking Handbook: A system view
- CIPS study guide page 49-51
LO 1, AC 1.3
NEW QUESTION # 150
A CPO is analyzing whole life cycle costing of a machinery. He realises that cost elements are not specific but come from a range of values. Which whole-life costing model should the CPO use to get the most accurate total cost of ownership?
- A. Optimisation models
- B. Decision support models
- C. Kraljic's preferencing model
- D. Simulation models
Answer: D
Explanation:
There are three basic groups of WLC (whole life-cycle costing) models:
- Decision support models
- Simulation models: Life cycle cost is an essential approach to decide on alternative rehabilitation strategies for infrastructure systems. Monte Carlo simulation approach is used to develop a stochastic life cycle cost (SLCC) model and methodology in order to compare different rehabilitation scenarios/alternatives for infrastructures, such as water mains. This method assumes that some inputs are randomly variable in a range of values.
- Optimisation models
NEW QUESTION # 151
What are the direct risks that can result from procurement receiving inadequate specifications from a research and development department?
- A. Under or over statement of need
- B. Under or over delivery of goods
- C. Increased labour costs
- D. Increased business size
Answer: B
NEW QUESTION # 152
Which of the following bodies provides standards for the products and services in the US?
- A. BSI
- B. ISO
- C. ANSI
- D. AFNOR
Answer: C
Explanation:
ANSI is the American National Standards Institute. It is responsible for providing technical stand-ards in the US LO 3, AC 3.1
NEW QUESTION # 153
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. Manufacturing
- B. Retail
- C. Construction
- D. Agriculture
- E. Finance
Answer: A
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.
Reference:
- CIPS study guide page 74-76
- manufacturing | Definition, Types, & Facts | Britannica
LO 2, AC 2.1
NEW QUESTION # 154
When should procurement professional tolerate a risk?
- A. When the risk may disrupt the production
- B. When the risk breaks the relationship with the strategic supplier
- C. When the risk imposes an existential threat
- D. When the risk causes some trivial annoyance
Answer: D
Explanation:
Risk control is the process by which an organization reduces the likelihood of a risk event occurring or mitigates the effects that risk should it occur. Our preferred way to determine your risk control strategy is to use the four T's Process:
Transferring Risk can be achieved through the use of various forms of insurance, or the payment to third parties who are prepared to take the risk on behalf of the organization Tolerating Risk is where no action is taken to mitigate or reduce a risk. This may be because the cost of instituting risk reduction or mitigation activity is not cost-effective or the risks of impact are at so low that they are deemed acceptable to the business (such as some trivial annoyance). Even when these risks are tolerated they should be monitored because future changes may make it no longer tolerable.
Treating Risk is a method of controlling risk through actions that reduce the likelihood of the risk occurring or minimize its impact prior to its occurrence. Also, there are contingent measures that can be developed to reduce the impact of an event once it has occurred.
Terminating Risk is the simplest and most often ignored method of dealing with risk. It is the ap-proach that should be most favored where possible and simply involves risk elimination. This can be done by altering an inherently risky process or practice to remove the risk. The same can be used when reviewing practices and processes in all areas of the business.
If an item presents a risk and can be changed or removed without it materially affecting the busi-ness, then removing the risk should be the first option considered; rather than attempting the treat, tolerate or transfer it.
NEW QUESTION # 155
A procurement manager consolidates the company expense on printing and office supplies into broader range of spend category. Other senior managers are concerned that it may increase company's spend. Is that concern justified?
- A. Yes, because the consolidation may create a large contract that costs more than placing each purchase order
- B. No, because the consolidation will help the supplier to shorten deliver time.
- C. No, because the broader range of spend category can increase the value of the contract and the buyer may get volume discount
- D. Yes, because the suppliers can't provide a broader range of products and they will fail to deliver
Answer: C
Explanation:
Printing and office supplies are often considered as low risk, low value items. Consolidation low value, low risk items into a broader range will dramatically increases the value of the contract and leverage of buying organisation in the negotiation.
Reference:
LO 1, AC 1.1
NEW QUESTION # 156
GSC Ltd is a manufacturer of car parts. To accommodate growing demands of electric cars, the company is developing a new component which requires different type of steel. The project team estimates that the component will be ready for production in 1.5 years. Until then, they need to keep the production busy.
After checking the inventory records, the production team sees that the company has 3 months of stock. The lead time for each batch is two months. Which of the following should be a priority ac-tion of the company?
- A. Standardise the specification
- B. Create new specification to current supplier
- C. Make a call-off order to current supplier
- D. Create new specification to new supplier
Answer: C
Explanation:
The scenario is very long with many distracting data. Students need to read carefully and use their experience to solve this problem.
The company is developing a new component which requires different type of material. But this component will not be available for mass production in 1.5 years. This means the company still needs to produce the current components with current materials until the development is finished. They must continue purchase the materials from current supplier through call-off orders. This situation is an example of straight re-buy.
Reference:
LO 1, AC 1.1
NEW QUESTION # 157
After a project, the procurement team at CLK Ltd meets up and summarises on the performance. They see that they actually spent $5,000 less than planned budget. The team tries to identifies why there is such difference. This activity is known as...?
- A. Cash flow analysis
- B. Variance analysis
- C. Cost modelling
- D. Rolling budget
Answer: B
Explanation:
The procurement team in the scenario is analysing the difference between the plan and actual spend. This activity is known as variance analysis. The sum of all variances gives a picture of the overall over-performance or under-performance for a particular reporting period. For each item, companies assess their favorability by comparing actual costs to standard costs in the industry.
For example, if the actual cost is lower than the standard cost for raw materials, assuming the same volume of materials, it would lead to a favorable price variance (i.e., cost savings). However, if the standard quantity was 10,000 pieces of material and 15,000 pieces were required in production, this would be an unfavorable quantity variance because more materials were used than anticipated.
Reference:
- CIPS study guide page 57-58
- Variance Analysis - Learn How to Calculate and Analyze Variances (corporatefinanceinsti-tute.com) LO 1, AC 1.4
NEW QUESTION # 158
Which of the following roles are relevant to a 'services' market?
* A data researcher
* A warehouse manager
* A marketing consultant
* A logistics director
- A. 1 and 2 only
- B. 2 and 3 only
- C. 3 and 4 only
- D. 1 and 3 only
Answer: D
Explanation:
Detailed Explanation:Roles such as a data researcher and marketing consultant are directly tied to the provision of services, which are intangible and often knowledge-driven. Warehouse managers and logistics directors are more relevant to goods markets. Reference: CIPS Level 4, Services Procurement.
NEW QUESTION # 159
A procurement manager has noticed that profitability within a market has increased steadily over the years. In addition, the market is relatively easy to enter, and demand within the market is predicted to remain high.
Which of the following is likely to happen in this particular market as a direct consequence of these factors?
- A. The market will attract new entrants
- B. The regulator will intervene and establish pricing controls
- C. Suppliers will invest more heavily in technology
- D. Buyers will switch to a different market
Answer: A
NEW QUESTION # 160
What is the output of regression analysis?
- A. Forecasting process
- B. Independent variables
- C. Dependent variables
- D. Line of best fit
Answer: D
Explanation:
Regression refers to a quantitative measure of the relationship between one or more independent variables and a resulting dependent variable. Regression is of use to professionals in a wide range of fields from science and public service to financial analysis.
To perform a regression analysis, a statistician collects a set of data points, each including a com-plete set of dependent and independent variables. For example, the dependent variable could be a firm's stock price and the independent variables could be the Standard and Poor's 500 index and the national unemployment rate, assuming that the stock is not listed in the S&P 500. The sample set could be each of these three data sets for the past 20 years.
On a chart, these data points would appear as scatter plot, a set of points that may or may not appear to be organized along any line. If a linear pattern is apparent, it may be possible to sketch a line of best fit that minimizes the distance of those points from that line. If no organizing axis is visually apparent, regression analysis can generate a line based on the least squares method. This method builds the line which minimizes the squared distance of each point from the line of best fit.
Line of best fit is one of the most important outputs of regression analysis.
Reference:
- CIPS study guide page 99-100
- Line Of Best Fit (investopedia.com)
LO 2, AC 2.3
NEW QUESTION # 161
Royal Navy is preparing a through-life contract. They put to the contract a term on rectification of operational defects and planning and delivery of Fleet Time Support Periods. Which part of through-life requirement does this term belong to?
- A. Installation
- B. In-service support
- C. Manufacture
- D. Customer support
Answer: B
Explanation:
There are 6 main components of the through-life requirements of an asset: Design, Manufacture, Installation, In-service support, Decommission and disposal and Customer support.
Rectification of operational defects and planning and delivery of Fleet Time Support Periods are maintenance activities which belong to in-service support. You may have chosen Customer support. However, in through- life asset management context, customer support does not include maintenance services. Instead, it is the services that go along the stages of asset life. It may include consulting, communication and information exchange.
Diagram, table Description automatically generated
Source: Andrew Graves
NEW QUESTION # 162
Which of the following specific markets engage in creation, liquidation and change of ownership of stock?
- A. Financial
- B. Retail
- C. Construction
- D. Agriculture
- E. Manufacturing
Answer: A
Explanation:
According to Investopedia, the financial services sector provides financial services to people and corporations. This segment of the economy is made up of a variety of financial firms includ-ing banks, investment houses, lenders, finance companies, real estate brokers, and insurance com-panies. As noted above, the financial services industry is probably the most important sector of the economy, leading the world in terms of earnings and equity market capitalization. Large conglomerates dominate this sector, but it also includes a diverse range of smaller companies.
According to the finance and development department of the International Monetary Fund (IMF), financial services are the processes by which consumers or businesses acquire financial goods. For example, a payment system provider offers a financial service when it accepts and transfers funds between payers and recipients. This includes accounts settled through credit and debit cards, checks, and electronic funds transfers.
Companies in the financial services industry manage money. For instance, a financial advi-sor manages assets and offers advice on behalf of a client. The advisor does not directly provide investments or any other product, rather, they facilitate the movement of funds between savers and the issuers of securities and other instruments. This service is a temporary task rather than a tangible asset.
Financial goods, on the other hand, are not tasks. They are things. A mortgage loan may seem like a service, but it's actually a product that lasts beyond the initial provision. Stocks, bonds, loans, commodity assets, real estate, and insurance policies are examples of financial goods.
Reference:
LO 2, AC 2.1
NEW QUESTION # 163
A garment manufacturer supplies global retailers with t-shirts, shirts, and linen trousers. Because of currency fluctuations, the manufacturer is aware that they must control their direct costs in order to ensure profits. Which of the following is a direct cost for the garment manufacturer?
- A. Utilities cost
- B. Office staff payroll
- C. Cotton fabric
- D. Facilities rent
Answer: C
Explanation:
Detailed Explanation:Cotton fabric is a direct cost because it is directly attributable to the production of the garments. Costs like rent, utilities, and payroll are indirect costs associated with running the business.
Reference: CIPS Level 4, Cost Categorization in Procurement.
NEW QUESTION # 164
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CIPS L4M2 exam covers a wide range of topics, including the importance of stakeholder analysis, requirements gathering techniques, and how to use various tools and techniques to identify and prioritize business needs. Candidates will also be tested on their ability to create and manage project plans, as well as their knowledge of risk management and change management.
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