CIPS LEVEL 4 MODULE 1 2026/2027 | COMPLETE STUDY GUIDE, PRACTICE
QUESTIONS & ANSWERS
The Purchasing process - ANS ✔✔1. Define Specification.
2. Select Supplier
3. Contract Agreement
4. Ordering
5. Expediting
6. Evaluation Follow up
Definition of Procurement & Supply - ANS ✔✔recognition of the fact that the purchasing
function has a role in not just "buying inputs" but in "securing supply"
Direct Costs - ANS ✔✔These are costs which can be identified directly with the production of a
good or service; e.g. raw materials.
Usually strategic or leverae suppliers
Indirect Costs - ANS ✔✔These are costs which cannot be matched against each product
because they need to be paid whether or not the production of good or services takes place;
e.g. rent on the premises.
Kraljic Matrix - ANS ✔✔A tool for portfolio analysis: a four-box matrix that reflects the
segmentation of spend based on an assessment of the value of the spend relative to the market
risk to acquire
1. Leverage Suppliers
2. Strategic Suppliers
3. Routine Suppliers
4. Bottleneck Suppliers
,CAPEX is - ANS ✔✔1. Capital expenditures are for major purchases that will be used in the
future.
2. The life of these purchases extends beyond the current accounting period in which they were
purchased.
3. Because these costs can only be recovered over time through depreciation, companies
ordinarily budget for 4. CAPEX purchases separately from preparing an operational budget.
OPEX - ANS ✔✔Operating expenses are the costs for a company to run its business operations
on a daily basis.
CAPEX - ANS ✔✔1. Useful beyond its curent year
2. Lump sum up front
3. 3-10 year accounting lifespan for depreciaiton
4. Listed as preprty or equipment
5. Tax deducted as asset depreciated
Name the 13 stages of the procurement cycle - ANS ✔✔1. Understand the need.
2. Market Commodity options.
3. Develop Stratgey/ Plan.
4. Pre-procurement / market test.
5. Develop required documentation.
6. Supplier Selection.
7. Issue invitation to tender.
8. Bid / tender evaluation.
9. Contract Award.
10. Warehouse logistics & receipt.
,11. Contract performance review and continuous improvement.
12. Supplier relationships / contract management.
13. Asset management / end of life.
Scope of Procurement - ANS ✔✔1. Contributor of Added Value
2. Manages cost of procured materials & services on behalf of an organisation
3. Helps manage inventory
4. Works alongside logistics partner function
5. Helps mange quality in procurement
6. Manages delivery performance
7. Manages & controls waste in the supply chain
Porters Value Chain - ANS ✔✔Primary - Inbound Logistics, Operations, Outbound Logistics,
Marketing & sales, Services
Support Activities - Firm Infrastructure, HR Management, Technology, Procurement
Action points for CAPEX purchasing - ANS ✔✔1. Documentation or guidline and standard
procedure
2. Cross-functional team for appraisal & evaluation
3. Appropriate project evaluation methology
4. Process automation (E-platform)
5. TCO / Life cycle costing
6. Regular review for better control & monitoring
5 rights of procurement - ANS ✔✔Right Quality
Right Quantity
, Right Price
Right Place
Right Time
Right Quality - ANS ✔✔goods which are of satisfactory quality and fit for their intended purpose
e.g. ensuring an accurate specification of the requirement and its quality standards.
Right Quantity - ANS ✔✔sufficient to meet demand and maintain service levels while
minimising stock holding e.g. by ensuring that there is accurate demand forecasting and
efficient inventory management.
Right Place - ANS ✔✔goods delivered to the appropriate delivery point, packaged and
transported so as to secure their safe arrival in good condition e.g. by including transport
instructions including packaging requirements as part of purchase orders.
Right Time - ANS ✔✔delivery of goods at the right time to meet demand, i.e. not too late but
not so early as to incur unnecessary inventory costs e.g. by ensuring accurate demand
management, placing orders in time for suppliers to provide timely delivery and ensuring that
suppliers are aware of delivery requirements.
Right Price - ANS ✔✔securing all of the above at a reasonable, fair, competitive and affordable
price. Ideally, minimising procurement costs in order to maximise profit e.g. by carrying out
price and supplier cost analysis and/or by carrying out competitive tendering and negotiation.
The 'right' price is one that represents good value for money.
Life Cycle cost (LLC) - ANS ✔✔The total cost throughout its life including planning, design,
acquisition and support costs and any other costs directly attributable to owning or using the
asset".
Total Cost of Ownership (TCO) - ANS ✔✔1. TCA
QUESTIONS & ANSWERS
The Purchasing process - ANS ✔✔1. Define Specification.
2. Select Supplier
3. Contract Agreement
4. Ordering
5. Expediting
6. Evaluation Follow up
Definition of Procurement & Supply - ANS ✔✔recognition of the fact that the purchasing
function has a role in not just "buying inputs" but in "securing supply"
Direct Costs - ANS ✔✔These are costs which can be identified directly with the production of a
good or service; e.g. raw materials.
Usually strategic or leverae suppliers
Indirect Costs - ANS ✔✔These are costs which cannot be matched against each product
because they need to be paid whether or not the production of good or services takes place;
e.g. rent on the premises.
Kraljic Matrix - ANS ✔✔A tool for portfolio analysis: a four-box matrix that reflects the
segmentation of spend based on an assessment of the value of the spend relative to the market
risk to acquire
1. Leverage Suppliers
2. Strategic Suppliers
3. Routine Suppliers
4. Bottleneck Suppliers
,CAPEX is - ANS ✔✔1. Capital expenditures are for major purchases that will be used in the
future.
2. The life of these purchases extends beyond the current accounting period in which they were
purchased.
3. Because these costs can only be recovered over time through depreciation, companies
ordinarily budget for 4. CAPEX purchases separately from preparing an operational budget.
OPEX - ANS ✔✔Operating expenses are the costs for a company to run its business operations
on a daily basis.
CAPEX - ANS ✔✔1. Useful beyond its curent year
2. Lump sum up front
3. 3-10 year accounting lifespan for depreciaiton
4. Listed as preprty or equipment
5. Tax deducted as asset depreciated
Name the 13 stages of the procurement cycle - ANS ✔✔1. Understand the need.
2. Market Commodity options.
3. Develop Stratgey/ Plan.
4. Pre-procurement / market test.
5. Develop required documentation.
6. Supplier Selection.
7. Issue invitation to tender.
8. Bid / tender evaluation.
9. Contract Award.
10. Warehouse logistics & receipt.
,11. Contract performance review and continuous improvement.
12. Supplier relationships / contract management.
13. Asset management / end of life.
Scope of Procurement - ANS ✔✔1. Contributor of Added Value
2. Manages cost of procured materials & services on behalf of an organisation
3. Helps manage inventory
4. Works alongside logistics partner function
5. Helps mange quality in procurement
6. Manages delivery performance
7. Manages & controls waste in the supply chain
Porters Value Chain - ANS ✔✔Primary - Inbound Logistics, Operations, Outbound Logistics,
Marketing & sales, Services
Support Activities - Firm Infrastructure, HR Management, Technology, Procurement
Action points for CAPEX purchasing - ANS ✔✔1. Documentation or guidline and standard
procedure
2. Cross-functional team for appraisal & evaluation
3. Appropriate project evaluation methology
4. Process automation (E-platform)
5. TCO / Life cycle costing
6. Regular review for better control & monitoring
5 rights of procurement - ANS ✔✔Right Quality
Right Quantity
, Right Price
Right Place
Right Time
Right Quality - ANS ✔✔goods which are of satisfactory quality and fit for their intended purpose
e.g. ensuring an accurate specification of the requirement and its quality standards.
Right Quantity - ANS ✔✔sufficient to meet demand and maintain service levels while
minimising stock holding e.g. by ensuring that there is accurate demand forecasting and
efficient inventory management.
Right Place - ANS ✔✔goods delivered to the appropriate delivery point, packaged and
transported so as to secure their safe arrival in good condition e.g. by including transport
instructions including packaging requirements as part of purchase orders.
Right Time - ANS ✔✔delivery of goods at the right time to meet demand, i.e. not too late but
not so early as to incur unnecessary inventory costs e.g. by ensuring accurate demand
management, placing orders in time for suppliers to provide timely delivery and ensuring that
suppliers are aware of delivery requirements.
Right Price - ANS ✔✔securing all of the above at a reasonable, fair, competitive and affordable
price. Ideally, minimising procurement costs in order to maximise profit e.g. by carrying out
price and supplier cost analysis and/or by carrying out competitive tendering and negotiation.
The 'right' price is one that represents good value for money.
Life Cycle cost (LLC) - ANS ✔✔The total cost throughout its life including planning, design,
acquisition and support costs and any other costs directly attributable to owning or using the
asset".
Total Cost of Ownership (TCO) - ANS ✔✔1. TCA
