CIPS L4M2 questions with correct answers graded 2024

CIPS L4M2 questions with correct answers graded 2024Re-buy - correct answer It is not necessary to specify a new specification or to source the market. Call-off or framework agreement. A preferred supplier is in place Modified Buy - correct answer Review of existing contract requirements and making any necessary amendments such as to build additional benefits, streamline the business or to establish new KPIs/SLAs. Where some of the specification or requirements have changed. New Buy - correct answer A new purchase outlines requirements that have not been specified before. There is a higher risk involved in procuring a new purchase, demand/supplier/market analysis should be conducted, and new specific KPIs should be included in the specification. Business Needs - correct answer The mission of the organisation determines its requirements and therefore what procurement needs to source. R - regulatory (any legal requirements) A - availability (supply of goods/services when required, risk, financial and capacity) Q - quality (consistency, repeatability, and fit for purpose) S - service requirements (flexibility, support, availability) C - cost (target costs, total cost of ownership, continuous improvement) I - innovation (improving customer experience) - correct answer A model that can be used to identify business needs. Kraljic Matrix - correct answer A matrix that allows procurement to prioritise spend in line with business needs. Leverage - Kraljic Matrix - correct answer Business needs met by using purchasing department buying power to gain the best price and terms e.g. competitive tendering. Example of Leverage item (Kraljic Matrix) - correct answer Company cars or mobile phones. Strategic - Kraljic Matrix - correct answer Business needs met by developing long term relationships such as partnerships to ensure security of supply. Example of Strategic item (Kraljic Matrix) - correct answer Capital assets such as premises Routine - Kraljic Matrix - correct answer Business needs met by trying to buy these more efficiently through blanket ordering, e-procurement and vendor managed inventory leadership in procurement and supply. Example of Routine item (Kraljic Matrix) - correct answer Stationary Bottleneck - Kraljic Matrix - correct answer Business needs met by developing appropriate contracts (such as call off contracts, framework agreements) in which the buyer can ensure that stock levels and maintained and speed of re-ordering. Example of Bottleneck item (Kraljic Matrix) - correct answer Spare parts or oil for machines Cost and risk - Kraljic Matric - correct answer Low cost / high risk - Bottleneck High cost / high risk - Strategic High cost / low risk - Leverage Low cost / low risk - Routine Total cost of ownership - correct answer Is how much it costs to own the product over its lifetime until disposal. Whole life costing - correct answer Is a technique used to arrive at the total cost of ownership Planning, preparation and implementation - correct answer Three stages of WLC WLC - planning - correct answer Determines the budget for the asset being purchased, helps improve the specification to reduce cost, and simulation or decision support models can be used to assist. WLC - preparation - correct answer Testing the various models for calculating WLC and is necessary to choose the best model. WLC - implementation - correct answer Implements the model to get the results. A review and intervals for regular recalculation. Acquisition, operation and disposal - correct answer There is a vital difference between purchase price and total cost of ownership. This includes 3 categories. Cost based pricing - correct answer Allows the supplier to cover its costs and make a profit. Limits to cost based pricing - correct answer Ignores competition and other influences on pricing and are quite inflexible. They also don't give a supplier an incentive to reduce or manage costs. Cost behaviour - correct answer The way in which costs of outputs are affected by fluctuations in the level of activity. Open book costing - correct answer The supplier provides the buyer with information about their costs to be scrutinised e.g. reassures there is VFM, facilitates cost based pricing. Costing methods - correct answer Marginal, absorption, activity based Marginal costing method - correct answer Is widely used by managers and is useful in the distinction between variable costs and fixed costs. Variable costs are always the relevant costs in terms of decision making. Absorption costing method - correct answer The challenge is to attribute a 'fair' amount of fixed costs to each unit of production output. Traditionally this has been done by determining the amount of some measurable resource consumed in a production period and the overheads of that resource.