CIPS L4M2 Exam Questions With 100% Correct Answers

CIPS L4M2 Exam Questions With 100% Correct Answers Re-buy - answerIt 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 - answerReview 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 - answerA 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 - answerThe 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) - answerA model that can be used to identify business needs. Kraljic Matrix - answerA matrix that allows procurement to prioritise spend in line with business needs. Leverage - Kraljic Matrix - answerBusiness 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) - answerCompany cars or mobile phones. Strategic - Kraljic Matrix - answerBusiness needs met by developing long term relationships such as partnerships to ensure security of supply. Example of Strategic item (Kraljic Matrix) - answerCapital assets such as premises Routine - Kraljic Matrix - answerBusiness 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) - answerStationary Bottleneck - Kraljic Matrix - answerBusiness 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) - answerSpare parts or oil for machines Cost and risk - Kraljic Matric - answerLow cost / high risk - Bottleneck High cost / high risk - Strategic High cost / low risk - Leverage Low cost / low risk - Routine Total cost of ownership - answerIs how much it costs to own the product over its lifetime until disposal. Whole life costing - answerIs a technique used to arrive at the total cost of ownership Planning, preparation and implementation - answerThree stages of WLC WLC - planning - answerDetermines 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 - answerTesting the various models for calculating WLC and is necessary to choose the best model. WLC - implementation - answerImplements the model to get the results. A review and intervals for regular recalculation. Acquisition, operation and disposal - answerThere is a vital difference between purchase price and total cost of ownership. This includes 3 categories. Cost based pricing - answerAllows the supplier to cover its costs and make a profit. Limits to cost based pricing - answerIgnores 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 - answerThe way in which costs of outputs are affected by fluctuations in the level of activity. Open book costing - answerThe supplier provides the buyer with information about their costs to be scrutinised e.g. reassures there is VFM, facilitates cost based pricing.