CIPS L4M8 Chapter 1 UPDATED ACTUAL
Exam Questions and CORRECT Answers
The 13 Stages of the Procurement Cycle - CORRECT ANSWER - Stage 1 - Identify need
and develop spec.
Stage 2 - Market commodity/make or buy options.
Stage 3 - Develop Strategy/Plan
Stage 4 - Pre procurement market tests
Stage 5 - Prepare Documentation
Stage 6 - Supplier Selection
Stage 7 - Send ITT
Stage 8 - Receive & Evaluate Bids
Stage 9 - Award contract
Stage 10 - Warehouse/logistics prep
Stage 11 - Contract management
Stage 12 - Relationship management
Stage 13 - End of life/asset management
Procurement Cycle - Stage 1 - Understand need and develop a high-level specification -
CORRECT ANSWER - The person generating the need should communicate with the
buyer to ensure there is no misinterpretation. Once the need is clearly understood, the
procurement professional should develop a specification
Two types of specification - CORRECT ANSWER - Performance and conformance
Performance specifications - CORRECT ANSWER - Specifies what the product or service
will do or achieve. This covers the outputs required, tolerances and any functions the
product/service may have to perform
,Conformance specifications (technical) - CORRECT ANSWER - Specifies which
standards a requirement must meet or exceed
Characteristics of Performance specifications - CORRECT ANSWER - - Allow supplier
innovation
- Promote competition in the marketplace
- The supplier bears the risk
- Buyer may not know exactly what they will be getting
- Shorter document
- Quicker to prepare
- Takes advantage of supplier expertise
Characteristics of Conformance specifications (technical) - CORRECT ANSWER - - No
supplier innovation
- Reduce competition
- The buyer bears the risk
- Buyer knows exactly what they are getting
- Longer, complex document
- More time consuming to prepare
- Disregards supplier expertise
Procurement Cycle - Stage 2 - Market commodity/make or buy options - CORRECT
ANSWER - Once specification has been developed, the procurement professional is aware
of what is required, why and when. The options to consider include the budget available to spend
on the procurement, the number of suppliers available and whether to make or buy
To fully understand the market pricing, procurement professionals should research the level of
competition. The .... .... ... model is an established way of assessing the competition - CORRECT
ANSWER - Porter's Five Forces
,Porter's Five Forces Model - CORRECT ANSWER - - Threat of new entrants
- Threat of substitutes
- Bargaining power of buyers
- Bargaining power of suppliers
- Rivalry among existing Competitors
Core Competencies - CORRECT ANSWER - The processes that are critical to an
organisation achieving success and competitive advantage
Make or buy decisions are about - CORRECT ANSWER - whether a product or service
should be made within the organisation or bought-in from an external supplier
A procurement professional can use Carter's Outsource Matrix when - CORRECT
ANSWER - deciding whether to make or buy
The four quadrants of Carter's Outsource Matrix - CORRECT ANSWER - - Strategic
Alliance
(High strategic importance/Low Contribution to operational performance)
- Retain
(High importance/Low contribution)
- Eliminate
(Low importance/Low contribution)
- Outsource
(Low importance/High contribution)
Benefits of Outsourcing - CORRECT ANSWER - - Saving money
- Reducing overheads
- Reducing headcount
- Using external knowledge
, Focusing internally on core competencies
- Helping with shortfalls in labour/expertise
Disadvantages of Outsourcing - CORRECT ANSWER - - Losing some control within an
organisation
- Relying on external organisations
- Reducing quality
- Losing some internal knowledge
Procurment Cycle - Stage 3 - Develop strategy/plan - CORRECT ANSWER - Once the
decision to make or buy has been made and the market has been evaluated, the next stage is to
develop the strategy or plan of how to achieve the procurement. Buyers should think about the
external environment when developing this plan and take several factors into account that could
affect their decisions (STEEPLE)
STEEPLE - CORRECT ANSWER - Social
Technological
Economic
Environmental
Political
Legal
Ethical
The STEEPLE analysis is an effective way to - CORRECT ANSWER - evaluate the
external environment. This helps buyers to assess which factors could affect their need and helps
them to develop the plan accordingly
The SWOT analysis is another useful tool for evaluating the environment before finalising a
strategy or plan to meet the generated need - CORRECT ANSWER - Strengths
Weaknesses
Exam Questions and CORRECT Answers
The 13 Stages of the Procurement Cycle - CORRECT ANSWER - Stage 1 - Identify need
and develop spec.
Stage 2 - Market commodity/make or buy options.
Stage 3 - Develop Strategy/Plan
Stage 4 - Pre procurement market tests
Stage 5 - Prepare Documentation
Stage 6 - Supplier Selection
Stage 7 - Send ITT
Stage 8 - Receive & Evaluate Bids
Stage 9 - Award contract
Stage 10 - Warehouse/logistics prep
Stage 11 - Contract management
Stage 12 - Relationship management
Stage 13 - End of life/asset management
Procurement Cycle - Stage 1 - Understand need and develop a high-level specification -
CORRECT ANSWER - The person generating the need should communicate with the
buyer to ensure there is no misinterpretation. Once the need is clearly understood, the
procurement professional should develop a specification
Two types of specification - CORRECT ANSWER - Performance and conformance
Performance specifications - CORRECT ANSWER - Specifies what the product or service
will do or achieve. This covers the outputs required, tolerances and any functions the
product/service may have to perform
,Conformance specifications (technical) - CORRECT ANSWER - Specifies which
standards a requirement must meet or exceed
Characteristics of Performance specifications - CORRECT ANSWER - - Allow supplier
innovation
- Promote competition in the marketplace
- The supplier bears the risk
- Buyer may not know exactly what they will be getting
- Shorter document
- Quicker to prepare
- Takes advantage of supplier expertise
Characteristics of Conformance specifications (technical) - CORRECT ANSWER - - No
supplier innovation
- Reduce competition
- The buyer bears the risk
- Buyer knows exactly what they are getting
- Longer, complex document
- More time consuming to prepare
- Disregards supplier expertise
Procurement Cycle - Stage 2 - Market commodity/make or buy options - CORRECT
ANSWER - Once specification has been developed, the procurement professional is aware
of what is required, why and when. The options to consider include the budget available to spend
on the procurement, the number of suppliers available and whether to make or buy
To fully understand the market pricing, procurement professionals should research the level of
competition. The .... .... ... model is an established way of assessing the competition - CORRECT
ANSWER - Porter's Five Forces
,Porter's Five Forces Model - CORRECT ANSWER - - Threat of new entrants
- Threat of substitutes
- Bargaining power of buyers
- Bargaining power of suppliers
- Rivalry among existing Competitors
Core Competencies - CORRECT ANSWER - The processes that are critical to an
organisation achieving success and competitive advantage
Make or buy decisions are about - CORRECT ANSWER - whether a product or service
should be made within the organisation or bought-in from an external supplier
A procurement professional can use Carter's Outsource Matrix when - CORRECT
ANSWER - deciding whether to make or buy
The four quadrants of Carter's Outsource Matrix - CORRECT ANSWER - - Strategic
Alliance
(High strategic importance/Low Contribution to operational performance)
- Retain
(High importance/Low contribution)
- Eliminate
(Low importance/Low contribution)
- Outsource
(Low importance/High contribution)
Benefits of Outsourcing - CORRECT ANSWER - - Saving money
- Reducing overheads
- Reducing headcount
- Using external knowledge
, Focusing internally on core competencies
- Helping with shortfalls in labour/expertise
Disadvantages of Outsourcing - CORRECT ANSWER - - Losing some control within an
organisation
- Relying on external organisations
- Reducing quality
- Losing some internal knowledge
Procurment Cycle - Stage 3 - Develop strategy/plan - CORRECT ANSWER - Once the
decision to make or buy has been made and the market has been evaluated, the next stage is to
develop the strategy or plan of how to achieve the procurement. Buyers should think about the
external environment when developing this plan and take several factors into account that could
affect their decisions (STEEPLE)
STEEPLE - CORRECT ANSWER - Social
Technological
Economic
Environmental
Political
Legal
Ethical
The STEEPLE analysis is an effective way to - CORRECT ANSWER - evaluate the
external environment. This helps buyers to assess which factors could affect their need and helps
them to develop the plan accordingly
The SWOT analysis is another useful tool for evaluating the environment before finalising a
strategy or plan to meet the generated need - CORRECT ANSWER - Strengths
Weaknesses
