©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:08PM. A+
CIPS L4M4 Exam Questions With Correct
Answers 100% Verified.
Outsourcing - Answer✔the strategic contracting out of major work, previously carried out in-
house by the organization, to an external supplier
Offshoring - Answer✔Outsourcing to other countries where costs are much lower
Subcontracting - Answer✔The user of a supplier by a buying organization to do work that the
latter cannot do itself, because of temporary shortage of resources or lack of capacity
Make-or-buy - Answer✔Choice between performing an activity internally vs outsourcing
Types of make or buy decisions - Answer✔Strategic - determine the long-term activities,
capabilities, resources and boundaries of the firm
Tactical - response to short-term or cyclical changes in demand for its products or services, or
changes in the market for materials, labor or skills
Operational or component - product design and manufacturing decisions (component
manufactured in-house or bought?)
Procurement is well placed to assess: - Answer✔- costs of purchasing materials / components
as an element of the option to make internally
- full implications of the buy option (since familiar with sup. capab., capacity and compatibility,
and likely costs)
Intra-company trade - Answer✔commercial relationships between ompanies that are part of
the same group
Transfer price - Answer✔price charged for sale of goods/services in intra-company trading
transactions
transfer prices are decided through: - Answer✔- negotiation between supplier subsid. and
buying subsid.
- decision of head office dept.
1
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:08PM. A+
Strategic sourcing - Answer✔long-term decisions about how and where to source from
cost of making in-house vs outsourcing - Answer✔In-house
- purchase of materials and parts
- cost of employed labor
- other additional costs (operating a factory or office accom.)
- cost of investm. in apital eq/machin
- opportunity cost
outsourcing
- payment to extern. supplier of materials, parts or services
- possibly some add. administr. costs
- contract, performance and relat. mgmt costs, communic. costs
- possibly hidden cost
Opportunity costs of making rather than buying - Answer✔- limited supply/avail. of a key
resource
- resource could be used for other profitable work if it were not being used
fixed vs var costs for outsourcing vs in-house - Answer✔In-house - more fixed costs (fixed
workforce, property rental, facilities mgmt)
oursourcing - more var.
the var. costs of outsourcing might be higher than the fixed costs of in-house operations
non-financial costs of outsourcing - Answer✔- some loss of mgmt control
- may damage employee morale
- loss of in-house skills
factors to consider in make vs buy - Answer✔- core non core
- security of supply
- effect on total costs
financial issues
2
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:08PM. A+
av. of in-house competencies or production capacity
- convenience
- monitoring and control
- risks
- av. of suitable supplier
- human resource impact
Benefits of outsourcing - Answer✔- Ability to downsize the company
- focus on core act. and compet.
- acccess to specialist expertise
- cost certainty
Competency - Answer✔Activities or processes through which the org. deploys resources
effectively
Threshold vs core competencies - Answer✔threshold - basic capab. necessary to enable an org.
to compete or operate successfully
core - distinctive value-creating skills, capabilities and resources
Outsourcing core activities risks - Answer✔- loss of in-house skill
- loss of key staff to compet.
- risk that supplier cannot be found
- loss of control over operating activities
- risk of loss of control over confid. info / IP
- similar risks to oursourcing non-core act.
Supplier appraisal - Answer✔Ensuring a potential supplier is able to perform the contract to
standard
methods of sourcing suitable supplier - Answer✔- 1 or more prequal. suppliers are identified
and included in a list or register of approved suppliers
- org. specifies the criteria that will be used for supplier appraisal and selection
Carter's 10Cs for prequalification - Answer✔Cost
Competence (capability)
3
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:08PM. A+
Commitment
Control systems
Cash
Consistency
Cost
Compatibility
Compliance
Communication
Outsource prourement process - Answer✔Feasibility study and business case dev.
Define the requirement
Appraise and pre-qualify suppliers
Invite tenders against specifications
Evaluate tenders against criteria
Engage in post-tender negotiation
Award the contract
Implement contract, perf. mgmt and relationship mgmt
Outsourcing gone wrong: reasons - Answer✔- failed to idetnify and select duitable supplier
- unrealistic expect. of the provider
- outsourcing contract contains inadequate and inappropr. t&cs
- contract does not ocntain well-defined KPIs or service levels
-org. lacks mgmt skills
org. gradually surrenders control of perfor. to supplier
Risks of outsourcing (core and non core) - Answer✔higher costs
service quality and consistency
loss of in-house knowledge and abilities
reliance on the supplier
risk of lock in to poor performing supplier
4
CIPS L4M4 Exam Questions With Correct
Answers 100% Verified.
Outsourcing - Answer✔the strategic contracting out of major work, previously carried out in-
house by the organization, to an external supplier
Offshoring - Answer✔Outsourcing to other countries where costs are much lower
Subcontracting - Answer✔The user of a supplier by a buying organization to do work that the
latter cannot do itself, because of temporary shortage of resources or lack of capacity
Make-or-buy - Answer✔Choice between performing an activity internally vs outsourcing
Types of make or buy decisions - Answer✔Strategic - determine the long-term activities,
capabilities, resources and boundaries of the firm
Tactical - response to short-term or cyclical changes in demand for its products or services, or
changes in the market for materials, labor or skills
Operational or component - product design and manufacturing decisions (component
manufactured in-house or bought?)
Procurement is well placed to assess: - Answer✔- costs of purchasing materials / components
as an element of the option to make internally
- full implications of the buy option (since familiar with sup. capab., capacity and compatibility,
and likely costs)
Intra-company trade - Answer✔commercial relationships between ompanies that are part of
the same group
Transfer price - Answer✔price charged for sale of goods/services in intra-company trading
transactions
transfer prices are decided through: - Answer✔- negotiation between supplier subsid. and
buying subsid.
- decision of head office dept.
1
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:08PM. A+
Strategic sourcing - Answer✔long-term decisions about how and where to source from
cost of making in-house vs outsourcing - Answer✔In-house
- purchase of materials and parts
- cost of employed labor
- other additional costs (operating a factory or office accom.)
- cost of investm. in apital eq/machin
- opportunity cost
outsourcing
- payment to extern. supplier of materials, parts or services
- possibly some add. administr. costs
- contract, performance and relat. mgmt costs, communic. costs
- possibly hidden cost
Opportunity costs of making rather than buying - Answer✔- limited supply/avail. of a key
resource
- resource could be used for other profitable work if it were not being used
fixed vs var costs for outsourcing vs in-house - Answer✔In-house - more fixed costs (fixed
workforce, property rental, facilities mgmt)
oursourcing - more var.
the var. costs of outsourcing might be higher than the fixed costs of in-house operations
non-financial costs of outsourcing - Answer✔- some loss of mgmt control
- may damage employee morale
- loss of in-house skills
factors to consider in make vs buy - Answer✔- core non core
- security of supply
- effect on total costs
financial issues
2
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:08PM. A+
av. of in-house competencies or production capacity
- convenience
- monitoring and control
- risks
- av. of suitable supplier
- human resource impact
Benefits of outsourcing - Answer✔- Ability to downsize the company
- focus on core act. and compet.
- acccess to specialist expertise
- cost certainty
Competency - Answer✔Activities or processes through which the org. deploys resources
effectively
Threshold vs core competencies - Answer✔threshold - basic capab. necessary to enable an org.
to compete or operate successfully
core - distinctive value-creating skills, capabilities and resources
Outsourcing core activities risks - Answer✔- loss of in-house skill
- loss of key staff to compet.
- risk that supplier cannot be found
- loss of control over operating activities
- risk of loss of control over confid. info / IP
- similar risks to oursourcing non-core act.
Supplier appraisal - Answer✔Ensuring a potential supplier is able to perform the contract to
standard
methods of sourcing suitable supplier - Answer✔- 1 or more prequal. suppliers are identified
and included in a list or register of approved suppliers
- org. specifies the criteria that will be used for supplier appraisal and selection
Carter's 10Cs for prequalification - Answer✔Cost
Competence (capability)
3
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:08PM. A+
Commitment
Control systems
Cash
Consistency
Cost
Compatibility
Compliance
Communication
Outsource prourement process - Answer✔Feasibility study and business case dev.
Define the requirement
Appraise and pre-qualify suppliers
Invite tenders against specifications
Evaluate tenders against criteria
Engage in post-tender negotiation
Award the contract
Implement contract, perf. mgmt and relationship mgmt
Outsourcing gone wrong: reasons - Answer✔- failed to idetnify and select duitable supplier
- unrealistic expect. of the provider
- outsourcing contract contains inadequate and inappropr. t&cs
- contract does not ocntain well-defined KPIs or service levels
-org. lacks mgmt skills
org. gradually surrenders control of perfor. to supplier
Risks of outsourcing (core and non core) - Answer✔higher costs
service quality and consistency
loss of in-house knowledge and abilities
reliance on the supplier
risk of lock in to poor performing supplier
4
