Qs 6 Flashcards
Which of the following would not affect rivalry in a marketplace? Select TWO.
Options:
A.industry growth or decline
B. exit barriers
C. switching costs
D. supply chain disruption
E. legislative changes
Answer:
D, E
Legislative changes wouldn’t affect rivalry in a market as all suppliers would be equally as affected, the same with supply chain disruptions. Factors which do affect rivalry include; industry growth and decline, product differences, brand identity, switching costs, diversity of competitors and exit barriers. These are listed on p.41
Francisco has entered a partnership with Pedro, who is a key supplier, and wants to ensure that the partnership achieves all of Francisco’s goals. As well as qualitative and quantitative KPIs, what other measures could Francisco take to ensure the partnership is a success?
Options:
A. Do frequent appraisals on the supplier
B. Conduct regular audits
C. Ensure there is a damages clause in the contract
D.Threaten the supplier with termination if he underperforms
Answer:
B
The correct answer is ‘Conduct regular audits’. This is explained on p.153. You wouldn’t do an appraisal on a supplier in a partnership relationship as both parties are equal. Threatening a partner isn’t good for the relationship and a damages clause would be used in a contractual relationship rather than a partnership.
A supplier is working with a buyer who represents a large percentage of his business. Without this particular buyer, the supplier would likely go out of business. There has been a dispute in the last invoice which the buyer is not happy about. What technique should the supplier use when talking to the buyer about this?
Options:
A. Competing- the supplier needs to earn more money as they are struggling financially
B. Avoiding- the supplier should avoid talking with the buyer as this may result in conflict
C. Accommodating- the supplier should show a large degree of co-cooperativeness as the buyer is important to their survival
D. Accepting – the supplier should accept that conflict should sometimes occur in buyer: supplier relationships and work hard to avoid them
Answer:
C
The correct answer is ‘accommodating’. This QUESTION NO: is based on the Thomas-Kilmann Conflict model on p.87. This comes up quite a bit in the exam. It is comprised of 5 techniques for dealing with conflict; competing, collaborating, compromising, avoiding and accommodating. In this instance, the supplier should have a high degree of co-cooperativeness and a low degree of assertiveness as the long-term relationship is very important- more important than the outcome of the disputed invoice.
Janet runs a factory which produces 1 million bread rolls every day. It requires a large amount of flour, and for this to be delivered regularly- in time with manufacturing operations. There are very few suppliers in the market place that can deliver the quality of flour Janet requires in the quantities required. Janet has just established a contract with Friendly Flour Limited - what type of supplier is Friendly Flour Limited to Janet?
Options:
A. bottleneck
B. strategic
C. routine
D.leverage
Answer:
B
Friendly Flour Ltd is a strategic supplier; this is a critical supplier, responsible for core products. They represent a high risk impact and a high cost impact. This is the top-right hand corner of the Kraljic matrix. There are lots of questions on Kraljic in the exam - do revise this topic and ensure you understand each of the four quadrants of the matrix (see p.20)
Debbie is a procurement manager at a small manufacturer company. She had a contract in place with a company that provides uniforms, but finds that she doesn’t need to order much from them as the staff re-wear the same clothes to work. The contract has now expired. Should Debbie do a Competitive Tender to source a new contract?
Options:
A. Yes – the contract has now expired so she must do a new competitive tender
B. Yes- competitive tender is the only option to procure uniforms
C. No- the contract is not of significant value
D. No- Debbie should continue using the same supplier- it doesn’t matter that the contract has expired.
Answer:
C
The correct answer is ‘no-the contract is not of significant value’. CIPS state that competitive tenders should only be used when ‘the item or service is of significant value’ p.73. Debbie could continue using the same supplier, but she should organise a contract extension or a new contract if she does.
Which of the following are valid strategies for dealing with conflict? Select THREE
Options:
A. Competing
B.Collecting
C.Contesting
D.Compromising
E. Collaborating
Answer:
A, D, E
The three right answers are competing, collaborating and compromising. See the Thomas Kilmann Model on p.87. There are quite a few questions on this in the exam.
In a partnership who is responsible for decision making?
Options:
A. The project steering committee
B. Both the supplier and the buyer
C. The buyer
D. The supplier
Answer:
B
The correct answer is both the supplier and the buyer- joint decision making is a key aspect of partnership relationships. A project steering committee decides on priorities, suggests improvements, conducts audits etc. See p.152
Which of the following are elements of a business that can develop a company’s competitive advantage? Select THREE.
Options:
A. cost focus
B. cost leadership
C. human resource management
D.organisation culture
E. natural resources
Answer:
C, D, E
This is one of those questions you have to read carefully- it asks for ‘elements of a business’. Cost focus and cost leadership are ways a company can improve their competitive advantage, but they’re not elements of a business. The other three options are. Porter created a list of elements of a business that can help a company’s competitive advantage- these can be found on p.33-34
Phone Maker Incorporated is a manufacturer of mobile phones. It is considering investing in a partnership with its supplier of batteries and circuit boards as it wishes to produce new models of its phone more regularly. What is the main driver for Phone Maker Incorporated?
Options:
A. Cheaper costs
B. Changes in the marketplace
C. Better quality products
D. Reduced product life-cycles
Answer:
D
The correct answer is ‘reduced product life-cycles’. In this example the reason for entering a partnership is to be able to produce new models of phones more quickly- this is likely because consumers are wanting to change mobile phones more often than they did in the past, so in order to keep up with demand, Phone Maker Incorporated need to produce more phones, more quickly. Drivers of Partnership Sourcing is a key topic in the exam – you can revise these by looking at p.127 in the Study Guide
Harry has just entered into a partnership with a key supplier. Although he is excited about the prospect, he thinks it’s a good idea to set some goals and KPIs. Which of the following criteria should Harry use to decide if a KPI is appropriate?
Options:
A. Measurable, achievable and relevant
B. Relatable, precise, and measurable
C. Time bound, difficult and relevant
D. Significant, measurable and achievable
Answer:
A
The correct answer is Measurable, achievable and relevant. This is from SMART KPIs on p. 151. Smart stands for specific, measurable, achievable, relevant, time-bound. In the exam they come up in different orders so be careful.
In Public Sector procurement a PIN is sent out to inform suppliers of an upcoming tender opportunity. What does PIN stand for?
Options:
A. Prior Information Notice
B. Procurement Information Number
C. Procurement Identification Number
D. Possibilities Identified Notice
Answer:
A
A PIN is a ‘prior information notice’ – it is sent out before the ITT to let suppliers know that an opportunity is coming up and they should look out for it. See p 72 “supplier identification- public sector” for more details.
Which of the following are NOT one of the four key principles of procurement in the EU?
Options:
A. Transparency
B. Value for Money
C. Non-Discrimination
D. Proportionality
Answer:
B
Value for money is not a principle of EU procurement. The four key principles are; transparency, non-discrimination, proportionality and equality of treatment. The principles are basically about ensuring the procurement process is fair. See p.75
Varying levels of commitment is one reason why many partnerships fail. Why is this?
Options:
A. It can lead to a lack of trust
B. One party doesn’t fulfil their KPIs
C. Sufficient time and resources are put in
D. Less profit is made.
Answer:
A
The correct answer is ‘It can lead to a lack of trust’ – this is a quote from p.162. The other answers are all incorrect; in a partnership KPIs are joint between the parties– so there wouldn’t be a situation where one party doesn’t fulfil their KPIs. Commitment doesn’t necessarily have a direct correlation with profit so that answer is incorrect. ‘Sufficient time and resources are put in’ is a positive thing, so can’t be a reason who a partnership fails.
Cigarettes and alcohol are often described as having an ‘inelastic price’. What does this mean?
Options:
A. Changes in price will greatly affect how much of the item is bought
B. Changes in price will not affect how much of the item is bought
C. The product is subject to high rates of tax
D. The product is subject to age restrictions
Answer:
B
A product with an ‘inelastic price’ means that consumption doesn’t really depend on how much it costs. So you could increase the price of alcohol and cigarettes and people would tend to still buy them. A product with an elastic price means that a change in price would have a large affect on the number of people who bought the item. See p.95 for more details on price elasticity.
Which of the following are considered ‘wastes’ which can be removed from a business? Select THREE.
Options:
A. Over-processing
B. Stockout
C. Equity
D. Transportation
E. Inventory
Answer:
A, D, E
The seven wastes (as defined by Taiichi Ohno) can be remembered as Tim Wood; transportation, inventory, motion, waiting, over-processing, over-production, defects. Some people add an S onto the end of Tim Wood to make Tim Woods (the s is for skills). In some modules of CIPS, they refer to 8 wastes and include skills, but in M6 they’ve only put the 7 on p.70.
According to Michael Porter, what is procurement?
A. a support activity which provides a source of competitive advantage
B. a primary activity which provides a source of competitive activity
C. a primary activity which provides value for money
D. a secondary activity which provides value for money
Answer(s): A
Explanation:
This question refers to Porter’s Value Chain (p.35). There’s a couple of questions on this in the exam so try to learn it. Procurement is a ‘support activity’ on this matrix along with firm infrastructure, HR and technology development.
In a monopoly market, which of the following statements is true?
A. bargaining power of suppliers is strong
B. bargaining power of buyers is strong
C. There is strong rivalry
D. There is a threat of new entrants
Answer(s): A
Explanation:
In a monopoly there is only one supplier- therefore their power is strong. Buyers in this market are price takers and their power is weak. There is generally a strong barrier to entry into a monopoly market so the threat of new entrants is low. There is no rivalry. There are many questions in the exam on Porter’s 5 Forces - see p. 39
Which of the following are advantages for the buyer of entering into a partnership? Select TWO.
Options:
A. They are likely to be able to gain price stability
B. There may be greater continuity of supply
C. They will gain an increased volume of business
D. The supplier may become complacent
Answer:
A, B
The correct answers are; They are likely to be able to gain price stability and There may be greater continuity of supply. The other options are an advantage for the supplier rather than the buyer (They will gain an increased volume of business) and a disadvantage of entering into a partnership (The supplier may become complacent). As you may have guessed from these questions – Partnerships come up a LOT in the exam. See p.130 for info on pros and cons of partnerships.
Which of the following are considered part of the ‘5 Rights of Procurement’? Select THREE.
A. place
B. quality
C. cost
D. focus
E. time
Answer(s): A,B,E
Explanation:
The 5 Rights of procurement are; place, quality, quantity, time, price. (Price and Cost are not the same thing). See p.38
In an oliogopy market, what would a regulator do?
A. prevent price fixing and collusion
B. stop the market becoming a monopoly
C. ensure value for money for buyers
D. ensure health and safety standards
Answer(s): A
Explanation:
In an oliogopy, supplier power is strong. Sometimes regulators are required in the market to prevent the group of suppliers conspiring together to artificially increase prices. See p.40 for more information on Oligopy markets.
Which of the following factors would you use to analyse the macro-environment? Select THREE.
A. social
B. cultural
C. political
D. philosophical
E. legislative
Answer(s): A,C,E
Explanation:
STEEPLE is what is used to analyse the macro-environment; the factors are; social, technological, economic, environmental, political, legislative and ethical. Details of this can be found on p.43-44
Gabriel is a procurement manager who wishes to explore a new avenue to procure products for his company. His manager has told him that he should invite internal stakeholders to a meeting to get their feedback.
Who should Gabriel invite? Select THREE.
A. end-users
B. legal department
C. customers
D. suppliers
E. employees
Answer(s): A,B,E
Explanation:
Internal stakeholders are those who work within the business so include the legal department, employees and end-users. End-users mean those people and departments who will be using the product or service. For example if Gabriel is procuring new software- an end-user would be anyone who would be using that software (whether they’re employees, volunteers or agencies). CIPS outlines types of stakeholders on p.64
Value for money is often described at the `three Es’; economy, efficiency and effectiveness. However some people consider a 4th E which refers to the public sector.
What is the fourth E?
A. Equality
B. Environment
C. Equity
D. Ethics
Answer(s): C
Explanation:
Equity is the fourth E- this means the extent to which the service is available. See p.65 for details on the 4 Es
Fred is a new procurement manager at a large engineering firm. They procure 100s of components and use these to make kitchen appliances such as kettles and toasters. He has been asked by his manager to look into procuring a new component which will go into a new environmentally friendly kettle and has been asked to ensure that the firm receives value for money.
What should Fred do?
A. Hold an open competition
B. Contact current suppliers to try and get a good deal
C. Invite known suppliers to bid for the contract
D. Put together a business case to make the product in-house
Answer(s): A
Explanation:
Fred should hold a competition as this is a key way of achieving value for money' p.67. Fred shouldn't put a business case together to make the product in-house without doing a make vs buy analysis, and that analysis showing make is the way to go. As the firm buy in 100s of components, it's very unlikely that making the component in-house would bring value for money’. He should also be careful of only looking at current suppliers or known suppliers- the best supplier of this new component might be unknown to the engineering firm at present.
Tim manages the procurement department at a large retailer. He wants to ensure that his team are achieving value for money in their procurement activities.
Which of the following should Tim set up?
A. ITT
B. Audit
C. Framework
D. Contract
Answer(s): B
Explanation:
Tim should do an audit. P.71 of the textbook says “to ensure that a procurement department is achieving value for money, an audit should be undertaken”
A garden centre has recently purchased some lollypop sticks to use as plant labels. The staff have written the name of the plant on the lollypop stick and put it next to the plant. This helps them identify which plant is which. However, after a couple of weeks, the lollypop sticks have become mouldy and the writing has faded. Staff are now struggling to identity their plants. The Manager of the garden centre is considering returning the lollypop sticks and asking for a full refund as they were not fit for purpose. Can the Manager do this?
A. Yes- the lollypop sticks have gone mouldy- this is unacceptable
B. Yes- so long as the manager kept the receipt
C. No- as this was not the lollypop sticks intended purpose
D. No- the manager cannot prove that the product is faulty
Answer(s): C
The correct answer is `no- as this was not the lollypop sticks intended purpose’.
When deciding if something is fit for purpose, you must consider its intended and common purpose. In this case it would be for making lollypops. As the garden centre is using them for something other than their intended purpose, they can’t complain if it doesn’t work. Fit for purpose is discussed on p.65
In public sector procurement, tenders are advertised with CPV codes, which provide a reference to describe the product or service being tendered.
What does CPV stand for?
A. Condensed Procurement Vocabulary
B. Common Procurement Vocabulary
C. Complete Procurement Vocabulary
D. Clear Procurement Vocabulary
Answer(s): B
Explanation:
CPV stands for Common Procurement Vocabulary. This is explained briefly on p.72 but it doesn’t really go into much detail as to what CPVs are or how they work. CPVs are a string of numbers which refer to an object that is being procured. For example the CPV for Fire Doors is 44221220.
When a Tender gets advertised for Fire Doors, it will have this CPV code on, and any suppliers who provide fire doors will get a notification if they have this CPV code on their profile. It’s basically a code that links suppliers with tender opportunities.
Under what circumstances should a competitive tender not be completed? Select TWO.
A. When the items are of high value
B. When the items are of low value
C. When there is a clear specifications
D. When there is not a clear specification
Answer(s): B,D
Explanation:
Note the word `NOT’ in the question. In order for a competitive tender to be successful, there should be a clear specification in place (i.e. you need to know what you want, in order for suppliers to bid for it). Competitive tendering should also only be used for high value purchases; it’s time consuming to do, so you wouldn’t do it for low value items such as pens for the office. Therefore the correct answer to this question is ‘items are of low value’ and ‘there isn’t a clear specification’. There’s a useful table on p.73 of when you would and wouldn’t use a competitive tender.
Which of the following documents can be used at the selection stage of a tender process to ensure that short listed bidders meet the requirements of the buying organisation? Select TWO.
A. Request for Information
B. Request for Quotation
C. Pre-Qualification Questionnaire
D. Invitation to Tender
Answer(s): A,C
Explanation:
Request for Information and Pre-Qualification Questionnaire can be used for short-listing suppliers. Request for Quotation is used when the only variable is price and you would like suppliers to submit a price for you. Invitation to Tender would be the next stage after RFI / PPQ- this is sent out to those suppliers who have passed selection, and details the second stage of the competition. See p.75 for more details.
Victoria runs a hotel and has recently had several security issues such as attempted robberies. She has decided that she needs to hire a security firm to ensure these issues don’t continue. She has done some research and has found there are several local security firms who may be able to provide services to her hotel. However, she hasn’t decided exactly what she would require the security firm to do.
What should be Victoria’s next steps?
A. Issue a Request for Proposal
B. Issue an Invitation to Tender
C. Issue a Request for Quotation
D. Issue a Prior Information Notice
Answer(s): A
Explanation:
Victoria should use a `request for proposal’ this allows the security firms to submit ideas on how best to serve the hotel. They might come up with some ideas that Victoria hasn’t thought about and can price against their own ideas. As Victoria doesn’t have a concrete specification, an ITT or RFQ are not appropriate. A PIN tells suppliers that a tender opportunity is coming up and is used in the Public Sector. A hotel is not a Public Sector organisation. See p.76 for more information on when to issue a Request for Proposal
David is sourcing a new cleaning contract as he is not impressed with his current cleaning company’s performance. He believes that his current supplier has been overcharging him, and due to budget cuts, he is keen to secure a lower price than what he is paying now. His Manager has suggested using an e-auction as the procurement method. Is this the correct way forward?
A. Yes- an e-auction is an electronic system so it will be easy for David to compare bids
B. Yes- an e-auction will allow David to secure the lowest possible price
C. No- a reverse e-auction would be more suitable as it will secure the lowest price
D. No- a reverse e-auction will ensure only high quality suppliers bid for the opportunity
Answer(s): C
Explanation:
The correct answer is `No- a reverse e-auction would be more suitable as it will secure the lowest price’. An E-auction is something like eBay- where bids go up in price. If David wants to secure a lower price, he should use a Reverse E-Auction- where suppliers bid lower than the previous bid in order to win. For example, Supplier 1 offers to fulfil the contract at £50k per year, Supplier 2 can offer to beat this price by bidding £48k per year. Although Reverse E-Auctions may ensure cheaper prices, there are a lot of disadvantages to using this method. See p.21 and p.76 for more information
In which procurement process is a PQQ not issued?
A. Open
B. Restricted
C. Competitive Procedure with Negotiation
D. Competitive Dialogue
Answer(s): A
Explanation:
Open Tender processes are a one-stage process which issues and ITT. It has no PQQ (selection) stage. P. 77
Why is it more difficult for buyers in the public sector to build relationships with suppliers?
A. Buyer power is weak in the public sector
B. Buyer power is strong in the public sector
C. There are regulations prohibiting public sector buyers from developing relationships
D. There are regulations that state competitive tender processes must be undertaken regularly
Answer(s): D
Explanation:
It can be difficult for buyers in the private sector to build relationships with suppliers because of rules that state competitive tenders must be undertaken every few years (within the EU this is usually every 4). This means that both parties aren’t as invested in developing the relationship as it’s possible the contact will end shortly. Competitive tendering is a requirement in the public sector to ensure value for money for taxpayers. See p.79 for further details. There are no rules stating Public Sector organisations can’t have good relationships with suppliers, and in fact most will have good relationships with their current suppliers- the issue is that neither party can get too invested in the relationship as everyone knows it may end shortly. There are rules, however, against entering into Partnership relationships (which is discussed in chapter 3).
If a stakeholder has high power in a business but isn’t interested in your procurement activity, what should be your management style for dealing with this stakeholder?
A. Keep them satisfied they have high power
B. Keep them informed they have high power
C. Manage closely they’re a key player
D. Minimum effort is required as they’re not interested- do nothing
Answer(s): A
Explanation:
The correct answer is `keep satisfied’ because the stakeholder is high power and low interest. This is the top left corner of Mendelow’s Stakeholder Matrix see p.81
The CEO of a business has asked his procurement manager to source new machinery for the factory. This machinery will help create a new line of products which will give the company a competitive edge. The CEO is heavily invested in this procurement activity as profits have been lower than expected this year and this new line of products could help increase profitability. How should the procurement manager include the CEO in the procurement activity?
A. It is important to keep the CEO informed of all decisions that are made
B. It is important to keep the CEO satisfied as he runs the business
C. The CEO is a key player- so it is important he is involved early in the process
D. The CEO is a key player- so should be given regular updates on progress
Answer(s): C
Explanation:
The correct answer is `The CEO is a key player- so it is important he is involved early in the process’. The CEO has high power and high interest which puts him in the top right-hand corner of Mendelow’s Stakeholder Matrix (p.81). CIPS says Key Players should be involved early in the procurement process (p.82).
According to Mendelow, there are four ways stakeholders can be managed, depending on the amount of power they have, and how interested they are in your project.
What are these four categories?
A. Keep satisfied, keep informed, minimal effort, no effort
B. Manage closely, manage loosely, keep satisfied, keep informed
C. Minimal effort, manage closely, keep informed, keep satisfied
D. Keep informed, keep happy, keep satisfied, keep notified
Answer(s): C
Explanation:
The four categories are; Minimal effort, manage closely, keep informed, keep satisfied. You can see the Matrix on p.81. An easy way to remember this is there are 2 Ms and 2 Keeps. And these sit on opposite sides of the matrix.
Richie has come up with a new idea for sourcing items for the business but feels that it will have mixed reviews within the team. He thinks that some people will be in favour of the idea, and some will be against it. He doesn’t think the CEO will have a strong opinion either way. In order to decide whether to put a business case together and present his idea to the CEO- what should Richie do?
A. Cost Analysis
B. Make vs Buy Analysis
C. Force Field Analysis
D. Value Engineering Analysis
Answer(s): C
Explanation:
Richie should do a Force Field Analysis this is explained on p.86 and is an idea of Kurt Lewin it identifies the driving forces for a project and the restraining forces (basically who will be for it and who will be against it). The textbook doesn’t go into much detail on this but there are questions on it in the exam- so have a quick google to familiarise yourself with Kurt Lewin’s Force Field Analysis.
Which of the following are not stages of team development? Select TWO.
A. Forming
B. Mourning
C. Achieving
D. Adjourning
E. Accepting
Answer(s): C,E
Explanation:
This question is very, very similar to a real exam Question: and is a really mean one. The CIPS study guide describes stages of team development as forming, storming, norming and performing. Of those listed in the book only forming is listed above.
What the textbook fails to tell you is that some people add on two additional stages to this model which are mourning and adjourning. I strongly recommend doing some further reading on this (it’s called the Tuckman Group Development Model) as it comes up a lot in the exam and the study guide doesn’t really go into enough detail.
What is a disadvantage of including qualitative KPIs into a contract?
A. They can lead to poor supplier performance
B. They pull focus from the more important quantitative KPIs
C. They are hard to measure
D. They make the buyer seem weak
Answer(s): C
Explanation:
The correct answer is `They are hard to measure’ p.103
Which of the following are not a valid reasons to terminate a relationship with a supplier? Select TWO.
A. The supplier suddenly increases prices
B. The supplier made one late delivery
C. Supply base rationalisation
D. The supplier becomes insolvent
E. The supplier has a change in senior management
Answer(s): B,E
Explanation:
Two invalid reasons are; one late delivery and a change in senior management. Valid reasons to terminate a relationship are listed on p.107 and include the three listed here, as well as a material breach, damage to reputation and the supplier merges or is acquired by another company.
