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NEW QUESTION # 116
Which of the following are remedial actions that may be undertaken by the purchasing organisation following a supplier audit? Select the TWO that apply.
- A. Daily brainstorming meetings with the supplier
- B. Employing the supplier's staff for job training
- C. Running supplier development programmes
- D. Violating the terms of the supplier contract
- E. Define specific corrective actions for the supplier
Answer: C,E
Explanation:
Defining corrective actions and running supplier development programs are effective remedial actions following an audit. These approaches support continuous improvement, aligning with responsible sourcing by helping suppliers meet ethical and performance standards.
NEW QUESTION # 117
Steff is a procurement manager at Giant Buttons Ltd who are considering offshoring a small section of their manufacturing operations. Which of the following is a risk of offshoring that Steff should consider.
- A. lower operating costs
- B. payments by electronic bank transfer
- C. importation rules and tariffs
- D. exportation rules and tariffs
Answer: C
Explanation:
The correct answer is importation rules and tariffs. This is because in offshoring some of the manufacturing will be done in another country then shipped back to the UK. The products will have to go through customs so may be subject to tariffs and duties.
Steff's not exporting anything in the scenario and paying electronically and getting lower costs are not RISKS.
NEW QUESTION # 118
Economic indices track a market's stability and health. One of these indices is the Consumer Price Index (CPI). Which of the following are aspects of the Consumer Price Index? Select TWO that apply.
- A. The CPI tracks the performance of selected companies in different stock markets
- B. The CPI shows that prices are influenced by tax thresholds rates rather than inflation rates
- C. The CPI tracks variations in prices in a particular geographical location
- D. The CPI helps in calculating the exchange rates and tariffs used in setting prices for imports
- E. The CPI tracks the weighted average prices of selected commodities within the country
Answer: C,E
Explanation:
The Consumer Price Index (CPI) measures the average change over time in the prices paid by consumers for a market basket of goods and services. It reflects price variations in specific geographical locations and tracks the weighted average prices of selected commodities, providing insights into inflation and cost of living.
Exact Extract from Study Guide:
"The Consumer Price Index (CPI) tracks variations in prices for a range of consumer goods and services over time, in a particular geographic location."
NEW QUESTION # 119
Which of the following payment mechanisms is most beneficial to the supplier?
- A. letter of credit
- B. cash in advance
- C. open account
- D. sight draft
Answer: B
Explanation:
cash in advance is the most beneficial to a supplier.
Open account /credit account is the most beneficial to the buyer. Learn this as it's a known exam topic.
NEW QUESTION # 120
Liquidity is a solvency measure which determines whether an organisation is able to pay its debt. Which of the following would you use to assess a supplier's liquidity? Select TWO.
- A. long-term debt
- B. shareholder's equity
- C. current liabilities
- D. current assets
Answer: C,D
Explanation:
The correct answer is current assets and current liabilities. There are manyQuestionsabout financial ratios on the exam.
If you're unsure on them I suggest doing further reading outside of the study guide as this will help. I like this youtube video (I'm not associated with the makers of this video but think it's a great way to explain liquidity) Liquidity ratios (youtube.com) You can be asked to work out liquidity in the exam. If you are asked this, the numbers will be very simple to the point you may be able to do the sums in your head. There is also a calculator on the test app you can use.
NEW QUESTION # 121
A company's balance sheet will show you which of the following?
- A. equity, assets and liabilities
- B. revenue, profit and expenses
- C. cash coming in and out of the business
- D. profit, loss and assets
Answer: A
Explanation:
a balance sheet shows 'equity, assets and liabilities'. The other financial statements you need to know for this exam are cash flow statements and and income statements.
If you're not familiar with these three I strongly recommend you do some further reading on this before the exam if you can. This is helpful: How the 3 Financial Statements are Linked Together - Step by Step (corporatefinanceinstitute.com)
NEW QUESTION # 122
The bill of lading is one of the main documents associated with sea freight within international sourcing.
Which of the following statements represent some of the uses of the bill of lading? Select TWO that apply.
- A. It provides evidence of the title of ownership of the goods
- B. It provides evidence of the contract of carriage for the goods
- C. It provides evidence that the goods are fully insured in transit
- D. It provides evidence guaranteeing the use of Incoterms on the goods
- E. It provides evidence of the country of origin of the goods
Answer: A,B
Explanation:
The bill of lading serves as both a receipt of goods and a document of title, which means it confirms the contract of carriage and can transfer ownership. Responsible sourcing in international trade requires precise documentation, which is why the bill of lading is critical in verifying both carriage and title.
NEW QUESTION # 123
A buyer for a large manufacturing organisation is assessing a sole supplier tender opportunity. The buyer is finding it challenging to differentiate the proposals on unit purchase price. Are there any added values that the procurement manager can use to leverage the sole supplier proposal?
- A. No, because a buyer has no leverage over a sole supplier
- B. Yes, but only if the buyer decides to re-start the tender opportunity
- C. No, the buyer must make the decision based on the existing information
- D. Yes, the buyer can negotiate on aspects such as after-sales service
Answer: D
Explanation:
In cases where price differentiation is minimal, negotiating on added-value services like after-sales support can offer additional benefits. This aligns with responsible sourcing by focusing on long-term value and fostering a cooperative relationship with the supplier.
NEW QUESTION # 124
According to the CIPS code of conduct, which laws should a procurement professional adhere to?
- A. all laws within countries they have business and contracts in
- B. all international procurement legislation
- C. all laws published by international organisations such as ILO
- D. all laws within the country they work in
Answer: A
Explanation:
The CIPS Code of Conduct says to adhere to all laws of countries in which I practice. So if you're in the UK and procure stuff from China, you need to abide by both UK and Chinese laws, not just UK laws.
There's no international procurement laws- these are all different for different countries.
ILO doesn't publish laws.
NEW QUESTION # 125
Which is an example of a criterion for supplier selection during a tender for a hospital build to demonstrate the people element of the 'triple bottom line'?
- A. Project plan is designed to use reverse logistics
- B. Building design is thermal efficient to meet carbon trust targets
- C. Demonstrated commitment to a labour industry code of conduct
- D. Specifications are designed with appropriately certified materials
Answer: C
Explanation:
The 'people' element of the triple bottom line focuses on social responsibility, including fair labor practices and community engagement. A supplier's demonstrated commitment to a labor industry code of conduct indicates adherence to ethical labor standards, such as fair wages, safe working conditions, and respect for workers' rights, aligning with the social sustainability goals of the project.
Exact Extract from Study Guide:
"The triple bottom line - profit, people and planet
* Adopt sustainable practices, standards and specifications in the supply chain
* Consider the social impact of the organisation's behaviours
* Design procurement processes to deliver social outcomes as well as, or as an alternative to, normal economic measures of value"
NEW QUESTION # 126
Bob works in the procurement department of a construction firm. He has been asked to procure an item for a short-term project which is considered low risk. What type of sourcing will he be completing?
- A. strategic
- B. insourcing
- C. tactical
- D. outsourcing
Answer: C
Explanation:
tactical is the correct answer; items that are short-term or low value are considered tactical.
Strategic sourcing is long term and high value.
Outsourcing is moving a key business function to an external company.
Insourcing is bringing a previously outsourced part of the company back in-house.
NEW QUESTION # 127
Tendering is a more formal and regimented process than sending out requests for quotations. Which of the following are services that are often put out to tender? Select THREE.
- A. provision of raw materials
- B. cleaning
- C. consultancy
- D. office supplies
- E. security
Answer: A,B,C
Explanation:
security, consultancy and cleaning are services which are often tendered as they tend to be high value and complex opportunities.
Office supplies and raw materials have less variables so you could use a RFQ for these instead.
A hint for this is also the word services. Security, consultancy and cleaning are services. Raw Materials and Office Supplies are goods.
NEW QUESTION # 128
A company has a requirement for an item that has been identified as strategic on the positioning model. The company needs to invite competitive tenders and make sure the selected supplier of this item is in a good financial position. What should the company ask the suppliers to send to show that their current assets cover their current liabilities?
- A. Acid test
- B. Annual turnover
- C. Profit and loss account
- D. Gearing ratio
Answer: A
Explanation:
The acid test, also known as the quick ratio, measures a company's ability to cover its current liabilities with its most liquid assets, excluding inventory. It is a stringent indicator of short-term financial health. By requesting this ratio, the company can assess whether a potential supplier has sufficient liquidity to meet its obligations, which is crucial when procuring strategic items.
Reference:
CIPS Level 4 Diploma in Procurement and Supply, L4M4 Study Guide, Section 2.3: Financial Appraisal of Suppliers
NEW QUESTION # 129
The procurement manager has received the following data from the supplier's accounts to facilitate the calculation of the supplier's current ratio:
Current Assets: Stock $200; Debtors $60; Cash $40; Total $300
Short Term Liabilities: Bank overdraft $150
Which calculation will the procurement manager use to find out the current ratio?
- A. 300÷150300 ÷ 150300÷150
- B. 300÷200×150300 ÷ 200 × 150300÷200×150
- C. (300#200#150)×100(300 - 200 - 150) × 100(300#200#150)×100
- D. (300#150)×100(300 - 150) × 100(300#150)×100
Answer: A
Explanation:
The current ratio is calculated by dividing total current assets by total current liabilities. Here, dividing $300 by $150 gives a current ratio of 2.0, indicating that the supplier has adequate current assets to cover its short- term obligations, an important factor in supplier evaluation.
NEW QUESTION # 130
What would an EBITDA ratio show you?
- A. how profitable a business is
- B. how much of a business's funding is made up of long term debt
- C. how solvent a business is
- D. how effectively a business uses its assets to generate sales
Answer: A
Explanation:
EBITDA stands for 'earnings before interest, tax, depreciation and amortization'. This is a profitability ratio and would show how profitable a business is.
EBITDA: Definition, Calculation Formulas, History, and Criticisms (investopedia.com)
NEW QUESTION # 131
Ramesh is a procurement manager who is looking at his supplier base. He is pursuing a sourcing strategy with the aim of enabling logistical cost reductions. He has made the decision to scale-down his supplier base and purchase from one supplier.
Which type of sourcing arrangement has Ramesh began?
- A. dual
- B. multiple
- C. single
- D. sole
Answer: C
NEW QUESTION # 132
A company has actively included supporting of disadvantaged groups within their ESG commitment. Which of the following groups are considered disadvantaged?
- A. Muslims
- B. endangered species
- C. international suppliers
- D. pregnant women and children
Answer: D
Explanation:
Pregnant women and children are considered 'disadvantaged' by the UN. The other groups the UN call disadvantaged include; the elderly, the immunocompromised, those with disabilities and those living in poverty. This is the list given in the study guide.
A company could help disadvantaged groups in several ways. Firstly by offering employment (obviously not to the children). It could also include helping these groups as part of a Social Value out-come or community benefit scheme.
NEW QUESTION # 133
Which of the following is not a indices that measures economic data?
- A. ISO
- B. GDP
- C. CPI
- D. PPI
Answer: A
Explanation:
ISO isn't an indices- it stands for 'International Labour Association'.
The others are all indices that measure economic data; consumer price index, producer price index and gross domestic product.
NEW QUESTION # 134
A buyer is only interested in working with suppliers who have strong Environmental and Social Governance practices. It is therefore using ethical criteria as supplier selection stage to determine which suppliers to work with. Which of the following statements is true?
- A. ethical behaviour is impossible to determine as issues such as Modern Slavery often go undetected
- B. the buyer should ask suppliers to be accredited to ISO9001
a supplier who follows the CIPS Code of Conduct is more likely to meet the buyer's needs - C. compliance with Codes of Conduct from professional bodies is mandatory
Answer: B
Explanation:
A supplier who follows the CIPS Code of Conduct is more likely to meet the buyer's needs is the correct answer.
The other options are wrong:
1) Compliance with Codes of Conduct from professional bodies is optional. E.g. CIPS - no organi-sation is forced to comply with CIPS.
2) Unethical behaviour is not impossible to detect, it may be difficult but with correct due diligence and things like audits it's completely possible
3) ISO 14001 is quality management so is irelevent.
NEW QUESTION # 135
A buyer is carrying out an assessment to identify the risk of unethical suppliers being selected for a new contract. Which of the following should the assessment include in order to protect the organisation against ethical reputational risks?
- A. The average staff retention levels experienced by the suppliers
- B. Performance records (late deliveries/poor quality) of agreed contract deliverables
- C. The likelihood of suppliers becoming insolvent in the future due to unforeseen circumstances
- D. Whether the suppliers have received negative press around their fair treatment of subcontracted staff
Answer: D
Explanation:
Assessing the ethical reputation of suppliers is crucial to mitigate risks associated with unethical practices.
Negative media coverage regarding the fair treatment of subcontracted staff is a significant indicator of potential ethical issues within a supplier's operations. Such information can highlight concerns related to labor rights violations, discrimination, or unsafe working conditions, which can adversely affect the buying organization's reputation if not addressed.
Reference:
CIPS Level 4 Diploma in Procurement and Supply, L4M4 Study Guide, Section 3.3.1: Application of the CIPS Code of Conduct
NEW QUESTION # 136
When working closely with a supplier, waste can be reduced which can lead to improved business functions and cost savings. Which of the following are wastes that can be removed from the supply chain? Select THREE.
- A. Motion
- B. Waiting
- C. Over-analyzing
- D. Barriers
- E. Inventory
Answer: B,C,E
Explanation:
The correct answers are; motion, waiting and inventory.
This is part of Ohno's 8 Wastes. You can remember this with the acronym Tim Woods; transportation, inventory, motion, waiting, over-production, over-processing, defects, skills.
This is only mentioned briefly in this module but comes up in other modules more in depth, so is worth memorising if you can.
NEW QUESTION # 137
Scott is a procurement manager who is evaluating a bid from a supplier to provide a new IT system to his office that will be used by 100 employees. He is considering the total life-cycle costs. Which of the following should Scott consider? Select THREE
- A. Functional Fit
- B. Training
- C. Maintenance
- D. Acquisition Costs
- E. Added value
Answer: B,D,E
Explanation:
total life-cycle costs include; acquisition costs, maintenance and training.
Added value and functional fit are quality criteria that should also be evaluated when selecting a supplier, but do not fall under total life-cycle costs.
Note: total life cycle costs and whole life asset management are the same thing. You may see both terms used in the exam. I think CIPS is moving more towards Whole Life Asset Management now as the preferred vocabulary but they're the same thing.
NEW QUESTION # 138
Which of the following financial ratios would indicate a supplier's potential exposure risk to a steeprise in inflation?
- A. current ratio
- B. gearing ratio
- C. gross profit margin
- D. acid test
Answer: B
Explanation:
The correct answer is 'gearing ratio'.
Gearing measures how much of a company's funding is based on long-term debt or loans- this would be affected by a steep rise in inflation. If a company has a mortgage on their offices or facto-ry and they need to remortgage and inflation has gone up a lot- they'll be paying a lot more on their mortgage. This will severely effect the gearing ratio as they'll have more outgoings than incoming.
Gross profit margin COULD be affected by inflation, for example if you've got hyper-inflation and the country goes into recession and people stop buying your product. However, this answer isn't al-ways right and depends on many factors- the industry, the product, the company etc, so for the purpose of CIPS should be discounted. There are many industries which are immune to inflation.
NEW QUESTION # 139
Jamilla is looking to find a new supplier who can deliver raw materials of wood and paper to her company Woody Manufacturing Incorporated. The requirement is for regular orders of high volume. She has issued a Request for Quotation. What will this assess the suppliers on?
- A. which price is the most ethical
- B. who can deliver the highest quality items
- C. the five rights of procurement
- D. who can deliver the items the cheapest
Answer: C
Explanation:
According to p.75 "a RFQ attempts to assess which supplier can achieve the Five Rights of Procurement".
Although price is the only factor considered when using a RFQ- it's important to consider this price in detail; can the supplier deliver the right QUALITY of product for this price?, can they deliver the item WHEN we need it for this price? etc.
The answer is not 'who will deliver it the cheapest' because Jamilla might not pick the cheapest sup-plier. If the cheapest supplier has inferior quality paper, or can only make deliveries every other Tuesday then Jamilla may not select them.
NEW QUESTION # 140
Which of the following would you use to determine the outcome of a competitive tender? Select TWO.
- A. quality
- B. reputation
- C. distribution
- D. price
- E. location
Answer: A,D
Explanation:
Price and Quality are the two considerations when marking a competitive tender.
Location, distribution and reputation may be considered for SOME tenders, but these would be sub-categories that fall under 'quality questions.
NEW QUESTION # 141
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