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| Section | Objectives |
|---|---|
| Understand compliance issues when sourcing from suppliers | - Anti-bribery and anti-corruption measures - Modern slavery and human rights in supply chains - Ethical sourcing and corporate social responsibility (CSR) - Global sourcing considerations and Incoterms - Sustainability and environmental considerations - Codes of conduct and ethical standards - Regulatory and legal compliance |
| Understand options for sourcing of requirements from suppliers | - Insourcing vs outsourcing decisions - Sourcing strategies and approaches - Single, dual and multiple sourcing - Factors influencing sourcing decisions |
| Understand the key processes that can be applied to the analysis of potential external suppliers | - Financial analysis of suppliers - Supplier audits and due diligence - Risk assessment in supplier selection - Use of Request for Information (RFI), Request for Proposal (RFP) and Request for Quotation (RFQ) - Supplier appraisal and evaluation methods |
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NEW QUESTION # 105
Which instance would multiple sourcing be the most applicable approach?
Answer: D
Explanation:
Multiple sourcing is particularly beneficial when requirements are time-sensitive and availability is critical.
By engaging more than one supplier, the buyer ensures supply continuity, reduces dependency on a single provider, and improves responsiveness to urgent needs. While sole or single sourcing may suit high-cost strategic components or unique expertise, these arrangements increase dependency risks. For short-notice requirements such as consumables or basic components, multiple sourcing provides resilience and flexibility.
CIPS L4M4 stresses that sourcing strategy should reflect risk, demand variability, and supply criticality, and multiple sourcing directly addresses supply risk mitigation.
Reference: CIPS L4M4 Study Guide (v2), LO: "Application" - sourcing strategies, single vs multiple sourcing.
NEW QUESTION # 106
A "carnet" provides evidence of the origin of goods shipped in international trade. Is this correct?
Answer: A
Explanation:
An ATA Carnet is an international customs document that allows temporary duty-free movement of goods for exhibitions, trade fairs, or professional use. It is not a certificate of origin, which proves where goods are manufactured, nor is it insurance. Carnets reduce administrative barriers and duties for temporary imports
/exports. Responsible sourcing requires buyers to understand the correct use of trade documents to ensure compliance and avoid penalties, while distinguishing between documents that confirm origin, provide insurance, or facilitate temporary movement.
Reference: CIPS L4M4 Study Guide (v2), LO: "Application" - international trade documentation.
NEW QUESTION # 107
A procurement manager is undertaking a financial due diligence of potential suppliers.
Which of the following financial elements are used in the calculation ofgearing?
Select TWO that apply.
Answer: A,E
Explanation:
Gearing is a measure of a supplier'slong-term financial riskand indicates the proportion of debt used to finance the organisation compared with equity. It is calculated usinglong-term debt (such as long-term loans)in relation toshareholders' equity (ordinary share capital). High gearing suggests greater reliance on borrowed funds, increasing the risk of financial instability and potential supply disruption. Cost of sales and operating costs relate to profitability, while current liabilities are short-term obligations assessed through liquidity ratios, not gearing. Procurement professionals must understand gearing when conducting financial due diligence to ensure suppliers are financially sustainable and capable of meeting long-term contractual commitments.
Reference:CIPS L4M4 Ethical & Responsible Sourcing Study Guide (v2) - Financial appraisal of suppliers; gearing and solvency analysis.
NEW QUESTION # 108
A procurement manager suggests implementing an ISO environmental standard to improve procurement practices. Some colleagues worry about complexity and resistance. Should the company proceed?
Answer: B
Explanation:
ISO environmental standards (e.g., ISO 14001) provide a structured framework for managing environmental responsibilities. They support sustainability goals by embedding continual improvement, legal compliance, and stakeholder trust. They are relevant to organisations of all sizes and sectors, not just large firms. While they do not automatically guarantee compliance, they enhance systematic control, training, and supplier engagement. Resistance and complexity can be overcome with phased implementation and awareness- building. CIPS emphasises that adoption of recognised standards demonstrates responsible sourcing, aligns with CSR strategies, and reassures stakeholders about commitment to sustainability.
Reference: CIPS L4M4 Study Guide (v2), LO: "Concepts" - standards, sustainability frameworks, ISO principles.
NEW QUESTION # 109
In which circumstances would it be relevant for a procurement organisation to apply the Pareto principle (the
80/20 rule) to analyse expenditure with suppliers? Select TWO that apply.
Answer: A,C
Explanation:
The Pareto principle, or the 80/20 rule, is a tool used in procurement to identify that approximately 80% of an organisation's spend is typically with 20% of its suppliers. Applying this principle helps in:
* Identifying Strategic Suppliers:Recognising which suppliers account for the majority of spend allows organisations to focus on managing and nurturing these key relationships.
* Optimising Supplier Relationships:Understanding spend distribution can highlight opportunities to renegotiate terms, consolidate suppliers, or adjust sourcing strategies for better efficiency and cost savings.
Exact Extract from Study Guide:
"The Pareto Principle is used to identify that 80% of spend is typically with 20% of suppliers, enabling procurement to focus on strategic supplier management and optimise commercial relationships."
NEW QUESTION # 110
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