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| Section | Objectives |
|---|---|
| Understand the use of specifications in procurement and supply | |
| Understand market management in procurement and supply | - Compare the competitive forces that influence markets
|
| Understand how to develop a business case for requirements to be sourced from external suppliers | - Analyse how market factors affect procurement |
In the information society, everything is changing rapidly. In order to allow users to have timely access to the latest information, our L4M2 real exam has been updated. Our update includes not only the content but also the functionality of the system. The content of the L4M2 training guide is the real questions and answers which are always kept to be the latest according to the efforts of the professionals. And we apply the newest technologies to the system of our L4M2 exam questions.
NEW QUESTION # 129
A company uses eight different floor cleaning products at different premises and has decided to standardise on just one. This product is available from a large number of suppliers. What benefits should the company expect to achieve?
Answer: B
Explanation:
Comprehensive and Detailed Explanation (paraphrased from CIPS L4M2 content) Standardising from many similar products to one common product is a classic variety reduction / standardisation decision.
In CIPS L4M2, when standardisation is discussed, the benefits highlighted include:
* Economies of scale - buying larger quantities of a single product allows for better prices and volume discounts.
* Reduced administration and handling costs - only one product code to manage, fewer invoices and orders, simpler stock control.
* Simplified quality control - one specification and one performance profile to monitor.
Because the product is available from many suppliers, competition remains strong. This supports lower prices, not higher.
* Option A (Lower costs) - correct, due to economies of scale and reduced process/handling complexity.
* Option B (Fewer staff) - staff numbers are driven by overall workload, not just the number of product variants; standardising doesn't automatically cut headcount.
* Option C (Increased stock levels) - if anything, standardisation often reduces safety stock (you can pool demand into one line).
* Option D (Increased costs) - contradicts the expected benefits of standardisation and competition between many suppliers.
Relevant CIPS L4M2 areas:
* Standardisation and variety reduction in specifications
* Economies of scale and cost drivers in sourcing decisions
* Managing supply markets with multiple potential suppliers
NEW QUESTION # 130
XYZ Ltd is the largest consumer of brass in the country. It consumes 48% of all brass manufactured, while the second-largest consumes less than 10% of brass manufactured. Which force or power does XYZ Ltd possess?
Answer: C
NEW QUESTION # 131
Robert is a senior buyer at MMC Construction Ltd. His company is doing multiple development projects in the country, which increases procurement workload significantly. Meanwhile, most of the tasks are handled manually, which causes bottlenecks in the workflows. The procurement team is overwhelmed by the workload and complains from other departments. From previous experience, Robert knows that electronic system may help his procurement team. He writes a business case to submit to the senior management, in which he insists on the possible productivity improvement by adopting e-system in procurement. Is Robert's action reasonable?
Answer: B
Explanation:
Composing a compelling business case requires the proposer to write in the language of the approvers. Generally, approvers are business executives or important shareholders whose major interest is the profitability of the firm. Business case proposer may embed the following contents:
- Return on investment: according to Investopedia, Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment's cost. A business case would seem more attractive if the proposal is expected to have high ROI.
- Time to market: Time-to-market (TTM) refers to the time from which a company initially con-ceives a product or service idea to the point when the actual product or service is accessible to buyers in the market (Afonso et al., 2008). The speed at which companies can introduce products into the market is critical for sustaining competitive advantage, and the reduction of product development cycle time has become a strategic objective for many technology-driven firms.
- Customer satisfaction: Keeping existing customer to stay in the business can affect greatly on the profit margin of a firm. A new proposal that finds the way to innovate while keeping the current customers satisfied may gain the interest of senior management.
- Improving productivity: Productivity is the measure of how efficient and effective a firm is. Im-proving the productivity means that with the same or lesser input, better output is generated. In-creasing productivity also improves the profitability of a company.
- Risk management: Any business activity contains inherent risks. For example, for a mining company to be truly responsible, it must keep all of its workers safe, healthy and motivated, meet the expectations of the local community and government for the region in which it is operating, ensure it impacts on the environment positively if at all, as well as achieve the financial objectives set by its investors for both the short and long term. Managing risks well improves the production throughput and maintains customer satisfaction.
In the scenario, Robert is trying to convince the senior management to adopt e-procurement system by insisting on potential productivity improvement. This is the right approach. A business plan should engage and please senior management and directors. An appealing business case tells them how important things to the business (such as productivity, return on investment, customer satisfaction or costs) are affected by the plan.
Reference:
LO 1, AC 1.1
NEW QUESTION # 132
Ray is a procurement officer working for a medium-sized enterprise. Ray is due to renew the IT support package for one of the company's software systems, which is used for selling a niche, but important product.
Tech Solutions are the only supplier who can provide support for this specialist software. The software support package represents only 3% of Tech Solutions' overall sales income, however. Ray and Tech Solutions have an effective working relationship Which statement below describes the bargaining power in this situation?
Answer: D
NEW QUESTION # 133
The position of a product in its life cycle can affect the price that suppliers set. Is this statement correct?
Answer: C
Explanation:
A firm also has to look at a myriad of other factors before setting its prices. Those factors include the offering's costs, the demand, the customers whose needs it is designed to meet, the external environment-such as the competition, the economy, and government regulations-and other aspects of the marketing mix, such as the nature of the offering, the current stage of its product life cycle, and its promotion and distribution. If a company plans to sell its products or services in international markets, research on the factors for each market must be analyzed before setting prices. Organizations must understand buyers, competitors, the economic conditions, and political regulations in other markets before they can compete successfully.
[...]
The costs of the product-its inputs-including the amount spent on product development, testing, and packaging required have to be taken into account when a pricing decision is made. So do the costs related to promotion and distribution. For example, when a new offering is launched, its promotion costs can be very high because people need to be made aware that it exists. Thus, the offering's stage in the product life cycle can affect its price.
Reference:
- CIPS study guide page 90-91
- 15.2 Factors That Affect Pricing Decisions - Principles of Marketing (umn.edu) LO 2, AC 2.2
NEW QUESTION # 134
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