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| Certification Vendor: | CIPS (Chartered Institute of Procurement and Supply) |
|---|---|
| Exam Name: | Defining Business Needs |
| Exam Number: | L4M2 |
| Available Languages: | English |
| Exam Price: | ยฃ199 / $250 USD |
| Certificate Validity Period: | 3 years |
| Exam Format: | Multiple-choice questions, Objective response format |
| Related Certifications: | L4M1 Scope and Influence of Procurement and Supply L4M3 Commercial Contracting L4M7 Whole Life Asset Management L4M4 Ethical and Responsible Sourcing L4M5 Commercial Negotiation L4M6 Supplier Relationships L4M8 Procurement and Supply in Practice |
| Real Exam Qty: | 55-65 |
| Exam Duration: | 90 minutes |
| Passing Score: | 60% |
| Recommended Training: | Official CIPS Online Learning L4M2 Defining Business Needs Study Guide |
| Exam Registration: | CIPS Official Registration |
| Sample Questions: | CIPS L4M2 Sample Questions |
| Exam Way: | Computer-based; online remote proctored or in-person at authorised test centres |
| Pre Condition: | No mandatory prerequisites; recommended: relevant work experience or completion of Level 3 Certificate |
| Official Syllabus URL: | https://www.cips.org/qualifications/level-4-diploma/l4m2-defining-business-need/ |
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CIPS L4M2 exam, also known as Defining Business Needs, is an essential module for procurement professionals. L4M2 exam is designed to provide learners with a comprehensive understanding of how to identify, define, and manage business needs effectively. L4M2 Exam covers various topics, including developing business cases, stakeholder management, and identifying procurement options.
NEW QUESTION # 146
When devising a business case for purchasing a new copier, Maria analyses its whole-life costs as following:
Though cost generating activities are identified, she has not categorised the costs. What is the total value of copier's end of life costs?
Answer: C
Explanation:
Life cycle costing is a key asset management tool that takes into account the whole of life implications of planning, acquiring, operating, maintaining and disposing of an asset.
The process is an evaluation method that considers all ownership and management costs. These include;
- Concept and definition;
- Design and development;
- Manufacturing and installation;
- Maintenance;
- Support services; and
- Retirement, remediation and disposal costs.
End of life costs often comprise of decommissioning, removing and disposal costs. In the copier scenario, the end of life costs equal to removal cost, which is $150.
Reference:
- Life Cycle Cost Guidelines (dlgsc.wa.gov.au)
- CIPS study guide page 36-40
LO 1, AC 1.2
NEW QUESTION # 147
A CPO is making a business case for acquiring a new computer system. He has set out objective, generated options, cost and benefit of each option and implementation plan. Which of the following elements should be included in the business case?
Answer: B
Explanation:
Before a project commences (either capital purchase or switching to a new supplier), a business case should be developed. The business case outlines the why, what, how, and who necessary to decide if it is worthwhile continuing a project.
Basically, the following criteria can be applied to the assessment of a business case:
1. Objectives
This part describes why you are doing the project. The business objective answers the following questions:
- What is your goal?
- What is needed to overcome the problem?
- How will the project support the business strategy?
2. Option identification and selection
Identify the potential solutions to the problem and describe them in enough detail for the reader to understand.
For instance, if the business case and proposed solution makes use of technology, make sure to explain how the technology is used and define the terms used in a glossary. Since most problems have multiple solutions an option appraisal is often needed. This will explore the potential solutions and recommend the best option.
When writing the initial business case the option appraisal is likely to contain a long list of options and will cover many possibilities. As the project continues a number of options will be rejected. The final business case may contain three to five options # the short list # that includes a do nothing or benchmark option.
3. Benefits and limitations
The benefits and limitations section describes the financial and non-financial benefits in turn. The purpose is to explain why you need a project.
For instance, to:
- Improve quality
- Save costs through efficiencies
- Reduce working capital
- Generate revenue
- Remain competitive
- Improve customer service
- Align to corporate strategy
The business case should also include any limitations since these present potential risk to the pro-ject.
4. Risk management
The risk assessment summarizes the significant project risks and opportunities and how they are managed.
The risks included should cover those that could arise from your project or the organiza-tion's ability to deliver change.
This section answers the following questions:
- What risks are involved?
- What are the consequences of a risk happening?
- What opportunities may emerge?
- What plans are in place to deal with the risks?
- Every project should include a risk log.
When writing a business case, make sure this is included as it explains how risk and opportunity are managed.
5. Implementation plan
The outline plan provides a summary of the main activities and overall timescale # project schedule # for the project.
Ideally, the project should be divided into stages with key decisions preceding each stage. Use this section to answer the following questions:
- What is required?
- How is it done?
- Who does what?
- When will things happen?
This outline plan lists the major deliverables and includes a brief project description plus accountabilities for each activity.
In the scenario, the CPO has set out objective, generated options, cost and benefit of each option and implementation plan. In order to make the business case more compelling, he should reinforce it with risk management.
Reference: CIPS study guide page 41-48
LO 1, AC 1.3
NEW QUESTION # 148
Which of the following is the technology that disrupts traditional retail?
Answer: A
Explanation:
One of the biggest disruptors in retail has been e-commerce. According to a report by IDC, in the month of December 2018, which is also the holiday season in the west, the e-commerce sector globally, has grown by 20 percent.
LO 2, AC 2.2
NEW QUESTION # 149
John has been asked to develop a business case before obtaining approval to purchase a large piece of capital equipment for a glove manufacturing unit. Is this the right thing to do?
Answer: D
Explanation:
Detailed Explanation:A business case allows for the evaluation of alternatives and ensures alignment with strategic goals. It also assesses risks, benefits, and financial impact, providing a comprehensive basis for decision-making. Reference: CIPS Level 4, Capital Expenditure and Business Case Development.
NEW QUESTION # 150
Ranjit is purchasing a large piece of laboratory equipment which is brand new to the market. Can this be classified as a straight re-buy?
Answer: B
Explanation:
Comprehensive and Detailed Explanation (paraphrased from CIPS L4M2 content) CIPS uses the classic buying situation model:
New buy - first time the item is purchased; high information need and perceived risk.
Straight re-buy - routine repurchase of a product that has been bought before and is well-known.
Modified re-buy - a repeat purchase with some changes (e.g. spec, price, supplier).
Here, the equipment is brand new to market, meaning:
It has not been purchased before by the organisation.
There is no previous sourcing history for this specific product, so it cannot be a straight re-buy.
Thus:
Option D is correct - it is not a straight re-buy because it has not been specified or sourced before.
Option A is incorrect - even if the supplier has been used before, the product is new.
Option B - there cannot be an "existing specification" for something new to the market; if there is, it would be a modified or straight re-buy, not a new product situation.
Option C - a standing purchase agreement would imply established purchasing arrangements: that contradicts
"brand new to market".
Relevant CIPS L4M2 areas:
Buying situations: new buy, straight re-buy, modified re-buy
Implications for information gathering, evaluation and risk
How new products affect sourcing and market management
NEW QUESTION # 151
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