L4M2 Exam Dumps - CIPS Level 4 Diploma in Procurement and Supply Questions and Answers

Comprehensive and Detailed Explanation (from CIPS L4M2: Business Case Development)

A business case should include:

Costs and risks (financial, operational, reputational)

Expected business benefits (value, performance, compliance)

Supplier lists or informal notes are not part of a formal business case.

Relevant CIPS L4M2 Sections:

Key contents of a business case

Risk and benefit analysis in procurement justification

Comprehensive and Detailed Explanation (from CIPS L4M2: Business Case & Cost Analysis)

When the quoted price seems higher than expected and market data suggests lower costs, CIPS advises to:

Seek a detailed cost breakdown to identify which components are inflating price.

This supports negotiation and ensures transparency, aligning with should-cost analysis and cost-based negotiation methods.

Options A and C would act prematurely; B (delay) is unnecessary.

Relevant CIPS L4M2 Sections:

Cost breakdown and cost analysis

Supplier pricing transparency and negotiation preparation

Comprehensive and Detailed Explanation (from CIPS L4M2 – Cost Management and Analysis)

CIPS teaches that indirect costs (e.g. overheads, admin, factory costs) can be estimated by using:

Supplier financial statements,

Benchmarking,

Industry cost models.

Analysing these supports negotiations by revealing true cost drivers.

Therefore, Option B is correct — buyers can and should assess indirect costs when evaluating total cost and negotiating.

Relevant L4M2 references:

“Understanding direct and indirect cost elements”

“Cost analysis and should-cost models in business case preparation”

Explanation

The specification that is produced too detailed will incur unnecessary cost because it does not allow suppliers to use their expertise in finding the most efficient way to produce it.

'No, because higher requirements in specification, the greater bargaining power of buying organi-sation': more detailed specifications could tighten the supplier base and potentially leave buying organisation with fewer potential supplier. This may reduce buyer's bargaining power in negotia-tion.

'Yes, because higher requirements will help buying organisation find the best supplier': in some circumstances, higher requirements will lead to smaller supplier base. In the worst scenario, there is no supplier who has capability to carry out those requirements

'Yes, because optimising the specification is the only method to achieve value for money': There are other methods to achieve cost saving and value for money, inter alia, volume concentration, relationship restructuring, etc.

Comprehensive and Detailed Explanation (from CIPS L4M2: Cost Management)

CIPS teaches that effective buyers conduct cost breakdowns that include both direct and indirect costs, using data from:

Supplier financial reports,

Benchmarking,

Industry cost models.

Thus, buyers can analyse indirect costs (e.g. overheads, utilities, admin) to strengthen negotiation positions.

Relevant CIPS L4M2 Sections:

Cost analysis and supplier price build-up

Using cost data to negotiate value

Explanation

The term product life cycle refers to the length of time a product is introduced to consumers into the market until it's removed from the shelves. The life cycle of a product is broken into four stages—introduction, growth, maturity, and decline.

Chart, line chart Description automatically generated

Source: https://blueoceanoutsource.co.ke/the-product-life-cycle-concept/

At maturity stage, price competition sets in as more and more supply capacity has been added by new entrants, then the competition will be the most intense.

Comprehensive and Detailed Explanation (from CIPS L4M2 – Specification Control)

A conformance specification defines exact technical details (dimensions, materials, design).

It ensures identical compatibility with existing items.

Hence, Option A is correct.

Performance or outcome specifications would allow variations, which are not acceptable here.

Relevant L4M2 references:

“Conformance vs performance specifications”

“Specification alignment for compatibility”

Explanation

This questions is intended to ask students about types of waste in Lean principles.

Lean was born out of manufacturing practices but in recent time has transformed the world of knowledge work and management. It encourages the practice of continuous improvement and is based on the fundamental idea of respect for people. Womack and Jones defined the five principles of Lean manufacturing in their book “The Machine That Changed the World”. The five principles are considered a recipe for improving workplace efficiency and include: 1) defining value, 2) mapping the value stream, 3) creating flow, 4) using a pull system, and 5) pursuing perfection.

Lean principles aim to eliminate waste in processes. The eight wastes of Lean principles are:

- Defects

- Over-production

- Waiting

- Not using talent

- Transport and handling

- Inventory

- Motion waste

- Excess processing

In the scenario, the component is processed more than necessary. The engineers try to make them as accurate as possible with very little tolerance. In fact, the component does not need to be that precise. This excesses buyer's requirements and incurs costs for both buyer and supplier. The scenario is an example of over processing (or excess processing).

Overprocessing is one of the seven wastes of lean manufacturing (or 7 mudas); Overprocessing is adding more value to a product than the customer actually requires such as painting areas that will never be seen or be exposed to corrosion.

Overprocessing as one of the seven wastes is caused by having unclear standards and specifications, many operators will try to do the best job possible and will not always be aware of what truly adds value to the product or even the end use. They will therefore often expend time polishing and finishing components that do not require it.