L5M6 Exam Dumps - CIPS Level 5 Advanced Diploma in Procurement and Supply Questions and Answers

When many suppliers exist, buyers have multiple options, increasing their bargaining power. Suppliers must compete for contracts, shifting power toward the buyer.

[Ref: CIPS L5M6 Study Guide, p.112 – Porter’s Five Forces: Buyer Power]

Pareto Analysis identifies the “vital few” issues that cause the majority of problems, usually presented as the 80/20 rule. While it is useful for prioritisation, its limitation is that it only highlights the frequency of issues and not the root causes behind them. In James’s example, identifying that “website errors” are the top cause of complaints is useful, but it doesn’t explain why the errors occur. Therefore, further investigation such as root cause analysis or process mapping is required to implement corrective action. Another limitation is that Pareto analysis is based on quantitative data only, not qualitative, meaning it cannot capture customer perceptions or subjective insights. This reinforces the need to use Pareto in conjunction with other diagnostic tools for effective problem solving. In practice, category managers must use Pareto as a screening tool to highlight priorities and then follow with more detailed analysis to ensure improvements are sustainable.

Supplier 1 → Price Acceptance + Bottleneck

Supplier 1 is the sole supplier of a critical item, and XYZ has confirmed through market research that there are no substitutes available. This places Supplier 1 in the Bottleneck quadrant of the Kraljic Matrix, which is defined by high supply risk but low profit impact (or limited ability to influence price). In bottleneck situations, buyers have limited leverage, making them price takers rather than price setters. That’s why the appropriate cost approach here is Price Acceptance—XYZ must accept the price dictated by the supplier because of the absence of alternatives. Procurement’s role becomes risk mitigation, ensuring continuity of supply rather than focusing on negotiation power. The recommended strategies include maintaining strong supplier relationships, holding safety stock, and monitoring supply risks. Price cannot be influenced significantly, so procurement must accept the terms, reflecting a bottleneck scenario.

(Ref: CIPS L5M6 Study Guide, pp.80–83, 97–100 – Cost ApproachesKraljic Matrix)

Supplier 2 → Cost Down + Leverage

Supplier 2 provides items that, while not purchased in large volumes, have a high impact on profit and carry a low supply risk. These characteristics fit into the Leverage quadrant of the Kraljic Matrix: high profit impact, low risk. In such cases, buyers hold strong bargaining power and can use competition or collaborative cost reduction measures to secure better value. The chosen cost approach here is Cost Down, which involves working with suppliers to systematically reduce costs without reducing value. XYZ’s long-term relationship with Supplier 2, combined with a focus on identifying where costs could be lowered, matches the cost-down philosophy. Examples might include value engineering, supplier process improvements, or volume consolidation. Leverage items are ideal for competitive sourcing, e-auctions, and bulk negotiation. By applying a cost-down approach, XYZ can ensure sustained profitability while keeping supply risk under control.

(Ref: CIPS L5M6 Study Guide, pp.80–81, 97–100 – Cost ManagementLeverage items)

Supplier 3 → Price Management + Non-Critical

Supplier 3 provides indirect goods such as stationery, which have little impact on company profits and are purchased regularly in small quantities. These fit into the Non-Critical quadrant of the Kraljic Matrix, which is characterised by low profit impact and low supply risk. In these cases, procurement’s focus should be on administrative efficiency and price management, rather than extensive strategic negotiations. The chosen cost approach here is Price Management, since XYZ meets with the supplier regularly to discuss pricing and bulk discounts. This approach ensures that, although the spend is low-value, the company avoids unnecessary waste or inflated costs. Tools such as catalogues, e-procurement systems, or framework agreements are commonly used in this quadrant to manage spend efficiently. Price management helps free up procurement resources for more strategic categories while still ensuring best value in non-critical areas.

(Ref: CIPS L5M6 Study Guide, pp.80–82, 97 – Non-critical items and price management)

Supplier 4 → Cost Out + Strategic

Supplier 4 is supplying a one-off capital expenditure item. XYZ has engaged in months of negotiations regarding specifications, and both parties are collaborating to reduce costs before manufacturing begins. This aligns perfectly with the Strategic quadrant of the Kraljic Matrix, where items have high profit impact and high supply risk. Strategic items require strong, long-term partnerships and close supplier collaboration. The appropriate cost approach here is Cost Out, which focuses on eliminating unnecessary costs during the design and specification stages, before production. This proactive approach ensures that efficiency and value are embedded in the product from the outset. Cost-out strategies often involve redesign, engineering collaboration, and innovation to reduce total cost of ownership. In such relationships, trust and partnership are critical, since both buyer and supplier must work together to achieve shared value and risk reduction.

(Ref: CIPS L5M6 Study Guide, pp.80, 97–99 – Strategic items and Cost-Out approach)

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Category 1: Highly innovative, many suppliers with similar products at similar price points

Porter’s Force: Competitive Rivalry – High

STEEPLE Factor: Technological

Explanation (150–200 words):

Category 1 operates in a market that is highly innovative and subject to rapid technological change. Innovation means suppliers are constantly developing new features or solutions, making technology the primary STEEPLE factor. Additionally, because there are many suppliers offering similar products at similar price points, competitive rivalry is intense. Buyers can switch easily, and suppliers must compete aggressively on features, pricing, and differentiation.

This combination of high rivalry and technological change creates both opportunity and risk for Randoxx. On one hand, innovation drives new solutions that can be leveraged; on the other hand, it increases pressure to manage supplier relationships strategically. Randoxx must monitor technological trends closely while maintaining competitive sourcing strategies to manage this highly dynamic category.

(Ref: CIPS L5M6 Study Guide – Porter’s Five Forces, p.112–116; STEEPLED Analysis, p.109)

The two most important factors when assessing supply chain risks are Severity and Likelihood. These are typically measured on a scale [e.g., 1–5], with the product of the two giving a risk score.

Severity measures the potential impact on the organisation if the risk materialises. For example, supplier insolvency may severely disrupt operations.

Likelihood assesses the probability of the event occurring.

The combination of severity × likelihood determines whether a risk is low, medium, or high, and informs mitigation strategies.

Other options are less central:

Location may influence likelihood but is a sub-factor.

People involved is not a formal assessment criterion.

Cost can be a consequence but is part of severity, not a separate factor.

Using severity and likelihood ensures risks are prioritised based on both impact and probability, allowing category managers to allocate resources effectively.

[Ref: CIPS L5M6 Study Guide, p.40 – Risk assessment and mitigation protocols]

The correct sequence of Category Strategy Development is:

Create the strategic plan – outlining objectives, tactics, and desired outcomes.

Develop a progress tracking plan – defining performance measures and milestones.

Define resources needed – identifying staff, skills, and financial support required.

Conduct a roadshow – presenting the strategy to stakeholders and gaining buy-in.

This order ensures strategies are clearly defined before resources are committed and that tracking mechanisms are in place to measure success. The roadshow is critical to gain organisational support and alignment, ensuring all stakeholders understand the plan and contribute to its implementation. Mis-sequencing these steps can result in wasted resources, poor engagement, or ineffective execution. Category managers must follow this structured approach to maintain accountability, transparency, and long-term success in strategy implementation.

The three key enablers are People, Tools, and Technology. Each plays a distinct but interconnected role in making category management effective:

People: Skilled category managers and cross-functional teams provide the expertise, negotiation skills, and stakeholder engagement needed for success. Without trained professionals, strategies cannot be executed effectively.

Tools: Analytical frameworks like Kraljic’s Matrix, spend analysis, TCO, and risk assessment tools enable informed decision-making. These provide structure and evidence for procurement strategies.

Technology: Digital platforms such as e-procurement systems, data analytics software, and supplier relationship management [SRM] tools support efficiency, transparency, and scalability.

By contrast, options such as “Place” and “Environment” are not formal enablers within CIPS’s framework. While environmental and cultural context matter, they are not listed as the three foundational enablers.

The study guide emphasises that category management can only be effective when these three enablers work together—skilled people using appropriate tools and supported by the right technology.

[Ref: CIPS L5M6 Study Guide, p.6 – Enablers of Category Management]