L4M8 CIPS Procurement and Supply in Practice Free Practice Exam Questions (2026 Updated)

A business case is a document containing the justification and the commercial benefits achievable for a potential project or an identified need, for example, the purchase of a capital equipment, con-struction of an additional warehouse or procuring more innovative software to replace the current on in use.

The essence of the business case is to obtain support and get buy-in from senior management.

In order to gain authority to apply whole life asset management a business case will need to be created and presented. A developed business case will cover the following element.

1) Introduction: Outline of what the business case is all about

2) Objective: Explanation of what the business case desired outcome is.

3) Approach that will be undertaken

4) List of resources required

5) Benefits of achieving the objective

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When evaluating potential suppliers, procurement professionals can carry out benchmarking. Benchmarking is the process of comparing a function, a process performance with another which is best in-class.

Other factors, apart from price that can be considered to find the total cost of acquisition include the product or service quality, lead time, supplier culture, its environmental awareness and sustainability.

Case study:

Tetsuya Tada, Chief engineer of the Toyata Supra Sports car has revealed how the process of benchmarking contributed to the car’s design.

Tada has worked by comparing the Supra to other cars. For example, it has been intentionally designed with a shorter wheelbase, than the Toyata 86 to make it more suitable for track racing. Furthermore, Tada has benchmarked the Supra against competition by suggesting that drivers will find the car’s performance comparable with that of Posche’s Cayman sports car.

Tada’s knowledge of the features belonging to different sports cars in his industry shows how benchmarking can be used by companies to successfully differentiate their products and remain competitive through awareness of their competitor’s activities.

Human rights are the statutory ways in which individual expects to and should be treated. Ethical and responsible sourcing includes the protection of human rights, not violating it.

When young women are being bound into contracts where they work for two to three years, they are not being granted the right to freedom from slavery.

Forcing these women to live in hostels under restrictions that prevent them from moving and are denied the opportunity to improve on their living condition is a violation of their right to life, liberty and personal security, also, their freedom from torture and degrading treatment is being violated.

Supply chain involves a network of individuals, organizations, technology activities and resources to make sure goods or services flow along the chain. If one point fails, every part further along the chain fails.

Fullpower projects (a flour manufacturer) supply chain begins with producers (raw materials, wheat farmers), suppliers, manufactures, distributors, retailers and end users (customer).

Fullpower projects supply chain falls within the primary sector (producers of wheat), the secondary sector include the manufacturing (those that converts the wheat the suppliers brings into flour) and tertiary sector (the distributor those that takes the wheat to the end users).

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Topics that are covered within ethics are;

1. Environmental factors

2. The triple bottom line: profit, people and planet

3. Adopting sustainable practice.

4. considering the social impact of organization’s behaviors

Though strong due diligence procurement professionals can assess which suppliers or potential suppliers appear to meet the criteria associated with ethical practice.

Prior to the contract being awarded, strong due diligence can save the organization from the following cost:

1) Cost of reputation

2) Environmental damage

3) Stakeholders dissatisfaction,

4) poor quality and rework

5) Breach of contract

6) Ethical concerns

When a contract has been awarded, either is to meet tangible needs or intangible needs, contractors or suppliers should be managed to ensure that they are meeting up with fulfilling their contractual agreement. To establish this, there are methods of managing contracts and suppliers.

Service level agreement (SLA) clauses: is placed in contract to ensures that supplier meets the expected and agreed level of service

Key performance indicator (KPI): are used to manage contracts that fulfill tangible needs, the KPIs are set performance thresholds that are used to monitor supplier’s performance.

Management by objectives (MBO): is the process of defining objective that are strategic to the organization relating them to the vision and mission and communicating them to the supplier through the contract and ensuring that this objective is met during contract performance.

Reviews: Regular supplier reviews are good practices, for it gives the buyer opportunity to give feedback on performance.

Continuous Improvement: Contracts and suppliers can be monitored through how they are chang-ing for better incrementally as they are fulfilling the schedule. There must be a set down system to timely improve on the process, people and continuously reduce waste.

Training: It is essential that training, are provided to come up on areas supplier is lacking.

Hidden costs are costs that do not always present themselves at the onset of the project.

Logistics can provide a hidden cost within global sourcing. The movement of goods can generate risk within a localized supply chain, but the risk is greater within global sourcing. Within global sourcing there are usually many more aspects to the logistics operation, hidden cost associated with the logistics process includes,;1) delays that can be experienced after placing orders, 2) unclear and poor/incorrect communication that might affect the successes of the transaction, also 3) goods could be confiscated by customs for unseen reasons.

Disposal of an asset is the final stage in the decommissioning process of a fixed asset.

When a fixed asset reaches the end of its useful or cost effective life time within an organization, the decision is made as to whether it should be removed from the premises or disposed off.

The process of disposing an asset cannot be without its risk, for example there could be pollution in the community, waste or hazardous materials that could affect the underground water or humans around.

These risks should be identified, evaluated to come up with a response strategy on how to avoid or mitigate them causing damage to human, property, business and the environment.

Conflict or dispute is the final area a procurement professional considers when creating terms for a contract with a supplier. If conflict or dispute arises, there must be a process put in place in the contract to try to resolve it and these includes;

a) Negotiation, b) mediation, c) arbitration and d) litigation.

Negotiation is usually carried out between senior people within organization that are in conflict, if they cannot reach an agreement through negotiation, mediation is the next stage, mediation is when a third party tries to help find a resolution among the parties in dispute. If mediation fails arbitration can start, arbitration involve independent professionals (arbitrators) working with all the party to try to reach an agreement. Parties do not have a formal or legal obligation to follow the arbitrator’s recommendation. Arbitration is expensive. If arbitration fails to resolve the conflict, the final stage is litigation, litigation takes time and money, and most people avoid it. It is a legal process where a court decides on the outcome of the dispute. The judge’s ruling is final.

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When the procurement professional is setting key performance indicator (KPI) where which the supplier performance will be monitored and managed. The KPI is expected to be SMART. SMART is an acronym that is used to set KPI and specification.

S - specific ,

M - measurable,

A - achievable,

R - relevant, and

T - timebound.

Organizational culture is made up of behaviors, traits, values and beliefs and these differ signifi-cantly across the globe. Gestures that may be positive in one country can be highly offensive in another. This culture could mean; for example, individualistic/collectivistic, masculine/feminine, uncertainty avoidance, power distance, Time perspective, indulgence/restraint.

When negotiating and forming contracts within the extended supply chain, it is important that the culture of the suppliers is understood to be compatible with the buying organization or else their might be loss of reputation, time, money material and equipment.

Also, being not aware of what is an acceptable ethically behavior in global sourcing can cost a buying organization. In some countries, bribery and kickbacks are a standard part of doing business. If procurement professional is not aware of the fact that some countries methods of doing business involves or expect kickbacks, for example, this could be costly to the organization and cancel out any savings that had originally been seen.

Cost of poor quality and rework: if the product or service quality is poor the organization may not satisfy it customers and this can lead to a loss of reputation in the market. For example, a residential building construction company contracting a supplier that supply would require home owners to reinstall a new door within three months. The organization would spend more funds in carrying out rework.

More administrative cost in contract management: an organization will have to manage it sup-pliers and the contracts to ensure they are delivering what they were contracted to do. A poor con-tract management is a waste in the process of delivery that can lead to loss of money. Also, to cor-rect this would cost the organizations administrative cost.

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A code of ethics is a set of morals and principle set out by an organization to state what it deems to be acceptable conduct and behavior

An ethical code of practice is a continually changing and developing document with society changing and different suppliers coming to market, the document has to remain current

Suppliers should continually monitor their codes of ethics to ensure that;

1. They are looking after the interest of the supply chain

2. That potential customers can be reassured that they are conforming to the required regulation, e.g. ISO 14001.

Ethical code of conduct should be constantly monitored and updated in accordance with the changes organization faces. This include 1) Define (2) prevent (3) detect (4) reprove (5) evaluate.

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If a supplier is accredited or is a member of an association that promotes good ethical conduct, a statement to this effect is likely to be featured on its company documentation. This could be in a form of letters after the organization name or the authorized use of logo.

Accreditation information should be verified by procurement professionals either asking organiza-tion for certification to prove membership or accreditation or checking on a professional register.

Below are associated bodies that form some industries.

1. ISO 14001 – for quality management

2. CIPS – for procurement and Supply

3. Red Tractor – NGO Registered in the UK, promoting human right

4. Amnesty International – human right

5. Carbon Trust – For Carbon neutral status.

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When reviewing supplier’s response the procurement professional should consider the right quantity of product or service that has to be ordered at anytime as against the price to decide how to gain the best cost.

Factors to consider include the following

(1)Cost of inventory

(2) cost of insurance

(3) cost of transportation.

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Contract performance review and continuous improvement is the stage 11 of the CIPS procurement and supply cycle.

In order to effectively manage supplier performance and contractual obligations, the suppliers per-formance against key performance indicators (KPI) should be reviewed regularly. This KPI should have been agreed doing the post contract award negotiation. In addition to review KPIs suppliers and the procurement team should work towards continuous improvement. This is a continuous ef-fort to improve product or services within an organization. This may involve improving quality, reducing waste in the supply chain and focusing on innovation. It is an ongoing process that works toward perfection.

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