L5M6 CIPS Category Management Free Practice Exam Questions (2025 Updated)

Within the Boston Consulting Group [BCG] Matrix, a Cash Cow represents a product or business unit that holds a high market share in a low-growth market. These products typically generate strong and stable cash flows because they dominate their markets with little new competition. Although growth opportunities are limited, these units require minimal investment and often fund other parts of the business.

For example, a well-established soft drinks brand in a mature market is a classic cash cow. While sales are stable and market share is high, growth potential is low due to saturation. This differs from:

Stars [high share, high growth] which require significant investment.

Question Marks [low share, high growth] which may or may not succeed.

Dogs [low share, low growth] which are often candidates for divestment.

In category management, identifying cash cows helps procurement teams prioritise efficiency and cost management, ensuring these categories remain profitable without heavy strategic input.

[Ref: CIPS L5M6 Study Guide, p.117 – BCG Matrix and procurement strategy]

Analytics data refers to data models and predictions, often generated through statistical methods or advanced software, that provide insights into future trends. Unlike historical data, which looks at past performance, or known data, which describes current realities, analytics projects what is likely to happen in the future. For example, predictive analytics can identify demand spikes based on past seasonal behaviour, consumer sentiment, or economic indicators. In category management, such predictive models are invaluable for anticipating supply shortages, managing risks, and planning procurement strategies. Analytics data allows procurement professionals to move from reactive decision-making to proactive and strategic management. The integration of analytics into forecasting also supports better negotiation with suppliers, as buyers can demonstrate awareness of future trends and cost drivers. In today’s fast-changing markets, reliance solely on historical data is insufficient—analytics data gives procurement a competitive edge.

A Technology Roadmap is a planning tool used to align technological investments with business strategy. It enables organisations to evaluate current capabilities, identify emerging challenges, and plan for future technology adoption. The purpose is not just to decide between existing options but to forecast which innovations will be most valuable over time.

For instance, a company may use a roadmap to determine whether to invest in automation, artificial intelligence, or renewable energy solutions, based on expected business growth and industry trends. This ensures resources are allocated to technologies that offer long-term competitiveness.

Other options are less accurate:

Option A oversimplifies; technology roadmaps are not for one-off decisions.

Option B is incorrect as tenders require specifications, not long-term roadmaps.

Option D relates to risk management, not strategic technology planning.

Therefore, the roadmap helps businesses stay adaptive and forward-thinking, ensuring that investments made today remain relevant tomorrow.

[Ref: CIPS L5M6 Study Guide, pp.126–127 – Technology Roadmaps in category management]

Inflation is directly linked to the Economic factor within STEEPLED. It affects costs, purchasing power, and business profitability.

[Ref: CIPS L5M6 Study Guide, p.109 – STEEPLED analysis factors]

The correct terminology is bargaining power of buyers, not "threat of buyers". Porter’s Five Forces are:

Threat of new entrants

Bargaining power of suppliers

Bargaining power of buyers

Threat of substitutes

The correct stage is Market/commodity and options [including make vs buy assessment], which is Stage 2 of the CIPS Procurement and Supply Cycle. This stage focuses on analysing the external market, internal requirements, and identifying whether to make a product in-house or source it externally.

A Make vs Buy assessment helps determine whether the organisation has the capacity, skills, and resources to produce the item internally, or whether outsourcing would deliver greater value. Factors such as cost, risk, quality, lead time, and strategic alignment are evaluated.

Other stages differ:

High-level specification [Stage 1]: Focuses on defining what is needed, not sourcing decisions.

Develop strategy/plan [Stage 3]: Comes after options are analysed, where the sourcing path is chosen.

Market engagement [Stage 4]: Involves engaging suppliers, which cannot happen until the Make vs Buy decision is made.

This makes Stage 2 the most accurate point for such an assessment.

[Ref: CIPS L5M6 Study Guide, pp.35–36 – Procurement Cycle, Make vs Buy analysis]

Category Management is a strategic approach to procurement. According to CIPS, it is defined as “a rigorous fact-based, end-to-end process for proactively collaborating with stakeholders to develop and implement sourcing strategies that deliver significant value from an organisation’s external spend.”

Unlike tactical or reactive procurement, which focuses on immediate needs or firefighting, category management emphasises long-term planning, data analysis, supplier relationships, and alignment with business objectives. It goes beyond simply planning purchases in advance [which could apply to “planned procurement”] by integrating market intelligence, risk assessment, and value optimisation.

Being strategic means that category management seeks not only cost savings but also innovation, sustainability, and resilience. It requires cross-functional collaboration and the use of analytical tools like Kraljic matrices, total cost of ownership, and supplier segmentation.

Therefore, the most accurate categorisation is strategic procurement, not merely tactical or planned.

[Ref: CIPS L5M6 Study Guide, p.2 – Category Management as a strategic approach]

Supply chain risks are risks that involve suppliers or logistics networks and have a direct impact on procurement performance. Poorly defined contract terms (Option A) may cause service failure, while delays due to port strikes (Option D) disrupt inbound logistics. These are classic supply chain risks because they are linked to supplier performance or external logistics factors. By contrast, lightning striking HQ is an internal operational risk, and a consultant giving poor advice is a professional service risk rather than a direct supply chain issue. For procurement, identifying supply chain risks is critical to developing mitigation strategies such as alternative suppliers, buffer stock, or stronger contractual clauses. Risk assessment frameworks like the likelihood/severity matrix help prioritise which risks to address first.

The correct answer is Maturity. In the industry lifecycle model, markets evolve through stages: birth, growth, maturity, and decline. Tulipa Ltd initially saw high growth, reflecting the growth stage, where demand is rising, and market share is expanding. However, for the past two years, share has plateaued, suggesting the market has stabilised, which is a key characteristic of the maturity stage.

At maturity, the market is often saturated, with limited opportunities for expansion. Competition becomes more intense, innovation slows, and firms compete largely on efficiency, branding, or incremental improvements. Unlike decline, the market is still viable and profitable, but growth rates are flat.

The study guide also introduces an intermediate stage called shakeout, occurring between growth and maturity, where weaker competitors exit. Tulipa’s situation has passed growth but has not yet entered decline, making maturity the correct classification.

[Ref: CIPS L5M6 Study Guide, p.175 – Industry Lifecycle and Procurement Strategy]

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]

This item is classified as a Bottleneck item in the Kraljic Portfolio Matrix. Bottleneck items are low-value in terms of spend but carry high supply risk, often because there are very few suppliers or a monopoly situation.

In this case, Frankie Burgers faces a monopoly supplier, meaning supply risk is high. Even though the item is low cost, its unavailability could disrupt operations, creating significant vulnerability.

By contrast:

Leverage items are high-value but low risk, suited for competitive sourcing.

Strategic items are high-value and high-risk, requiring partnerships.

Routine items are low-value and low-risk, suitable for automated procurement.

Category managers facing bottleneck items often mitigate risk through strategies such as developing alternative suppliers, stockpiling, or long-term contracts to secure continuity of supply.

[Ref: CIPS L5M6 Study Guide, p.157 – Kraljic Matrix applications]

The services industry does not have a specific SIC code because it is highly diverse, spanning multiple activities that do not fit neatly into a single classification.

[Ref: CIPS L5M6 Study Guide, p.88 – SIC classification limitations]

Cost-out is the most effective approach for reducing supplier costs while increasing value. It involves redesigning products or services collaboratively with suppliers to eliminate costs before they occur. For example, altering product design to use fewer materials can reduce overall costs without compromising quality. This differs from price acceptance (simply accepting a supplier’s offer), price management (controlling or negotiating pricing), or cost-down (gradual cost reduction). Cost-out is proactive and strategic, focusing on long-term value creation rather than short-term savings. For category managers, adopting cost-out strategies requires close supplier collaboration, innovation, and joint investment in process improvements.

Kearney’s 7 Step Strategic Sourcing Model provides a structured, step-by-step approach for managing sourcing activities. The steps include profiling the category, assessing the supply market, developing sourcing strategies, and implementing them. This model ensures that sourcing is systematic, evidence-based, and aligned with strategic objectives. Unlike tools such as the Kraljic Matrix, which classifies items by risk and impact, Kearney’s model provides an end-to-end process framework for sourcing execution. Similarly, Pareto and Porter’s 5 Forces are useful analytical tools but not procedural sourcing frameworks. For category managers, the Kearney Model is valuable because it emphasises cross-functional collaboration, data-driven decision-making, and continuous improvement. Its structured approach reduces risks of ad-hoc decision-making and ensures alignment with organisational goals. This is why it is a central feature of L5M6 study material and often tested in exams.

The correct answer is Inspire. According to the negotiation styles outlined in the L5M6 study guide, the Inspire style is based on passion, motivation, and creating a sense of shared purpose between buyer and supplier. It focuses on appealing to the values and aspirations of the other party, encouraging collaboration and commitment beyond transactional goals.

Unlike logic [which relies on rational arguments and data] or confidence [which emphasizes authority and assertiveness], inspire creates an emotional connection that fosters trust and long-term cooperation. Empathy is another style that focuses on understanding the other party’s position but does not carry the motivational dimension of “inspire.”

For category managers, using an inspire style can be particularly powerful when renewing contracts with long-term suppliers where collaboration, innovation, and trust are critical to value creation. It demonstrates leadership and ensures both sides are committed to mutually beneficial outcomes.

[Ref: CIPS L5M6 Study Guide, p.67 – Negotiation styles in category management]

A SWOT Analysis distinguishes between internal factors (strengths and weaknesses) and external factors (opportunities and threats). Strengths are internal capabilities, resources, or skills that give the organisation an advantage in the market—such as strong supplier relationships, unique expertise, or cost leadership. Weaknesses are internal limitations, such as lack of investment, poor technology, or inadequate processes. These are factors the organisation has direct control over and can improve. On the other hand, opportunities and threats are external influences outside the business’s direct control, such as market trends, legislation, or competitor actions. For category management, applying SWOT allows managers to assess the current position of categories and design strategies that build on strengths and address weaknesses. This analysis also ensures that procurement strategies remain aligned with organisational goals and competitive environments. The correct recognition of internal versus external factors is essential to avoid misdiagnosis and wasted effort.

In the automobile industry, the most logical method for structuring categories is by part. Large manufacturing organisations, such as Ford or Toyota, procure thousands of parts and materials from hundreds of suppliers. To manage this complexity effectively, they segment procurement responsibilities into categories such as engines, tyres, glass, electronics, or body frames. This allows Category Managers to develop deep expertise in their assigned areas, improving supplier relationships and value delivery.

Other approaches are less effective:

Alphabetical categorisation is impractical and arbitrary, providing no strategic value.

By spend creates imbalances, as high-value categories would attract disproportionate workload and risk, leaving others underrepresented.

By supplier could lead to inefficiency and over-fragmentation, as suppliers often provide multiple types of products.

The study guide stresses that categorisation must allow procurement teams to be efficient, balanced, and capable of strategic focus. By organising categories by part, managers can align more closely with engineering and production needs, ensuring better cross-functional collaboration.

[Ref: CIPS L5M6 Study Guide, p.3 – Defining categories in Category Management]

Cross-Functional Teams (CFTs) are essential in category management, as they bring together expertise from different areas of the organisation. Their success depends on having a clear, articulated purpose and endorsement from leadership to ensure authority and resource allocation. It is not necessary to have exactly four functions (the guidance suggests three or more), nor for all members to have technical expertise—CFTs should balance technical, procurement, legal, and operational knowledge. Strong leadership support ensures the team’s recommendations are implemented, while a clear purpose ensures alignment and focus. Without these, CFTs risk becoming unfocused discussion groups with limited impact.

Contract leakage refers to the difference between the benefits forecasted before awarding a contract and the actual benefits realised during its execution. For example, savings predicted during tendering may not materialise due to supplier underperformance, scope creep, or poor contract management. This phenomenon highlights the importance of post-contract management and continuous monitoring of supplier performance. Category managers must ensure that expectations set during procurement are followed through by tracking delivery, compliance with terms, and value creation. Tools such as KPIs, SLAs, and audits help minimise leakage by ensuring accountability. Ultimately, failure to address leakage can lead to financial loss, reduced trust, and missed opportunities for improvement. By focusing on contract outcomes as well as initial savings, procurement ensures that strategic objectives are consistently met.