CIPS L4M1 Latest Exam Pattern - L4M1 New Questions

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CIPS L4M1 Exam Syllabus Topics:

Topic	Details
Topic 1	Understand and analyse the added value through procurement and supply chain management: This section of the exam measures skills of supply chain managers related to identifying added value outcomes in procurement and supply and evaluating cost savings, service improvements, and innovationsu contributions.It also measures procurement and supply processes that contribute to added value.
Topic 2	Understand and analyse the key steps when procuring goods or services: This section measures that skills of purchasing managers and procurement officers in identifying and evaluating stages in the sourcing process, planning, supplier selection, and contract management.
Topic 3	Public, private, charity, not-for-profit, manufacturing, retail, construction, financial, agriculture, and service sectors. It also covers analyzing the impact of the public sector on procurement and supply chain activities public sector objectives, regulations, competition, accountability, and value for money. It finally covers the impact of the private sector on procurement or supply chain activities.

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Newest L4M1 Exam Questions and Scope and Influence of Procurement and Supply Learning Reference Files

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CIPS Scope and Influence of Procurement and Supply Sample Questions (Q40-Q45):

NEW QUESTION # 40
Industry Sectors can be classified as Primary, Secondary and Tertiary. What is meant by an 'industry sector'?
Describe the main characteristics of and types of business you will find in these. (25 marks)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question
- The first question can be a simple introduction with a bit of extra detail. The main 'meat' to your essay is going to be explaining the three sectors, their characteristics and example businesses.
- Aim for three well explained characteristics as a minimum
Example essay
An industry sector refers to a broad category or grouping of businesses and economic activities that share similar characteristics and functions in the production and distribution of goods and services. These sectors are often classified into three main categories: Primary, Secondary, and Tertiary. Here are the main characteristics and types of businesses you will find in each of these industry sectors:
1.Primary Sector:
*Characteristics: The primary sector involves activities related to the extraction and production of raw materials and natural resources directly from the environment. This sector relies on nature and weather patterns: businesses in the primary sector are highly dependent on natural factors such as climate, weather, soil quality, and geographic location. These factors can significantly impact the productivity and profitability of primary sector activities. Extreme weather such as floods can severely impact this sector. Moreover there is a seasonality to this sector and many activities in the primary sector require a significant amount of manual labour, particularly in agriculture, fishing, and forestry. However, modern technology has also been integrated into some primary sector activities to increase efficiency.
*Types of Businesses: a. Agriculture: This includes farming, crop cultivation, livestock raising, and forestry. b.
Mining and Extraction. c. Fishing and Aquaculture: Forestry and Logging: Includes the harvesting of timber and related activities.
2.Secondary Sector:
*Characteristic: The secondary sector focuses on the transformation of raw materials and intermediate goods into finished products. The main characteristic of the sector is that it requires high levels of machinery and industrial techniques. There is a reliance on technology. Secondly, the secondary sector adds significant value to the products compared to their raw material form. This value addition is achieved through processing, assembly, and quality control processes. The third main characteristic is standardisation: Manufacturing processes often involve standardization of components and processes to ensure consistency and quality in the final products. Standardization helps in economies of scale.
*Types of Businesses: a. Manufacturing: This sector includes factories and plants that produce tangible goods such as automobiles, electronics, textiles, and machinery. b. Construction: Involves the building and construction of structures like buildings, bridges, and infrastructure. c. Utilities: Companies providing essential services like electricity, gas, and water supply fall into this category.
3.Tertiary Sector:
*Characteristic: The tertiary sector is also known as the service sector and involves businesses that offer various services to consumers and other businesses. The main defining characteristic of this sector is Intangibility: Services are intangible and cannot be touched or held. They are often experienced directly by consumers through interactions with service providers or through the use of technology. Secondly, High Human Involvement: The tertiary sector relies heavily on a skilled and often highly educated workforce to deliver services effectively. This can include professionals such as doctors, lawyers, teachers, and customer service representatives. Lastly, Customization: Many services are customized to meet the specific needs and preferences of individual clients or customers. This personalization is a key characteristic of the tertiary sector.
For example Legal Advice will always be different depending on the specific needs of the client.
*Types of Businesses: a. Retail and Wholesale: Businesses engaged in the sale of goods to consumers or to other businesses. b. Healthcare and Education: This includes hospitals, clinics, schools, colleges, and universities. c. Financial Services: Banks, insurance companies, and investment firms are part of this sector. d.
Hospitality and Tourism: Hotels, restaurants, travel agencies, and entertainment venues fall into this category.
e. Professional Services: Legal, accounting, consulting, and IT services are part of the tertiary sector.
These industry sectors represent the different stages of economic activity, with the primary sector providing raw materials, the secondary sector processing and manufacturinggoods, and the tertiary sector offering services and distribution. Together, these sectors form the backbone of an economy, contributing to its growth and development Tutor Notes
- I've gone overboard on naming the types of organisation in the different sectors. You don't have to remember all of these. 3 examples is sufficient to get good marks. I've just named them all so you can see what could be considered a right answer.
- Some people are talking about Quaternary and Quinary Sectors. CIPS is not one of those people, so don't worry if you come across those terms in any further reading. But FYI
1.
*Quaternary Sector: This sector involves knowledge-based activities, including research and development, information technology, and data analysis.
*Quinary Sector: The quinary sector comprises high-level decision-making and leadership roles in areas such as government, academia, healthcare, and top-level corporate management.
- LO 4.1 p.196

NEW QUESTION # 41
Explain, with examples, the three different ways one can categorise procurement spend: direct vs indirect, capital expenditure vs operational expenditure and stock vs non-stock items. (25 points)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
The knowledge to remember:
A table with text on it Description automatically generated

Essay Plan :
Remember to include examples for each of the six categories of spend. This is specifically asked for in the question so it's important to include as many examples as you can. To do this you could take an example organisation such as a cake manufacturer and explain which of their purchases would fall into each category and why.
Introduction - explain why procurement categorises spend
- Direct - these are items that are incorporated into the final goods (the cakes) so would include raw materials such as flour, eggs, sugar etc
- Indirect - these are items that the company needs, but don't go into the end product. For example, cleaning products and MRO supplies for the machines
- Capital Expenditure- these are large one-off purchases, such as buying a new piece of equipment such as a giant oven to cook the cakes.
- Operational Expenditure - these are purchases that are required to ensure the business can function day-to-day. They may include PPE for the workers in the factory and cleaning equipment
- Stock items - these are items procured in advance and held in inventory until they are needed. In a cake manufacturing factory this could be PPE for staff such as hairnets and gloves. The organisation will buy these in bulk and keep them in a stock cupboard, using these as and when they are required
- Non- stock items - items that are not stored and used right away. An example would be eggs- these will need to be put directly into the cakes as they would go off if bought in advance.
Conclusion - the categories are not mutually exclusive - an item can be direct and operational, or indirect and stock. Different companies may use different systems to classify items of spend.
Example Introduction and Conclusion
Introduction
Procurement categorizes spend to efficiently manage resources and make strategic decisions. Three primary ways of categorizing procurement spend include distinguishing between direct and indirect spend, classifying expenditures as capital or operational, and categorizing items as stock or non-stock. These distinctions aid organizations in optimizing their procurement strategies for better resource allocation.
Conclusion:
In conclusion, categorizing procurement spend into direct vs. indirect, capital vs. operational, and stock vs.
non-stock items is essential for strategic resource management. While these categories provide a structured framework, they are not mutually exclusive, as an item can fall into multiple categories. For example, an item may be both direct and operational or indirect and stock. The flexibility of these categories allows organizations to tailor their procurement strategies based on their specific needs, ensuring efficient resource allocation and effective supply chain management. Different companies may adopt varying categorization approaches depending on their industry, size, and operational requirements.
Tutor notes:
- Because you've got 6 categories of spend to talk about you're only going to need 3-4 sentences for each.
Providing you've said the category, explained what it is and given one example, you'll absolutely fly through this type of question
- You could also mention that it is useful to use categories of spend as this helps with budgeting. Different categories may also have different processes to follow for procuring the item (this could form part of your introduction or conclusion).
- This subject is LO 1.3.2 it's quite spread out in the text book but the main info is on p.49
- Note- different companies/ industries classify items of spend differently. Particularly packaging and salaries.
Some say they're direct costs and some say they're indirect costs. Honestly, it's a hotly debated subject and I don't think there is a right or wrong. I'd just avoid those two examples if you can and stick to ones that aren't as contentious like eggs and PPE.

NEW QUESTION # 42
What is an electronic system? Describe the following: e-requisitioning, e-catalogues, e-sourcing, e-payment technologies (25 marks)

Answer:

Explanation:
See the solution in Explanation part below.
Explanation:
How to approach this question:
- Your response will need 5 definitions. For 25 points that means 5 points per section so think about the level of detail you'll need to include. It would be 5 points for electronic system (i.e. your introduction and conclusion), and then do a paragraph on each of the technologies. In the description you could talk about why it's used and the advantages, and give some examples if you know any.
- Definition of electronic system - a system which uses some form of technology and automates a procurement process than would otherwise have been completed manually.
- E-Requisitioning - a way of ordering goods or services. Includes the use of integrated ordering systems such as: ERP/ ERP II / MRP / MRP II
- E-Catalogue- an electronic display of what goods can be ordered. A simple example of this may be a supplier displaying the goods they offer on their website and the prices to purchase the goods.
- E-Sourcing - this involves the early stages of the tender process- using an electronic portal to find a supplier and / or conduct a tender exercise.
- E-Payment - the P2P part of the cycle (procure to pay) - may involve electronic POs and Invoices, BACS, CHAPS and SWIFT payment systems, and the use of Purchasing Cards Example essay:
Electronic systems, commonly refered to as E-procurement, is the business-to-business or business-to- consumer purchase of goods or services, typically using the Internet or other information/ networking systems such as ERP systems. It has developed in the past 20 years as technology has improved and replaces time- consuming manual processes and is now considered the 'norm'. Electronic systems and e-procurement can be used throughout the entire supply chain- not just between a single buyer and supplier. Examples of electronic systems including the following:
E-requisitioning
This is often used in manufacturing organisations to order raw materials. An electronic 'bill of materials' is created and stock levels are automatically updated. As materials get used and a pre-determined level is reached, this triggers a new order which is placed via an e-requisitioning system such as MRP. It is a technological version of the traditional kan-ban (2 bin) system. E-requisition tools are often cloud-based. It helps buyers simplify the buying process, track orders and provides higher levels of visibility on spend. The main disadvantage to this technology is that it requires technology interfacing between the buyer and suppler, which may be expensive.
E-catalogues
This is a digital or online version of a catalogue- a document that details what you can buy and at what price.
There are two main types - buy side catalogues and sell side catalogues. A buy-side catalogue is an internal system used by a buyer which hosts a list of pre-approved suppliers from whom purchases can be made. It may include details of commonly bought items and the prices. The use of this reduces maverick spending and ensures consistency in purchases (e.g. whenever lightbulbs need to be ordered, the same lightbulbs are ordered so the office lighting is consistent). A sell-side catalogue is provided by a supplier and details what they offer- it often includes prices, any discounts for bulk buying and may also let buyers know of availability (e.g. the website may say only two items remaining). This may be as simple as a price list on their website, available for anyone to view.
E-sourcing
This is a tool that helps a buyer find the most suitable supplier. Examples include e-tendering websites where a buyer can host a competition to find a supplier. E-auctions are also a type of e-sourcing tool. The tool (often a website) hosts all of the tendering documents and allows for buyers and suppliers to communicate during the tender process (for example if there are any clarifications needed on the specification). Using this tool allows for transparency and equal treatment, but also saves time in completing the tender exercise. PQQs can be automated and some e-sourcing tools include the use of Artificial Intelligence which can 'read' tender submissions and automatically exclude suppliers who do not fulfil the required criteria.
E-payment technologies
These are methods to pay for goods and services that replace the need for cash and cheques. Examples include online bank transfers, electronic Purchase Orders and Invoices and the use of Pre-Payment cards. These act like credit cards for employees to use when they need to buy supplies. For example, if you have a maintenance team that frequently need to purchase low-value items like screws and paint, you could issue the team with a Pre-Payment card with a certain limit (e.g. £500/ month) so they can buy what they need. The company will then automatically be sent a monthly invoice for all of the purchases. This saves time from having to issue the maintenance team with petty cash for the purchases and allows for greater visibility over spend (e.g. how many screws are typically bought per year?). Another typical use is for staff travel.
In conclusion, procurement teams benefit significantly from leveraging electronic tools, including e- requisitioning, e-catalogues, e-sourcing, and e-payment technologies. The adoption of these electronic tools brings about various advantages that enhance efficiency, transparency, cost-effectiveness, and overall effectiveness in the procurement process. Moreover E-procurement tools has helped develop the procurement function into a professional and respected function and allows for a more pro-active rather than reactive approach to purchasing.
Tutor Notes:
- Fun Fact! In the public sector, it is mandated that electronic systems are used in procurement (Public Contract Regulations 2015) as this helps to achieve the objectives of transparency and equal treatment. Where manual systems are used, it is easy to manipulate the tender process. For example, a buyer could read some tender submissions before the deadline for submission and no one would know, but with an electronic system this is impossible as it locks evaluators out until the deadline has passed and all bidders have submitted their responses. (note PCR 2015 is being replaced in 2024- details are still TBC but the above fun fact will still remain in the new legislation- they're definitely still going to make it compulsory).
- You could also mention the names of systems if you know any. For example, e-sourcing tools include MyTenders.com and Delta E-Sourcing. PO / Invoice systems include Sage, Xero and copyright.
- The question doesn't ask for advantages of using these technologies but you could mention this in your answer. Just be sure that this isn't the focus of your response- the question asks specifically for you to DESCRIBE the systems so detailed Explanation: s and examples are where you will secure the most points.
- p.108

NEW QUESTION # 43
What is an electronic system? Describe the following: e-requisitioning, e-catalogues, e-sourcing, e-payment technologies (25 marks)

Answer:

Explanation:
See the solution inExplanation partbelow.
Explanation:
How to approach this question:
- Your response will need 5 definitions. For 25 points that means 5 points per section so think about the level of detail you'll need to include. It would be 5 points for electronic system (i.e. your introduction and conclusion), and then do a paragraph on each of the technologies. In the description you could talk about why it's used and the advantages, and give some examples if you know any.
- Definition of electronic system - a system which uses some form of technology and automates a procurement process than would otherwise have been completed manually.
- E-Requisitioning - a way of ordering goods or services. Includes the use of integrated ordering systems such as: ERP/ ERP II / MRP / MRP II
- E-Catalogue- an electronic display of what goods can be ordered. A simple example of this may be a supplier displaying the goods they offer on their website and the prices to purchase the goods.
- E-Sourcing - this involves the early stages of the tender process- using an electronic portal to find a supplier and / or conduct a tender exercise.
- E-Payment - the P2P part of the cycle (procure to pay) - may involve electronic POs and Invoices, BACS, CHAPS and SWIFT payment systems, and the use of Purchasing Cards Example essay:
Electronic systems, commonly refered to as E-procurement, is the business-to-business or business-to-consumer purchase of goods or services, typically using the Internet or other information/ networking systems such as ERP systems. It has developed in the past 20 years as technology has improved and replaces time-consuming manual processes and is now considered the 'norm'. Electronic systems and e-procurement can be used throughout the entire supply chain- not just between a single buyer and supplier.
Examples of electronic systems including the following:
E-requisitioning
This is often used in manufacturing organisations to order raw materials. An electronic 'bill of materials' is created and stock levels are automatically updated. As materials get used and a pre-determined level is reached, this triggers a new order which is placed via an e-requisitioning system such as MRP. It is a technological version of the traditional kan-ban (2 bin) system. E-requisition tools are often cloud-based. It helps buyers simplify the buying process, track orders and provides higher levels of visibility on spend. The main disadvantage to this technology is that it requires technology interfacing between the buyer and suppler, which may be expensive.
E-catalogues
This is a digital or online version of a catalogue- a document that details what you can buy and at what price.
There are two main types - buy side catalogues and sell side catalogues. A buy-side catalogue is an internal system used by a buyer which hosts a list of pre-approved suppliers from whom purchases can be made. It may include details of commonly bought items and the prices. The use of this reduces maverick spending and ensures consistency in purchases (e.g. whenever lightbulbs need to be ordered, the same lightbulbs are ordered so the office lighting is consistent). A sell-side catalogue is provided by a supplier and details what they offer- it often includes prices, any discounts for bulk buying and may also let buyers know of availability (e.g. the website may say only two items remaining). This may be as simple as a price list on their website, available for anyone to view.
E-sourcing
This is a tool that helps a buyer find the most suitable supplier. Examples include e-tendering websites where a buyer can host a competition to find a supplier. E-auctions are also a type of e-sourcing tool. The tool (often a website) hosts all of the tendering documents and allows for buyers and suppliers to communicate during the tender process (for example if there are any clarifications needed on the specification). Using this tool allows for transparency and equal treatment, but also saves time in completing the tender exercise. PQQs can be automated and some e-sourcing tools include the use of Artificial Intelligence which can 'read' tender submissions and automatically exclude suppliers who do not fulfil the required criteria.
E-payment technologies
These are methods to pay for goods and services that replace the need for cash and cheques. Examples include online bank transfers, electronic Purchase Orders and Invoices and the use of Pre-Payment cards. These act like credit cards for employees to use when they need to buy supplies. For example, if you have a maintenance team that frequently need to purchase low-value items like screws and paint, you could issue the team with a Pre-Payment card with a certain limit (e.g. £500/ month) so they can buy what they need. The company will then automatically be sent a monthly invoice for all of the purchases. This saves time from having to issue the maintenance team with petty cash for the purchases and allows for greater visibility over spend (e.g. how many screws are typically bought per year?). Another typical use is for staff travel.
In conclusion, procurement teams benefit significantly from leveraging electronic tools, including e-requisitioning, e-catalogues, e-sourcing, and e-payment technologies. The adoption of these electronic tools brings about various advantages that enhance efficiency, transparency, cost-effectiveness, and overall effectiveness in the procurement process. Moreover E-procurement tools has helped develop the procurement function into a professional and respected function and allows for a more pro-active rather than reactive approach to purchasing.
Tutor Notes:
- Fun Fact! In the public sector, it is mandated that electronic systems are used in procurement (Public Contract Regulations 2015) as this helps to achieve the objectives of transparency and equal treatment. Where manual systems are used, it is easy to manipulate the tender process. For example, a buyer could read some tender submissions before the deadline for submission and no one would know, but with an electronic system this is impossible as it locks evaluators out until the deadline has passed and all bidders have submitted their responses. (note PCR 2015 is being replaced in 2024- details are still TBC but the above fun fact will still remain in the new legislation- they're definitely still going to make it compulsory).
- You could also mention the names of systems if you know any. For example, e-sourcing tools include MyTenders.com and Delta E-Sourcing. PO / Invoice systems include Sage, Xero and copyright.
- The question doesn't ask for advantages of using these technologies but you could mention this in your answer. Just be sure that this isn't the focus of your response- the question asks specifically for you to DESCRIBE the systems so detailedExplanation:s and examples are where you will secure the most points.
- p.108

NEW QUESTION # 44
Sarah has recently been hired as the new Head of Procurement at Alpha Ltd, a manufacturer of small electronics such as hairdryers and alarm clocks. Alpha Ltd has a large factory based in Birmingham where many of the products are manufactured. One of the large pieces of machinery in the factory has recently broken and Sarah has been charged with replacing it as quickly as possible. Sarah is considering using the Whole Life Costing approach to this procurement. What is meant by Whole Life Costing? (5 points). Discuss
5 factors that Sarah should consider when buying new machinery (20 points).

Answer:

Explanation:
See the solution in Explanation part below.
Explanation:
How to approach this question
- I'd use clear headings with numbers for this one. It asks you for a definition and 5 factors. Number them.
Makes it easy for you to write and easy for the examiner to mark.
- Don't go over 5 - you won't get any extra points for this. So spend your time giving examples and explaining the 5 well, rather than naming more than 5.
Example Essay
As the new Head of Procurement at Alpha Ltd, Sarah faces the urgent task of replacing a critical piece of machinery in the company's Birmingham factory. Recognizing the complexity of the decision, Sarah contemplates utilizing the Whole Life Costing approach to ensure a comprehensive evaluation that goes beyond initial expenses. This essay explores the concept of Whole Life Costing and delves into five essential factors Sarah should consider when procuring new machinery.
Definition:
Whole Life Costing (WLC) is a procurement approach that considers the total cost associated with an asset throughout its entire lifecycle. Unlike traditional procurement methods that focus primarily on the initial purchase price, WLC evaluates all costs incurred from acquisition to disposal. This includes operational, maintenance, and disposal costs, providing a holistic perspective on the true financial impact of an asset over time.
Factors to Consider in Machinery Procurement
1) Initial Purchase Price:
While WLC looks beyond the initial cost, the purchase price remains a critical factor. Sarah should balance the upfront expense with the long-term costs to ensure the initial investment aligns with the overall financial strategy.
2) Operational Costs:
Sarah needs to analyze the ongoing operational costs associated with the new machinery. This includes energy consumption, routine maintenance, and potential repair expenses. Opting for energy-efficient and reliable equipment can contribute to substantial operational savings over the machine's lifespan, even though this may result in a higher up-front purchase price
3) Training and Integration:
The cost of training employees to operate and maintain the new machinery is a significant consideration.
Sarah should assess how easily the equipment integrates into existing workflows and whether additional training programs are required, impacting both immediate and long-term costs.
4) Downtime and Productivity:
Evaluating the potential downtime and its impact on productivity is crucial. Sarah should assess the reliability and historical performance of the machinery to gauge its potential contribution to sustained production levels and minimized disruptions, impacting the overall operational efficiency.
5) Technology Upgrades and Adaptability:
Sarah should consider the machinery's adaptability to technological advancements and potential upgrades.
Investing in equipment that allows for seamless integration with future technologies ensures that Alpha Ltd remains competitive and resilient in a rapidly evolving industry landscape.
In conclusion, adopting a Whole Life Costing approach empowers Sarah to make informed decisions that align with Alpha Ltd's strategic goals. By considering factors beyond the initial purchase price, such as operational costs, training, downtime, and technology adaptability, Sarah ensures that the replacement machinery not only meets immediate production needs but proves to be a cost-effective and efficient asset throughout its entire lifecycle. The WLC approach safeguards against unforeseen financial burdens, fostering sustainable and informed procurement practices in the dynamic manufacturing environment.
Tutor Notes
- Whole Life Costing is on p.28
- Total Life Cycle Costs, Total Cost of Ownership and Life Cycle Costs are all practically the same thing. The book says they're slightly different, but don't get yourself bogged down in trying to remember the differences.
Honestly, in the real world, people use this language interchangeably.
- Other factors you could have chosen to talk about include commissioning costs and disposal costs
- Don't worry if you feel CIPS breezed through this as a topic, they did. It's explained much better in L4M7.
You can read more about it here: Whole Life Costing - What is Whole Life Costing | CIPS and here Whole- Life Cost: What it Means, How it Works (investopedia.com)

NEW QUESTION # 45
......

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CIPS L4M1 LATEST EXAM PATTERN - L4M1 NEW QUESTIONS

CIPS L4M1 Latest Exam Pattern - L4M1 New Questions