L4M4 certification is a diploma in procurement and supply offered by CIPS. It is a valuable qualification which will open many doors for you. It is an exam of ethical and responsible sourcing.
Question: 1
Which of the following are reasons why a global organisation opts to use transfer pricing arrangements? Select TWO that apply:
A. Improving local economy
B. No risk of tax evasion
C. Leveraging local sourcing better
D. Simply internal accounting procedure
E. Reduction in international tax expense
Answer: D,E
Question: 2
Which of the following best describes the restricted tendering process?
A. The use of pre-qualified suppliers
B. There is no competition among the bidders
C. Any unqualified supplier can submit the bid
D. The supplier can submit the bid anytime after the deadline
Answer: A
Explanation/Reference:
Restricted tendering is a procurement method that limits the request for tenders to a select number of suppliers, contractors or service providers. This method of procurement is also called: Limited Bidding and Selective Tendering. Although considered a competitive procurement method, competition is limited to only firms shortlisted or invited by the procuring entity.
A process should be in place for arriving at the number and specific firms that will be invited; that number however is dependent on the stipulations of the public procurement legal framework.
Any decision to use the Restricted Tendering procurement method must conform to the policies and procedures governing the procurement system
A basic characteristic of this method is that competition is confined to a certain number of firms either because only a few firms are qualified to fulfill the specific type of requirement, or certain conditions warrant the use of a limited number of firms in order to reduce the time and cost of the selection process.
Reference:
- CIPS study guide page 22-24
- Restricted Tendering – The Procurement ClassRoom LO 1, AC 1.2
Question: 3
Which type of sourcing is most suitable for products with many suppliers to leverage?
A. Multiple sourcing
B. Sole sourcing
C. Outsourcing
D. Single sourcing
Answer: A
Explanation/Reference:
Single sourcing means that the purchaser buys the product from only one supplier. This type of sourcing is suitable in case that the products are rare, and purchaser wants to leverage the economy of scale.
Sole sourcing is similar to single sourcing. The major difference is that sole sourcing is a situation where the purchaser has no choice but buying from the supplier. Single sourcing means the purchaser opts to buy from only one supplier. Multiple sourcing means that the purchaser buys the products from many suppliers at a time. This type is often used when there are many suppliers and purchaser wants to secure the supply. This is the best option here.
Outsourcing is a business practice where an organisation hires another business to do some of its functions. The answer should be Multiple sourcing.
Reference:
- Single Sourcing vs. Sole Sourcing
- CIPS study guide page 20-22 LO 1, AC 1.2
Question: 4
Organisations which do not take action to prevent bribery practices in their supply chains are exposed to which of the following?
A. More suppliers
B. Higher costs
C. Reputational damage
D. Poor credit rating
Answer: C
Explanation/Reference:
Organisations which do not prevent unethical practices may face disapproval from authorities and the public. They may be fined or restricted to attend public procurement and boycotted by customers. Reputation is the first aspect being affected by such unethical practices. Reputational damages also lead to other consequences like financial instability, reduced revenue, losing market share,...
LO 4, AC 4.1
Question: 5
Which of the following involves supplier analysis, make or buy decisions, the consideration of outsourcing and evaluating associated risks?
A. Tender assessment
B. Sourcing
C. Insourcing
D. Purchasing
Answer: B
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