Free Practice Questions for CIPS L4M8 Exam

Carters outsource matrix is a useful tool that procurement professionals uses to decide which products or services has a high or low contribution to the organization operation performance and its strategic importance. The matrix segments products/services into four quadrants. These are Eliminate, outsource, strategic alliance and retain.

According to Carters outsource matrix, all product/services that has a high strategic importance should not be outsourced. They should rather be retained in house or carefully chose suitable sup-pliers and go into strategic alliance.

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14001 set out as international standards for an environmental management system.

Whole life asset management is the process of evaluating the total price and all associated costs of a product to make an informed decision as to which option will provide the organization with the best value for money option: To achieve this the organization works at the following eight elements.

1. Identify need/objectives/risk: The first stage of the whole life asset management is the same as the first stage in the CIPS procurement and supply cycle: identify the need prior to any asset being procured; the need could be competition in the marketplace, raised/reduced demands or financial concern. Once this need has been identified, the objectives of the new assets need to be set, and this may include being more energy efficient, reducing cost or saving money.

Risk also needs to be explored. When investing in a new asset there are factors to be considered that may or may not be advantageous to the investment. These include; downtime, lost sale/revenue or associated cost.

2. Procurement: Procurement professional would have to source and arrange supply of the asset.

3. Construction: ones the supply has being arranged, then the designing and the manufacturing of the asset begins.

4. Commissioning

5. Deterioration/maintenance

6. Condition performance monitoring

7. Decommissioning

8. Renewal/replacement

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Assets are things that an organization owns regarded as having value and available to meet debt and generate revenue. The following are list of assets owned by Fullpower project, a shoe manufacturing firm;

1) Machinery,

2) a factory,

3) an innovative software,

4) skills of its personnel,

5) land,

6) Distribution network.

7) Its long time relationship with experienced suppliers of raw materials and Distributors of finished shoes.

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.

When an organization want to purchase an asset, it considers the depreciation and deterioration in the whole life of the asset and how it will be manage.

Depreciation is the reduction in value of a tangible and a fixed asset over time. The purpose of calculating the depreciation of the asset is to give the organization a fair and current view of what the asset is worth at a particular time. Depreciation is a way of converting the cost of an asset into an expense over a period of time. Depreciation is a permanent feature listed against an asset throughout its life time and it based on wear and tear, reduction in performance and reduction in value.

Deterioration is the process of something becoming lower in quality or performance. The longer the asset can last without deteriorating the better value the asset represents.

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Carter’s 10cs is a detailed mechanism that procurement professional uses to evaluate potential supplier. What the procurement professional should consider in supplier are the following 10 things.

1) Competency 2) capacity 3) Cost 4) Cash 5) Clean 6) Consistency 7) Control 8) Culture 9) Com-mitment 10) Communication.

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.

These three should be considered against price.

Note: Incoterms are versatile and procurement professionals should understand how they are ap-plied and what point the risk transfers from being the supplier’s responsibility to being the buyer’s responsibility. It is important to consult the ICC for the most recent definitions, but in the following questions (101-111) you can understand the rules.

Note: sharpen your knowledge on INCOTERMS. Please consider the following Objective Re-sponse questions

Commissioning is bringing something new into working condition, e.g start running a gas plant after building it. Commissioning is one of the eight elements that form the cycle of whole life asset management. The commissioning of an asset has the following associated costs, installation, training insurance, testing, operational efficiencies/performance and quality.

It would be rare to find a supplier who does not emit any form of pollution. However, part of ethical and responsible sourcing is to make effort to reduce impact of population on the planets. Pollution can be factory emission, Noise, smell, Transportation Development, waste disposal. Transportation is a major cause of pollution. The carbon dioxide emitted from vehicles contributes greatly to air contamination. Yet it is better to use sea freight rather than air because it has a smaller impact on the environment.