L4M6 Supplier Relationships Questions and Answers

In the context of the IT equipment industry,Technologicalfactors are paramount. The rapid pace of technological advancement influences product development, supply chain processes, and market competitiveness. Utilizing the STEEPLED framework, technological considerations would significantly impact the company's supply chain strategy.

As per the CIPS Intelligence Hub:

"STEEPLED analysis is a strategic planning methodology that can be used across all business functions to discover, evaluate, organise, and track external risk."

— CIPS Intelligence Hub: Using STEEPLED analysis to develop your supply chain

Explanation

The correct answer is ‘The CEO is a key player- so it is important he is involved early in the process’. The CEO has high power and high interest which puts him in the top right-hand corner of Mendelow’s Stakeholder Matrix (p.81). CIPS says Key Players should be involved early in the procurement process (p.82).

Across-organisational teambrings together specialists from various departments—such as R&D, marketing, finance, and production—to collaborate on complex projects. This team structure enables diverse perspectives, innovative solutions, and efficient decision-making, which are crucial when developing and launching new products. The CIPS L4M6 guide emphasizes the importance of integrated teamwork in achieving strategic outcomes in procurement and supply chain projects.

Partnership sourcing is ideal for high-spend, high-risk situations where collaboration mitigates risks and maximizes value through innovation, efficiency, and trust.

Explanation

This is a bottleneck supplier- refer to the Kraljic matrix on p.20; these types of supplier hold a monopoly in the marketplace and provide low-value items. There are lots of questions on Kraljic in the exam - do revise this topic and ensure you understand each of the four quadrants of the matrix

Intense rivalry occurs when suppliers are equally balanced and face high barriers to exit, leading to aggressive competition to retain market share, as described in Porter’s Five Forces model.

Comprehensive and Detailed Explanation:

In scenarios requiring specialized expertise and collaborative input, apartnering relationshipis most appropriate. This type of relationship fosters close cooperation, shared goals, and mutual trust, enabling both parties to contribute effectively to the project's success.

Comprehensive and Detailed Explanation:

Early Supplier Involvement (ESI) refers to the practice of involving suppliers early in the product development process to leverage their expertise and capabilities. Cross-organisational involvement entails collaboration across various departments within the organization, such as procurement, engineering, manufacturing, and R&D, to ensure the product design is feasible and efficient for production.

Explanation

Victoria should use a ‘request for proposal’ – this allows the security firms to submit ideas on how best to serve the hotel. They might come up with some ideas that Victoria hasn’t thought about and can price against their own ideas. As Victoria doesn’t have a concrete specification, an ITT or RFQ are not appropriate. A PIN tells suppliers that a tender opportunity is coming up and is used in the Public Sector. A hotel is not a Public Sector organisation. See p.76 for more information on when to issue a Request for Proposal

Explanation

Tail spend items are low value, high volume. P. 132

Comprehensive and Detailed Explanation:

Partnership arrangements often lead to price stability, as both parties work collaboratively to manage costs and avoid market volatility. Additionally, such relationships can result in cost savings through joint process improvements, shared investments, and economies of scale. While managing a partnership does incur relationship management costs, these are typically offset by the benefits gained. Supplier complacency is a potential risk but not an inherent advantage of partnerships.

Explanation

The logistics risk can be reduced by ‘Sharing up-to-date information’. If the Pub tells the supplier when it’s running low, they can then time the deliveries more accurately. P. 136. A lot of the questions on the ‘Partnerships’ chapters of the book are common-sense questions like this. It involves reading thequestion and using logic, rather than relying on your knowledge of procurement. If you found this question easy – that’s a good sign for the exam.

Selection criteria focus on the supplier’s capability and experience (e.g., method statements). Award criteria are used to evaluate and compare proposals during the tender process, such as price or environmental considerations.

An amicable approach is critical when alternative suppliers are limited or when ongoing collaboration is required during the termination period. Maintaining positive relations ensures smooth operations and protects reputations in the marketplace.

Explanation

Jenny should consider whole life costing. Ensuring value for money means considering a combination of price and quality throughout the lifetime of the product. See p.65 for more on ‘Achieving Value for Money’

Explanation

The correct answer is ‘no- as this was not the lollypop sticks intended purpose’. When deciding if something is fit for purpose, you must consider its intended and common purpose. In this case it would be for making lollypops. As the garden centre is using them for something other than their intended purpose, they can’t complain if it doesn’t work. Fit for purpose is discussed on p.65 p.s. there’s a QUESTION NO: like this in the real exam – it’s just not lollypop sticks ; )

Explanation

The correct answer is both the supplier and the buyer- joint decision making is a key aspect of partnership relationships. A project steering committee decides on priorities, suggests improvements, conducts audits etc. See p.152

Explanation

In an adversarial relationship "the outcome of the deal… is more important than maintaining the relationship over a long-term period" p.7. They can be characterised by poor communication and can be used for one-off purchases but be careful for words in answers such as 'only' and 'always', as these can be misleading; adversarial relationships aren't always for one-off purchases, and communication isn't always poor. The other answer is incorrect (price is more important) because it doesn't describe the relationship, which is what the question asked.

Negative leaders and promoters hold the most influence. Negative leaders can sway opposition, while promoters can actively advocate for project success. Managing these stakeholders effectively is crucial in procurement projects.

Explanation

The correct answer is Forming, storming, norming, performing (p.91). Note; some people add on two additional stages to this; mourning and adjourning. The study guide forgets to mention this, but theexam may ask you about these additional stages. So I strongly recommend doing some further reading on this (it’s called the Tuckman Group Development Model)

Forward buying involves purchasing in advance to lock in current prices and avoid future increases. This strategy is effective in volatile markets where price hikes are anticipated.

Partnerships emphasize collaboration, shared risks, and mutual benefits. Unlike adversarial or transactional relationships, they focus on long-term goals and joint value creation.

Explanation

The portable CD player has been replaced with a substitute product. This threat wasn't considered by the company and this resulted in poor sales. There are many questions in the exam on Porter's 5 Forces - see p. 39

Explanation

They could outsource cleaning and facilities management. These are auxiliary services. The manufacturing of bike parts is their 'core' business so they should retain this in-house

Explanation

The correct answer is ‘keep satisfied’ because the stakeholder is high power and low interest. This is the top left corner of Mendelow’s Stakeholder Matrix – see p.81

Partnerships are built on trust and transparency, with shared benefits such as cost reductions and improved processes. Adversarial relationships, in contrast, focus on price and contractual obligations.

Comprehensive and Detailed Explanation:

A performance specification outlines the desired outcomes or results without prescribing the exact methods to achieve them. This approach allows suppliers the flexibility to use their expertise and creativity to meet the buyer's requirements, thereby encouraging innovation.

Explanation

The correct answer is TUPE: Transfer of Undertakings (Protection of Employment). Details on TUPE can be found on p.115

Comprehensive and Detailed Explanation:

Partnership sourcing is most appropriate for products that are critical to the buyer's business, involve high spend, and are technically complex or require innovation. The chocolate brownie cake is the company's most popular product, indicating high sales volume and strategic importance. Establishing a partnership with suppliers for this product can lead to benefits such as improved quality, innovation, and supply chain efficiency.

Comprehensive and Detailed Explanation:

Therelationship spectrumin procurement outlines the range of relationships between buyers and suppliers, from transactional to strategic partnerships. Key types include:

Transactional:Short-term, price-focused relationships with minimal collaboration.

Partnership:Long-term, collaborative relationships with shared goals and mutual benefits.

While "contractual" refers to the legal agreement aspect of relationships, it is not a specific type on the relationship spectrum. "Conspiratorial" is not a recognized relationship type in procurement contexts.

Value for money is achieved through a balance of quality and cost, ensuring that the goods meet performance requirements while being cost-effective, as per procurement best practices.

Comprehensive and Detailed Explanation:

During the onboarding stage:

Pre-qualifying and Assessing Capability:Ensures the supplier can meet the organization's requirements.

Building Trusting Relationships:Establishing open communication and trust sets the foundation for a successful partnership.

Keeping information confidential (Option 1) and focusing solely on the buyer's goals (Option 3) can hinder collaboration.

Explanation

The correct answer is Measurable, achievable and relevant. This is from SMART KPIs on p. 151. Smart stands for specific, measurable, achievable, relevant, time-bound. In the exam they come up in different orders so be careful.

Adding value involves enhancing customer experience through excellent service, providing differentiated product features, and offering convenience. These align with procurement strategies aimed at driving customer satisfaction and loyalty.

Explanation

STEEPLE is what is used to analyse the macro-environment; the factors are; social, technological, economic, environmental, political, legislative and ethical. Details of this can be found on p.43-44. Note in the exam they won't necessarily be given in this order.

Explanation

Stationary is a routine item; it is ordered often (as Barry uses different suppliers), it is a low category spend, and low risk to the business' operations (a late delivery of pens isn't going to stop the company making its biscuits). There are lots of questions on Kraljic in the exam - do revise this topic and ensure you understand each of the four quadrants of the matrix (see p.20)

Explanation

Equity is the fourth E- this means the extent to which the service is available. See p.65 for details on the 4 Es

Confidentiality is critical in professional relationships, especially for law firms, as they handle sensitive client information. Ensuring that all legal obligations to protect this information are met aligns with ethical and legal best practices.

Comprehensive and Detailed Explanation:

For high-value and high-risk contracts, such as facilities management services for multiple schools,competitive tenderingis the most appropriate sourcing approach. This process involves inviting multiple suppliers to submit bids, ensuring transparency, fairness, and the opportunity to assess various proposals to select the most suitable supplier. It helps in mitigating risks and achieving value for money.

Explanation

The reason for outsourcing in this example is that the IT firm is an expert in their field. The requirement is complex and important and this is the reason why it is not being delivered in-house. The other answers given CAN be reasons for out-sourcing, but don't relate to this example. For a full list of reasons a company could use outsourcing see p. 4-5

The Restricted and Two-stage procedures involve a PQQ stage to shortlist suppliers before issuing an ITT. This approach is common for contracts requiring stringent supplier qualifications.

Explanation

You would expect a supplier to submit full pricing information, risk assessments and method statements. However, depending on what you’re procuring, you might not need to see risk assessments or method statements. Liquidity and Gearing may be looked at during the Pre-Qualification stage, but wouldn’t form part of a RFP. See p.76

Comprehensive and Detailed Explanation:

Differentiation involves offering unique products or services that are valued by customers, allowing the company to charge premium prices. This strategy focuses on uniqueness and added value rather than competing solely on cost.

In stakeholder management,Negative leadersandPromoterspossess high influence over others:

Negative leaders: Individuals who oppose the project and can sway others against it due to their influence.

Promoters: Advocates who support the project and can positively influence others.

Understanding these dynamics is crucial for effectively managing stakeholder resistance.

As highlighted in the CIPS study materials:

"Overcoming resistance- Promoters - They have a high influence on other stakeholders and support the project. They support and empower."

Explanation

STEEPLE is what is used to analyse the macro-environment; the factors are; social, technological, economic, environmental, political, legislative and ethical. Details of this can be found on p.43-44

Explanation

The three right answers are competing, collaborating and compromising. See the Thomas Kilmann Model on p.87. There are quite a few questions on this in the exam.

Explanation

The correct answer is ‘greater creativity’. A synergy is the concept that the value and performance of two companies combined will be greater than the sum of the separate individual parts. P.160

Comprehensive and Detailed Explanation:

When a buyer selects a single supplier for a specific period, such as a one-year contract, and excludes other suppliers during this time, this is referred to as asingle sourcedrelationship. This approach is often used to consolidate purchases, achieve economies of scale, and build a more streamlined procurement process for specific goods or services.

Explanation

The Handfield ESI model is on p.98 and comprises of Black Box, Grey Box, White Box and None. Therefore Red and Blue can be automatically discounted. The correct answer is White Box as the definition given is correct. Grey Box is a formalised supplier integration; joint development activity between buyer and supplier. I have no idea why Handfield calls his system after coloured boxes- but it’s only briefly mentioned in the study guide and is not likely to be a big topic in the exam.

Explanation

In an oliogopy, supplier power is strong. Sometimes regulators are required in the market to prevent the group of suppliers conspiring together to artificially increase prices. See p.40 for more information on Oligopy markets.

Explanation

The first step is to obtain business approval to terminate. If Senior Management don’t give approval, then the rest of the stages can’t happen and Sandra will be stuck with her current banana supplier. There’s a good diagram on p.109 detailing the steps to supplier termination.

Legitimate reasons for contract termination under CIPS guidelines include failure to perform duties and serious breaches of contract terms. Ordering errors or changes in stakeholder needs are not valid termination grounds unless explicitly stated in the contract. This protects both parties from unjustified termination risks.

Explanation

Value for money is not a principle of EU procurement. The four key principles are; transparency, non-discrimination, proportionality and equality of treatment. The principles are basically about ensuring the procurement process is fair. See p.75

Bread is a strategic item due to its high spend and critical role in daily operations. A partnership approach ensures consistent quality and reliability, aligning with strategic supplier management principles.

Explanation

The correct answer is ‘The product is easy to source elsewhere’. The other three are given as reasons a marketplace might be restricted on p.138. Other reasons also include; brand loyalty, difficult access to distribution channels, and companies colluding.

Explanation

Tim should do an audit. P.71 of the textbook says “to ensure that a procurement department is achieving value for money, an audit should be undertaken”

Explanation

CPV codes help suppliers find opportunities they can bid for. CPV codes are a numerical classification for products e.g. Strawberry Jam is 15332296 and when they are included on a Tender, any supplier who is registered with that same CPV code will get a notification that the tender is live. CPV codes arediscussed on p.72 but not in much detail- so don’t worry if you don’t know much about them. So long as you know the above, you’ll be fine.

Comprehensive and Detailed Explanation:

For one-off, low-value purchases that are readily available from multiple suppliers, anadversarialrelationship is often appropriate. This type of relationship is transactional, with minimal collaboration or long-term commitment. The focus is on obtaining the best price and terms for a specific purchase without investing in developing a deeper relationship.

Early supplier involvement highlights supplier strengths and capabilities, enabling collaborative development. This supports innovation and optimizes the procurement process.

Explanation

The correct answer is “A mechanism for performance management where the buyer has the right to deduct money from payments owed for under performance”. A definition is provided on p.113 and states “If a supplier fails to meet the standard set in the service credits, the buyer has the right to deduct set amounts of money from payments owed to the supplier”

Explanation

The correct answer is ‘Yes- the Public Sector is regulated by EU procurement regulations which prohibits this’. This is stated on p.122. Please note that this study guide and exam were written before Brexit. Once Brexit happens, nobody knows what will happen with this.

Explanation

A product with an ‘inelastic price’ means that consumption doesn’t really depend on how much it costs. So you could increase the price of alcohol and cigarettes and people would tend to still buy them. A product with an elastic price means that a change in price would have a large affect on the number of people who bought the item. See p.95 for more details on price elasticity.

Effective communication is essential in partnerships to ensure alignment on objectives, progress updates, and issue resolution. Regular communication builds trust and fosters collaboration, leading to successful outcomes.

Explanation

Legislative changes wouldn't affect rivalry in a market as all suppliers would be equally as affected, the same with supply chain disruptions. Factors which do affect rivalry include; industry growth and decline, product differences, brand identity, switching costs, diversity of competitors and exit barriers. These are listed on p.41