Free CIPS L4M4 Practice Exam with Questions & Answers | Set: 3

Explanation

According to p.75 "a RFQ attempts to assess which supplier can achieve the Five Rights of Procurement". Although price is the only factor considered when using a RFQ- it's important to consider this price in detail; can the supplier deliver the right QUALITY of product for this price?, can they deliver the item WHEN we need it for this price? etc.

The answer is not 'who will deliver it the cheapest' because Jamilla might not pick the cheapest sup-plier. If the cheapest supplier has inferior quality paper, or can only make deliveries every other Tuesday then Jamilla may not select them.

The withholding of passports is a potential indication of modern slavery, and the offer of a discount to avoid reporting this is a form of bribery. Reporting these ethical concerns aligns with responsiblesourcing practices and is critical for maintaining a supply chain free from human rights abuses.

Professional magazines, economic indices, and supplier websites provide secondary data that can be useful in understanding market trends and supplier performance. Responsible sourcing often relies on a mix of primary and secondary data sources to make informed decisions about supplier selection.

The bill of lading serves as both a receipt of goods and a document of title, which means it confirms the contract of carriage and can transfer ownership. Responsible sourcing in international trade requires precise documentation, which is why the bill of lading is critical in verifying both carriage and title.

Financial stability is a critical risk factor in high-value contracts. If a supplier collapses financially during contract performance, the buying organisation faces supply disruption, increased costs, and reputational risk. Financial assessments help identify vulnerabilities such as high debt, poor liquidity, or over-reliance on limited customers. While profitability, credit scores, and broader capability assessments are useful, the most pressing concern is ensuring continuity of supply. Ethical and responsible sourcing requires buyers to consider the long-term viability of suppliers, not just short-term savings. This aligns with responsible practice, protecting stakeholders, end customers, and the organisation’s own obligations.

In commodity markets, shortages combined with sustained demand drive price increases. The buyer loses bargaining power, as suppliers can charge higher rates. Negotiating downward is unrealistic; instead, buyers should manage risk through hedging, forward contracts, or alternative sourcing. CIPS notes that responsible sourcing requires understanding market dynamics and their ethical implications (e.g., food security, affordability). The organisation must manage stakeholder expectations about pricing rather than assume negotiation leverage. This reflects the implications of market volatility in global supply chains.

Outsourcing critical functions like cybersecurity can lead to a loss of in-house expertise, which is a strategic cost. This loss may impact the organization's ability to respond swiftly to security threats, innovate, and maintain control over sensitive operations. Retaining core competencies is vital for sustaining competitive advantage and ensuring long-term resilience.

Exact Extract from Study Guide:

"Outsourcing core activities risks – loss of in-house skill, loss of key staff to competitors, risk that supplier cannot be found, loss of control over operating activities, risk of loss of control over confidential information/IP.

A credit rating is one of many tools used to assess a supplier’s financial health. Responsible sourcing requires a comprehensive assessment of suppliers, considering multiple factors, to ensure a balanced and ethical approach to supplier selection.

Explanation

The correct answer is 'no - added value may change from one company to another'.

Added value is very subjective. What one person thinks is excellent added value, another may not rate highly. For example one buyer may consider a supplier having good brand reputation as added value, but another might not care.

The other no answer is incorrect because added value can be tangible or intangible. Tangible means you can touch and see it and intangible means you can't.

Embedding ESG/ethical clauses and reporting in contracts is a key mechanism to implement responsible sourcing, set clear expectations, and enable monitoring and remedies. Suppliers can be held to contractual ESG obligations where these are defined and agreed.