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CIPS
CIPS Level 4 Diploma in Procurement and Supply
L4M4
Ethical and Responsible Sourcing Questions and Answers

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Questions # 1:

Ramesh is an IT category manager within the UK’s National Health Service and is responsible for the procurement of a new high-value network system, which will spread across multiple doctors' practices and community health centres. Ramesh has reviewed different tender approaches and concluded that the use of a restricted tender is the most appropriate. Which of the following statements is true for a restricted tender process?

Options:

Direct negotiations occur prior to suppliers submitting their offer

The contract will be awarded strictly on pricing criteria

Suppliers responding to the tender are pre-qualified

It is only relevant when there are few suppliers in the market

Answer

Explanation

In a restricted tender process, only pre-qualified suppliers are invited to bid, ensuring that participating suppliers have met necessary qualifications. This approach helps in managing high-value contracts by focusing on capable suppliers. Ethical and responsible sourcing in the public sector demands supplier pre-qualification to ensure compliance, transparency, and quality.

Questions # 2:

What would an EBITDA ratio show you?

Options:

how profitable a business is

how solvent a business is

how much of a business's funding is made up of long term debt

how effectively a business uses its assets to generate sales

Answer

Explanation

EBITDA stands for 'earnings before interest, tax, depreciation and amortization'. This is a profitability ratio and would show how profitable a business is.

EBITDA: Definition, Calculation Formulas, History, and Criticisms (investopedia.com)

Questions # 3:

Which of the following is an example of intracompany trading? Select TWO

Options:

a manufacturer in the UK buys raw copper from a supplier in Chile

two companies owned by the same entity conduct business

two companies join together to create a new product

two departments within the same company collaborate on a project

cleverness

Answer

B, D

Explanation

Intracompany trading is when two departments in the same company do trading. AND when two companies owned by the same parent company do trading.

INTRA means 'within' - so it's doing business with yourself.

Questions # 4:

Chantelle is a procurement apprentice working in the public sector for an education organisation. As a result of studying towards the CIPS qualification, Chantelle has become aware of the importance of incorporating sustainability and environmental award criteria into tender exercises and has informed her manager of this. For the purchase of IT supplies, which requirement could be evaluated within the sustainability and environmental award criterion?

Options:

After-sales support

Competitive pricing

Delivery lead time

Consolidated delivery

Answer

Explanation

Incorporating sustainability and environmental criteria into procurement decisions is essential for promoting responsible sourcing practices.Consolidated deliveryrefers to combining multiple shipments into a single delivery, which can significantly reduce the carbon footprint associated with transportation. By minimizing the number of deliveries, organizations can decrease fuel consumption and emissions, aligning with environmental sustainability goals.

This practice is particularly relevant in the procurement of IT supplies, where frequent, small deliveries can be consolidated to improve efficiency and environmental performance. Evaluating suppliers based on their ability to provide consolidated deliveries demonstrates a commitment to sustainable procurement practices.

[References:, CIPS Study Guide: Ethical and Responsible Sourcing - Study Guides - CIPS, Quizlet: CIPS L4M4 Ethical and Responsible Sourcing Flashcards, , , , , ]

Questions # 5:

What are some of the benefits of conducting unscheduled supplier audits? Select TWO that apply.

Options:

Unscheduled audits significantly reduce costs compared to scheduled visits

Unscheduled audits help to achieve an unbiased assessment

Unscheduled audits help to identify non-compliance issues

Unscheduled audits increase the risk of providing misinformation

Unscheduled audits are more time-efficient than scheduled audits

Answer

B, C

Explanation

Unscheduled audits can provide an unbiased view of supplier practices and help identify compliance issues that might be hidden during scheduled audits. This approach supports responsible sourcing by ensuring accurate assessments of ethical and quality standards.

Questions # 6:

Guillerme is a Category Manager within the procurement department of a Manufacturing company. In his Category there are 200 items he procures, and he has recently undertaken an ABC analysis of these. Which of the following items would be C category items?

Options:

high value items

one-off purchases

tail spent

strategic sourcing

Answer

Explanation

The C category is the 'tail spend' - it represents a large number of suppliers of small value items.

I recommend giving this a read ABC Classification & ABC Method | CIPS

Questions # 7:

Sourcing products internationally involves extra considerations when looking at the price of the item. Which of the following are additional price considerations for international sourcing? Select TWO

Options:

exchange rate

total life cycle costs

tariffs

batch quantities

tax

Answer

A, C

Explanation

Exchange rates and tariffs are associated with international sourcing.

The other options are concerns for both local sourcing and international sourcing.

Questions # 8:

An organisation wants to measure its Triple Bottom Line. Which of the following should be considered to help achieve this goal?

Options:

Quality and lead time and performance

Innovation and creativity performance

Financial and environmental performance

Procedure and process performance

Answer

Explanation

The Triple Bottom Line framework evaluates an organisation's impact on social, environmental, and economic factors. Financial and environmental performance are critical components, along with social metrics, aligning with responsible sourcing goals to promote sustainability and ethical practices.

Questions # 9:

Steff is a procurement manager at Giant Buttons Ltd who are considering offshoring a small section of their manufacturing operations. Which of the following is a risk of offshoring that Steff should consider.

Options:

importation rules and tariffs

exportation rules and tariffs

payments by electronic bank transfer

lower operating costs

Answer

Explanation

The correct answer is importation rules and tariffs. This is because in offshoring some of the manufacturing will be done in another country then shipped back to the UK. The products will have to go through customs so may be subject to tariffs and duties.

Steff's not exporting anything in the scenario and paying electronically and getting lower costs are not RISKS.

Questions # 10:

Pierre is constructing a tender for a security contract. As well as cost, he would like to ask the security companies some questions about their health and safety processes and staff qualifications. He has created several questions and weighted these so that they add up to 25. is this the correct thing to do?