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CIPS
CIPS Level 5 Advanced Diploma in Procurement and Supply
L5M7
Achieving Competitive Advantage Through the Supply Chain (L5M7) Questions and Answers

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Questions # 1:

Electro Bob is a wholesaler of electrical equipment. One of its customers, RoostyFace, spends very little and is unlikely ever to increase its spend. Whattype of customeris RoostyFace to Electro Bob (Supplier Preferencing Model)?

Options:

Core

Annoying

Exploitative

Nuisance

Answer

Explanation

In supplier preferencing,nuisancecustomers havelow value/attractivenesswithlimited growth potential. Short cited terms: “nuisance,” “low attractiveness/low value” (L5M7 Study Guide, p.86).

[Reference:CIPS L5M7 Study Guide, p.86., ]

Questions # 2:

George, a property manager, agrees acost-pluspayment with a plumber. Which of the following will he need to know to calculate total price?

Select THREE.

Options:

Cost of materials

Cost of labour

Supplier’s overhead and profit

Supplier’s tax rate

Supplier’s pension contribution

Answer

A, B, C

Explanation

Cost-plus pricingis based onactual material and labour costs plus an agreed marginfor overheads and profit.

Short cited extract: “Cost-plus = actual cost + agreed mark-up for profit/overheads.” (L5M7 Study Guide, p.191)

[Reference:CIPS L5M7 Study Guide, p.191., ]

Questions # 3:

Tom, a Procurement Manager, is initiating aSupplier Rationalisationproject. What should he completefirstto direct the project?

Options:

Introduce Six Sigma

Implement Total Quality Management

Conduct SWOT Analysis

Perform Spend Analysis

Answer

Explanation

ASpend Analysisidentifies where money is spent and with which suppliers—vital to determine consolidation opportunities before rationalising the base.

Short cited term: “spend analysis precedes supplier rationalisation.” (L5M7 Study Guide, p. 203)

[Reference:CIPS L5M7 Study Guide, p. 203., ]

Questions # 4:

Six Sigmais only suitable for the manufacturing industry. Is this correct?

Options:

Yes – it reduces defects in the supply chain

Yes – it’s an excellent way to reduce costs

No – it can be used across all industries and delivers bottom-line savings

No – it’s not suitable for manufacturing

Answer

Explanation

Six Sigmaapplies universally tomanufacturing, services, and administrative processes, improving quality and efficiency.

Short cited term: “applicable across all sectors to improve process performance.” (L5M7 Study Guide, p. 154)

[Reference:CIPS L5M7 Study Guide, p. 154., ]

Questions # 5:

Anagilesupply chain focuses on the elimination of waste. Is this true?

Options:

Yes – an agile supply chain reduces waste and defects

Yes – it introduces TQM to remove inefficiencies

No – it incorporates continuous improvement until errors cease

No – it focuses on responsiveness to changing customer demand

Answer

Explanation

Agilesupply chains prioritiseflexibility and responsivenessto change, whereasLeanfocuses on waste elimination.

Short cited term: “agile = responsive to demand; lean = waste removal.” (L5M7 Study Guide, p. 155)

[Reference:CIPS L5M7 Study Guide, p. 155., ]

Questions # 6:

Which of the following isNOTan objective ofTotal Quality Management (TQM)?

Options:

Employee empowerment

Zero-defects

Meeting customer expectations

Financial planning

Answer

Explanation

TQM objectives focus oncustomer satisfaction, zero defects, and employee engagement, not financial planning.

Short cited extract: “TQM aims: customer focus, zero defects, continuous improvement – not financial planning.” (L5M7 Study Guide, p. 112)

[Reference:CIPS L5M7 Study Guide, p. 112., ]

Questions # 7:

A pricing approach in which avalue pointis decided upon and maintained for aprescribed periodis known as what?

Options:

Fixed Pricing

Variable Pricing

Cost-Plus Pricing

Competitive Pricing

Answer

Explanation

Fixed pricingmaintains aconstant pricefor a defined period regardless of market changes, providing stability for both buyer and supplier.

Short cited extract: “Fixed pricing – price remains constant for an agreed duration.” (L5M7 Study Guide, p.188)

[Reference:CIPS L5M7 Study Guide, p.188., ]

Questions # 8:

The5S Methodologyis an organisational system to ensure workplace cleanliness and efficiency. Under which principle does it fall?

Options:

Quality Assurance

Agile Working

Lean

Total Quality Management

Answer

Explanation

The5S Methodology—Sort, Set in order, Shine, Standardise, Sustain—originates from Lean philosophy to promote efficiency and discipline in operations.

Short cited extract: “5S – a Lean technique for organisation and cleanliness in the workplace.” (L5M7 Study Guide, p.166)

[Reference:CIPS L5M7 Study Guide, p.166., ]

Questions # 9:

Guppy Fish Ltd manufactures machinery. A rival is releasing automated technology that could replace manual operation. What type of threat does this pose?

Options:

Bargaining power of suppliers

Bargaining power of buyers

Threat of new entrants

Threat of artificial intelligence

Answer

Explanation

According toPorter’s Five Forces, new automated competitors represent athreat of new entrants, introducing innovation and market pressure.

Short cited extract: “New entrants increase competition and threaten existing players.” (L5M7 Study Guide, p.56)

[Reference:CIPS L5M7 Study Guide, p.56., , ]

Questions # 10:

Supplier vettingis a form of which type of quality management system?

Options:

Quality inspection

Lean

Six Sigma

Quality assurance

Answer

Explanation

Quality assurance (QA)isproactive, including activities such assupplier approval/vetting;inspectionis reactive sampling of outputs. Short extract: “QA—proactive systems e.g., supplier approval; inspection—sampling outputs.” (L5M7 Study Guide, p.123)

[Reference:L5M7 Study Guide, p.123., ]

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