L4M6 Supplier Relationships Questions and Answers

Comprehensive and Detailed Explanation:

Traditional contracting agreements are typically characterized by:

Short-Term Focus:These agreements often prioritize immediate needs over long-term collaboration.

Transactional Nature:Emphasis is on price and terms rather than building strategic partnerships.

Explanation

This QUESTION NO: refers to Porter's Value Chain (p.35). There's a couple of questions on this in the exam so try to learn it. Primary activities are; inbound logistics, operations, outbound logistics, marketing and sales, after sales- service

Explanation

The 5 Rights of procurement are; place, quality, quantity, time, price. (Price and Cost are not the same thing). See p.38

Explanation

Intellectual Property Rights include; Patents, Copywrite, Trademarks and Trade Secrets. P.114

Comprehensive and Detailed Explanation:

Leverage products are characterized by:

High profit impact:They significantly affect the company's bottom line.

Low supply risk:They are available from multiple suppliers, making it easy to switch if necessary.

These products often have standardized quality, and the competitive supply market allows buyers to negotiate favorable terms.

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.

Profitability is impacted when product costs rise without corresponding price adjustments. Understanding cost-price relationships is key to managing profitability in procurement.

Comprehensive and Detailed Explanation:

In the Kraljic Matrix, a 'Bottleneck' item is characterized by low financial impact but high supply risk. These items may be sourced from a limited number of suppliers or involve complex logistics, making them susceptible to supply disruptions. Managing bottleneck items requires strategies focused on risk mitigation, such as developing alternative suppliers or holding strategic stock reserves.

The relationship qualifies as a partnership due to their collaboration, shared investments, and mutual efforts toward improvement, regardless of the absence of formal contracts. Partnerships focus on shared goals, trust, and strategic alignment rather than mere documentation.

Within the STEEPLED analysis framework, socio-cultural (social) factors relate to demographics, workforce behaviour, societal attitudes, and population trends.

Labour mobility directly relates to how easily workers move between regions, industries, or employers, affecting:

Availability of skilled labour

Recruitment and retention

Supplier workforce stability

The other options belong to different STEEPLED categories:

Employment law → Legal

Environmental regulations → Environmental

Consumer confidence → Economic

L4M6 Reference:

Learning Outcome 1: Understand external influences on procurement and supply

Topic: STEEPLED and PESTLE analysis

CIPS L4M6 Study Guide – Macro-environmental analysis

Explanation

Using technical jargon can lead to misunderstandings if not all parties understand the jargon. See p. 158 on communication issues

Economic factors such as unemployment rates affect labor availability, wages, and consumer purchasing power, directly impacting business operations and supply chains.

Comprehensive and Detailed Explanation:

Collaborative partnering relationships are characterized by high levels of trust, mutual objectives, shared information, and long-term commitment. Among the options provided:

Co-destiny: This represents the highest level of collaboration, where both parties' futures are closely linked, and decisions are made jointly for mutual benefit.

Strategic alliance: This involves a formal agreement between organizations to pursue shared objectives while remaining independent entities.

These relationship types are positioned on the collaborative end of the relationship spectrum, emphasizing joint efforts and shared success.

Comprehensive and Detailed Explanation:

The described relationship includes:

Joint Product Development:Collaborative involvement in strategic projects indicates a deep partnership.

Integrated Systems:JIT delivery systems require synchronized operations, reflecting significant integration.

These elements are hallmarks of a significant integration partnership.

Comprehensive and Detailed Explanation:

Bruce Tuckman's model of team development outlines five stages:

Forming– Team members get acquainted and establish ground rules.

Storming– Members begin to communicate their feelings but still view themselves as individuals rather than part of the team.

Norming– People feel part of the team and realize that they can achieve work if they accept other viewpoints.

Performing– The team works in an open and trusting atmosphere where flexibility is the key and hierarchy is of little importance.

Adjourning– The team conducts an assessment of the year and implements a plan for transitioning roles and recognizing members' contributions.

Explanation

The correct answers are; no tender process, early supplier involvement and no defined end-period. A partnership wouldn’t automatically mean lower costs, and in a partnership the KPIs are usually a joint performance measurement rather than set to the supplier. For more information on the difference between partnerships and contractual relationships see p.124-5

Explanation

The correct answer is ‘Strong levels of trust and honest communication’. The questions on Partnership in the exam tend to be quite straightforward, but if you’re struggling with this see p. 148 for further details of behaviour in Partnerships.

Comprehensive and Detailed Explanation:

In Porter's Five Forces framework, thethreat of substitutesrefers to the availability of products or services that can perform the same function as the industry's product. The supplier's suggestion to use a newly developed plastic component instead of the traditional brass one introduces a substitute product. This alternative can potentially change the dynamics of the market by offering different benefits, such as cost savings or improved performance, thereby affecting competition.

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

Partnership arrangements promote shared responsibility and joint ownership of outcomes. CIPS highlights that partnerships typically involve:

Shared risks and rewards

Joint performance measurement

Continuous performance review

Collaborative problem resolution

Traditional contracts often place risk entirely on the supplier, rely on adversarial pricing, and use infrequent reviews. Therefore, risk sharing is a defining feature of a partnership.

L4M6 Reference:

Learning Outcome 3: Understand approaches to managing supplier relationships

Topic: Partnership characteristics and governance

CIPS L4M6 Study Guide – Risk allocation and collaboration

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.

Comprehensive and Detailed Explanation:

In the Supplier Preferencing Model, customers are categorized based on their attractiveness and value to the supplier. A "Nuisance" customer is characterized by low profitability and high maintenance, often requiring disproportionate resources relative to the benefits they provide. Such customers may be deprioritized or even considered for discontinuation by the supplier.

Explanation

Fred should hold a competition as this is a ‘key way of achieving value for money’ p.67. Fred shouldn’t put a business case together to make the product in-house without doing a make vs buy analysis, and that analysis showing make is the way to go. As the firm buy in 100s of components, it’s very unlikely that making the component in-house would bring ‘value for money’. He should also be careful of only looking at current suppliers or known suppliers- the best supplier of this new component might be unknown to the engineering firm at present.

Explanation

Danny should issue a RFI (Request for Information). His next step would be to find out more about the products available by asking suppliers for information- this will help him put a spec together before he goes out to tender. The other options mean; RFQ - request for quotation- when you ask suppliers to submit a price. ITT- Invitation to tender – a document you send out to suppliers which details all the information about the tender (this usually involves both price and quality components of assessment). OJEU- Official Journal of the European Union- where tenders for the Public Sector are published. For more info on RFI see p.74

Value-added benefits are additional services offered by suppliers that enhance the buyer’s operations without significant additional cost. These typically include:

Free training (A) – improves buyer staff skills.

Customer service hotlines (C) – improves responsiveness and support.

Expert consulting services (D) – provides specialist knowledge.

Options B, E, and F are operational necessities, not “value-added extras.”

Explanation

This is category 'A' spend in the ABC model - they represent a large value and a small number of purchases / suppliers. See p.17 for more information on the ABC Analysis

Drivers for partnership include a high spend with the supplier, criticality of the product, and technical complexity. These factors encourage collaboration for cost efficiency, quality improvement, and risk management. Partnerships are less likely when there are many suppliers or the product is a commodity, as competition and standardization reduce the need for close collaboration.

Explanation

The correct answer is ‘Yes- partnership sourcing can improve performance which will ultimately satisfy the end customer’. The important thing to note in this QUESTION NO: is the word ‘monopolistic’. This means that there are no alternative suppliers- so the ‘no’ options are wrong- there are no alternative suppliers and no opportunity to outsource. The other answer is incorrect as sales figures isn’t Andrew’s concern – it’s the complaints and quality of the product. Improving performance to satisfy end customers is therefore his main driver for considering a Partnership. See p. 127 for more information on Drivers of Partnership Sourcing. This comes up a lot in the exam

Routine suppliers typically supply low-value, low-risk items. Maintaining partnerships in such cases is inefficient since alternative suppliers are readily available. Adopting a transactional or adversarial relationship would be more appropriate.

CIPS defines partnerships as collaborative, long-term relationships based on mutual trust, transparency, and shared objectives.

Key partnership characteristics include:

Information sharing

Joint problem-solving

Continuous improvement

Reduced reliance on inspection and adversarial control mechanisms

The other options reflect transactional or traditional relationships, focusing on cost, inspection, or sourcing flexibility rather than collaboration.

L4M6 Reference:

Learning Outcome 3: Understand approaches to managing supplier relationships

Topic: Partnerships vs traditional relationships

CIPS L4M6 Study Guide – Relationship types and behaviours

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”

Strategic suppliers are those that are critical to business continuity and risk management. CIPS states that such suppliers require:

Long-term commitment

High levels of trust

Joint planning and collaboration

Given the impact on patient safety and service continuity, a partnership sourcing relationship is appropriate, enabling shared responsibility, performance management, and continuous improvement.

Transactional or competitive sourcing would not provide the stability required.

L4M6 Reference:

Learning Outcome 3: Understand supplier relationship strategies

Topic: Strategic suppliers and partnerships

CIPS L4M6 Study Guide – Supplier segmentation and SRM

Explanation

This would reduce inventory (holding stock). Inventory is considered a business waste because it costs money to store stuff (e.g. paying the rent on a warehouse, electricity to light it up etc). If you can reduce the need to store materials and components on site- you reduce costs. You also save time because you get deliveries when you need them- you don’t need to allow for staff unpacking things, storing them away, then going back to them later when they need them. For more information on the 7 Business Wastes see p.70. This comes up in a couple of modules, so it’s worth remembering.

Bottleneck suppliers often control critical or scarce resources. Developing relationships with these suppliers is crucial to mitigate risks and ensure continuity of supply, per procurement best practices.

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.

Using Kraljic’s Portfolio Matrix, CIPS classifies items based on:

Financial impact

Supply risk

Engines have:

High financial value

High supply risk, as production cannot proceed without them

This places the supplier firmly in the strategic quadrant, requiring close relationship management, risk mitigation, and long-term collaboration.

L4M6 Reference:

Learning Outcome 2: Understand supply positioning and risk

Topic: Kraljic portfolio analysis

CIPS L4M6 Study Guide – Strategic items and supplier relationships

Explanation

The correct answer is ‘Yes- mediation involves a neutral third party and gets both parties to attempt to reach a compromise’. Be careful not to confuse mediation with arbitration – arbitration is when the buyer and supplier agree to accept a third party’s decision which will solve the disagreement issues. See p.112 for more information on solving disputes

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.

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.

Substitute products pose a competitive threat by offering alternative solutions to customers, potentially eroding market share. Effective differentiation and customer retention strategies are essential.

Explanation

The correct answer is ‘reduced product life-cycles’. In this example the reason for entering a partnership is to be able to produce new models of phones more quickly- this is likely because consumers are wanting to change mobile phones more often than they did in the past, so in order to keep up withdemand, Phone Maker Incorporated need to produce more phones, more quickly. Drivers of Partnership Sourcing is a key topic in the exam – you can revise these by looking at p.127 in the Study Guide

Explanation

Two invalid reasons are; one late delivery and a change in senior management. Valid reasons to terminate a relationship are listed on p.107 and include the three listed here, as well as a material breach, damage to reputation and the supplier merges or is acquired by another company.

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 correct answer is ‘No- good levels of communication can exist in other types of relationships’. The study guide makes a point that not all good buyer: supplier relationships are partnerships. In fact 70% on supplier relationships will not be partnerships (according to Lambert who is quoted on p.131)

Explanation

Friendly Flour Ltd is a strategic supplier; this is a critical supplier, responsible for core products. They represent a high risk impact and a high cost impact. This is the top-right hand corner of the Kraljic matrix. 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

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’

Partnership sourcing improves efficiency through cost reduction and ensures continuity of supply by fostering long-term, collaborative relationships with key suppliers, as highlighted in CIPS guidelines.

Technological factors play a pivotal role in IT equipment supply chains. Advancements, obsolescence, and innovation significantly affect production, cost, and competitiveness, making it a primary focus in supply chain development.

Explanation

The correct answer is ‘accommodating’. This QUESTION NO: is based on the Thomas-Kilmann Conflict model on p.87. This comes up quite a bit in the exam. It is comprised of 5 techniques for dealing with conflict; competing, collaborating, compromising, avoiding and accommodating. In this instance, the supplier should have a high degree of co-cooperativeness and a low degree of assertiveness as the long-term relationship is very important- more important than the outcome of the disputed invoice.

Improving supplier commitment and loyalty is a core theme of Supplier Relationship Management (SRM) within L4M6. CIPS emphasises that long-term, collaborative relationships encourage suppliers to invest time, resources, and innovation into the buyer relationship.

Providing guaranteed order levels reduces supplier uncertainty and risk, improving trust and encouraging commitment. This aligns with the concept of mutual dependency and relationship stability, which strengthens supplier loyalty.

The other options are incorrect because:

A stand-off approach discourages collaboration

Over-promising future work damages trust if unmet

Excessive penalties create adversarial relationships

L4M6 Reference:

Learning Outcome 3: Understand approaches to managing supplier relationships

Topic: Supplier commitment, trust, and collaboration

CIPS L4M6 Study Guide – Relationship spectrum and SRM principles

Price management is crucial for low-cost retailers to maintain profitability. This includes negotiating better pricing, managing costs effectively, and ensuring competitive pricing for volume sales.

Leverage products are characterized by high spend and low complexity, giving buyers the ability to negotiate favorable terms due to supplier competition and standardization.

In the Supplier Preferencing Model:

Core: A buyer with high spend and high attractiveness is viewed as critical by the supplier, encouraging strategic collaboration.

Exploitable: Where buyer spend is high but power is lower, suppliers may exploit the situation by raising prices or setting unfavorable terms.

These are the two scenarios associated with high spend buyers.

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)

The relationship spectrum runs from adversarial/transactional to collaborative partnerships such as strategic alliances and co-destiny. Also included are mid-spectrum arrangements like single sourcing and arm’s length. Options 2 and 3 list valid relationship types, making 2 and 3 correct.

Explanation

This is differentiation as the target market is broad. Differentiation focus would be if the supermarket was targeting a niche market. There's a couple of questions on Porter's Generic Strategies in the exam- there's a useful diagram of this on P.13

Explanation

The definition of value mapping is given on p.69 this is; ‘a process in which value is created through the elimination of waste and operational inefficiencies’. It ties into JIT / Lean.

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.

Comprehensive and Detailed Explanation:

Forward buyinginvolves purchasing goods in advance of actual need, often in larger quantities, to take advantage of favorable pricing or to hedge against anticipated price increases. This strategy is commonly used in volatile markets to stabilize costs and ensure supply continuity.

For partnerships to succeed, both buyer and supplier must see significant value in the relationship. High spend indicates strategic importance, ensuring mutual commitment. If the buyer is a core customer for the supplier, and has a high spend, partnership sourcing is mutually beneficial.

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.

CIPS refers to Tuckman’s team development model, which identifies the following stages:

Forming – team comes together

Storming – conflict and challenge

Norming – cooperation and cohesion

Performing – effective performance

Adjourning – team disbands

From the options provided:

Norming ✔

Forming ✔

Adjourning ✔

Achieving, Presenting, and Grieving are not recognised stages in Tuckman’s model.

L4M6 Reference:

Learning Outcome 3: Understand teamworking and collaboration

Topic: Team development and behaviour

CIPS L4M6 Study Guide – Tuckman’s team development theory

Explanation

The correct answer is ‘It can lead to a lack of trust’ – this is a quote from p.162. The other answers are all incorrect; in a partnership KPIs are joint between the parties– so there wouldn’t be a situation where one party doesn’t fulfil their KPIs. Commitment doesn’t necessarily have a direct correlation with profit so that answer is incorrect. ‘Sufficient time and resources are put in’ is a positive thing, so can’t be a reason who a partnership fails.

Partnerships provide access to local market knowledge, enable shared investments, and mitigate risks associated with relocation. These advantages outweigh concerns that can be managed through strong contracts and confidentiality agreements.

Explanation

Request for Information and Pre-Qualification Questionnaire can be used for short-listing suppliers. Request for Quotation is used when the only variable is price and you would like suppliers to submit a price for you. Invitation to Tender would be the next stage after RFI / PPQ- this is sent out to those suppliers who have passed selection, and details the second stage of the competition. See p.75 for more details.

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

Cost modeling helps in understanding supplier pricing strategies, identifying cost drivers, and opportunities for negotiation or cost reduction, which supports profitability improvements.

Explanation

The correct answers are; The marketplace has become more volatile, Working together will create synergies and The need to improve performance to satisfy the end customer. Further Drivers ofPartnership Sourcing can be found on p.127. The other answers are incorrect as entering a partnership won’t protect intellectual property rights- in fact that’s one of the big risks of entering into a partnership. Partnerships won’t increase costs and lead-times, they’re likely to decrease them.

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.

In Tuckman’s model of team development, the Forming stage occurs at the outset. Team members meet, roles are unclear, and there is little conflict. Stakeholder teams will be in this stage initially before moving into storming (conflict), norming (agreement), and performing (high productivity).

Comprehensive and Detailed Explanation:

Arestricted marketis characterized by:

High entry barriers: Significant capital investment, stringent regulatory requirements, or specialized knowledge needed to enter the market.

Limited profitability: Existing suppliers may operate on thin margins, deterring new entrants.

These factors result in a market with few competent and capable suppliers, limiting competition and options for buyers.

Comprehensive and Detailed Explanation:

By acquiring an Australian office furniture manufacturer, COFM can:

Access the Restricted Local Market:Acquisition allows COFM to operate as a local entity, thereby overcoming barriers to entry and benefiting from any local government support available to domestic manufacturers.

Improve Knowledge of the Local Market:The acquired company brings with it an understanding of local customer preferences, regulatory requirements, and market dynamics, which is invaluable for successful operations.

However, the acquisition does not remove government support for other local manufacturers, nor does it necessarily decrease competition.

Comprehensive and Detailed Explanation:

Effective conflict resolution involves:

Individual Meetings:Understanding the root cause of the conflict by discussing with each individual separately to determine if issues are personal or work-related.

Joint Meetings with Mutual Targets:Bringing the individuals together to set mutual goals can foster collaboration and reduce friction.

Avoiding the issue (Option D) or moving a team member (Option C) are not proactive solutions and may not address the underlying problem.

Internal stakeholders are individuals or groups within an organization who are directly involved in its operations and decision-making processes. The finance director plays a crucial role in budgeting and financial planning, while maintenance engineers are essential for ensuring equipment functionality and efficiency. Both are integral to the organization's internal operations, as outlined in the CIPS L4M6 study materials.

Explanation

partnerships are always win: win p.7