L4M6 Supplier Relationships Questions and Answers

Explanation

The correct answers are information sharing and trust. Further qualitative KPIs are listed on p.102. Deliveries in full and on time would be a quantitative KPI and early supplier involvement is not a KPI at all.

Explanation

The correct answer is ‘Building better relationships with primary stakeholders’. This is a direct quote from the start of chapter 2.2: ‘building better relationships with primary stakeholders such as employees, customers, suppliers and communities could lead to increased shareholder wealth by developing a competitive advantage’. The other three options wouldn’t give you a competitive advantage; increasing prices would do the opposite, engaging in market research won’t give you a competitive advantage unless you do something with that research such as implement a change to your business, and completing formal tenders for everything would be a waste of time and resources- there’s no need to tender for low value, low risk items. See p.80

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.

Comprehensive and Detailed Explanation:

In Michael Porter's Value Chain model, primary activities are those that are directly involved in the creation and delivery of a product or service. These include:

Inbound Logistics:Activities related to receiving, storing, and distributing inputs internally.

Operations:Transforming inputs into the final product.

Outbound Logistics:Distributing the final product to customers.

Marketing and Sales:Activities that inform buyers about products and services, induce buyers to purchase them, and facilitate their purchase.

Service:Activities that maintain and enhance the product's value, such as customer support and repair services.

Firm infrastructure and technology development are considered support activities, as they assist the primary activities in helping the organization achieve its competitive advantage.

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

Partnerships require careful planning, including alignment of goals, stakeholder involvement, and clear expectations. Poor planning leads to unmet objectives and lack of value generation, as highlighted by CIPS.

Explanation

Barriers to entry are economies of scale (in the air travel industry you can't just start off small and grow), access to capital (you need to already have a lot of money to buy airplanes) and licences and permits (you need to ensure you have the correct licences to fly planes). These are listed on p.41. Other barriers include; strong brand identity already dominant in the market, high switching costs for buyers, access to distribution networks and government policy.

Explanation

The correct answer is ‘Yes- joint innovation projects are often a strong motivation for entering into a partnership’. The other options are simply not true statements. A lot of the questions on the ‘Partnerships’ chapters of the book are common-sense questions like this. It involves reading the QUESTION NO: and using logic, rather that relying on your knowledge of procurement. If you found this QUESTION NO: easy – that’s a good sign for the exam.

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:

Statement B:A strategic alliance is an agreement between two or more parties to pursue a set of agreed-upon objectives while remaining independent organizations. It is typically managed jointly by the partners to achieve mutual benefits without forming a new legal entity.Wikipedia

Statement C:In a joint venture, two or more parties create a new, separate legal entity by contributing equity, and they share in the revenues, expenses, and control of the enterprise. This new company is formed to undertake specific business activities.

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)

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

Partnerships require the most investment out of those listed. The only relationship type that requires more investment than Partnerships is Co-Destiny. See p.9 for more information on this

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.

The stages of team development as defined by Tuckman include forming, storming, norming, and performing. These stages reflect how teams evolve and mature through collaboration and problem-solving.

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

Explanation

Unrestricted is not a type of tender. The 5 types are; open, restricted, competitive with negotiation, competitive dialogue and innovative partnership (though this last one is very rare in the public sector). The five types are explained in detail on p.77

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.

A partnership relationship allows Joseph to collaborate with suppliers on cost savings in manufacturing, logistics, and installation, providing a competitive edge over rival companies.

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).

Explanation

George should use a weighted award criteria – this will allow him to judge suppliers not only on cost, but also on the quality of their products and whether or not they can provide maintenance. For example George could weight the bids in this way; 40% cost, 30% durability of the panels and 30% maintenance costs. For more information on how weighted award criteria works see p.78

Comprehensive and Detailed Explanation:

A Non-Disclosure Agreement (NDA) is a legal contract that establishes a confidential relationship between parties. It ensures that any sensitive information shared during the course of a partnership is not disclosed to unauthorized parties. Implementing an NDA fosters trust by providing assurance that proprietary information, trade secrets, and other confidential data are protected. This is particularly crucial in partnerships where open communication and information sharing are essential for success.

Explanation

The correct answer is ‘A situation when the apparent output from collaboration is considerably less than expected’. This is verbatim the definition given in the study guide on p.166 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.

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

Explanation

Adversarial and Arm's Length relationships have low levels of trust. Single Source, Partnership and Outsourcing require high level of trust. See p.5 for the Supplier Relationship Spectrum

Comprehensive and Detailed Explanation:

Partnerships between buyers and suppliers are often driven by:

High Spend:Significant expenditure justifies the investment in developing a closer relationship to achieve cost savings and efficiencies.

Critical Products:Items that are essential to the buyer's operations necessitate a reliable and collaborative supplier relationship.

Technical Complexity:Complex products benefit from joint development efforts, shared expertise, and coordinated problem-solving.

Conversely, commodities and markets with many suppliers typically lend themselves to transactional relationships rather than partnerships.

Regular reviews focusing on lessons learned and continuous improvement ensure the partnership remains effective and aligned with objectives. This supports ongoing collaboration and operational excellence.

Buyers with a strong brand profile and adherence to ethical standards attract suppliers, as they provide market prestige and assurance of fair practices. This aligns with CIPS's emphasis on ethical procurement.

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.

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

Internal stakeholders are those who work within the business so include the legal department, employees and end-users. End-users mean those people and departments who will be using the product or service. For example if Gabriel is procuring new software- an end-user would be anyone who would be using that software (whether they're employees, volunteers or agencies). CIPS outlines types of stakeholders on p.64

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

The correct answer is ‘They are hard to measure’ p.103

Explanation

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

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 ‘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.

Explanation

Pareto is the 80:20 rule- this can be adapted to talk about supplier relationships, where instead of having 2 categories there are now 3 (A B and C). CIPS use the terms Pareto and ABC interchangeably. See p.16 for further information

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

Partnership sourcing is suitable for products that contribute to the buying organization's unique selling point (USP) and for critical products on which key customers depend. This approach ensures strategic alignment and mutual benefits for both parties, focusing on collaboration rather than cost alone.

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.

Explanation

The four categories are; Minimal effort, manage closely, keep informed, keep satisfied. You can see the Matrix on p.81. An easy way to remember this is there are 2 Ms and 2 Keeps. And these sit on opposite sides of the matrix.

Explanation

This question is very, very similar to a real exam QUESTION NO: and is a really mean one. The CIPS study guide describes stages of team development as forming, storming, norming and performing. Of those listed in the book only forming is listed above. What the textbook fails to tell you is that some people add on two additional stages to this model which are mourning and adjourning. I strongly recommend doing some further reading on this (it’s called the Tuckman Group Development Model) as it comes up a lot in the exam and the study guide doesn’t really go into enough detail.

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

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

The seven wastes (as defined by Taiichi Ohno) can be remembered as Tim Wood; transportation, inventory, motion, waiting, over-processing, over-production, defects. Some people add an S onto the end of Tim Wood to make Tim Woods (the s is for skills). In some modules of CIPS, they refer to 8 wastes and include skills, but in M6 they’ve only put the 7 on p.70.

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

Carter's 10 Cs are a way to qualify (aka shortlist) a supplier. See p.11 for more details on this and p.10 for the stages of the relationship cycle.

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.

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.

Comprehensive and Detailed Explanation:

Cultural compatibility is crucial in partnership relationships. Differences in corporate culture can lead to misunderstandings, misaligned objectives, and conflicts, ultimately jeopardizing the partnership's success. Therefore, assessing cultural compatibility at the outset is essential.

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.

Complex and technical suppliers often involve high financial risks due to the critical nature of their products. A close relationship ensures better collaboration, risk management, and value generation.

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

Partnering supports supply chain consolidation and continual improvement by fostering collaboration and shared objectives. These benefits align with the strategic goals of building resilient and efficient supply chains.

Comprehensive and Detailed Explanation:

The accommodating conflict management style is characterized by a low concern for self and a high concern for others. This approach involves yielding to others' needs and maintaining harmony, which can be appropriate in situations where preserving relationships is more important than achieving personal goals.

In the context of a commercially sensitive outsourcing project, adopting an accommodating approach may be suitable to ensure stakeholder cooperation and minimize conflict.

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

Value for money in the private sector is about achieving shareholder profit and busines benefit (p.66). In the public sector it is about ensuring taxpayers’ money is spent wisely. Value for money is a mixture of price and quality.

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)

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.

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.

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.

Explanation

Note the word ‘NOT’ in the question. In order for a competitive tender to be successful, there should be a clear specification in place (i.e. you need to know what you want, in order for suppliers to bid for it). Competitive tendering should also only be used for high value purchases; it’s time consuming to do, so you wouldn’t do it for low value items such as pens for the office. Therefore the correct answer to this question is 'items are of low value' and 'there isn’t a clear specification'. There’s a useful table on p.73 of when you would and wouldn’t use a competitive tender.

Early supplier involvement ensures the supplier understands process timelines and allows the buyer to leverage supplier capabilities. This improves product development efficiency and enhances outcomes.

Explanation

Supplier development is time-consuming and resource-intensive so should only be done with strategic suppliers. P.14