CIPS L4M1 - Question Answer Past exam

CIPS L4M1 - Question & Answer Past exam questions Latest Update - Questions and 100% Correct Answers Guaranteed A+

O1. Explain FIVE differences between operational expenditure and capital expenditure.`

- CORRECT ANSWER: Capital expenditure items are charged to a capital account,

whereas operational expenditure is charged to a profit and loss account Capital items are procured for a long period of time and have a lifespan of many years.Operational items are procured for short term consumption Capital items tend to be high value assets, whereas operational items tend to be comparatively inexpensive The procurement of capital items involves complex requirements and decisions about expenditure are likely to involve a wide range of stakeholders. Operational expenditure is usually less complex and often involves repeat spends Preparation work on capital expenditure is likely to be lengthy and will involve building a business case, investment appraisal and the option to buy or lease. Operational expenditure tends to be more straight forward and budgets are pre-set for regular demand Capital procurement is less frequent than the procurement of operational items, which is usually on a regular basis

O1. FIVE elements of the total cost of ownership of capital equipment - CORRECT

ANSWER: 1. pre acquisition costs

• purchase price
• operating costs
• maintenance and repair costs
• downtime costs and end of life/decommissioning costs

O1. It is widely believed that it is important to attempt to reduce costs and add value throughout the supply chain. Explain THREE innovative strategies that might achieve such goals - CORRECT ANSWER: 1. value engineering 1 / 3

• lean supply
• agile supply

4. TQM

• JIT and
• value added negotiations/relationships

O1. Outline FIVE differences between purchasing goods and purchasing services. - CORRECT ANSWER: 1. Goods are tangible, services are intangible:

2. Services cannot be separated from their supplier:

• Heterogeneity: goods are usually uniform in nature while services are unique at each

delivery

• Services 'perish' immediately on delivery whereas goods can be stored until required
• Products are easier to specify, being tangible

O1. Outline FIVE ways in which improving the quality of a product can add value for an

organisation. - CORRECT ANSWER: Improved quality can add value by reducing the

need for appraisal and prevention activities, which will save time and money.Improved quality will mean that the risk of failure is reduced. This should lead to a reduction in losses incurred due to poor quality products reaching the consumer.Improved quality will result in fewer goods being rejected or having to be re-worked, which will reduce costs for the organisation.Improved quality should improve brand image, resulting in more customers, increased revenue and profits, which have the effect of adding value.Similarly, if an improvement in the quality of the product has improved the brand image, customers are more likely to be loyal, resulting again in higher revenue and profits.Improved quality should mean that quality control measures can be reduced, thereby saving costs

O1. Outline why supply chain management (SCM) may be unattractive for some

organisations. - CORRECT ANSWER: high investment in finances and resource, a

closer supplier relationship might not be appropriate if transactional purchases are involved, there are risks associated with closer relationships such as complacency and loss of control over confidential information. 2 / 3

O1. potential benefits of a supply chain management (SCM) approach to procurement and supply - CORRECT ANSWER: derive from eliminating waste activities, improving responsiveness in the continuous flow of value and other efficiency projects. Other benefits might include access to resources and expertise throughout the chain, collaborative quality management, improved communication, integrated systems and data share, co-ordinated demand forecasting, agility in faster lead-times and innovation, transparency reducing stock levels and waste.

O1. The main focus for procurement and supply is that value can be added either by cutting costs or by securing operational efficiency.Describe FIVE methods through which value may be achieved in procurement and

supply using these approaches - CORRECT ANSWER: The use of value analysis, to

eliminate non-essential features ; this technique involves looking critically at the elements that make up a product or service and investigating whether they are necessary Challenging user generated specifications, to minimise variety, stock proliferation and over-specification, with costs being cut as a result Consolidating demand, by aggregating orders or forming a consortium, in order to lower costs through bulk discounts or economies of scale Eliminating or reducing inventory, through systems such as JIT, to reduce the costs of holding stock International sourcing, to take advantage of low-cost country production, although this involves higher risks and higher costs, in terms of transport and possible taxes Negotiating with suppliers to reduce the cost of inputs Working with supply chain partners to minimise waste, with the technique of lean supply

O2. activities that take place post contract award - CORRECT ANSWER: there are a vast range of answers to choose from such as expediting orders, payment, contract management, supplier management, contract review and learning lessons, any activity within the purchase to pay process and contract termination preparation

O2. Describe FOUR potential costs of using electronic systems in procurement and

supply. - CORRECT ANSWER: The high capital investment and set-up costs of the

electronic systems, including hardware and software items

• / 3