CIPS L4M4 Ethical and Responsible Sourcing Exam Practice Test

Explanation

Phishing is a type of fraud where IT users are sent a link (usually by email) which exposes them to activities of expert cybercriminals.

Explanation

The correct answers are; motion, waiting and inventory.

This is part of Ohno's 8 Wastes. You can remember this with the acronym Tim Woods; transportation, inventory, motion, waiting, over-production, over-processing, defects, skills.

This is only mentioned briefly in this module but comes up in other modules more in depth, so is worth memorising if you can.

Explanation

The correct answer is 'no- quoting in the supplier's currency increases the risk for the buyer'. This questions comes up in a variety of formats in the exam. Remember; if the price is in your own currency (most examples in the exam are given in £) there is less risk than if the prices are quoted in a foreign currency. This is because exchange rates fluctuate; if the price is in £ you always know what you're paying, if it's in another currency the price can change daily depending on if the exchange rate compared to £ has gone up or down.

Explanation

The best way to deal with potential Conflicts of Interest is to openly declare these. Just because you have a relationship with someone doesn't mean this is going to be an issue or lead to fraud, but it is a good idea to keep a written record of these.

It wouldn't be a risk register, because how can you rate someone's risk of doing something dodgy? Risk registers are for objective risks such as Health and Safety.

Explanation

A Category spend is high value and strategic suppliers. C category is low value, high volume of spend aka tail spend. The bits in the middle are B category.

For example when you have a baby you have to buy lots of stuff for it. Your A spend is the big, important and expensive purchases like the pram, cot, carseat. You spend a lot of time in this category because they're important purchases you want to get right. The Tail Spend / C are all the little bits like nappies, baby shampoo, sippy cups. The B category are the bits in between - the purchases are kinda important but aren't as strategic or important as A category. Toys may fall into this category.

Explanation

ISO isn't an indices- it stands for 'International Labour Association'.

The others are all indices that measure economic data; consumer price index, producer price index and gross domestic product.

Explanation

Incoterms describe the point at which an item is considered 'delivered' and explains who has the risk of what during the transport of the goods.

Explanation

In a 'Credit Account' payment mechanism- the supplier receives payment after the goods are delivered, in line with agreed payment terms (which may be 30 days or something like that).

Explanation

The buyer should seek a 'collaborative' relationship. Transactional and arms-length relationships are more suited to tactical sourcing. Partnerships are reserved for joint-ventures.

Explanation

The correct answer is 'the supplier is able to work at the same technical level as the buyer'. It's aboutbeing able to integrate the businesses together in terms of IT systems and such like.

Explanation

weighted points systems for assessments should add up to 100. This is 100%.

An example is how this would work is

Price = 50%

Health and Safety questions= 30%

Qualifications = 20%

Explanation

The correct answer is 'no - added value may change from one company to another'.

Added value is very subjective. What one person thinks is excellent added value, another may not rate highly. For example one buyer may consider a supplier having good brand reputation as added value, but another might not care.

The other no answer is incorrect because added value can be tangible or intangible. Tangible means you can touch and see it and intangible means you can't.

Explanation

This is an Invitation to Tender.

The only other real document listed in Request for Quotation. This is incorrect because the document asks questions relating to how they will deliver the service. This means price isn't the only factor, which is the case for a RfQ.

Request for Tender and Invitation to Quote are not real things.

Explanation

Ex-Works has the lowest risk to the supplier- in Exworks the buyer collects the items directly from the supplier - so they have all the issues and risks of transporting it back home.

There are many question on Incoterms CIPS can ask. But as there's such a huge bank of questions it's really hit or miss if you'll get one of those question. Two students sitting the exam at the same time in the same study centre can get different question sets. One person can get 3 Incoterm questions and the other gets 0.

I would learn the major ones- the ones at the ends of the table in particular because these are the ones question are likely to be about. Ex works / Free carrier and Delivered at Place Unloaded/ De-livered Duty Paid in particular.

I like this graph as I'm a visual person. I think it makes it easier to understand than the study guide:

Shipping Incoterms: the Complete Guide - Guided Imports

Explanation

the correct answer is 'marketplace competition'.

Ethical practice is about prohibiting corrupt and unfair practice, rather than issues of supply and demand. Although being in a cartel is 'unethical behavior' this option doesn't fully answer the question which talks about limiting supply- this is related to marketplace competition.

Explanation

According to p.75 "a RFQ attempts to assess which supplier can achieve the Five Rights of Procurement". Although price is the only factor considered when using a RFQ- it's important to consider this price in detail; can the supplier deliver the right QUALITY of product for this price?, can they deliver the item WHEN we need it for this price? etc.

The answer is not 'who will deliver it the cheapest' because Jamilla might not pick the cheapest sup-plier. If the cheapest supplier has inferior quality paper, or can only make deliveries every other Tuesday then Jamilla may not select them.

Explanation

The CIPS Code of Conduct says to adhere to all laws of countries in which I practice. So if you're in the UK and procure stuff from China, you need to abide by both UK and Chinese laws, not just UK laws.

There's no international procurement laws- these are all different for different countries.

ILO doesn't publish laws.

Explanation

gross profit = total revenue - cost of sales.

Learn all you can about financial ratios and financial statements for the exam- it's a very common topic

Explanation

Raja should send out a RFI- request for information; this will allow him to gain feedback from the marketplace prior to tender.

Speaking only with current suppliers will not provide all the information Raja requires.

He should not send out a request for quotation since he is still conducting market research

An open competition would be how he can procure, after he's completed his research

Explanation

the right to change nationality is not included in the UN Declaration of Human Rights. There are 30 in total but you're not expected to know them all. You should know the big ones though which are; life, security, belief, equal treatment, free speech and expression. A summary can be found here: Universal Declaration of Human Rights | United Nations

Explanation

Plastic is not a commodity. A commodity is something that is naturally occurring and plastic is manufactured. The other category of commodity is agriculture.

Explanation

Primary data includes trade fairs and exhibits, and phone calls to current suppliers. The others are examples of secondary data.

Remember primary= you do it yourself, Secondary = someone else did it.

Explanation

The correct answer is 'yes - these can be completed without warning which would give Ali an accurate picture of the supplier's operations'. The other options are incorrect:

1) you can do many types of audit- financial, ethical, Health and Safety etc

2) asking a supplier about their ethical practices isn't likely going to get you accurate information. They'll just tell you what they think you want to hear

3) audits are great- but they don't ALWAYS uncover issues. Always is the key word in that sentence which makes it incorrect.

Explanation

The correct answer is the CIPS Code of Conduct. This is a voluntary document about doing 'good procurement' i.e. treating suppliers with respect.

EU Procurement Directive is legislation, so isn't voluntary

ISO9001 is about quality management

ILO is an organisation rather than a document

Explanation

A risk of pre-planning an audit is the supplier has time to prepare for it. It's a good thing in that they can get their paperwork in order but the downside is they can overprepare so you don't get a realis-tic representation of what they're doing. One way they can do this is coaching staff in what to say to the auditors.

Explanation

Incoterms describe who out of the buer and seller; organises transport and what type of transport this is, who pays for insurance, and who organises duty / tariff arrangements when the goods go through customs. See p.131. Note- some students report a lot of questions on Incoterms in the exam, some say they only had 1. If you can, I'd learn them just to be safe.

Explanation

You should investigate automatically low tenders by clarifying the bid with the supplier. It could be they have misunderstood the requirement. Or the bid could be genuine and they can really provide best value for money. But without enquiring, you just don't know.

Explanation

the correct answer is 'Yes- a low gearing ratio means the company's finances are made up of equity rather than debt'.

Remember low gearing = good (based on equity), high gearing = bad (based on debt). Anything over 50% is considered high.

The two no answers are therefore incorrect and you can discount these straight away. The other yes answer is one of those answers which COULD be true, but isn't always true, and we'd need more information to know for sure. When you get options like this there will be one that is always right and one which is sometimes right - so always pick the always right one.

Dealing with supply chain disruptions is complex, and depending what the disruption is, how big it is, what the industry is etc determines whether a supplier can handle it or not. Because there's more factors to consider than just gearing, this isn't the right answer.

Explanation

Request for Quotations can include more details than just prices. They can include specs and technical drawings and samples. It's like saying 'we can give you this price with these conditions'.

The other no answer is wrong because RfQ don't always include samples. A sample wouldn't be possible for a quote for an IT consultancy piece of work.

Explanation

The correct answer is bribery, corruption and the environment.

ESG stands for environmental and social governance. It's the new buzzword for CIPS and is basically everything to do with ethical procurement- so areas such as bribery and corruption are included as well as the environment.

Option 4 is incorrect as economic doesn't come into it.

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.

Explanation

When single sourcing, you should aim to have a collaborative relationship with the supplier. They're the only ones who provide you with glass, which is a vital part of windows. So you need to make sure you have a good relationship with them and work with them to overcome any issues such as supply chain disruptions. If not- you've got no windows to sell!

Explanation

An oligopoly. Perfect competition is a situation in a marketplace where there is plenty of competition. A monopoly or monopolistic competition would have 'imperfect competition'

Explanation

A Bill of Exchange is a payment instruction - it says who will pay whom and when.

Bill of Exchange Definition: Examples and How It Works (investopedia.com)

Explanation

ISO9001 is Quality Management so is therefore the correct answer. The other options can be used to appraise suppliers but do not link directly or fully to Quality Management.

Explanation

The correct answer is 'demand is exceeding supply'- If everyone wants to buy something, the sup-pliers will likely increase the price.

If there was little demand or there were threats of substitutions, this would likely result in a price decrease.