Key details for this exam, checked against the published exam outline
Each question shows the correct answer and an explanation of why it is right
Synergy Ltd is a fast-growing tool and hardware retailer. The company's customer services team has been using Excel worksheets to manage customer relationships. When the company is expend-ing its market presence, this way of working leads to poorer customer services as the database is scattered around in spreadsheet, leading to patchy and inconsistent conversations with customers. The company decides to purchase a CRM system. What requirement should Synergy's procurement team take into account in the specification for CRM system?
The purpose of this QUESTIO N NO: is to test the student's ability to identify the problems and translate those problems to actionable requirements before communicating with the suppliers. The scenario suggests that Synergy Ltd's customer services team is using Excel spreadsheets, they lack a centralised customer database. This leads to problems in communications with customers.
A CRM system can solve the communication problem. But a QUESTIO N NO: arises: If a CRM system is employed, how will the previous data be imported? If the CRM system can support bulk import from Excel tables, it will save a lot of time.
LO 1, AC 1.1
An IT category buyer wishes to include social and environmental criteria within a supplier specification. The focus is on the avoidance of hardware manufacturing inputs that have been derived from 'conflict minerals', e.g. from politically unstable areas. Is this the right approach?
Ymira is asked to develop the specification for water purifier which will be used at the company headquarter. She believes that the specification can be drafted based on the information available on the Internet, such as blog posts, comparison websites, how-to websites, life hacks, etc. Which of the following traits will make the information more useful?
Explanation
Internet is a great source of information, however, information from the Internet needs to be tested for accuracy and reliability. To check the information from the Internet, a buyer can use the criteria with acronym SAMOA:
Source (of the information)
Audience (intended as the recipient of the information)
Methodology (used to collect and analyse the data)
Objectivity (of the information - there should be no bias)
Accuracy
LO 3, AC 3.1
Procurement provides the following information to a business case ...
Which of the following activities are considered as primary activities of an organization according to Porter's value chain? Select TWO that apply:
Explanation
Primary activities consist of inbound logistics, operations, outbound logistics, sales & marketing, service.
Second activities consist of firm infrastructure, human resource management, technology development and procurement
The following graph illustrate the value chain (Source: Smartsheet)
Picking and delivery components is inbound logistics.
Maintenance is an example of operations activity.
Sourcing transportation services is an activity of procurement
Assembly design is an activity in research and development (Technology)
Recruiting is an activity of human resource management
LO 2, AC 2.1
Which of the following are the fair and reasonable comparators in price analysis? Select TWO that apply:
Explanation
Price Analysis is the process of deciding if the asking price for a product or service is fair and rea-sonable, without examining the specific cost and profit calculations the vendor used in arriving at the price. It is basically a process of comparing the price with known indicators of reasonableness. When adequate price competition does not exist, some other form of analysis is required. Some reasons that could affect adequate price competition are: specifications are not definitive, tolerances are restrictive, or production capacity limits those eligible to bid.
Examples of other forms of price analysis information include:
* Analysis of previous prices paid
* Comparison of vendor's price with the in-house estimate
* Comparison of quotations or published price lists from multiple vendors
* Comparisons with government agencies (such as GSA in the US) published prices
A strike price is the set price at which a derivative contract can be bought or sold when it is exercised. For call options, the strike price is where the security can be bought by the option holder; for put options, the strike price is the price at which the security can be sold. Strike price is also known as the exercise price.
A cost driver is the direct cause of a cost and its effect is on the total cost incurred. For example, if you are to determine the amount of electricity consumed in a particular period, the number of units consumed determines the total bill for electricity. In such a scenario, the number of units of electricity consumed is a cost driver.
LO 1, AC 1.2
A company is analysing its existing product's components and aims at reducing costs without damaging customer value proposition. They want to check which components are critical and which are unnecessary. Which of the following should be adopted by the company?
Explanation
In marketing, a customer value proposition (CVP) consists of the sum total of benefits which a vendor promises a customer will receive in return for the customer's associated payment (or other value-transfer).
Value analysis is concerned with existing products. It involves a current product being analysed and evaluated by a team, to reduce costs, improve product function or both. Value Analysis exercises use a plan which step-by-step, methodically evaluates the product in a range of areas. These include costs, function, alternative components and design aspects such as ease of manufacture and assembly.
Value engineering is concerned with new products. It is applied during product development. The focus is on reducing costs, improving function or both, by way of teamwork-based product evalua-tion and analysis. This takes place before any capital is invested in tooling, plant or equipment.
In this scenario, the company's objective is cost reduction, then value analysis or value engineering is more likely to be applied. The products are existing, so value analysis is the best option.
LO 3, AC 3.4
Exam domains verified against: Official CIPS L4M2 exam guide, last checked October 2026.
Learn to analyse how business needs influence procurement decisions, including purchase types and the procurement role in developing business cases. Understand cost estimation methods using market data, direct and indirect costs, and total cost of ownership approaches. Study the criteria applied in business case creation such as costs, benefits, options, organisational alignment and timescales, and how to interpret financial budgets for purchase control including cost entries, cash flow timing, performance monitoring, and variance management.
Sample question from this domain above: Q7
Analyse different market types including manufacturing, construction, retail, financial, agriculture and services sectors. Compare competitive forces affecting markets such as bargaining strength of suppliers and buyers, availability of substitutes and threat of new entrants. Understand how to contrast direct and indirect costs, collate cost information sources to estimate cost breakdowns, prepare budgets and negotiate prices using market data research.
Analyse different specification types including drawings, samples, branded, technical, conformance, outcome or output and statement of work specifications. Identify information sources such as standards, the internet and suppliers' directories. Learn the sections of through-life contract specifications including scope, definition, description, testing and acceptance, change control and remedies, and social and environmental criteria. Identify risks from inadequate specifications and mitigation approaches, and opportunities to regulate specifications through standardisation, value analysis and value engineering.
Common questions about the exam itself
