Pass the CIPS CIPS Level 4 Diploma in Procurement and Supply L4M2 Questions and answers with CertsForce

Explanation

Closed problem is something happens that should not have happened. To solve this type of prob-lem, procurement professional should find a way to correct the situation or try to adapt to it. On the other hand, open ended problem is a obstacle to your short-term objective. You will need to overcome this obstacle.

Shortage of key medicines is a situation in which procurement must find a substitution or try to save the current stock.

In case of cyber attack, procurement should find a way to recover the IT system as soon as possible.

Otherwise, 'There are not enough data for procurement analytics' is an open-ended problem be-cause it prevents company to conduct procurement analytics (an objective).

'Logistics costs incur a large portion in wholesale prices': In this situation, logistics costs are hur-dles that prevent companies to reach lower wholesale.

'The suppliers don’t comply with the company’s policy on underage labour': In this situation, pro-curement should seek ways to help supplier comply with the company's labour policy.

LO 1, AC 1.1

Explanation

The following are typical social criteria in procurement:

• Reducing unemployment

• Preventing the use of child labour

• Preventing discrimination on the grounds of race, religion, disability, sex or sexual orientation

• Encouraging good employment practice

• Reducing local unemployment

• Reducing social exclusion

• Promoting training opportunities for the young or disadvantaged

• Encouraging access to work for people with disabilities

Explanation

Open-ended problem is something stopping the achievement of an objective or blocking progress. To solve this type of problems, procurement professional should find a way to unblock the block-age. In the above question, high logistics cost is an obstacle to cost cutting objective while suppli-er’s incompliance prevents the company to achieve its sustainable objective.

Explanation

Design specification is a detailed document providing a list of points regarding a product or pro-cess. For example, the design specification could include required dimensions, environmental fac-tors, ergonomic factors, aesthetic factors, maintenance that will be needed, etc. It may also give specific examples of how the design should be executed, helping others work properly (a guideline for what the person should do).

Performance specification is written requirement that describes the functional performance criteria required for a particular equipment, material, or product.

Tolerance is the permissable limit of a variable used to define a product

Statement of work is the document that captures and defines all aspects of a project, including the activities, deliverables and the timetable for the project.

Explanation

To improve production process and reduce supply risk, Datong should collaborate with suppliers early in procurement cycle. Collaborating with suppliers in this way is often referred as Early Supplier Involvement (ESI)

'Request for quotation from potential suppliers': Quotations should only be requested if the buyer know exactly what they need. In this scenario, Datong is not yet sure about the specifications of product's components, request for quotation is not a good idea.

'Mapping out business plan': A business plan, as defined by Entrepreneur, is a “written document describing the nature of the business, the sales and marketing strategy, and the financial back-ground, and containing a projected profit and loss statement.” A business plan is not appropriate with improving production process and reducing supply risk.

'Budget controlling': Budget controlling largely concerns with dealing with budget variances. Tighter budget alone cannot lead to improved processes and fewer risks.

LO 3, AC 3.1

Explanation

Based on variability, the costs has been classified into three categories, they are fixed, variable and semi variable. Fixed costs, as its name suggests, is fixed in total i.e. irrespective of the number of output produced. Variable costs vary with the number of output produced. Semi-variable is the type of costs, which have the characteristics of both fixed costs and variable costs (Source: Key Differences).

Among above costs, leasing and depreciation are relatively static and do not change if volume of business activities increase or reduce.

Packaging, utilities and annual business rate (tax) are variable costs.

Explanation

ISO 14001:2015 specifies the requirements for an environmental management system that an or-ganization can use to enhance its environmental performance. ISO 14001:2015 is intended for use by an organization seeking to manage its environmental responsibilities in a systematic manner that contributes to the environmental pillar of sustainability.

ISO 14001:2015 helps an organization achieve the intended outcomes of its environmental man-agement system, which provide value for the environment, the organization itself and interested parties. Consistent with the organization's environmental policy, the intended outcomes of an environmental management system include:

• enhancement of environmental performance;

• fulfilment of compliance obligations;

• achievement of environmental objectives.

ISO 14001:2015 is applicable to any organization, regardless of size, type and nature, and applies to the environmental aspects of its activities, products and services that the organization determines it can either control or influence considering a life cycle perspective. ISO 14001:2015 does not state specific environmental performance criteria.

ISO 14001:2015 can be used in whole or in part to systematically improve environmental manage-ment. Claims of conformity to ISO 14001:2015, however, are not acceptable unless all its require-ments are incorporated into an organization's environmental management system and fulfilled without exclusion.

In conclusion, ISO 14001:2015 focuses on: management system (including roles, leadership and processes) and the life cycle of product or service. Life cycle is defined as "consecutive and inter-linked stages of a product (or service) system, from raw material acquisition or generation from natural resources to final disposal. [...] The life cycle stages include acquisition of raw materials, design, production, transportation/ delivery, use, end-of-life treatment and final disposal."

The answer is process and life cycle.

Comprehensive and Detailed Explanation (paraphrased from CIPS L4M2 content)

CIPS L4M2 defines fixed costs as those that do not change in total with small changes in the level of activity within a relevant range (for example, rent, insurance, basic utilities standing charges).

Premises costs (C) – such as rent and building insurance, are typically fixed: they are paid regardless of production volume (within normal operating levels).

Utilities costs (D) – often treated as fixed or semi-fixed in exam-style questions: the organisation pays standing charges and must maintain services regardless of output.

In contrast:

Staff overtime (A) – varies with workload; this is a variable cost.

Sales commission (B) – depends on sales volume, so it is variable.

Materials costs (E) – directly linked to output (more units = more materials), so variable.

Understanding fixed versus variable costs is vital when preparing a business case (e.g. break-even, sensitivity analysis, and assessing the impact of demand changes).

Relevant CIPS L4M2 areas:

Cost behaviour: fixed, variable, semi-variable

The role of cost analysis in business cases and sourcing decisions

Overhead allocation and cost structures