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CIPS L5M6 Exam Syllabus Topics:
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NEW QUESTION # 48
Volatile inflation rates are a risk that can affect any business. Which STEEPLED factor would this fall under?
- A. Economic
- B. Ethical
- C. Political
- D. Socio-Cultural
Answer: A
Explanation:
Inflation is directly linked to the Economic factor within STEEPLED. It affects costs, purchasing power, and business profitability.
[Ref: CIPS L5M6 Study Guide, p.109 - STEEPLED analysis factors]
NEW QUESTION # 49
In a Sourcing Business Model, stakeholders must answer key questions to determine the right model.
Which are the most important?
- A. What factors form part of the total cost of ownership?
- B. How much risk does the company wish to take?
- C. What is the most appropriate economic model?
- D. What is the most appropriate contractual relationship?
Answer: C,D
Explanation:
In deciding the correct Sourcing Business Model, stakeholders must clarify two fundamental issues:
* The most appropriate contractual relationship [C]: This could be transactional [short-term, cost- focused], relational [long-term collaboration], or investment-based [joint ventures, alliances]. The choice defines how risks and rewards are shared with suppliers.
* The most appropriate economic model [D]: This determines the pricing and performance framework, e.g., transactional [pay-per-unit], output-based, or outcome-based [pay-for-results].
Options A and B are important but secondary considerations. Risk appetite and TCO factors are inputs to decision-making, but the contractual and economic models define the overall sourcing structure.
This reflects the study guide's emphasis that sourcing models should be tailored to category complexity and business objectives. Using the wrong model can undermine supplier relationships and value delivery.
[Ref: CIPS L5M6 Study Guide, p.32 - Key questions in Sourcing Business Models]
NEW QUESTION # 50
In mitigating risks within the supply chain, which two factors should be assessed when evaluating potential risks?
- A. People involved
- B. Severity
- C. Location
- D. Cost
- E. Likelihood
Answer: B,E
Explanation:
The two most important factors when assessing supply chain risks are Severity and Likelihood. These are typically measured on a scale [e.g., 1-5], with the product of the two giving a risk score.
* Severity measures the potential impact on the organisation if the risk materialises. For example, supplier insolvency may severely disrupt operations.
* Likelihood assesses the probability of the event occurring.
The combination of severity × likelihood determines whether a risk is low, medium, or high, and informs mitigation strategies.
Other options are less central:
* Location may influence likelihood but is a sub-factor.
* People involved is not a formal assessment criterion.
* Cost can be a consequence but is part of severity, not a separate factor.
Using severity and likelihood ensures risks are prioritised based on both impact and probability, allowing category managers to allocate resources effectively.
[Ref: CIPS L5M6 Study Guide, p.40 - Risk assessment and mitigation protocols]
NEW QUESTION # 51
Which of the following can be used to group categories for Category Management within an organisation?
- A. UNSPC
- B. WTO Guidelines
- C. ISO9001
- D. Kraljic Matrix
Answer: A
Explanation:
The United Nations Standard Products and Services Code (UNSPC) provides a universal taxonomy for classifying goods and services. Some organisations adopt UNSPC as a standard way of grouping categories for procurement, while others create their own frameworks tailored to business needs. Unlike tools such as the Kraljic Matrix, which is used to assess risk and value, UNSPC is a classification system designed for spend categorisation and reporting. Using standardised codes ensures better data consistency, benchmarking, and spend visibility across organisations, especially in global supply chains. By adopting UNSPC, procurement teams can reduce ambiguity in spend analysis and ensure categories are aligned with recognised frameworks.
Reference: CIPS L5M6 Study Guide, p.3
NEW QUESTION # 52
Which of the following approaches to managing cost, common in Category Management, results in the most reduced costs from suppliers and increased value?
- A. Cost-out
- B. Price acceptance
- C. Cost-down
- D. Price management
Answer: A
Explanation:
Cost-out is the most effective approach for reducing supplier costs while increasing value. It involves redesigning products or services collaboratively with suppliers to eliminate costs before they occur. For example, altering product design to use fewer materials can reduce overall costs without compromising quality. This differs from price acceptance (simply accepting a supplier's offer), price management (controlling or negotiating pricing), or cost-down (gradual cost reduction). Cost-out is proactive and strategic, focusing on long-term value creation rather than short-term savings. For category managers, adopting cost-out strategies requires close supplier collaboration, innovation, and joint investment in process improvements.
Reference: CIPS L5M6 Study Guide, p.79
NEW QUESTION # 53
Peak Pricing is also known as which other type of pricing model?
- A. Penetration pricing
- B. Limit pricing
- C. Dynamic pricing
- D. Price skimming
Answer: C
Explanation:
Peak pricing is another term for dynamic pricing, where the cost of a product or service changes in response to fluctuations in demand and market conditions. A common example is airline ticket pricing, where fares increase during peak travel periods and drop during off-peak times.
Dynamic pricing relies on market data, technology, and sometimes artificial intelligence to adjust prices in real-time. It maximises revenue by capturing higher margins during periods of strong demand while stimulating sales when demand weakens.
Other options are different strategies:
* Penetration pricing involves initially low prices to gain market entry.
* Limit pricing aims to deter new entrants by setting prices low enough to discourage competition.
* Price skimming involves launching at a high price, then gradually lowering it as demand declines.
In category management, understanding pricing models like dynamic pricing helps procurement anticipate supplier pricing strategies and develop negotiation tactics.
[Ref: CIPS L5M6 Study Guide, pp.180-182 - Pricing models and procurement]
NEW QUESTION # 54
When using the Kraljic Matrix to analyse the category of item, which of the following categories does Kraljic recommend be further analysed in conjunction with a comparison of the buyer's strength vs supply market strength?
- A. Bottleneck
- B. Strategic
- C. Leverage
- D. Non-critical
Answer: B
Explanation:
For strategic items, Kraljic recommends further analysis through a 3x3 supply positioning matrix, which compares buyer strength against market strength. This creates three possible strategies: exploit, balance, diversify.
Reference: CIPS L5M6 Study Guide, p.102
NEW QUESTION # 55
Salim is using the CIPS Procurement and Supply Cycle to run a tender for a new item. He needs to complete a Make vs Buy assessment. Under which stage of the cycle should this be done?
- A. Develop a high-level specification
- B. Develop strategy/plan
- C. Market engagement
- D. Market/commodity and options
Answer: D
Explanation:
The correct stage is Market/commodity and options [including make vs buy assessment], which is Stage 2 of the CIPS Procurement and Supply Cycle. This stage focuses on analysing the external market, internal requirements, and identifying whether to make a product in-house or source it externally.
A Make vs Buy assessment helps determine whether the organisation has the capacity, skills, and resources to produce the item internally, or whether outsourcing would deliver greater value. Factors such as cost, risk, quality, lead time, and strategic alignment are evaluated.
Other stages differ:
* High-level specification [Stage 1]: Focuses on defining what is needed, not sourcing decisions.
* Develop strategy/plan [Stage 3]: Comes after options are analysed, where the sourcing path is chosen.
* Market engagement [Stage 4]: Involves engaging suppliers, which cannot happen until the Make vs Buy decision is made.
This makes Stage 2 the most accurate point for such an assessment.
[Ref: CIPS L5M6 Study Guide, pp.35-36 - Procurement Cycle, Make vs Buy analysis]
NEW QUESTION # 56
Porter's 5 Forces is a useful tool to analyse market factors that affect profitability. Which of the following is not one of the forces?
- A. Rivalry among existing firms in the industry
- B. Threat of buyers
- C. Threat of new entrants
- D. Threat of substitutions
Answer: B
Explanation:
The correct terminology is bargaining power of buyers, not "threat of buyers". Porter's Five Forces are:
* Threat of new entrants
* Bargaining power of suppliers
* Bargaining power of buyers
* Threat of substitutes
Reference: CIPS L5M6 Study Guide, p.111
NEW QUESTION # 57
ABC Ltd is a manufacturer of hi-tech IT equipment in an industry set to grow substantially over the next 10 years. What type of industry is this?
- A. Cow industry
- B. Bear industry
- C. Dog industry
- D. Bull industry
Answer: D
Explanation:
A Bull Industry is one that is experiencing strong growth, with positive demand and market expansion expected in the future. In financial terms, "bull" markets are characterised by optimism, rising investment, and business confidence.
For ABC Ltd, operating in a high-growth IT sector, this categorisation is appropriate because demand is projected to increase. This means opportunities exist for innovation, supplier partnerships, and long-term strategic sourcing.
By contrast:
* Bear industries represent declining markets, where firms face shrinking demand.
* Dog and Cow industries are not recognised terms within category management; they are distractors in this question.
Identifying whether an industry is in a bull or bear phase helps Category Managers assess market risks, supplier relationships, and investment priorities.
[Ref: CIPS L5M6 Study Guide, p.150 - Market classifications: bull vs bear industries]
NEW QUESTION # 58
Penelope works for an international manufacturer. Which categories are most likely to be outsourced?
- A. Marketing services
- B. Facilities management
- C. Operations
- D. Raw materials
- E. Warehousing
Answer: A,B
Explanation:
The categories most likely to be outsourced are Marketing services and Facilities Management [FM].
These are examples of indirect spend categories where external providers often offer specialist expertise, cost efficiency, and scalability.
CIPS identifies five indirect categories frequently outsourced: Marketing, Facilities Management, IT
/Communications, Human Resources, and MRO [Maintenance, Repairs, Operations]. Outsourcing these allows organisations to focus internal resources on core competencies such as manufacturing or R&D.
Raw materials, warehousing, and operations are typically core to production and therefore managed internally or strategically sourced, rather than fully outsourced. While warehousing may sometimes be outsourced
[3PL], it is not listed among the primary categories in the study guide.
Outsourcing decisions must balance cost, risk, and strategic importance. For example, outsourcing FM reduces overheads while ensuring professional management of buildings and services, whereas marketing agencies provide creativity and campaign expertise.
[Ref: CIPS L5M6 Study Guide, pp.46-47 - Categories commonly outsourced]
NEW QUESTION # 59
Frankie Burgers operates in the UK and USA. One supplier holds a monopoly, but the item supplied is low cost. According to the Kraljic Matrix, which type of item is this?
- A. Strategic
- B. Leverage
- C. Bottleneck
- D. Routine
Answer: C
Explanation:
This item is classified as a Bottleneck item in the Kraljic Portfolio Matrix. Bottleneck items are low-value in terms of spend but carry high supply risk, often because there are very few suppliers or a monopoly situation.
In this case, Frankie Burgers faces a monopoly supplier, meaning supply risk is high. Even though the item is low cost, its unavailability could disrupt operations, creating significant vulnerability.
By contrast:
* Leverage items are high-value but low risk, suited for competitive sourcing.
* Strategic items are high-value and high-risk, requiring partnerships.
* Routine items are low-value and low-risk, suitable for automated procurement.
Category managers facing bottleneck items often mitigate risk through strategies such as developing alternative suppliers, stockpiling, or long-term contracts to secure continuity of supply.
[Ref: CIPS L5M6 Study Guide, p.157 - Kraljic Matrix applications]
NEW QUESTION # 60
'Kaizen' is a Japanese term used frequently in the manufacturing industry. What does it refer to?
- A. Sustainability
- B. Supplier Relationship Management
- C. Cost Reduction
- D. Continuous Improvement
Answer: D
Explanation:
Kaizen translates to "continuous improvement" in Japanese. It is a philosophy that encourages making small, incremental changes that collectively lead to significant performance enhancements over time. Within procurement and category management, Kaizen focuses on ongoing collaboration with suppliers to identify ways to reduce waste, improve quality, and optimise processes. Unlike one-off cost-reduction initiatives, Kaizen is embedded in the organisational culture and requires engagement from all levels of the supply chain.
For example, small adjustments in packaging design might reduce material use, leading to cost savings and environmental benefits. This approach fosters long-term supplier partnerships and supports innovation. In competitive markets, organisations that adopt Kaizen are more resilient and adaptable, making it a key concept for category managers to understand.
Reference: CIPS L5M6 Study Guide, p.40
NEW QUESTION # 61
A 'should cost' analysis and value analysis can be completed on items procured by a buyer. Which of the following categories of spend are these tools most applicable for?
- A. Strategic
- B. Leverage
- C. Bottleneck
- D. Non-critical
Answer: B
Explanation:
These tools are most applicable for leverage items, which typically have high spend but low supply risk.
Buyers can use cost breakdowns and value analysis to reduce prices and improve cost-efficiency.
Reference: CIPS L5M6 Study Guide, p.103
NEW QUESTION # 62
Servers, hardware and licences are items which may be found in which category of spend?
- A. Professional services
- B. Legal
- C. IT
- D. Facilities management
Answer: C
Explanation:
Items such as servers, hardware, and licences fall under the IT (Information Technology) category of spend. Categories are organised into direct and indirect spend, and IT is a common example of indirect spend
, which includes goods and services that do not directly contribute to production but are essential to operations. IT spend is strategically important as it supports digital transformation, efficiency, and business continuity. Effective management of IT categories involves considering licensing agreements, hardware refresh cycles, cybersecurity, and vendor lock-in risks. Poor IT procurement strategies can lead to high costs, inefficiencies, and security vulnerabilities. Category managers in IT must also keep up with fast- changing technology markets, cloud adoption trends, and vendor consolidation. Recognising IT as a distinct category ensures that procurement strategies address unique risk factors and maximise value.
Reference: CIPS L5M6 Study Guide, p.3
NEW QUESTION # 63
Tulipa Ltd is a manufacturer of vegan frozen food. It saw significant market growth for three years, but in the last two years market share has remained stable despite no new entrants. Which stage in the lifecycle is the vegan frozen food market?
- A. Growth
- B. Birth
- C. Maturity
- D. Decline
Answer: C
Explanation:
The correct answer is Maturity. In the industry lifecycle model, markets evolve through stages: birth, growth, maturity, and decline. Tulipa Ltd initially saw high growth, reflecting the growth stage, where demand is rising, and market share is expanding. However, for the past two years, share has plateaued, suggesting the market has stabilised, which is a key characteristic of the maturity stage.
At maturity, the market is often saturated, with limited opportunities for expansion. Competition becomes more intense, innovation slows, and firms compete largely on efficiency, branding, or incremental improvements. Unlike decline, the market is still viable and profitable, but growth rates are flat.
The study guide also introduces an intermediate stage called shakeout, occurring between growth and maturity, where weaker competitors exit. Tulipa's situation has passed growth but has not yet entered decline, making maturity the correct classification.
[Ref: CIPS L5M6 Study Guide, p.175 - Industry Lifecycle and Procurement Strategy]
NEW QUESTION # 64
ABC Ltd is a manufacturer of hi-tech IT equipment and is operating in an industry set to grow substantially over the next 10 years. What type of industry could this be described as?
- A. Cow industry
- B. Bear industry
- C. Dog industry
- D. Bull industry
Answer: D
Explanation:
A bull industry is one that is experiencing sustained growth, driven by technological innovation, consumer demand, or favourable market conditions. The opposite is a bear industry, which is in decline. The terms are borrowed from stock market language but are also used in category management to describe the overall trajectory of an industry. For ABC Ltd, operating in a bull industry means it must prepare for higher demand, increased competition, and potential supplier shortages. This requires a proactive category strategy that focuses on securing long-term supplier relationships, investing in innovation, and managing risks associated with rapid growth. Recognising industry cycles ensures that procurement strategies are forward-looking and aligned with long-term organisational objectives. Misclassifying an industry's trajectory could lead to missed investment opportunities or poor resource allocation.
Reference: CIPS L5M6 Study Guide, p.150
NEW QUESTION # 65
In A.T. Kearney's 7 Step Model of Strategic Sourcing, which of the following should be done first?
- A. Continuous benchmarking of supply market
- B. Selection of implementation path
- C. Supplier portfolio generation
- D. Competitive supplier selection
Answer: C
Explanation:
The first step in A.T. Kearney's 7 Step Model of Strategic Sourcing is Supplier Portfolio Generation. The model provides a structured approach to sourcing, beginning with an understanding of current spend and supplier landscape before progressing to strategy development and implementation.
The seven steps are:
* Profile spend and supply base.
* Develop sourcing strategy and cost comparison.
* Generate supplier portfolio.
* Select implementation path.
* Select competitive suppliers.
* Integrate operations with suppliers.
* Continuously benchmark supply market.
The reason supplier portfolio generation is first is because procurement must identify potential suppliers and the overall supply base structure before choosing strategies or engaging in competitive selection. Skipping this step risks building a strategy without understanding available market options.
Thus, while options C and D are important later in the process, they cannot occur without first mapping the supplier portfolio.
[Ref: CIPS L5M6 Study Guide, Chapter 1.2 - Strategic Sourcing Models, esp. p.31-32]
NEW QUESTION # 66
In order for Category Management to succeed, is business commitment and stakeholder buy-in essential?
- A. No - categories work independently of each other
- B. No - commitment is only required for high-spend categories
- C. Yes - must be endorsed and supported by top management
- D. Yes - because it is tactical and requires cross-functional teamwork
Answer: C
Explanation:
The correct answer is Yes - business commitment and top management endorsement is essential.
Category management is a strategic approach that requires cross-functional collaboration and long-term alignment with business objectives. Without commitment from senior leadership, procurement lacks the authority, resources, and stakeholder engagement necessary to implement effective category strategies.
Option B is incorrect because category management is strategic, not merely tactical. Options C and D underestimate the interdependence of categories and the need for broad business support. Even low-spend categories can carry risks or opportunities requiring strategic oversight.
CIPS emphasises that full endorsement by senior management ensures stakeholder buy-in, smooth adoption of new processes, and maximisation of category benefits. Lack of support often results in fragmented efforts, limited compliance, and failure to achieve intended value.
[Ref: CIPS L5M6 Study Guide, p.46 - Importance of stakeholder commitment]
NEW QUESTION # 67
Why would a company use a Technology Roadmap?
- A. To assist in marking a tender for IT equipment
- B. To help decide which technology to invest in the future
- C. To decide between two different software providers
- D. To mitigate risks of cyber-attacks
Answer: B
Explanation:
A Technology Roadmap is a planning tool used to align technological investments with business strategy. It enables organisations to evaluate current capabilities, identify emerging challenges, and plan for future technology adoption. The purpose is not just to decide between existing options but to forecast which innovations will be most valuable over time.
For instance, a company may use a roadmap to determine whether to invest in automation, artificial intelligence, or renewable energy solutions, based on expected business growth and industry trends. This ensures resources are allocated to technologies that offer long-term competitiveness.
Other options are less accurate:
* Option A oversimplifies; technology roadmaps are not for one-off decisions.
* Option B is incorrect as tenders require specifications, not long-term roadmaps.
* Option D relates to risk management, not strategic technology planning.
Therefore, the roadmap helps businesses stay adaptive and forward-thinking, ensuring that investments made today remain relevant tomorrow.
[Ref: CIPS L5M6 Study Guide, pp.126-127 - Technology Roadmaps in category management]
NEW QUESTION # 68
When implementing procurement projects, it is important for Category Managers to consider the "human side" of change. Why is this?
- A. A change cannot be made without buy-in from everyone
- B. Everybody is resistant to change
- C. Ignoring stakeholders' feelings may result in rework or a poor result
- D. Change will always bring about a positive result
Answer: C
Explanation:
The correct answer is ignoring stakeholders' feelings may result in rework or a poor result. In category management, implementing change-whether new sourcing strategies, supplier consolidation, or digital tools-affects multiple stakeholders. People often resist change, either passively or actively. CIPS highlights a model where typically 20% embrace change, 60% accept it cautiously, and 20% actively oppose it.
If stakeholders' concerns are ignored, resistance can derail projects, leading to delays, poor adoption, or the need for costly rework. For example, if end-users are not engaged in developing specifications, the final product may not meet needs, requiring adjustments later.
Options A and B overstate the issue; not everyone resists change, but enough stakeholders may to cause disruption. Option D is incorrect because change can also bring risks and negative consequences if poorly managed.
Effective change management in procurement requires communication, stakeholder engagement, and addressing emotional as well as technical challenges.
[Ref: CIPS L5M6 Study Guide, p.68 - Managing the human side of change]
NEW QUESTION # 69
CEB Research states that there are 6 competencies which drive strategic performance in Procurement. The ability to stay calm under pressure and handle criticism is which competency?
- A. Influencer
- B. Innovator
- C. Results seeker
- D. Adaptor
Answer: D
Explanation:
The Adaptor competency reflects resilience and flexibility, particularly the ability to remain calm under pressure and handle criticism constructively. CEB Research identifies six key competencies for high- performing procurement teams: functional expert, influencer, results seeker, innovator, adaptor, and complier.
Each competency contributes to overall effectiveness. Adaptors are especially important in procurement because markets are dynamic and supplier relationships can be complex. Their ability to adjust strategies in the face of change ensures procurement remains resilient. For category managers, adaptability supports risk management, stakeholder engagement, and effective negotiation. Without this competency, procurement risks being rigid and unresponsive to changing circumstances.
Reference: CIPS L5M6 Study Guide, p.70
NEW QUESTION # 70
What name is given to an item or business which has both low market share and low growth?
- A. Dog
- B. Cash cow
- C. Star
- D. Question mark
Answer: A
Explanation:
In the BCG Growth-Share Matrix, a dog is a business unit or product that has both a low relative market share and a low growth rate. Such items typically generate low or no profits and are often seen as candidates for divestment or discontinuation. Unlike cash cows which generate strong cash flow despite slow growth, or stars which dominate high-growth markets, dogs occupy a weak position in the portfolio. Managing these categories strategically is critical because maintaining them often consumes more resources than the value they return. Organisations need to assess whether retaining these products provides any strategic advantage, such as complementing other offerings, or whether resources should be reallocated. This is why category managers use tools like the BCG Matrix to evaluate the positioning of spend categories and align them with organisational strategy.
Reference: CIPS L5M6 Study Guide, p.117
NEW QUESTION # 71
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