New CIPS L4M2 Dumps & Questions Updated on 2025
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CIPS L4M2: Defining Business Needs exam is an essential qualification for procurement professionals who want to develop their skills and progress in their careers. It provides a comprehensive understanding of the procurement process and the skills required to develop effective procurement strategies, making it a valuable asset for any procurement professional.
CIPS L4M2 (Defining Business Needs) Certification Exam is highly respected in the industry and is recognized by employers around the world. Individuals who pass this certification exam are highly sought after by employers who are looking for skilled and knowledgeable professionals to help them succeed in their business endeavors. Whether you are just starting out in your career or are looking to advance to the next level, the CIPS L4M2 (Defining Business Needs) Certification Exam is an excellent way to demonstrate your expertise and commitment to your profession.
NEW QUESTION # 19
ABC Ltd has recently set up a stationery contract with a large stationery provider, obtaining fixed prices on core stationery items. The brochures have been distributed within ABC Ltd and one of the key users wants to order a corner desk and office chair from the brochure. Is this within scope?
- A. Yes, because the contract is with the company and not just stationery
- B. Yes, because the office equipment is in the brochure and must be covered
- C. No, because the contract is for stationery only and not furniture
- D. No, because the corner desk wouldn't match existing furniture
Answer: C
NEW QUESTION # 20
Which of the following are typical examples of secondary sources of market data? Select TWO that apply.
- A. Communication with suppliers
- B. Published market analysis
- C. Supplier marketing publications
- D. Trade fairs and exhibitions
- E. Price comparison websites
Answer: B,E
NEW QUESTION # 21
Which of the following are characteristics of effective financial markets?
* Market stability is maintained
* Market volatility is encouraged
* Investment is encouraged
* The level of regulation is reduced
- A. 3 and 4 only
- B. 1 and 2 only
- C. 2 and 4 only
- D. 1 and 3 only
Answer: D
NEW QUESTION # 22
Which of the following is an advantage of competitive benchmarking over other types of bench-marking?
- A. Cost effectiveness
- B. Different corporate culture
- C. Similarity among processes
- D. Limited access to competitor's data
Answer: C
Explanation:
Competitive benchmarking
Competitive benchmarking is a direct competitor-to-competitor comparison of a product, service, process, or method. This form of benchmarking provides an opportunity to know yourself and your competition better; combine forces against another common competitor. An example of competitive benchmarking within the Department of Defense, might include contrasting Army and Air Force supply systems for Joint initiatives. Within the private sector, two or more American car companies might benchmark for mutual benefit against common international competitor; or, rival chemical companies benchmark for environmental compliance.
Benefits
- Comparing like processes
- Know your competition better
- Possible partnership
- Useful for planning and setting goals
- Similar regulatory issues
Challenges
- Difficult legal issues
- Relatively low performance improvement
- Threatening
- Limited by trade secrets
- May provide misleading information
- May not get best-in-class comparisons
- Competitors could capitalize on your weaknesses
Source: USN Benchmarking Handbook
Reference:
LO 1, AC 1.3
NEW QUESTION # 23
Which of the following activities are considered as primary activities of an organization according to Porter's value chain? Select TWO that apply:
- A. Sourcing transportation services
- B. Picking and delivery components
- C. Maintenance
- D. Trainees recruitment
- E. Assembly design
Answer: B,C
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) Graphical user interface, diagram Description automatically generated
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
NEW QUESTION # 24
Which of the following will help the bargaining strength of a buyer?
* The buyer has the option to make the product in-house
* There are a limited number of suppliers available to the buyer
* The buyer's switching costs are high
* The buyer's spend is a high proportion of the supplier's revenue
- A. 1 and 2 only
- B. 2 and 4 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: D
Explanation:
Detailed Explanation:
* 1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
* 4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power. Reference: CIPS Level 4, Market Power Analysis.
NEW QUESTION # 25
Which of the following are fixed costs? Select TWO that apply.
- A. Sales commission
- B. Premises costs
- C. Staff overtime
- D. Utilities costs
- E. Materials costs
Answer: B,D
NEW QUESTION # 26
A procurement manager consolidates the company expense on printing and office supplies into broader range of spend category. Other senior managers are concerned that it may increase company's spend. Is that concern justified?
- A. No, because the broader range of spend category can increase the value of the contract and the buyer may get volume discount
- B. Yes, because the consolidation may create a large contract that costs more than placing each purchase order
- C. No, because the consolidation will help the supplier to shorten deliver time.
- D. Yes, because the suppliers can't provide a broader range of products and they will fail to deliver
Answer: A
Explanation:
Printing and office supplies are often considered as low risk, low value items. Consolidation low value, low risk items into a broader range will dramatically increases the value of the contract and leverage of buying organisation in the negotiation.
NEW QUESTION # 27
EV Inc is facing the following challenges:
1. The capital investment is enormous.
2. Most of company's working capital is in form of inventories, which include raw materials, work-in- progress and finished goods.
3. Competitors are increasingly deploying robotics and automation to boost productivity.
Which of the below business sectors does EV Inc belong to?
- A. Retails
- B. Manufacturing
- C. Construction
- D. Financial services
Answer: B
Explanation:
Every sector among the options requires intensive capital investment. However, only manufacturing and retails bury much of their working capital in form of inventory. Raw materials and WIP only present in manufacturing sector.
The manufacturing industry is undergoing massive change, rivaling the Industrial Revolution that began in England and continued on Detroit's assembly lines. But today's revolution is "smart," thanks to factories using artificial intelligence and robots.
A new trend is the "cobot" - a collaborative robot designed to work with humans. One company called Moduform uses them to make furniture in the U.S. The company credits using cobots for reducing their staffing turnover, since the robots do mundane repetitive tasks that bore humans, while people can now do cognitive tasks requiring judgment and diversified responsibilities. Other innovations include 3D printing, Artificial Intelligence and automation.
Today's artificial intelligence manufacturing revolution improves performance in two key areas of manufacturing: productivity and quality control.
NEW QUESTION # 28
Which of the following is the core of value analysis process?
- A. Be creative
- B. Evaluate
- C. Develop
- D. Carry out functional analysis
- E. Gather information
Answer: D
Explanation:
Value Analysis (VA) is concerned with existing products. It involves a current product being ana-lysed 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 manufac-ture and assembly.
According to the Value Methodology standard, there are 6 phases to a Value Analysis:
- Information
- Function Analysis
- Creative
- Evaluation
- Development
- Presentation
1. Information
In this first phase, the team attempts to understand why the project exists and who or what it is to produce. They obtain project data, present the original design or product concepts, and understand the project scope. Schedule, costs, budget, risk, and other non-monetary issues are studied until the team is comfortable with the concept of the project, what it is to produce, and who its end users are.
This step also includes things like site visits and meetings with the project team, if required. Project documents like plans, drawings, specifications, and reports are obtained and the value engineering team becomes familiar with them.
2. Function Analysis
This step represents the meat and potatoes (core) of the value analysis. The team attempts to determine the functions the project serves. Functions come in two forms:
- Primary functions are those that represent the reason for the project's existence, for example, a building project might have adequate plumbing as a primary function.
- Secondary functions are those that the project serves without being core to the project. For example, a building project might have as a secondary function maintaining the view of the neighboring building.
The functions are described in verb/noun pairs, such as "supply water to all suites," or "Maintain view of adjacent park." For a project like this, the team should come up with 10 - 15 functions. You might be surprised how many secondary functions exist for most projects. Subject matter experts would be a great resource, but in their absence an appropriate level of brainstorming and analysis are necessary.
The team should also identify value-mismatched functions to focus the improvements on. For ex-ample, maybe a large obstruction is preventing the view of the adjacent park from too many suites resulting in a potential mismatch of the cost vs. functional benefit. This is investigated in the next step.
3. Creative
This phase represents the generation of improvement ideas. The team develops alternative ways that the project can perform the functions that have been identified. At this step, the functions are looked at individually and each one gets a list of alternative ways to perform the function. There is no judging between the importance of the various functions.
4. Evaluation
At this stage, a priority is given to each project improvement idea. The ideas are discussed and potential costs are determined. Once the risk-reward profile of each idea is itemized, the team has determined which ideas are worth implementing into the project or feature.
A few years ago, there was a pedestrian bridge built near my home which was originally designed for emergency vehicles. Although this type of design is standard practice for the bridges of this type, the value engineering team identified that emergency vehicle passage was not needed (verb/noun pair = 'maintain passage for emergency vehicles'). Also, a second major outcome of this value analysis was to change the design to an aesthetic, curved bridge because it was in a prominent location. The redesign of the bridge cost some money but this was more than made up by the cost of the bridge construction. Thus, the value analysis paid for itself about 10 times over in the reduced construction cost, and the bridge was significantly more aesthetic.
5. Development
Once the value improvement options have been whittled down to the ones that make sense, the value engineering team develop the options to the point of passing them back to the original project team. They must be clearly written and explained so that the project owner and stakeholders can understand how it benefits the project and act on it. Any potential negative factors are identified. Potential costs and cost savings are itemized.
6. Presentation
This last phase represents the presentation of the alternatives to the stakeholders. Often value engineering represents a change in the normal practices that people are used to, an "out of the box thinking." Thus the best salesperson on the team is often the best one to do the presentation.
Some typical products of a value engineering analysis are a briefing document, risk analy-sis, present worth analysis, advantages vs. disadvantages, etc.
Reference:
LO 3, AC 3.4
NEW QUESTION # 29
A buyer may consider switching from one product or service to another, or from one supplier to another.
Which of the following options are a type of switching cost?
* Inflation cost
* Historical cost
* Retraining cost
* Modification cost
- A. 1 and 4
- B. 3 and 4
- C. 2 and 3
- D. 1 and 2
Answer: B
NEW QUESTION # 30
Which of the following can directly affect labour variance? Select TWO that apply:
- A. Wage rate per hour
- B. Inflation
- C. Overtime
- D. Company's budget
- E. Overhead expenditure
Answer: A,C
Explanation:
Labour variance refers to a situation in which actual costs of labor differ from projected or budgeted labor costs. This concept is most commonly applied in manufacturing environments.
Labour variance either results from efficiency or rate discrepancies. Efficiency variance results when actual time worked is more or less than budgeted time for a project. Rate variance means you paid more per hour worked than expected. This may occur with overtime pay or when you have higher paid employees on a project than projected. Labour variance is fairly typical, but modest variance is usually not a big factor in manufacturing, because materials and other production costs are often much higher.
LO 1, AC 1.4
NEW QUESTION # 31
Which of the following are main focuses of ISO 27001:2013 standard?
1. Confidentiality
2. Logistics
3. Process
4. Life cycle
- A. 3 and 4 only
- B. 2 and 4 only
- C. 2 and 3 only
- D. 1 and 3 only
Answer: D
Explanation:
This International Standard (ISO 27001:2013) has been prepared to provide requirements for establishing, implementing, maintaining and continually improving an information security management system. The adoption of an information security management system is a strategic decision for an organization. The establishment and implementation of an organization's information security management system is influenced by the organization's needs and objectives, security requirements, the organizational processes used and the size and structure of the organization. All of these influencing factors are expected to change over time.
The information security management system preserves the confidentiality, integrity and availability of information by applying a risk management process and gives confidence to interested parties that risks are adequately managed.
It is important that the information security management system is part of and integrated with the organization's processes and overall management structure and that information security is considered in the design of processes, information systems, and controls. It is expected that an information security management system implementation will be scaled in accordance with the needs of the organization.
This International Standard can be used by internal and external parties to assess the organization's ability to meet the organization's own information security requirements.
The order in which requirements are presented in this International Standard does not reflect their importance or imply the order in which they are to be implemented. The list items are enumerated for reference purpose only.
ISO/IEC 27000 describes the overview and the vocabulary of information security management systems, referencing the information security management system family of standards (includ-ing ISO/IEC 27003[2], ISO/IEC 27004[3] and ISO/IEC 27005[4]), with related terms and defini-tions.
Reference:
- ISO/IEC 27001:2013 Information technology - Security techniques - Information security management systems - Requirements LO 3, AC 3.1
NEW QUESTION # 32
An automotive manufacturer is sourcing rubber components from Company A. The specification given to the supplier state that the component should be 1 meter long, without mentioning the tolerance. Enthusiast with the opportunity, engineers at Company A work hard to cut the components with tolerance at only +/- 1mm.
The head and tail of the component is then joined together to form a circular band. After that it is stretched over another component. To fit this purpose, the rubber component can be at any length from 80cm to 110cm.
This is an example of...?
- A. Over processing
- B. Unnecessary motion
- C. Defects
- D. Waiting
Answer: A
Explanation:
This questions is intended to ask students about types of waste in Lean principles.
Lean was born out of manufacturing practices but in recent time has transformed the world of knowledge work and management. It encourages the practice of continuous improvement and is based on the fundamental idea of respect for people. Womack and Jones defined the five principles of Lean manufacturing in their book "The Machine That Changed the World". The five principles are considered a recipe for improving workplace efficiency and include: 1) defining value, 2) mapping the value stream, 3) creating flow,
4) using a pull system, and 5) pursuing perfection.
Lean principles aim to eliminate waste in processes. The eight wastes of Lean principles are:
- Defects
- Over-production
- Waiting
- Not using talent
- Transport and handling
- Inventory
- Motion waste
- Excess processing
In the scenario, the component is processed more than necessary. The engineers try to make them as accurate as possible with very little tolerance. In fact, the component does not need to be that precise. This excesses buyer's requirements and incurs costs for both buyer and supplier. The scenario is an example of over processing (or excess processing).
Overprocessing is one of the seven wastes of lean manufacturing (or 7 mudas); Overprocessing is adding more value to a product than the customer actually requires such as painting areas that will never be seen or be exposed to corrosion.
Overprocessing as one of the seven wastes is caused by having unclear standards and specifications, many operators will try to do the best job possible and will not always be aware of what truly adds value to the product or even the end use. They will therefore often expend time polishing and finishing components that do not require it.
NEW QUESTION # 33
Which of the following problems may be identified as closed problems? Select TWO that apply:
- A. There are not enough data for procurement analytics
- B. The suppliers don't comply with the company's policy on underage labour.
- C. Shortage of key medicines in healthcare industry
- D. Logistics costs incur a large portion in wholesale prices
- E. A cyber attack takes down whole company's IT system
Answer: C,E
NEW QUESTION # 34
CP Group places emphasis on the following business objectives:
* Responsive production processes to react quickly to market changes
* Collaboration and technological integration
* New products launched and on sale very quicklyWhich of the below business markets does CP Group belong to?
- A. Financial
- B. Retail
- C. Agriculture
- D. Construction
Answer: B
NEW QUESTION # 35
Gaskins Caskets (GC) is a manufacturing company that wants to identify new suppliers for a number of current parts. GC no longer has technical drawings for the parts and none of the engineers currently working for them have enough knowledge of the parts to write a specification. What could GC do to get accurate pricing from suppliers for these parts to compare to the existing parts?
- A. GC could send samples of the parts to prospective suppliers as part of the request for quotation
- B. GC's engineers could estimate the specification and drawings that are sent to prospective suppliers
- C. GC could communicate a cost to the suppliers that must be met regardless of the final specification
- D. GC could allow suppliers to develop and use their own specification as part of their cost proposal
Answer: A
NEW QUESTION # 36
A procurement manager has noticed that profitability within a market has increased steadily over the years. In addition, the market is relatively easy to enter, and demand within the market is predicted to remain high.
Which of the following is likely to happen in this particular market as a direct consequence of these factors?
- A. Buyers will switch to a different market
- B. The regulator will intervene and establish pricing controls
- C. Suppliers will invest more heavily in technology
- D. The market will attract new entrants
Answer: D
NEW QUESTION # 37
Which of the following sources of information are considered as primary data? Select TWO that apply.
- A. Reports in business magazines
- B. The information about specific market sectors from trade associations
- C. RFI
- D. Commercial publishers of market reports
- E. The collection of data from surveying customers
Answer: C,E
Explanation:
The aim of this question is to check students' understanding of different types of data. There are 2 types of data:
- Primary data is the collection of original or raw data which are generated from field research. In this case, only RFI and surveys from customers are considered as primary data.
- On the other hand, secondary data is public information that has been collected by others. It is typically free or inexpensive to obtain and can act as a strong foundation to any research project - provided you know where to find it and how to judge its worth and relevance. Examples of secondary data are government statistics, industry associations, trade publications, published market reports, etc.
Reference:
LO 1, AC 1.2
NEW QUESTION # 38
Which of the following always impact negatively on a company's cash flow? Select TWO that ap-ply
- A. Depreciation of fixed asset
- B. Increasing revenue
- C. Supplier shortens their payment period
- D. Customers agree to pay immediately
- E. More inventory
Answer: C,E
Explanation:
To answer this question, candidates are required to remember the cash flow cycle and cost entries as well as the impact of their timing on a business.
Diagram Description automatically generated
Source: https://cfoperspective.com/free-your-cash-trapped-in-the-cash-conversion-cycle/ Shorter payment term and more inventory are likely to have negative impact on the cash flow be-cause the buyer has to pay sooner and greater.
"Customers agree to pay immediately" will increase the organisation's bank account sooner.
Depreciation has no impact on cash flow as it is only listed in Profit and Loss statement.
Increasing revenue may have negative or positive impact on cash flow, depending on the real situation.
NEW QUESTION # 39
Which of the following factors would mean a buyer had high bargaining power in a competitive market?
Select TWO that apply.
- A. Many substitute products are available
- B. Buyers are demanding large volumes
- C. High switching costs for the buyer
- D. Buyers are procuring a low volume of products
- E. Products are highly differentiated
Answer: A,B
NEW QUESTION # 40
Variances occur when there are differences between the budgeted costs and the actual costs. When are labour cost variances likely to arise?
* When the sales prices change over time due to inflation
* When there is more overtime than is expected
* When a different wage grade of worker is used to complete a task than was planned for
* When the supplier changes from manual to electronic invoicing systems for all transactions
- A. 1 and 3 only
- B. 1 and 2 only
- C. 2 and 4 only
- D. 2 and 3 only
Answer: D
NEW QUESTION # 41
To improve the productivity, Plantation Ltd is planning to purchase a tractor, which it has never bought before. The project must be quick to catch up with the next growing season. Leanne, a jun-ior procurement staff at the company, assumes that she could skip market analysis stage to save time. Is this assumption reasonable?
- A. Yes, Leanne just needs to purchase the tractor from her friend's company
- B. Yes, the company has extensive experience in purchasing tractor
- C. No, market analysis will inform the company of the pricing as well as latest technology trends
- D. No, the company assesses supplier's performance solely based on market analysis
Answer: C
Explanation:
Market analysis is a stage in CIPS Procurement and Supply Cycle. This stage informs the purchaser about the number of suppliers, the average pricing, and product trends. Even urgent purchase should undergo market analysis. Without undertaking this stage, the buying organisation may not purchase the right product, or they may purchase at higher price.
NEW QUESTION # 42
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