Free Practice Questions for CIPS L5M7 Exam

Question 1

Freddie, a Procurement Professional, is reviewing supply chain risks. He believes all risks should be eliminated. Is this correct?

AYes -- all supply chain risks must be removed

BYes -- create risk assessments for each supplier

CNo -- prevent risks where possible but tolerate low-level risks

DNo -- awareness only is required

Correct Answer: C. No -- prevent risks where possible but tolerate low-level risks

Explanation:

Risk management seeks to prevent and mitigate major risks, while tolerating low-impact risks when elimination isn't feasible.

Short cited extract: ''Low-level risks can be tolerated if likelihood and impact are minimal.'' (L5M7 Study Guide, p.49)

Question 2

George, a property manager, agrees a cost-plus payment with a plumber. Which of the following will he need to know to calculate total price?

Select THREE.

ACost of materials

BCost of labour

CSupplier's overhead and profit

DSupplier's tax rate

ESupplier's pension contribution

Correct Answer: A. Cost of materials; B. Cost of labour; C. Supplier's overhead and profit

Explanation:

Cost-plus pricing is based on actual material and labour costs plus an agreed margin for overheads and profit.

Short cited extract: ''Cost-plus = actual cost + agreed mark-up for profit/overheads.'' (L5M7 Study Guide, p.191)

Question 3

Mark, a logistics procurement manager, describes his chain as tightly coupled. What does this mean?

AThere are many organisations in the supply chain

BThe supply chain is strong

CThere is a high level of interdependency in the supply chain

DThere is flexibility in the supply chain

Correct Answer: C. There is a high level of interdependency in the supply chain

Explanation:

A tightly coupled supply chain exhibits high interdependence between members; decisions by one partner affect all others.

Short cited extract: ''Tightly coupled = high interdependence between supply-chain partners.'' (L5M7 Study Guide, p. 82)

Question 4

RIDDOR statistics provide information on which of the following?

AFinancial standing

BSpeed of production

CHealth and safety

DConformance with specification

Correct Answer: C. Health and safety

Explanation:

RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) relates to health and safety performance measurement---tracking workplace incidents and compliance.

Short cited extract: ''RIDDOR statistics relate to health and safety reporting.'' (L5M7 Study Guide, p.141)

Question 5

Which of the following tactics helps organisations in the middle of a supply chain protect themselves from the Bullwhip Effect?

AHave buffer stock

BConduct due diligence on lower-tier suppliers

CEmploy a younger workforce

DTrade in a strong currency

Correct Answer: A. Have buffer stock

Explanation:

The Bullwhip Effect describes amplified demand fluctuations up the supply chain; buffer stock mitigates shortages caused by sudden demand changes.

Short cited term: ''buffer stock helps counter demand fluctuation'' (L5M7 Study Guide, p. 4).

Question 6

Electro Bob is a wholesaler of electrical equipment. One of its customers, RoostyFace, spends very little and is unlikely ever to increase its spend. What type of customer is RoostyFace to Electro Bob (Supplier Preferencing Model)?

ACore

BAnnoying

CExploitative

DNuisance

Correct Answer: D. Nuisance

Explanation:

In supplier preferencing, nuisance customers have low value/attractiveness with limited growth potential. Short cited terms: ''nuisance,'' ''low attractiveness/low value'' (L5M7 Study Guide, p.86).

Question 7

In what way has the increase in the use of technology affected buyer--supplier relationships?

AIt has reduced the bargaining power of suppliers as buyers now have access to a wider pool of suppliers and product information.

BIt has increased the bargaining power of suppliers as they can provide faster quotations.

CIt has reduced the bargaining power of buyers because there are fewer suppliers.

DIt has increased the bargaining power of buyers because technology has increased operational costs.

Correct Answer: A. It has reduced the bargaining power of suppliers as buyers now have access to a wider pool of suppliers and product information.

Explanation:

Technology enhances buyer access to data, broadening supplier choice and transparency, which reduces supplier power.

Short cited term: ''technology has reduced suppliers' bargaining power'' (L5M7 Study Guide, p. 66).

Question 8

Which of the following is an example of a closed-loop supply chain?

AA farm supplying milk to a dairy manufacturer

BThe extraction of diamonds from a mine sold to a jewellery manufacturer

CThe sale of second-hand cars at a retail outlet

DA retailer which accepts old phones to be given back to the manufacturer

Correct Answer: D. A retailer which accepts old phones to be given back to the manufacturer

Explanation:

A closed-loop supply chain returns used products to the chain for reuse/recycling/remanufacture. Short extract: ''closed loop -- products/materials re-enter the supply chain.'' (L5M7 Study Guide, pp.5--7)

Question 9

When would you use a Fishbone (Ishikawa) Diagram?

ATo decide which supplier to use

BTo map issues in the supply chain

CTo identify the cause of a problem

DTo clarify a relationship

Correct Answer: C. To identify the cause of a problem

Explanation:

A Fishbone Diagram identifies root causes of problems by categorising factors (e.g., people, process, materials, environment).

Short cited term: ''used to identify root causes of problems.'' (L5M7 Study Guide, p. 126)

Question 10

For items viewed as Strategic/Critical (high supply risk and high value), which sourcing strategy is best?

ACompetitive bidding

BOutsourcing

CPartnership or alliance approach

DArm's-length relationship with supplier

Correct Answer: C. Partnership or alliance approach

Explanation:

The Kraljic Matrix recommends partnership/alliances for strategic items to secure continuity, innovation, and joint value creation. Short cited term: ''strategic items ... partnership'' (L5M7 Study Guide, p.84).