L5M6 Practice Questions

Reeves, Moose and Venema (2014) established that products move through the four quadrants of

the BCG matrix more quickly in the modern business environment compared to the past. This is a

reflection of faster innovation cycles, market saturation, and increased competition. The other three

statements are the opposite of what their research proved.

Reference: CIPS L5M6 Study Guide, p.120

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

The International Association for ContractCommercial Management [IACCM], now known as

WorldCC, provides frameworks to help organisations select the most suitable sourcing and

contracting models. For category managers, this is particularly valuable when deciding whether a

transactional, relational, or investment-based model best fits the organisation’s needs.

It does not directly choose suppliers or perform market analysis; rather, it guides decision-makers on

the structural relationship with suppliers. For example, IACCM provides tools to decide whether to

adopt outcome-based contracts, performance partnerships, or traditional transactional agreements.

Benchmarking may be a separate exercise, but sourcing models determine the governance and risk-

sharing approach that underpins supplier relationships.

CIPS encourages procurement professionals to be familiar with IACCM’s role, as it reinforces the

need for strategic selection of sourcing models rather than a one-size-fits-all approach.

[Ref: CIPS L5M6 Study Guide, p.31 – IACCM and sourcing model selection]

Contract leakage refers to the difference between the benefits forecasted before awarding a contract

and the actual benefits realised during its execution. For example, savings predicted during tendering

may not materialise due to supplier underperformance, scope creep, or poor contract management.

This phenomenon highlights the importance of post-contract management and continuous

monitoring of supplier performance. Category managers must ensure that expectations set during

procurement are followed through by tracking delivery, compliance with terms, and value creation.

Tools such as KPIs, SLAs, and audits help minimise leakage by ensuring accountability. Ultimately,

failure to address leakage can lead to financial loss, reduced trust, and missed opportunities for

improvement. By focusing on contract outcomes as well as initial savings, procurement ensures that

strategic objectives are consistently met.

Reference: CIPS L5M6 Study Guide, p.145

Leverage items [low supply risk, high financial impact] are best suited for e-auctions. Buyers can use

competitive bidding to drive down prices when multiple suppliers exist.

By contrast:

Bottleneck items [low value, high supply risk] are not suited as choice is limited.

Strategic items require partnership and collaboration, not price-only competition.

Non-critical items don’t justify the effort of auctions.

[Ref: CIPS L5M6 Study Guide, p.97 – Kraljic Portfolio Matrix]

The key barrier is language and the use of acronyms. In cross-functional, international, or virtual

teams, communication challenges can hinder collaboration. Procurement often uses specialised

terminology and acronyms that other functions or non-native speakers may not fully understand.

This can create confusion, misalignment, and inefficiency.

Geography is less of an issue in virtual teams, as digital platforms enable collaboration across

locations. Time and cost can be challenges, but the study guide specifically identifies language and

acronyms as barriers.

Effective category managers overcome this by using clear, simple communication and ensuring

shared understanding of procurement terms. This reduces misunderstandings and ensures that all

team members—finance, engineering, operations—can contribute effectively.

Cross-functional teamwork is central to category management success, but only if barriers to

collaboration are proactively addressed.

[Ref: CIPS L5M6 Study Guide, p.64 – Cross-functional teams and barriers]

SIC [Standard Industrial Classification] codes are numerical codes used to classify industries. For

example, 1000 = mining, 1500 = construction. These codes help in categorising spend,

benchmarking, and market analysis but are not intended for memorisation.

[Ref: CIPS L5M6 Study Guide, p.82 – SIC codes]

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Category 1: Highly innovative, many suppliers with similar products at similar price points

Porter’s Force: Competitive Rivalry – High

STEEPLE Factor: Technological

Explanation (150–200 words):

Category 1 operates in a market that is highly innovative and subject to rapid technological change.

Innovation means suppliers are constantly developing new features or solutions, making technology

the primary STEEPLE factor. Additionally, because there are many suppliers offering similar products

at similar price points, competitive rivalry is intense. Buyers can switch easily, and suppliers must

compete aggressively on features, pricing, and differentiation.

This combination of high rivalry and technological change creates both opportunity and risk for

Randoxx. On one hand, innovation drives new solutions that can be leveraged; on the other hand, it

increases pressure to manage supplier relationships strategically. Randoxx must monitor

technological trends closely while maintaining competitive sourcing strategies to manage this highly

dynamic category.

(Ref: CIPS L5M6 Study Guide – Porter’s Five Forces, p.112–116; STEEPLED Analysis, p.109)

The correct answer is CSR [Corporate Social Responsibility]. In modern procurement, tenders are no

longer evaluated solely on price and quality. Organisations increasingly consider ethical,

environmental, and sustainability performance as part of supplier evaluation. CSR factors include

labour practices, carbon footprint, use of sustainable materials, and compliance with ethical trading

standards.

Other options represent different procurement tools but are not additional evaluation factors:

TCO [Total Cost of Ownership]: A financial analysis tool, not a tender factor.

ITT [Invitation to Tender]: A formal document, not a factor.

PQQ [Pre-Qualification Questionnaire]: Used for initial supplier screening, not tender evaluation.

Integrating CSR into tenders reflects the wider move towards responsible procurement. It ensures

suppliers align with the buyer’s values and long-term risk management priorities.

[Ref: CIPS L5M6 Study Guide, p.39 – CSR considerations in tenders]

Direct costs are those directly attributable to the production of goods or services. For BikeFace, raw

materials such as rubber (used in tyres) and labour (workers assembling bicycles) are direct costs

because they contribute directly to finished products. By contrast, advertising spend and IT systems

are indirect costs as they support operations but do not directly form part of the bicycle. Category

managers must distinguish between direct and indirect costs to design effective sourcing strategies.

Direct categories often warrant closer supplier collaboration and longer-term contracts due to their

critical role in production.

Reference: CIPS L5M6 Study Guide, p.83

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