CIPS L4M4 PRACTICE TEST
COMPLETE 60Q
Question 1: Which statement best describes sourcing in a procurement context?
Choices:
1) Paying invoices after goods are received 2) Negotiating only after a contract has been awarded 3) Managing only the storage of purchased inventory 4) Identifying and selecting external sources capable of meeting requirements Correct Answer: Identifying and selecting external sources capable of meeting requirements Explanation: Sourcing is the pre-contract activity of identifying and evaluating supply options and suppliers that can meet an organisation's requirements. Invoice processing, inventory management, and post-award negotiation are di�erent procurement or supply activities.Page 1
Question 2: A company transfers its payroll operation, previously performed by
employees, to a specialist external provider. What is this an example of?
Choices:
1) Outsourcing 2) Insourcing 3) Intracompany trading 4) Multiple sourcing
Correct Answer: Outsourcing
Explanation: Outsourcing occurs when an activity previously carried out internally is contracted to an external supplier. Insourcing brings activity back inside, while intracompany trading occurs between units within the same corporate group.Question 3: Which situation most strongly supports a MAKE decision rather than a BUY decision?
Choices:
1) Many capable suppliers can provide the item at lower total cost 2) The activity is a core capability that provides competitive advantage and requires tight control 3) The requirement is non-core and needs specialist technology the buyer lacks 4) Demand volumes are too small to justify internal production Correct Answer: The activity is a core capability that provides competitive advantage and requires tight control Explanation: A make decision is strongest when the activity is strategically core, di�erentiating, and requires close control. A competitive external market, specialist external capability, or uneconomic internal volumes generally strengthens the case to buy.Page 2
Question 4: Which feature is most characteristic of strategic sourcing?
Choices:
1) Automatic reordering without reviewing the market 2) Long-term analysis of important or high-risk requirements and supplier relationships 3) Routine low-risk purchases handled transactionally 4) Immediate spot buying based only on unit price Correct Answer: Long-term analysis of important or high-risk requirements and supplier relationships Explanation: Strategic sourcing is used for important, higher-risk or higher-value requirements and involves longer-term analysis, planning, total-cost thinking, and supplier relationship considerations. Routine transactions are more typical of tactical sourcing.Question 5: Which is a likely bene�t of outsourcing a non-core service to a capable specialist?
Choices:
1) Removal of the need to manage supplier performance 2) Access to specialist expertise without building the capability internally 3) Complete retention of operational control 4) Guaranteed elimination of all supplier risk Correct Answer: Access to specialist expertise without building the capability internally Explanation: Outsourcing can provide specialist skills, technology, economies of scale, or �exibility without the buyer creating those capabilities internally. It does not eliminate risk or the need for contract and supplier management, and it can reduce direct control.Page 3