CHARTERED INSTITUTE OF PROCUREMENT & SUPPLY

DIPLOMA IN PROCUREMENT AND SUPPLY

SUPPLIER RELATIONSHIPS
(L4M7)

MOCK EXAMINATION
Time Allowed: 1 HOUR 30 MINUTES
Instructions to Candidates

1. Answer all questions

2. ALL QUESTION CARRY ONE MARK EACH
3. Copying from others is not tolerated and constitutes a serious academic offense.

DO NOT WRITE ANYTHING ON THIS QUESTION PAPER NEITHER SHOULD

YOU MAKE ANY MARKS TO THE ANSWERS. PLEASE RETURN THIS
QUESTION PAPER TO THE INVIGILATOR IMMEDIATELY AFTER THIS
EXAMINATION

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1. Which of the following are correct statements for a joint venture and/or strategic alliance?
Select TWO that apply?
A. For a strategic alliance a new company is formed between the partners
B. A strategic alliance is managed by both partners
C. In a joint venture a new company is formed between partners
D. A joint venture is also known as vertical integration
E. A strategic alliance is permanent arrangement

2. Which of the following is a way of improving supplier commitment and loyalty?

A. Have a stand off approach to the relationship
B. Overpromising the supplier future work
C. Imposing excessive performance penalties
D. Providing guaranteed order levels

3. A software developer is seeking to develop a new fitness trends app, they are looking to
create a contract with the fitness expert to give advice on the changing fitness trends.
What agreement should the app developer aim to achieve?
A. Traditional contracting relationship
B. Cost-based relationship
C. Partnership relationship
D. Quality-based relationship

4. In Porter’s Five Forces model, suppliers are powerful in which of the following
situations? Select THREE that apply.
A. There are few substitutes products
B. The products are highly differentiated
C. There is potential for backward integration
D. The switching costs are high
E. The volume purchased is not important
F. The product is undifferentiated

5. Joseph works as a category manager for a large electrical supply company. His company is
one of the six electricity companies in the country. All have a high spend on the same
specifications cable. There are only five cable manufacturers capable of supplying the
cables. Joseph has established that all the suppliers use the same raw materials using the
same types of manufacturing lines. Prices tendered by all the suppliers are very similar.
After paying for the cable Joseph’s company spends an additional 25% on moving and
installing the cable. In order to enable Joseph to gain advantage over the other electricity
companies which type of supplier relationship should he adopt?
A. Partnership
B. Single-sourced
C. Closer tactical
D. Transactional

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6. Is it correct to suggest that the sole objective of partnership sourcing is to achieve the lowest
acquisition cost?
A. Yes, the concept of ‘lowest acquisition cost’ focuses on collaboration just like
partnership sourcing does
B. Yes because the concept of ‘lowest acquisition cost’ ignores the quoted prices and
focuses on long term cost factors
C. No, because partnership sourcing considers ‘lowest acquisition cost’ together with
aspects of supplier partnerships
D. No, partnership sourcing is not applicable in one-off capital purchases where the
concept of ‘lowest acquisition cost’ applies

7. Which of the following are considered as value adding-primary activities?

1. Inbound logistics
2. Firm infrastructure
3. Technology development
4. Marketing and sales

A. 2 and 4 only C. 3 and 4 only

B. 1 and 4 only D. 1 and 2 only

8. A national catering supplier are outsourcing their IT and HR requirements and only
negotiating their own contracts for food and logistic suppliers. They are looking at
partnership contracting arrangements with these suppliers, what is likely to be their driver
towards partnership sourcing?
A. Increased market presence
B. Contracting on core business
C. Reducing costs
D. Increasing supply base

9. In the purchasing portfolio matrix, routine items can be purchased from many established
suppliers and they would not halt production at a factory. Is this true or false?
A. False, the product is in a supply market which is highly complex and is low
importance
B. False, the product is in a supply market of low complexity and is of high importance
C. True, the product is in a supply market which is highly complex and is of high
importance
D. True, the product is in a supply market which is of low complexity and of lo
importance

10. A differentiation strategy is described as offering a specialised service in a niche market.

Is this true or false?
A. True, it narrows the competitive scope and differentiates
B. False, it broadens the competitive scope and differentiates
C. True, it increases the cost and narrows the market segment
D. False, it increases the cost and broadens the competitive scope

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11. In a STEEPLE framework, which of the following is an economic factor?

A. Unemployment rates
B. Demographics
C. Supply chain labour standards
D. Election results

12. What is the valid reason for terminating a commercial relationship?

A. Fulfilment of the contract
B. One late delivery
C. Other party seeks to trade with other parties alongside you
D. A change of management at the other party but no change to company ethos

13. Which of the following are typical drivers of partnership between the buyer and the
supplier? Select THREE that apply?
A. The buyer has a high spend with the supplier
B. There are many suppliers in the market
C. The product is critical for the buyer
D. The product is a commodity
E. The product is technically complex
F. The supplier provides the product to a buyer’s competitor

14. The purpose of supplier prequalification is to identify suppliers that have financial stability
to sustain continuous supply. Is this statement true?
A. Yes, because profitability ratios are used to determine the most suitable potential
supplier
B. Yes, although the sustainability of supply should be determined by considering
other factors
C. No, financial stability can be determined by accountants only
D. No, the most important aspect of determining supplier sustainability is by trial
orders

15. Which of the following relationship types are listed on the ‘relationship spectrum’?
1. Partnership
2. Contractual
3. Transactional
4. Conspiratorial

A. 2 and 3 only
B. 1 and 3 only
C. 1 and 2 only
D. 2 and 4 only

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16. Which of the following is an important step in partnership sourcing?
A. Selling the ideal to management
B. Ensuring the other party has as little margin as possible
C. Secretly formulate an exit strategy
D. Enforce and impose unrealistic KPIs

17. Which of the following are stages in team development? Select THREE that apply.
A. Norming
B. Achieving
C. Forming
D. Presenting
E. Mourning
F. Grieving

18. Which of the following would constitute a succession issue when terminating a
relationship?
A. Payment of old invoices
B. Deletion of old specifications
C. Continuity of supplies
D. Processing penalties

19. Andrew is a senior buyer on a project which is already substantially over the budget. The
current supplier has suggested the use of substitute material to deliver the project on budget.
The supplier performed rigorous tests and believes the substitute material is suitable for the
project. Andrew sent the proposal to the Head of Engineering for evaluation. He was
advised that currently the engineering is short of staff, so the use of substitute material
cannot be evaluated and commercial benefits were not a consideration for the engineering
team. Andrew is intending to share his finding with the Project manager and to ask for a
joint meeting with the Head of Engineering. Is this the right approach for Andrew to use?

A. No, the head of engineering already provided an answer hence the project manager
needs to accept overspend
B. No, it is not professional for Andrew to get the project manager involved
C. Yes, Andrew developed an option to deliver the project on budget and needs the
Project manger’s support to evaluate it
D. Yes, cost should be main consideration for the Head of Engineering

20. Which of the following is required to carry out value chain analysis?
A. Details of specifications available
B. Comprehensive technical and commercial information
C. Knowledge of supplier’s current customers
D. Estimation of asset costs of suppliers

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21. Which of the following statements refer to an agile organisation? Select TWO that apply.
A. Focus on short lead times by managing stock inventory using control measures
B. Managing stock inventory by focusing on responding to market demand
C. Developing supply chain partners with suppliers using relationship performance
measures
D. Developing supply networks to maximise new opportunities when market forces
require quick response
E. Their governance is based upon long-term business value and adaptation

22. What is a key driver for developing a partnership relationship?

A. Fast changing technology
B. Low risk supplies
C. Unrestricted market
D. Well understood services

23. Which of the following are long term benefits of early supplier involvement?
1. Joint research programmes
2. Better production quality
3. Lower development costs
4. Aligned technology strategies
5. Risk sharing between parties
6. Communication investment
A. 1, 3 and 5 only
B. 2, 4 and 5 only
C. 1, 4 and 5 only
D. 1, 2 and 6 only

24. A company purchases products from a supplier that falls in the ‘Strategic’ segment of the
supply positioning grid. They are drawing up a formal partnership agreement with the
supplier. The supplier views the company as ‘core’ to the business. What would be an
important clause to include in the agreement to help make sure the partnership worked in a
fully collaborative way?
A. Force majeure
B. Liquidated damages
C. Continuous improvement
D. Time of the essence

25. A buyer wants their organisation to conclude a partnership approach to sourcing a new
product. What would be an effective way to do this?
A. Present options for board approval
B. Audit the potential new supplier
C. Email all staff with the approach
D. Work with finance on cost savings

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26. A security company X has recently won a contract for guarding a school. Currently another
company Y provided the contract where the current guard has worked for years at this
school, Monday to Friday, 9am until 5pm, for 40 weeks of the year. What are the key legal
issues needs to be considered when the current relationship is terminated and the new
company takes over?
A. Intellectual property rights
B. Sustainability policies
C. Employment rights
D. Quality policies

27. Early supplier involvement has advantages which procurement should exploit as way of
adding value to the supply chain. Identify some of the potential advantages from the
following.
1. Exchange of information and knowledge
2. Access to technology ahead of competitors
3. Longer product development lead time
4. Heavy investment in inter-company communication
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 3 and 4 only
28. Supplier selection criteria are designed to ensure that all suppliers who quote or tender are
capable, suitable and acceptable. The difference between selection criteria and contract
award criteria is that selection criteria are primarily evaluative and they focus on the overall
supplier suitability even beyond the immediate requirement that is purchased. Which of the
following might be considered to be a selection criterion?
A. Supplier’s quoted pre-delivery prices
B. The supplier’s reputation for environmental policies
C. Supplier discounts offered in post tender negotiations
D. The supplier’s innovative proposal in the tender document

29. When using STEEPLE analysis framework, what considerations are likely to be evaluated
under the ‘Political’ factor?
1. Consumerism in supply chains
2. Grants and subsidies to the supply chains
3. Civil unrest and war in the supply chains
4. The wage rates in the supply chains
A. 1 and 2 only
B. 2 and 3 only
C. 3 and 4 only
D. 1 and 4 only

30. The only risk with the concept of ‘early supplier involvement’ is that procurement might
get ‘trapped’ with an incompatible supplier. Is this correct?

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 A. Yes, because the involved suppliers usually have more bargaining power than the
buyer
B. No, because the approach has other disadvantages including intellectual property
risks
C. Yes, because involving the suppliers early into the plans is a commitment by the
buyer to the suppliers.
D. No, the only disadvantage is the sharing of knowledge and information with the
suppliers
31. Which of the following would be the most likely driver for a manufacturing organisation
to consider partnership sourcing?
A. Increase in the supply base
B. Shorten product life cycle
C. Decrease unit cost
D. Create competitive relationships
32. In the stages of team development, which of the following occurs in the storming phase
with stakeholders?
A. Review and analysis of past performance
B. Testing boundaries and identifying roles
C. Identifying and selecting appropriate members of the team
D. All objectives are agreed, including team roles
33. A law firm is ending an agreement with a client they have represented for many years.
What is the most important legal consideration to be taken before terminating?
A. Employment rights
B. Confidentiality
C. Finance
D. Security
34. According to Porter’s value chain, procurement is …
A. A primary activity for adding value to the organisation
B. Involved in systems and assets planning, finance, quality control and management
C. Responsible for transforming inputs into finished goods
D. Able to add value by supporting primary value adding activities of an organisation
35. Based on your understanding of the supplier preferencing matrix, which of these makes a
customer unattractive to the seller? Select THREE that apply.
A. Reducing payment terms from 60 to 30 days
B. Increasing the lead time in placing orders
C. The buyer taking less risk in the contract
D. The buyer participating in protracted negotiations
E. Sellers ethical and unprofessional trading practices
F. Sellers environmental or unethical leadership
36. In a STEEPLE framework which of the following is a legal factor?
A. Changes in mobile technology
B. Sustainable sourcing
C. Tax policies
D. Consumer confidence

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37. Which of the following would be benefits of partnership sourcing? Select TWO that apply?
A. Inflation is reduced
B. Reduction in costs
C. Removes the need for contracts
D. Reduces stakeholder numbers
E. Continuity of supply
38. Which of the following is an advantage of early supplier involvement?
A. Supplier is responsible for all intellectual property risks
B. Large investment in supplier communications
C. Understanding of supplier capabilities
D. No need for supplier non-disclosure agreements
39. Which of the following are features of partnership sourcing compared with a traditional
adversarial relationship? Select TWO that apply.
A. Emphasis on short term relationship
B. Emphasis on long term relationship
C. Emphasis on inspection of incoming suppliers
D. Emphasis on quality with zero defects
E. Emphasis on the lowest price
40. Which of the following are advantages of partnering?
1. Supply chain consolidation
2. Continual improvement
3. Hard to displace
4. Prioritisation of transactions
A. 2 and 4 only
B. 1 and 2 only
C. 3 and 4 only
D. 1 and 4 only
41. In the purchasing portfolio matrix, a leverage product is one which is in a market where it
is easy to switch suppliers and the quality is standardised? Is this true or false?
A. False, the product is in a supply market which is highly complex and the product is
of low importance
B. False, the product is in a supply market which is highly complex and the product is
of high importance
C. True, the product is in a supply market which is of low complex and the product is
of high importance
D. True, the product is in a supply market which is of low complex and the product is
of low importance
42. A team has been created to develop a new product for a software company, the team have
lots of ideas but are yet to agree on a way forward. What stage of the team development
are they in?
A. Norming
B. Storming
C. Adjourning
D. Performing

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43. Which of the following is a characteristic of partnership sourcing?
A. Emphasis on mutual trust between purchaser and supplier
B. Emphasis on multiple sourcing
C. Emphasis on quality checking products by inspection delivery
D. Emphasis on unit price and looking at lowest cost
44. A furniture company is running a promotion. For one week they are offering customers a
free assembly of any flat pack furniture purchased. What would best describe the offer
being made to the customer?
A. Low cost
B. High quality
C. Added value
D. Discounted price
45. In the exploratory stage of the relationship development, capital purchases are made. Is this
true?
A. True, both parties invest in capital equipment at this stage
B. True, several capital purchases have been made at this stage
C. False, the specifications for capital equipment is made at this stage
D. False, commitment have not been established at this stage
46. Which of the following is an advantage of partnering to the buyer?
A. Access to economies of scale
B. Greater stability supply and supply prices
C. Adds competitive performance incentives
D. Allows focused investment of resources on the organisation’s core activities
47. A buyer is seeking to purchase in a new market, they phone a well-known market leader
for a quote so they can start working with them. Where in team development would you
place this?
A. Storming
B. Norming
C. Performing
D. Forming
48. A competitor develops an alternative type of vacuum cleaner to one produced by your
organisation. Is this an example of threat of substitutes, one of the five forces of competition
described by Michael Porter?
A. Yes, customers may switch to alternative products
B. Yes, there are no barriers to entry, it is an oligopoly
C. No, it does not serve the same purpose
D. No, it is threat from a new entrant to the market
49. Which of the following are typical examples of partnering between companies? Select
TWO that apply.
A. Sole trader
B. Limited company
C. Joint venture
D. Strategic alliance
E. Public limited company

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50. In the purchasing portfolio matrix, a bottleneck product is one which is purchased in a small
quantity but has the potential to halt production at a factory. Is this true?
A. True, the product is in a supply market which is highly complex and is of low
importance
B. True, the product is in a supply market which has low complex and is of high
importance
C. False, the product is in a supply market which is highly complex and is of high
importance
D. False, the product is in a supply market with low complex and is of low importance
51. Which of the following activities are like to be taken in Pareto analysis?
1. Focuses on items that will leverage on procurement’s time in order to add value
2. Identifies items into leverage and strategic, thus helping to prioritize
procurement activities
3. Separates items into critical few and trivial many to determine areas of higher
spend
4. Helps to determine buyer’s attractiveness to the supplier
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 2 and 4 only
52. John, a food buyer, wants to change bread contracts for a catering service. John confirms
with his existing supplier their contract will end on the 30th of August. The paperwork of
the new contract and cannot commence until the 5th of September. What termination issue
does john now have?
A. Continuity of supplies
B. Invalid contract
C. Cost pressure
D. Quality of supplies
53. Which of the following are likely to be barriers to ‘new entrants’ in Porter’s five forces
model?
1. Heavy capital investments
2. Buyers with great switching cost
3. Differentiation and brand loyalty
4. Standardisation and variety reduction
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 3 and 4 only
54. International company XYZ Ltd was trying to enter the Russian market, but without any
success. The main issue is that the Russian government supports local manufacturers. XYZ
Ltd has successful bid to acquire one of the Russian manufacturers. Which of the following
benefits will XYZ achieve with acquisition?
1. Accessing the restricted local market
2. Removing the government support for local manufacturers

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 3. Decreasing the competition between local manufacturers
4. Improving its knowledge of local market
A. 1 and 2 only
B. 3 and 4 only
C. 2 and 3 only
D. 1 and 4 only
55. What factors make the buyer more attractive to the supplier?
1. Where the brand profile is high
2. When the buyer negotiates longer credit terms
3. Where the buyer exercises a stringent code of conduct
4. When the buyer procedural in its systems
A. 1 and 2 only C. 2 and 3 only
B. 1 and 3 only D. 2 and 4 only
56. The Managing Director of XYZ Ltd has asked the Procurement Manager to support the
engineering team and ensure a new product design is suitable for volume manufacturing.
The Procurement Manager arranged a series of meetings with suppliers and its internal
developing team, the XYZ manufacturing department and research and development
department to get their feedback on the proposed design. What are the activities undertaken
by XYZ Ltd called?
1. Early supplier involvement
2. Benchmarking
3. Cross-organisational development
4. Subcontracting
A. 1 and 2 only
B. 3 and 4 only
C. 2 and 3 only
D. 1 and 3 only
57. A company’s analysis shows some of their product from a supplier fall into the ‘strategic’
segment of the supply positioning grid. They are meeting with the supplier with the
intention that they enter into a partnership. The supplier views the company as a ‘core’ to
their business. Which of the following would be the most important in determining that a
partnership agreement would be good for both companies?
A. They have a high spend with supplier
B. They have a low spend with the supplier
C. There are many suppliers in the market
D. Their products are technically simple
58. A hospital awarded a contract to an IT consultancy to build and maintain their payroll and
patient information systems. After a success implementation, problems started to appear
with poor maintenance and occurrence of information, and slow response times from the
supplier. After repeated problems, the decision to terminate the contract was agreed. Which
of the following would be the priority legal concern for hospital?
A. Employee rights C. Confidentiality agreement
B. Intellectual property rights D. Capital asset issues

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59. A low cost fashion retailer based in Europe is looking at adding value in their procurement
activities. The retailer buys clothing for resale with a very small profit margin applied,
relying on volume sales to make profit. Which of the following added-value approaches
will be the most critical for the procurement team of the retailer to focus on their supply
chain?
A. Price management
B. Quality enhancement
C. Improving time scales
D. Reduction of inventory
60. A confectionery company has a portfolio of different items to sell. The most popular
product is the Brownie cake, but they begun to trial sales of cereal bars, granola cereal and
chewing gum. As a high quality producer in a competitive market the company requires
effective supplier sourcing arrangements. Which of the following product lines would be
the most suitable for partnership sourcing?
A. Chocolate brownie
B. Chewing gum
C. Cereal bars
D. Granola cereal

-----The End-----

Page 13 of 13
 SUPPLIER RELATIONSHIPS

L4M6

Harvesthouse Consulting& Training South Africa Pty Ltd Web: www.harvesthouse.co.za

595 Thabo Sehume Street Email: [email protected]
Signal House Building Tel: 012 753 8007
Pretoria, Gauteng, South Africa 0002 Cell: 073 209 3309, 082 079 1866, 073 277 7489
Email: [email protected]
Tel: 012 753 8007
 QUESTIONS
1. There are several advantages for the business using an internal supplier. Select TWO answers.

A. As no money is changing hands the internal supplier may be less motivated to meet the required
performance standards.
B. When the product or service is created in-house, the internal supplier will have both fixed and
variable costs.
C. Improved quality control due to having a higher degree of control over the manufacturing
process.
D. Intellectual property (ID) is protected from passing to competitors.

2. There are several disadvantages of business using an external supplier. Select TWO answer.

A. Cost and risk of transportation.

B. Potential damage to the buyer’s reputation if the external supplier engages in unethical behaviour
such as the use of child labour.
C. An external supplier is often an expert in its field.
D. The external supplier may be more flexible to meet changing levels of demand.

3. Where does single sourced sit on the relationship spectrum?

A. At the competitive end.

B. At the collaborative end.
C. In the middle.

4. There are nine types of relationship that make up the relationship spectrum. As you move from
left to right on the spectrum the level of closeness and collaborations increases.

A. True.
B. False.

5. What type of relationship is highly characterised by “poor communication’’?

A. Adversarial relationships.
B. Arm’s- length relationships.
C. Partnership relationship.
D. Single-source relationship.

6. What type of relationship is highly characterized by ‘’ TUPE legislation’’?

A. Outsourced relationship.
B. Strategic alliance relationship.
C. Co-destiny relationships.
D. Partnership relationships.

Harvesthouse Consulting& Training South Africa Pty Ltd Web: www.harvesthouse.co.za

595 Thabo Sehume Street Email: [email protected]
Signal House Building Tel: 012 753 8007
Pretoria, Gauteng, South Africa 0002 Cell: 073 209 3309, 082 079 1866, 073 277 7489
Email: [email protected]
Tel: 012 753 8007
 7. __________ is a key model that buyers can use to support them in building effective selection and
qualification processes.

A. Kraljic matrix.
B. Pareto principles.
C. Carter’s 10c’s.
D. Relationship spectrum.

8. A process that involves the buyer reviewing the costs of a products or service throughout its life is
called …

A. Total cost of acquisitioning.

B. Whole life costing.
C. Open book costing.

9. What might be the reason for the termination of contract?

A. Poor performance.
B. The end of the contract.
C. Supply base rationalisation.

10. What are the benefits of supplier’s development for the buyer? (Select TWO).

A. It can reduce costs for a buyer and supplier.

B. Working together result in elimination of waste.
C. Win- lose situation.

11. Pareto analysis, also referred to as the 80/20 rule, applies not only to economics and its related
disciplines but also to much of the natural environment. What best outlines A items?

A. A items account for 80% of volume and 20% of costs.

B. items account for 80% of the costs and 20% of volume.
C. A items account for 80% of low cost and 20% of high volume.

12. What is the downside of Pareto principle?

A. It targets a buyers efforts in order to leverage better outcomes and add more value for leverage
better outcomes and add more value for the wider business.
B. It does not consider the impact of the categories or the market complexity.
C. It does provide strategic recommendations.

Harvesthouse Consulting& Training South Africa Pty Ltd Web: www.harvesthouse.co.za

595 Thabo Sehume Street Email: [email protected]
Signal House Building Tel: 012 753 8007
Pretoria, Gauteng, South Africa 0002 Cell: 073 209 3309, 082 079 1866, 073 277 7489
Email: [email protected]
Tel: 012 753 8007
 13. Which of the following well explains the two categories of Kraljic matrix?

A. Non-critical Low profit impact, low supply risk.

B. Bottleneck Low profit impact, high supply risk
C. Non- critical High profit impact , low
D. Bottleneck Transactional supply risk
E. A and B High profit impact ,high supply
F. C and D

14. Use of the Kraljic model to segment the products and services that an organisation procures has
a number of benefits. Select TWO answers.

A. The model is simple to understand and apply.

B. Supply markets complex.
C. It can be applied across all industries and the company types.
D. Overtime there likely to be changes in the market place.

15. There are four options for how a supplier might view a buyer. Which of quadrant is best for the
buying organisation to be in?

A. Exploitable.
B. Core.
C. Development.

16. Which of the following would limit the buyer’s potential to take advantages from brand entrants
to a markets? If the buyer sets minimum requirement relating to:

A. Employee qualifications.
B. Insurance provision.
C. Profit history.
D. Technical capability.

17. An engineering company (ENGO) is a becoming concerned by reducing number of its potential
suppliers of components of XZZZ, which is vital to manufacture of its leading products. Over the
years a number of suppliers have merged and some have exited the market. Which of the following
actions might open up new suppliers to ENGCO through substitute products?

A. Change the specification.

B. Ease the commercial terms.
C. Shorter the supply chain.
D. Relax quality assurance.

Harvesthouse Consulting& Training South Africa Pty Ltd Web: www.harvesthouse.co.za

595 Thabo Sehume Street Email: [email protected]
Signal House Building Tel: 012 753 8007
Pretoria, Gauteng, South Africa 0002 Cell: 073 209 3309, 082 079 1866, 073 277 7489
Email: [email protected]
Tel: 012 753 8007
 19. A leading pharmaceutical (PharmaCo) is concerned about the impact of market changes on its
product portfolio. Following a recent review it has highlighted both the tightening regulatory regime
around customer potential and exchange rate volatility as two key threats the factors of most
concern to PharmaCo are …….?

A. Legislative and economic.

B. Political and environment.
C. Economic and political
D. Environmental and legislation.

20. Auto Group (AG) is an automotive manufacture. It is an established business with a strong
market share in its chosen market, providing vehicles in the mid-range quality segment.AG has
decided to launch a new low- spec vehicles range in the economy segment .Its strategy is to price
low, which it can do because it can produce the vehicles relatively cheap due to its previous
investments in technology. Its source of competitive advantages is based on which recognized
approach?

A. Product differentiation.
B. Cost leadership.
C. Brand differentiation.
D. Cost reduction.

21. A measure of the change in demand for a product or service in relation to change in its price.

A. Price elasticity.
B. Price elastic.
C. Price inelastic.

22. What best defines the Backward integration?

A. A situation where the being organisation purchases one of its supplier of raw materials.
B. A situation where the supplier purchases one its buying organisation.
C. None of the above.

23. The rise and fall over-time of output in an economy as measured by Gross domestic product is
called….

A. Business cycle.
B. Product cycle.
C. Procurement cycle.

Harvesthouse Consulting& Training South Africa Pty Ltd Web: www.harvesthouse.co.za

595 Thabo Sehume Street Email: [email protected]
Signal House Building Tel: 012 753 8007
Pretoria, Gauteng, South Africa 0002 Cell: 073 209 3309, 082 079 1866, 073 277 7489
Email: [email protected]
Tel: 012 753 8007
 24. Which of the following id the sources of added value. Select FOUR answers.

A. Pricing and cost management.

B. Improving quality.
C. Timescale.
D. Quantities and place consideration.
E. Relationship with suppliers.

25. What is open book costing?

A. Where the supplier allows the buyer access to its finances so the buyer knows what the cost are.
B. Where the supplier mutually allows the buyer access to its finances so the buyers knows what the
costs are.

26. A situation where a supplier is responsible for the amount of stock that the buyer has is called
…..

A. Vendor managed inventories.

B. Consignment stock.

27. A stakeholder that has a strong interest in a company’s activities. This is due to its contractual or
commercial relationship with the company is called …..

A. External stakeholder.
B. Commercial stakeholder.
C. Internal stakeholder.

28. The most advantageous combination of price and quality that makes a product or service fit for
purpose and will achieve the buyers required outcomes is called ‘’value for money’. Select THREE
E’s that are used to describe (VFM)

A. Economy.
B. Equity.
C. Efficiency.
D. Effectiveness.

29. In a recently created team, people start to push against the established boundaries and there is a
conflict between team members’ working styles causing some people to feel frustrated. This team is
at which stage of its development.

A. Forming.
B. Norming.
C. Performing.
D. Storming.

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 30. Which of the following are most typically used between stakeholders in respect of IPR?

A. Non-disclosure agreement.
B. Exclusion clauses.
C. Patent terms.
D. Secrecy Act conditions.

31. Risk management in procurement and supply fundamentally focuses on understanding which of
the following? Select TWO answers.

A. Security.
B. Reward.
C. Probability.
D. Impact.

32. A procurement officer is creating award criteria for competitive tender and has decided to
evaluate suppliers based on price and the supplier’s method statement for delivering the
specification. Is this appropriate?

A. Yes, because a method statement is a requirement in all tenders.

B. No, because there must be more than two evaluation criteria.

C. No, because method statements are not easy to evaluate.
D. Yes, because these both relate directly to the execution of the contract.

33. Effective cost modelling involves which of the following? Select THREE that apply.

A. Supplier negotiation.
B. Continuity planning.
C. Differential pricing.
E. Data analysis.
F. Identity drivers.

34. Which of the following are recognised conflict resolution approaches when dealing with key
internal stakeholders, where a resolution must be agreed? Select TWO that apply.

A. Avoiding.
B. Compromising.
C. Accommodating.
D. Maintaining.
E. Defending.

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 35. What method of communication should the team have adopted with the employees, based on
their stakeholder categorization?

A. Minimal effort.
B. Keep informed.
C. Keep satisfied.

36. When the team was working together to identify appropriate suppliers, what stage of team
development would this have been?

A. Forming.
B. Storming.
C. Performing.

37. When the team members were giving suggestions about how to proceed, what types of
behaviour is that?

A. Competitive and avoidant.

B. Competitive and accommodating.
C. Compromising.

38. What benefit did early supplier engagement bring to the utilities organisation?

A. Allowed the suppliers to see where they would be working.

B. Allowed the suppliers to see what facilitator were available.
C. Allowed the suppliers to suggest improvement and efficiencies.

39. A process that buyers use to understand all of the costs that make up a supplier’s price .The
model is also used to understand how the cost is broken down across the production of product or
service.

A. Whole life costing.

B. Open book costing.
C. Activity based costing.
D. Cost modelling.

40. Triangulation is a statistical concept based on understanding whether data is valid or not by
reviewing information from multiple data sources. Data is considered to be valid if is verified by two
or more reliable information.

A. True.
B. False.

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 41. Price Fluctuations can have a big impact on an organisation, particularly its profitability.
Community products such as oil, grain and precious metals are not at risk from price increased.
Select THREE reasons that causes price fluctuations?

A. Scarcity of the product.

B. Increase in import duties/ Exchange rates.
C. Political instability.
D. Economy.

42. Buying a quantity greater than the volume currently required in order to avoid future price
increases is called?

A. Forward buying.
B. Hedging.

43. Measurements of non- numerical data that tends to be based on thoughts and feelings, for
example, how satisfied the end customer is with the product manufactured by the supplier and
buyer is called?

A. Qualitative.
B. Quantitative.

44. A commitment between a buying organization and a supplier entering into a long-term,
collaborative relationship based on trust and mutually agreed objectives and goals for the benefit of
both parties.

A. Partnership.
B. Sole sourcing.
C. Style sourcing.

45. The buyer and supplier set up a partnership to improve an aspect of their relationship, such as
delivery over the next year. Procurement is involved from the buyer side and operations from the
supplier side. (This is a practical example of what type of partnership).

A. Type 1.
B. Type 2.
C. Type 3.

46. The buyer and the supplier now have additional integrated systems and have developed just in
time delivery and stock holding. The supplier is viewed and treated as a key partner and is involved
in product development. (What is this type of partnership?)

A. Type 1.
B. Type 2.
C. Type 3.

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 47. Identify four drivers for partnership sourcing.

A. To generate synergies.
B. Product life cycles have reduced in recent decades.
C. Need to improve performances.
D. To reduce stockholding.
E. Partnership can become locked in.

48. The relationship spectrum identifies a range of possible relationships an organisation may have
with its suppliers.
A. Aggressive and Arm’s length
B. Adversarial and Arm’s length
C. Transactional and adversarial
D. Win-lose and transactional

49. The relationship spectrum identifies a range of possible relationships or organisation may have
with its suppliers. The closest type of relationships is
A. Strategic alliance
B. Partnership
C. Outsourced
D. Co-destiny
E. Ownership

50. Make or buy decision is the action of choosing whether to manufacture a product or provide a
service in-house or purchase it from an external supplier.
A. True
B. False

51. Internal supplier is a part of the same company as its customer. It provides the products or
services that co-workers within the organisation need in order to do their jobs.
A. True
B. False

52. Due to the complexity of the market which of the following tool may be used to access the type
of relationship that is required.
A. Supplier Audit
B. Value stream mapping
C. Kraljic matrix
D. Boston matrix

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 53. The four quadrants of the Kraljic are:
A. Strategic, Operational, Transaction and Leverage
B. Strategic, Bottleneck, Non-critical and Leverage
C. Strategic, Critical, Non-critical and Route
D. Strategic, Core, Leverage and Routine

54. The axes of the Kraljic matrix are:

A. Importance of item and complexity of market.
B. Purchase spend and market structure
C. Purchase spend and risk
D. Importance of item and risk

55. Which of the following is a supplier appraisal model:

A. Pareto ABC
B. Kraljic 4 quadrants
C. Carter 10c’s
D. Beckz BACK

56. The trend of cost per unit being reduced as output increases due to factors such as increased
bargaining power and the cost of tooling being shared between larger numbers of units is called?
A. Total cost of ownership
B. Economies of scale
C. Target

57. Pareto principle is also called the 80/20 rule; this states that 80% of the inputs come from 20% of
the output.
A. True
B. False

58. TUPE legislation stands for transfer of undertakings (Protection of employment). TUPE
regulations protect the rights of the employees where work they were employed to undertake is
transferred to a new business.
A. True
B. False

59. The measurable values that enable a buyer to track how well a supplier is performing are called?
(Select three).
A. CSF
B. KPI
C. SLA
D. Contract

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 60. An RFI might be used if a buyer is unsure about the number of suppliers in the market place or
whether there are a large number in the market.
A. True
B. False

61. The process that involves the buyer reviewing the costs of product or service throughout its life
is called?
A. Whole life costing
B. Total life cycle costing
C. Total cost of ownership
D. All of the above

62. Risk management is process involving risk identification, assessment and mitigation.
A. True
B. False

63. Exiting a relationship with a supplier that has been found to have problem in compliance with a
supplier ethical code should be.
A. Immediate of an ethical problem is found
B. A last resort
C. A soon as a new supplier can be found
D. Never
E. As soon as the required termination clause allows.

64. Supplier development can result in a number of benefits for both the buyer and supplier (select
two)
A. It can reduce cost for a buyer and supplier
B. Working together can result in lock-in
C. Long-term security of business can serve to increase the motivation of a supplier, which could lead
to innovative benefits.

65. Portfolio analysis is used to meet procurement objectives. (select three that apply)
A. Value-adding relationship
B. ABC analysis
C. Kraljic model
D. Whole life costing

66. Pareto analysis and ABC analysis are based on the 80/20 rule.
A. True
B. False

67. The Kraljic model cannot be used to develop procurement strategies.

A. True
B. False

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 68. An electronic procurement process that involves suppliers competing against each other by
increasing their prices. The supplier that submits the highest price will win the auction.
A. True
B. False

69. When a group of separate organisations come together to procure products or services. This
allows them to leverage their buying power. This is called what?
A. Partnership procurement
B. Consortia procurement
C. Multiple procurement

70. Market management matrix model helps a buyer to understand where its ______________ are
and how it is viewed.
A. Requirements and market
B. Suppliers and buyers
C. Competitors and buyers

71. The management matrix model combines __________ and the ____________.
A. Kraljic model and supplier preferencing model
B. Cox model and Kraljic model
C. Kraljic model and relationship spectrum

72. The insight provided by the position models should be used to develop ___________.
A. Supplier relationship management action plans
B. Marketing action plans
C. Supplier preferencing model

73. Porter (1985) stated that there were two elements to selecting a competitive strategy (select
two).
A. The attractiveness of industries for long-term profit
B. Factors that determine relative competitive position within an industry
C. Putting an organisation in a strong position against its competition

74. Porter stated that there were three generic strategies for competitive advantage (select three).
A. Cost leadership
B. Differentiation
C. Focus
D. Growth
E. Pre-emptive

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 75. In addition to the three generic strategies outlined by Porter there are other elements of a
business that can develop a company’s competitive advantage. (Select three)
A. Technology
B. Capital
C. Natural resources
D. Tacit knowledge

76. The value chain is made up of ____________ activities and _____________ activities.
A. Primary and secondary activities
B. Corporate activities and business activities

77. The procurement department is a ____________ activity.

A. Primary
B. Support

78. Price elasticity is a measure of a change in price for a product.

A. True
B. False

79. In monopolistic, the supplier and buyer power is characterised by?

A. Very high supplier power and buyer power very high.
B. Very high supplier power and buyer power very low.

80. In imperfect competition, the supplier power and buyer power?

A. Weakening and strengthening
B. Very high supplier power and buyer power very high

81. A situation were the buying organisation purchases one of its suppliers of raw materials is called?
A. Backward integration
B. Forward integration

82. Ethical sourcing ensuring that products are obtained in a responsible and sustainable way that
demonstrates respect for the people who produce them and for the environment.
A. True
B. False

83. Return on relationship investment (RORI) is the financial benefits for a buyer of establishing,
developing and maintaining buyer-supplier relationships.
A. True
B. False

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 84. In terms of cost management, procurement can add value via _______________
A. Careful specification development
B. Competitive tender
C. E-sourcing
D. Negotiations
E. Contract management
F. All of the above

85. There are a number of reasons to hold stock. (select three)

A. To ensure continuity of supply
B. Reduce long-lead time
C. Protect against price fluctuation
D. Capital cost
E. Opportunity costs

86. When a stock is located at the buyer’s site it’s called?

A. Vendor managed inventories (VMI)
B. Consignment stock

87. An agile organisation is one that has systems and processes that enables it to react quickly to
changes in its environment
A. True
B. False

88. Suppliers would be classified as what type of stakeholders?

A. Key
B. Connected
C. Internal
D. Secondary
E. Primary

89. The first stage in stakeholder management is

A. Establish stakeholder needs
B. Engagement
C. Identify stakeholders
D. Map stakeholders

90. Both ______________ and pre-qualification questionnaires (PQQs) can be used for the selection
stage of a tender process to ensure that short-listed bidders meet the requirements of the buying
organisation.
A. RFIs
B. RFQs
C. RFP

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 91. Key stakeholders should be involved when developing the evaluation and award criteria. This is
the case in both the public and private sectors and will ensure that procurement achieves
_________
A. Competitive advantage
B. Value for money
C. Low cost strategy

92. A stakeholder categorised as keep satisfied in the Mendelow’s matrix has got the following.
A. High power, low interest
B. Low power, high interest
C. Low power, low interest

93. Conflict is a disagreement or difference of opinion s or principles

A. True
B. False

94. There are five methods that can be used to cope with conflict situations.
A. Avoiding
B. Competing
C. Accommodating
D. Collaborating
E. Compromising
F. All of the above

95. There are four stages of teem development according to Tuckman’s (1965). Which is the first
stage?
A. Forming
B. Storming
C. Norming
D. Performing

96. There are a number of benefits for a buying organisation if it involves its suppliers in the ESI
programmes. (Select two)
A. The overall quality of the product can be improved.
B. Product development costs can be reduced
C. There are often issues with communication

97. The risks of knowledge transfer are? (Select two)

A. Cost savings
B. Intellectual property rights
C. Knowledge disclosure bears

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 98. The two major methods of ADR are:
A. Mediation and Conciliation
B. Mediation and negotiation
C. Arbitration and negotiation
D. Adjudication and conciliation

99. Select three drivers that a buyer or supplier may have for entering into a partnership
relationships. (Select three)
A. Working together
B. Product life cycles reduced
C. The desire to reduce stock holding
D. Less contractual

100. Sustainable procurement is defined as “Procurement that has the most positive ____________
social and economic impacts on a whole life basis “. Sustainable Procurement ISO 20400 2017
A. Financial
B. Responsible
C. Ethical
d. Environmental

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 SUPPLIER
RELATIONSHIPS
L4M6
‘NO ONE OF US IS AS SMART AS ALL OF US’
1
Which of the following are correct statements for a joint venture and/or
strategic alliance? Select TWO that apply
A. For a strategic alliance a new company is formed between the partners
B. A strategic alliance is managed by both partners
C. In a joint venture a new company is formed between partners
D. A joint venture is also known as vertical integration
E. A strategic alliance is permanent arrangement

2
Which of the following is a way of improving supplier commitment and
loyalty?
A. Have a stand off approach to the relationship
B. Overpromising the supplier future work
C. Imposing excessive performance penalties
D. Providing guaranteed order levels

3
A software developer is seeking to develop a new fitness trends app, they
are looking to create a contract with the fitness expert to give advice on the
changing fitness trends. What agreement should the app developer aim to
achieve?
A. Traditional contracting relationship
B. Cost-based relationship
C. Partnership relationship
D. Quality-based relationship

4
In Porter’s five forces model, suppliers are powerful in which of the
following situations? Select THREE that apply.
A. There are few substitutes products
B. The products are highly differentiated
C. There is potential for backward integration
D. The switching costs are high
E. The volume purchased is not important
F. The product is undifferentiated

5
Joseph works as a category manager for a large electrical supply company.
His company is one of the six electricity companies in the country. All have
a high spend on the same specifications cable. There are only five cable
manufacturers capable of supplying the cables. Joseph has established
that all the suppliers use the same raw materials using the same types of
manufacturing lines. Prices tendered by all the suppliers are very similar.
After paying for the cable joseph’s company spends an additional 25% on
moving and installing the cable. In order to enable joseph to gain
advantage over the other electricity companies which type of supplier
relationship should he adopt?
A. Partnership
B. Single-sourced
6

C. Closer tactical
Is it correct to suggest that the sole objective of partnership sourcing is to
achieve the lowest acquisition cost?
A. Yes, the concept of ‘lowest acquisition cost’ focuses on collaboration just
like partnership sourcing does
B. Yes because the concept of ‘lowest acquisition cost’ ignores the quoted
prices and focuses on long term cost factors
C. No, because partnership sourcing considers ‘lowest acquisition cost’
together with aspects of supplier partnerships
D. No, partnership sourcing is not applicable in one-off capital purchases
where the concept of ‘lowest acquisition cost’ applies
7
Which of the following are considered as value adding-primary activities?
1. Inbound logistics
2. Firm infrastructure
3. Technology development
4. Marketing and sales

A. 2 and 4 only
B. 1 and 4 only
C. 3 and 4 only
D. 1 and 2 only 8
A national catering supplier are outsourcing their IT and HR
requirements and only negotiating their own contracts for food
and logistic suppliers. They are looking at partnership
contracting arrangements with these suppliers, what is likely to
be their driver towards partnership sourcing?
A. Increased market presence
B. Contracting on core business
C. Reducing costs
D. Increasing supply base 9
In the purchasing portfolio matrix, routine items can be purchased from
many established suppliers and they would not halt production at a factory.
Is this true or false?
A. False, the product is in a supply market which is highly complex and is
low importance
B. False, the product is in a supply market of low complexity and is of high
importance
C. True, the product is in a supply market which is highly complex and is of
high importance
D. True, the product is in a supply market which is of low complexity and of
lo importance 10
A differentiation strategy is described as offering a specialised service in a
niche market. Is this true or false?
A. True, it narrows the competitive scope and differentiates
B. False, it broadens the competitive scope and differentiates
C. True, it increases the cost and narrows the market segment
D. False, it increases the cost and broadens the competitive scope

11
In a STEEPLE framework, which of the following is an economic factor?
A. Unemployment rates
B. Demographics
C. Supply chain labour standards
D. Election results

12
What is the valid reason for terminating a commercial relationship?
A. Fulfilment of the contract
B. One late delivery
C. Other party seeks to trade with other parties alongside you
D. A change of management at the other party but no change to company
ethos

13
Which of the following are typical drivers of partnership between the buyer
and the supplier? Select THREE that apply
A. The buyer has a high spend with the supplier
B. There are many suppliers in the market
C. The product is critical for the buyer
D. The product is a commodity
E. The product is technically complex
F. The supplier provides the product to a buyer’s competitor

14
The purpose of supplier prequalification is to identify suppliers that have
financial stability to sustain continuous supply. Is this statement true?
A. Yes, because profitability ratios are used to determine the most suitable
potential supplier
B. Yes, although the sustainability of supply should be determined by
considering other factors
C. No, financial stability can be determined by accountants only
D. No, the most important aspect of determining supplier sustainability is by
trial orders

15
Which of the following relationship types are listed on the ‘relationship
spectrum’ ?
1. Partnership
2. Contractual
3. Transactional
4. Conspiratorial

A. 2 and 3 only
B. 1 and 3 only
C. 1 and 2 only 16

D. 2 and 4 only
Which of the following is an important step in partnership sourcing?
A. Selling the ideal to management
B. Ensuring the other party has as little margin as possible
C. Secretly formulate an exit strategy
D. Enforce and impose unrealistic KPIS

17
Which of the following are stages in team development? Select THREE that
apply.
A. Norming
B. Achieving
C. Forming
D. Presenting
E. Mourning
F. Grieving

18
Which of the following would constitute a succession issue when
terminating a relationship?
A. Payment of old invoices
B. Deletion of old specifications
C. Continuity of supplies
D. Processing penalties

19
Andrew is a senior buyer on a project which is already substantially over the budget. The
current supplier has suggested the use of substitute material to deliver the project on
budget. The supplier performed rigorous tests and believes the substitute material is
suitable for the project. Andrew sent the proposal to the head of engineering for evaluation.
He was advised that currently the engineering is short of staff, so the use of substitute
material cannot be evaluated and commercial benefits were not a consideration for the
engineering team. Andrew is intending to share his finding with the project manager and to
ask for a joint meeting with the head of engineering. Is this the right approach for Andrew
to use?
A. No, the head of engineering already provided an answer hence the project manager
needs to accept overspend
B. No, it is not professional for Andrew to get the project manager involved
C. Yes, Andrew developed an option to deliver the project on budget and needs the project
manger’s support to evaluate it 20

D. Yes, cost should be main consideration for the head of engineering

Which of the following is required to carry out value chain analysis?
A. Details of specifications available
B. Comprehensive technical and commercial information
C. Knowledge of supplier’s current customers
D. Estimation of asset costs of suppliers

21
Which of the following statements refer to an agile organisation? Select
TWO that apply.
A. Focus on short lead times by managing stock inventory using control
measures
B. Managing stock inventory by focusing on responding to market demand
C. Developing supply chain partners with suppliers using relationship
performance measures
D. Developing supply networks to maximise new opportunities when market
forces require quick response
E. Their governance is based upon long-term business value and
22

adaptation
What is a key driver for developing a partnership relationship ?
A. Fast changing technology
B. Low risk supplies
C. Unrestricted market
D. Well understood services

23
Which of the following are long term benefits of early supplier involvement?
1. Joint research programmes
2. Better production quality
3. Lower development costs
4. Aligned technology strategies
5. Risk sharing between parties
6. Communication investment
A. 1, 3 and 5 only
B. 2, 4 and 5 only
C. 1, 4 and 5 only
D. 1, 2 and 6 only 24
A company purchases products from a supplier that falls in the ‘strategic’
segment of the supply positioning grid. They are drawing up a formal
partnership agreement with the supplier. The supplier views the company
as ‘core’ to the business. What would be an important clause to include in
the agreement to help make sure the partnership worked in a fully
collaborative way?
A. Force majeure
B. B. Liquidated damages
C. Continuous improvement
D. Time of the essence
25
A buyer wants their organisation to conclude a partnership approach to
sourcing a new product. What would be an effective way to do this?
A. Present options for board approval
B. Audit the potential new supplier
C. Email all staff with the approach
D. Work with finance on cost savings

26
A security company X has recently won a contract for guarding a school.
Currently another company Y provided the contract where the current guard
has worked for years at this school, Monday to Friday, 9am until 5pm, for
40 weeks of the year. What are the key legal issues needs to be considered
when the current relationship is terminated and the new company takes
over?
A. Intellectual property rights
B. Sustainability policies
C. Employment rights
D. Quality policies
27
Early supplier involvement has advantages which procurement should
exploit as way of adding value to the supply chain. Identify some of the
potential advantages from the following.
1. Exchange of information and knowledge
2. Access to technology ahead of competitors
3. Longer product development lead time
4. Heavy investment in inter-company communication
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
28
D. 3 and 4 only
Supplier selection criteria are designed to ensure that all suppliers who
quote or tender are capable, suitable and acceptable. The difference
between selection criteria and contract award criteria is that selection
criteria are primarily evaluative and they focus on the overall supplier
suitability even beyond the immediate requirement that is purchased. Which
of the following might be considered to be a selection criterion?
A. Supplier’s quoted pre-delivery prices
B. The supplier’s reputation for environmental policies
C. Supplier discounts offered in post tender negotiations
D. The supplier’s innovative proposal in the tender document
29
When using STEEPLE analysis framework, what considerations are likely
to be evaluated under the ‘political’ factor?
1. Consumerism in supply chains
2. Grants and subsidies to the supply chains
3. Civil unrest and war in the supply chains
4. The wage rates in the supply chains
A. 1 and 2 only
B. 2 and 3 only
C. 3 and 4 only
D. 1 and 4 only 30
The only risk with the concept of ‘early supplier involvement’ is that
procurement might get ‘trapped’ with an incompatible supplier. Is this
correct?
A. Yes, because the involved suppliers usually have more bargaining power
than the buyer
B. No, because the approach has other disadvantages including intellectual
property risks
C. Yes, because involving the suppliers early into the plans is a
commitment by the buyer to the suppliers.
D. No, the only disadvantage is the sharing of knowledge and information
with the suppliers 31
Which of the following would be the most likely driver for a manufacturing
organisation to consider partnership sourcing?
A. Increase in the supply base
B. Shorten product life cycle Confirm between B and C

C. Decrease unit cost

D. Create competitive relationships

32
In the stages of team development, which of the following occurs in the
storming phase with stakeholders?
A. Review and analysis of past performance
B. Testing boundaries and identifying roles
C. Identifying and selecting appropriate members of the team
D. All objectives are agreed, including team roles

33
A law firm is ending an agreement with a client they have represented for
many years. What is the most important legal consideration to be taken
before terminating?
A. Employment rights
B. Confidentiality
C. Finance
D. Security

34
According to porter’s value chain, procurement is …
A. A primary activity for adding value to the organisation
B. Involved in systems and assets planning, finance, quality control and
management
C. Responsible for transforming inputs into finished goods
D. Able to add value by supporting primary value adding activities of an
organisation

35
Based on your understanding of the supplier preferencing matrix, which of
these makes a customer unattractive to the seller? Select THREE that apply.
A. Reducing payment terms from 60 to 30 days
B. Increasing the lead time in placing orders
C. The buyer taking less risk in the contract
D. The buyer participating in protracted negotiations
E. Sellers ethical and unprofessional trading practices
F. Sellers environmental or unethical leadership

36
In a STEEPLE framework which of the following is a legal factor?
A. Changes in mobile technology
B. Sustainable sourcing
C. Tax policies
D. Consumer confidence

37
Which of the following would be benefits of partnership sourcing? Select
TWO that apply
A. Inflation is reduced
B. Reduction in costs
C. Removes the need for contracts
D. Reduces stakeholder numbers
E. Continuity of supply

38
Which of the following is an advantage of early supplier involvement?
A. Supplier is responsible for all intellectual property risks
B. Large investment in supplier communications
C. Understanding of supplier capabilities
D. No need for supplier non-disclosure agreements

39
Which of the following are features of partnership sourcing compared with a
traditional adversarial relationship? Select TWO that apply.
A. Emphasis on short term relationship
B. Emphasis on long term relationship
C. Emphasis on inspection of incoming suppliers
D. Emphasis on quality with zero defects
E. Emphasis on the lowest price

40
Which of the following are advantages of partnering?
1. Supply chain consolidation
2. Continual improvement
3. Hard to displace
4. Prioritisation of transactions
A. 2 and 4 only
B. 1 and 2 only
C. 3 and 4 only
D. 1 and 4 only
41
In the purchasing portfolio matrix, a leverage product is one which is in a
market where it is easy to switch suppliers and the quality is standardized.
Is this true or false?
A. False, the product is in a supply market which is highly complex and the
product is of low importance
B. False, the product is in a supply market which is highly complex and the
product is of high importance
C. True, the product is in a supply market which is of low complex and the
product is of high importance
D. True, the product is in a supply market which is of low complex and the
product is of low importance 42
A team has been created to develop a new product for a software company,
the team have lots of ideas but are yet to agree on a way forward. What
stage of the team development are they in?
A. Norming
B. Storming
C. Adjourning
D. Performing

43
Which of the following is a characteristic of partnership sourcing?
A. Emphasis on mutual trust between purchaser and supplier
B. Emphasis on multiple sourcing
C. Emphasis on quality checking products by inspection delivery
D. Emphasis on unit price and looking at lowest cost

44
A furniture company is running a promotion. For one week they are offering
customers a free assembly of any flat pack furniture purchased. What
would best describe the offer being made to the customer?
A. Low cost
B. High quality
C. Added value
D. Discounted price

45
In the exploratory stage of the relationship development, capital purchases
are made. Is this true?
A. True, both parties invest in capital equipment at this stage
B. True, several capital purchases have been made at this stage
C. False, the specifications for capital equipment is made at this stage
D. False, commitment have not been established at this stage

46
Which of the following is an advantage of partnering to the buyer?
• A. Access to economies of scale
• B. Greater stability supply and supply prices
• C. Adds competitive performance incentives
• D. Allows focused investment of resources on the organisation’s core
activities

47
A buyer is seeking to purchase in a new market, they phone a well-known
market leader for a quote so they can start working with them. Where in
team development would you place this?
A. Storming
B. Norming
C. Performing
D. Forming

48
A competitor develops an alternative type of vacuum cleaner to one
produced by your organisation. Is this an example of threat of substitutes,
one of the five forces of competition described by Michael Porter?
A. Yes, customers may switch to alternative products
B. Yes, there are no barriers to entry, it is an oligopoly
C. No, it does not serve the same purpose
D. No, it is threat from a new entrant to the market

49
Which of the following are typical examples of partnering between
companies? Select TWO that apply.
A. Sole trader
B. Limited company
C. Joint venture
D. Strategic alliance
E. Public limited company

50
In the purchasing portfolio matrix, a bottleneck product is one which is
purchased in a small quantity but has the potential to halt production at a
factory. Is this true?
A. True, the product is in a supply market which is highly complex and is of
low importance
B. True, the product is in a supply market which has low complex and is of
high importance
C. False, the product is in a supply market which is highly complex and is of
high importance
D. False, the product is in a supply market with low complex and is of low
importance 51
Which of the following activities are like to be taken in Pareto analysis?
1. Focuses on items that will leverage on procurement’s time in order to
add value
2. Identifies items into leverage and strategic, thus helping to prioritize
procurement activities
3. Separates items into critical few and trivial many to determine areas of
higher spend
4. Helps to determine buyer’s attractiveness to the supplier
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only 52

D. 2 and 4 only
John, a food buyer, wants to change bread contracts for a catering service.
John confirms with his existing supplier their contract will end on the 30th of
august. The paperwork of the new contract and cannot commence until the
5th of September. What termination issue does john now have?
A. Continuity of supplies
B. Invalid contract
C. Cost pressure
D. Quality of supplies

53
Which of the following are likely to be barriers to ‘new entrants’ in porter’s
five forces model?
1. Heavy capital investments
2. Buyers with great switching cost
3. Differentiation and brand loyalty
4. Standardisation and variety reduction
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 3 and 4 only 54
International company XYZ ltd was trying to enter the Russian market, but without any
success. The main issue is that the Russian government supports local manufacturers.
XYZ ltd has successful bid to acquire one of the Russian manufacturers. Which of the
following benefits will XYZ achieve with acquisition?
1. Accessing the restricted local market
2. Removing the government support for local manufacturers
3. Decreasing the competition between local manufacturers
4. Improving its knowledge of local market
A. 1 and 2 only
B. 3 and 4 only
C. 2 and 3 only
D. 1 and 4 only
55
What factors make the buyer more attractive to the supplier?
1. Where the brand profile is high
2. When the buyer negotiates longer credit terms
3. Where the buyer exercises a stringent code of conduct
4. When the buyer procedural in its systems
A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 2 and 4 only
56
The managing director of XYZ ltd has asked the procurement manager to support the
engineering team and ensure a new product design is suitable for volume manufacturing.
The procurement manager arranged a series of meetings with suppliers and its internal
developing team, the XYZ manufacturing department and research and development
department to get their feedback on the proposed design. What are the activities
undertaken by XYZ ltd called?
1. Early supplier involvement
2. Benchmarking
3. Cross-organisational development
4. Subcontracting
A. 1 and 2 only
B. 3 and 4 only
57

C. 2 and 3 only
A company’s analysis shows some of their product from a supplier fall into
the ‘strategic’ segment of the supply positioning grid. They are meeting with
the supplier with the intention that they enter into a partnership. The
supplier views the company as a ‘core’ to their business. Which of the
following would be the most important in determining that a partnership
agreement would be good for both companies?
A. They have a high spend with supplier
B. They have a low spend with the supplier
C. There are many suppliers in the market
D. Their products are technically simple
58
A hospital awarded a contract to an IT consultancy to build and maintain
their payroll and patient information systems. After a success
implementation, problems started to appear with poor maintenance and
occurrence of information, and slow response times from the supplier. After
repeated problems, the decision to terminate the contract was agreed.
Which of the following would be the priority legal concern for hospital?
A. Employee rights
B. Intellectual property rights
C. Confidentiality agreement
D. Capital asset issues
59
A low cost fashion retailer based in Europe is looking at adding value in
their procurement activities. The retailer buys clothing for resale with a very
small profit margin applied, relying on volume sales to make profit. Which of
the following added-value approaches will be the most critical for the
procurement team of the retailer to focus on their supply chain?
A. Price management
B. Quality enhancement
C. Improving time scales
D. Reduction of inventory

60
A confectionery company has a portfolio of different items to sell. The most
popular product is the brownie cake, but they begun to trial sales of cereal
bars, granola cereal and chewing gum. As a high quality producer in a
competitive market the company requires effective supplier sourcing
arrangements. Which of the following product lines would be the most
suitable for partnership sourcing?
A. Chocolate brownie
B. Chewing gum
C. Cereal bars
D. Granola cereal
61
 ENRICHING PROCUREMENT MINDS

L4M6 REVISION QUESTIONS

SUPPLIER RELATIONSHIPS
Q1. Which of the following are the correct characteristics of an arm’s length relationship?
Select the TWO that apply?

a. High volumes of business

b. Parties are less dependent on one another
c. Considerations of collaborative working
d. Infrequent and short term interactions between the parties
e. Considerations of mutual needs between the parties

Q2. A buying organisation is looking to enter into a long-term partnership with one of its
suppliers to ensure its security of supply. It is important for the buyer to diligently assess the
supplier’s financial standing. Is this statement correct?

a. Yes, because supplier’s financial position is a legal requirement in every contract

b. No,

Q3. Which of the following is a benefit for the organisation of producing products and services
in-house?

a. Allows the organisation to leverage specialist expertise of the supplier

b. Materials are acquired at a lower cost from the supplier
c. Ensures ongoing collaborative relationship with the organisation’s providers
d. A greater control over the operation’s processes

Q4. The benefits of an organisation using an internal supplier are...

1. Prices paid to the supplier acts as a motivation tool to improve performance

2. Protection of intellectual property is assured
3. Improved quality control due to high process controls
 4. High degree of dependence on external parties

a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 3 and 4 only

Q5. Procurement need to take necessary measures to ensure that an internal supplier is
evaluated and managed as an external supplier. Is this statement correct?

a. No, internal supplier needs to be reviewed and managed only when necessary
b. Yes, reviewing and managing an internal supplier helps in effective benchmarking for
appropriate supplier selection
c. Yes, reviewing an internal supplier prevent and correct likelihood of any poor
performance that could negatively impact an organisation
d. No, only an external supplier need to be managed to identify poor performance

Q6. At which stage of the relationship lifecycle should a buyer focus mostly on monitoring the
supplier against clearly stated standards?

a. Onboarding
b. Supplier development
c. Mobilisation
d. Performance management

Q7. A relationship characterised by a high degree of trust between the parties and need for
mutually beneficial relationship relates to which of the following?

1. Transactional
2. Partnership
3. Arm’s length
4. Co-destiny
 a. 1 and 3 only
b. 3 and 4 only
c. 2 and 4 only
d. 1 and 2 only

Q8. A conflict resolution method where parties collaborate to identify a position that is
beneficial to both is known as...

a. Win-win
b. Win-lose
c. Lose-lose
d. Distributive

Q9. Which ONE of the following types of relationship with the supplying organisation is driven
by the need to reduce costs of staffing and overheads?

a. Arm’s length
b. Outsourcing
c. Transactional
d. Single-sourced

Q10. Which of the following are the actions that the supplying organisation may take when
dealing with a nuisance customer? Select the THREE that may apply.

a. Request large contract volumes to keep relationship going

b. Decide to stop dealing with the customer
c. Find opportunities to withdraw from the relationship
d. Provision of great customer service to reduce potential complaints
e. Going extra mile to win more business from the supplier
f. Raise prices to exploit the customer

Q11. Which of the following are the generic strategies that an organisation may use in achieving
competitive advantage?

1. Contingency planning
 2. Cost leadership
3. Root cause analysis
4. Differentiation

a. 1 and 2 only
b. 2 and 4 only
c. 2 and 3 only
d. 3 and 4 only

Q12. Which ONE of the following would a buyer want to exploit from a potential new entrant to
a market?

a. High switching cost

b. Smaller distribution network
c. Insurance provision
d. Economies of scale

Q13. Which of the following elements can help a business in achieving its competitive
advantage? Select the TWO that apply.

a. Effective human resourcing activities

b. Sharing commercially sensitive data with competitors
c. Re-engineering and streamlining business processes
d. Use of obsolete technological devices
e. Sourcing from a low cost country with geopolitical threats

Q14. An engineering company (EngCo) is becoming concerned by the reducing number of its
potential suppliers of components of X2ZZ, which is vital to the manufacture of its leading
products. Over the years several suppliers have merged and some have exited the market.
Which ONE of the following actions might open up new suppliers to EngCo through substitute
products?

a. Relax quality assurance

b. Shorten the supply chain
c. Change the specification
 d. Ease the commercial terms

Q15. Which of the following in the primary activities of the value chain model is concerned with
creating a high level of customer loyalty and improved brand?

a. Service
b. Inbound logistics
c. Procurement
d. Outbound logistics

Q16. Which of the following are the five rights of procurement that buyers need to take into
account when dealing with external suppliers? Select the THREE that apply.

a. Time
b. Competitors
c. Relationship
d. Contract
e. Price
f. Quality

Q17. A leading pharmaceutical company (PharmCo) is concerned about the impact of market
changes on its product portfolio. Following a recent review, it has highlighted both the
tightening regulatory regime around consumer protection and exchange rate volatility as he
two key threats. The factors of most concern to PharmCo are...

a. Political and environmental

b. Economic and political
c. Environmental and legislative
d. Legislative and economic

Q18. Which of the following forces are likely to impact on the intensity of the competition in
the market place?

1. Threats from new entrants

2. Legislation on international trade
 3. Number of competitors in industry
4. Supplier bargaining powers

a. 3 and 4 only
b. 1 and 3 only
c. 2 and 4 only
d. 2 and 3 only

Q19. A market dominated by few large suppliers with greater bargaining power is known as...

a. Oligopoly
b. Monopoly
c. Perfect competition
d. Monopolistic competition

Q20. Which ONE of the following is the appropriate approach for supplies which have high-cost
impact/low-risk impact characteristics?

a. Competitive tendering
b. Strategic alliance
c. Joint venture
d. Spot buying

Q21. Buyers have all the relevant technical expertise about the product that the organisation
needs to procure and how it needs to be manufactured. They use performance specification to
communicate the requirement to the potential supplier. Is this the correct approach?

a. Yes, performance specification will help reduce costs incurred by the organisation
b. Yes, performance specification will detail out all the input processes that the supplier
needs to follow
c. No, with performance specification the supplier will decide how the product is
manufactured
d. No, performance specification will limit the supplier’s innovative measures to product
manufacturing
Q22. A procurement officer is creating award criteria for a competitive tender and has decided
to evaluate suppliers based on price and the supplier’s method statement for delivering the
specification. is this appropriate?

a. Yes, because these both relate directly to the execution of the contract
b. No, because method statements are not easy to evaluate
c. No, because a method statement is a requirement in all tenders
d. Yes, because price is a requirement in all tenders

Q23. The process of supplier pre-qualification is always necessary in the procurement process.
Is this statement TRUE?

a. Yes, it helps the buyer to identify suitable suppliers to deliver the contract
b. No, supplier pre-qualification process is a cost burden and non-value adding activity
c. Yes, supplier pre-qualification process persuades suppliers to reduce costs of inputs
d. No, pre-qualifying supplier is only necessary when dealing with international suppliers

Q24. In which of the following circumstance will it not be suitable for the buyer competitive
bidding? Select the TWO that apply.

a. The items is of high and significant value

b. Price is not the only factor to consider
c. A large number of capable suppliers available
d. The time is sufficient for tendering process to be undertaken
e. Specification is more likely to change

Q25. Which of the following are the benefits of undertaking an effective stakeholder mapping
activity?

1. Identifies who needs to be closely involved in the processes

2. Determines the salaries that needs to be paid to each stakeholder
3. Identifies the extent to which a stakeholder group needs to be prioritised
4. Identifies who the company owners are and their levels of stake in the company
 a. 1 and 3 only
b. 2 and 4 only
c. 3 and 4 only
d. 1 and 2 only

Q26. It is important for all the stakeholders to be ‘kept informed’ of the decisions and actions
that the company has taken and implemented. Is this statement correct?

a. Yes, this will reduce the level of resistance that may impact on performance
b. No, there are stakeholder groups which have to be informed
c. Yes, it is a legal requirement to keep all stakeholders informed
d. No, only shareholders have to be informed of what decisions are taken

Q27. What are the characteristics of stakeholders that need to be kept satisfied at all times?

1. High power
2. Low power
3. Low level of interest
4. High level of interest

a. 1 and 2 only
b. 3 and 4 only
c. 1 and 3 only
d. 2 and 4 only

Q28. Which of the following may be the reason for stakeholders resisting a procurement
project? Select the TWO that apply.

a. Fear of uncertainties that may come with the project

b. The need to ensure price reduction in the project
c. Pressure to comply with legislation in all activities
d. Changes which may affect the current positions of employees
e. Tense competition as a result of competitors bidding for the project
Q29. A global financial services organisation (FSO) has decided to outsource a significant part of
its customer service operations. It has created a shortlist of four possible suppliers. The FSO has
a range of specific needs in respect of service delivery and each will need to be evaluated when
the final tenders are received. However, some of these needs are more important than others.
Which ONE of the following will enable FSO to undertake an effective evaluation of the final
bids from the potential suppliers?

a. Weighted criteria
b. Pre-qualification questionnaire
c. Request for information
d. Contract terms

Q30. Which conflict management style is used by a party who has a high concern for itself and
low concern for others?

a. Compromising
b. Avoiding
c. Collaborating
d. Competing

Q31. An organisation is undertaking a complex and a high risk activity. This activity requires a
wide range of expertise to be completed effectively. The project manager sets up a cross-
functional team which will be responsible for ensuring completion of the specified activity
before the specified deadline. Is this the right approach?

a. No, cross-functional teams delays decision making and will affect the project completion
date
b. Yes, cross-functional teams bring together various skills and competencies for effective
project completion
c. Yes, cross-functional teams reduces the need to outsource other skills from suppliers
d. No, cross-functional teams are only set-up where there is sufficient time to complete a
project

Q32. In a recently created team, people start to push against the established boundaries and
there is a conflict between team members’ working styles causing some people to feel
frustrated. The team is at which stage of its development?
 a. Storming
b. Forming
c. Norming
d. Performing

Q33. Which of the following are recognised conflict resolution approaches when dealing with
key internal stakeholders, where a resolution must be agreed? Select the TWO that apply.

a. avoiding
b. Maintaining
c. Compromising
d. Accommodating
e. Defending

Q34. Which of the following are likely to lead to a team dysfunction?

1. Poor communication
2. Constructive Conflict
3. Lack of clear roles and responsibilities
4. Reviews

a. 1 and 2 only
b. 2 and 4 only
c. 2 and 4 only
d. 1 and 3 only

Q35. A project team has recently been established and team performance is improving. Team
members are now working effectively together as a cohesive unit. The team has now reached
the ‘norming’ stage of team development. Is this statement TRUE?

a. Yes, it has taken a while and trust now has been established
b. No, this is the forming stage of team development
c. Yes, it takes the team time to learn the roles and the skills of others
d. No, this is the storming stage of team development
Q36. Which ONE of the following is a benefit that the organisation can achieve from developing
an accurate cost modelling?

a. Allows the buyer to understand the supplier’s pricing strategy

b. Allows the organisation to justify their international sourcing decision
c. Determines the quantity that an organisation requires to complete a particular project
d. Justify an organisation decision to forming a consortium with other competitor
organisations

Q37. Which ONE of the following is a disadvantage of early supplier involvement (ESI)?

a. Supplier provide technical expertise to ensure product innovation

b. Supplier may suggest low quality product which may not conform to requirement
c. Specification may be created around suppliers capabilities only therefore limiting
innovation
d. Suppliers may be willing to source materials from low cost country which affect product
quality

Q38. Risk management in procurement and supply fundamentally focuses on understanding

which of the following?

a. Reward
b. Security
c. Impact
d. Probability

a. 3 and 4 only
b. 1 and 2 only
c. 1 and 3 only
d. 2 and 4 only

Q39. Effective cost modelling involves which of the following? Select the THREE that apply.
 a. Data gathering
b. Supplier negotiation
c. Data analysis
d. Continuity planning
e. Differential pricing
f. Identify drivers

Q40. For a manufacturing organisation, significant added value can be achieved by maximising
supply chain relationships and in particular by reducing inventory holding quantities. Which
ONE of the following is an approach that such an organisation could use to achieve added value
in this way?

a. Contract management (CM)

b. Just in time (JIT)
c. Total quality management (TQM)
d. Value for money (VFM)

Q41. Accurate cost modelling is a useful aid for procurement professionals to gain a better
understanding of which of the following?

1. Potential cost savings

2. Cost targets
3. Cost sharing opportunities
4. Cost drivers

a. 1 and 2 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 4 only

Q42. There are times where buyer-supplier relationships may need to be terminated. Which of
the following are the reason for terminating a relationship between the buyer and the supplier?
Select the TWO that apply.

a. The need for continuity of supply

 b. Perfect completion of the contract
c. Breach of contact
d. Significant reduction of prices by the supplier
e. Collaborative working between the parties

Q43. Which of the following are recognised organisational culture types? Select the THREE that
apply.

a. Structure
b. Power
c. Role
d. Task
e. Knowledge
f. Sector

Q44. The buyer can undertake relationship termination with the supplier any time they wish to.
Is this statement correct?

a. Yes, it allows the buyer to move on to a more cost-effective alternative

b. No, the buyer must have en exit strategy to ensure minimum disruption to day-to-day
operation
c. No, relationship with supplier must not be terminated until the supplier has fulfilled its
obligations
d. Yes, this will put the supplier under pressure to perform its contract responsibilities

Q45. Which of the following are the main types of intellectual property rights (IPR) in
procurement and supply?

1. Patents
2. Assets
3. Trademarks
4. Strategies

a. 1 and 3 only
b. 2 and 4 only
 c. 3 and 4 only
d. 1 and 2 only

Q46. Partnership sourcing is highly effective and should be applied to all types of spend. Is this
statement TRUE?

a. No, it should be implemented on contracts of high value and low risk spend
b. Yes, all suppliers should be treated like partners as it is good ethical practice
c. Yes, it is well known to drive maximum value on all areas of spend
d. No, it will only apply to high value and high risk spend

Q47. Which of the following are characteristics of a partnership relationship that distinguish it
from other types of relationships?

1. Low level of trust and dependency

2. Joint product development
3. Defined end periods
4. Joint performance measurement

a. 2 and 4 only
b. 1 and 3 only
c. 3 and 4 only
d. 2 and 3 only

Q48. Partnerships often fail due to changes in the external market environment that impact on
both the procurement organisation and its chosen supplier. Which tools could be used to help
monitor such changes? Select the TWO that apply.

a. Porter’s five forces

b. STEEPLE
c. Pareto analysis
d. Whole life costing (WLC)
e. Early supplier involvement (ESI)
Q49. Which ONE of the following is a reason why a partnership relationship may fail?

a. Provision of effective feedback

b. Senior management support
c. Effective resource allocation
d. Poor communication

Q50. Poor communication in a partnership relationship is likely to result in which of the

following?

1. Lack of understanding of roles and responsibilities

2. Agreement on when to terminate the contract
3. Transparency and openness
4. Conflicts and misunderstandings

a. 1 and 4 only
b. 2 and 3 only
c. 1 and 2 only
d. 3 and 4 only

Q51. Which ONE of the following is a necessary course of action to be taken to ensure effective
top management support and trust?

a. Hiding some of the information which top management may not agree to
b. Taking out director to coffee to build rapport for easy influencing
c. Effective selling of idea to the organisation’s management
d. Forming a group to persuade the management to agree to the idea

Q52. Lack of trust between partners in a relationship may occur due to which ONE of the
following?

a. Failure to share the required level of information

b. Openness when addressing issues affecting relationship
c. Demonstrating integrity when dealing with the other party
d. Being guided by ethics in all business transactions and relationship
Q53. What is the name of the process where customers or suppliers are grouped according to
their characteristics to determine the suitable relationship to establish with them?

a. Relationship analysis
b. Segmentation
c. Prioritising
d. Group evaluating

Q54. Which model is used by the supplier organisation to determine the relationship it can
establish with the buyer?

a. Supplier preferencing model

b. Kraljic matrix
c. Pareto analysis
d. Market management matrix

Q55. In the value chain model, which of the following support activities is concerned with the
organisation acquiring effective workforce to deliver the activities and processes of the
organisation?

a. Outbound logistics
b. Procurement
c. Firm infrastructure
d. Human resource management

Q56. The threats from new entrants are likely to increase the intensity of market competition in
which of the following situations?

1. No barriers to entry
2. One supplier controlling sources of supply
3. Restrictive legislation
4. Low set-up costs
 a. 1 and 4 only
b. 3 and 4 only
c. 2 and 3 only
d. 1 and 2 only

Q57. Which ONE of the following is a characteristic of a perfect competition type of market?

a. Sole supplier dictating market prices

b. Large number of suppliers providing identical products
c. Fewer larger companies competing
d. Less knowledge about the market

Q58. Which of the following may be the examples of barriers to entry in a particular market?
Select the TWO that apply.

a. No set-up cost requires

b. Favourable legislative requirements
c. One supplier providing economies of scale
d. Low switching costs allowing buyer to move to alternative products
e. Access to distribution channels controlled by a single supplier

Q59. Bargaining power of buyers may be increased through which ONE of the following
strategy?

a. Coercing and threatening a supplier to cut down its prices

b. Increasing volumes of business to a monopoly supplier
c. Forming a consortium with other companies that have the same requirement
d. Only buying from small, incompetent and newly-formed companies

Q60. Which of the following is an output-focused specification that the buyer can use to
communicate its requirement to a potential suppler?

a. Technical specification
b. Performance specification
c. Conformance specification
d. Standardised specification
REVISION MATERIAL

L4M6- SUPPLIER
RELATIONSHIPS

INSTRUCTIONS:
1. ANSWER ALL QUESTIONS

2. MARK “X” ON THE ALPHABETICAL LETTER

AGAINST THE CORRECT ANSWER FOR
MULTIPLE CHOICE QUESTIONS

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Liato communicated his organisation’s requirements by placing more
emphasis on what the products to be supplied should be capable of doing.
Sewagodimo the assistant procurement officer argued that giving the
supplier a tight specification centred on the accurate measurements, design,
colour and weight was appropriate.
1. What category of specification did Sewagodimo prefer to use?
a) Sample specification
b) Service level agreement
c) Outcome based specification
d) Conformance based specification

2. What category of specification did Liato prefer to use?

a) Sample specification
b) Service level agreement
c) Outcome based specification
d) Conformance based specification

3. Which specification category poses the lowest risk of product failure to

the buying entity?
a) The specification category used by Liato
b) The specification category used by Sewagodimo
c) Both
d) None of the above

4. Which among the following is a qualitative measure of buyer and

supplier relationship?
a) Communication
b) Cost
c) Delivery
d) Quality

5. What form of relationship is where the 'Buyer and supplier agree to

collaborate closely for the long term, sharing information and ideas for
development. There is a very high level of trust and the aim is to find
solutions that benefit both parties without detriment to either'.
a) Co- destiny
b) Single- sourced
c) Outsourcing
d) Partnership

6. The relationship spectrum goes from most distant to closer relationships.

What are the relationships at each end of this relationship spectrum?
a) Adversarial and outsourcing
b) Adversarial and partnerships
c) Adversarial and co destiny
d) Partnership and single sourced

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 7. The table below presents Carter’s 10Cs; key performance indicators
(KPI) applicable when buying complex purchases. Use arrows to match
the descriptions to the correct KPI in table 1 below:

Table 1
KPI DESCRIPTION
Cost Measurement of the supplier’s financial
capability in terms of stability and gearing.
Cash Comparison of the total acquisition
package offered by each supplier
organization and not only the purchase
price Quoted.
Competence Measure of evidence for continuous
improvement and sustainable delivery,
Quality and reliability to reduce the risk of
supply failure or cut.
Capacity Measure the organization’s dedication to
Environmental systems, Quality, timely
delivery and process controls.
Consistency Measuring supplier’s technical capability
to produce the Quality and Quantity we
deserve, by considering availability of
machinery, financial resources and skilled
manpower.
Control Measuring the supplier’s ability of having
the relevant key personnel such as the
management, technical/production,
administrative and professional staff.
Commitment Measures the extent to which effective
management mechanisms and
Information Systems are available to
ensure all activities including those
associated with quality are managed in
the organization.

8. Which among the following are the four E's used to achieve of Value
for money in procurement and supply?
a) Economy
b) Economics
c) Efficient
d) Efficiency
e) Effectively
f) Effectiveness
g) Equity

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 9. Deco is an organisation in which individuals are experts and the
organisation chart is flat. What type of organisation culture as per
Charles Handy’s model exists in Deco?
a) Person culture
b) Role culture
c) Task culture
d) Power culture

10. In examining the four main types of organisational culture, there are
three important qualifications. Which of the following is not one of
these?
a) Organisational cultures are unstable and change constantly
b) Several types of culture usually exist in the same organisation
c) Different cultures may predominate depending on the
headquarters and ownership of the company
d) Organisations change over time

11. A manufacturer of delivery drones is concerned with the change in

government in its dominant market and the new bill to establish a
regulator that has been tabled in the parliament. In addition, it is
worried about the weakness of the currency of its biggest export
market.
Identify which of the two factors that is of concern to the company in
its external environment analysis.
a) Political
b) Technology
c) Opportunity
d) Economic
e) Social
f) Threat
g) Legal

12. According to Porter, if an organization does not follow either a cost

leadership strategy or a differentiation strategy they are:
a) Hybrid
b) Stuck in the middle
c) Focused
d) Competitive.

13. In Porter's Generic Strategies model, a focus strategy involves:

a) Selling a limited range of products
b) Selling to a narrow customer segment
c) Selling to one region only
d) Selling simple products that are cheap to produce

14. Which of the following is a primary activity in Porter's value chain?

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 a) Routines.
b) Control.
c) Marketing and sales.
d) Procurement.
e) Human resource management.

15. Which of the following are primary activities in Porter's value chain?
a) Operations and outbound logistics.
b) Marketing and sales.
c) Human resource management and service.
d) Answers A& B.

16. Pareto is a positioning tool that can be used to separate critical few
suppliers from the trivial many.
a) True
b) False

17. Which of the following are the FOUR possibilities for competitive
advantage as suggested by Michael Porter?
a) Price, differentiation, cost focus and differentiation focus
b) Cost, differentiation, price focus and differentiation focus
c) Price, differentiation, cost focus and differentiation focus
d) Cost, differentiation, cost focus and core competences

18. Which TWO of the following characteristics apply to oligopoly?

a) Many small firms account for a high percentage of industry output.
b) A few large firms account for a high percentage of industry output.
c) The industry is often characterised by extensive non-price
competition.
d) There are no entry barriers

19. Perfect competition occurs in a market where there are many firms
each selling:
a) a competitive product.
b) a capital intensive product
c) a similar product
d) a unique product
e) an identical product

20. Deco is concerned with the recent downturn of the economy and is re-
evaluating its pricing decision. It has now decided to price its products
based on variable cost instead of full cost so as to keep its plant
operating. Which of the following pricing model is Deco using?

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 a) Contribution pricing
b) Market skimming pricing
c) Marginal costing pricing
d) Differential pricing

21. Use arrows to match the business cycle stages to the description in the
table 3 below:

Table 3
Stage Description
Depression Consumption, production, profits
starts to fall; unemployment starts
to rise.
Recovery Consumer spending rises;
investment picks up; prices are
stable; profits and employment
start to rise and confidence grows.
Boom Low consumer demand;
production capacity is unused;
prices are stable or falling; business
profits are low; there is high
unemployment; and business
confidence is low
Recession Consumer spending is rising fast.
Production capacity is reached,
labour shortages, output only
increased by new investment in
labour-saving technology high.

22. A procurement Manager can manage stakeholders and get their best
contributions through working in teams. Apply Tuckman’s team
formation model to identify the stage at which team members begin
to assert themselves and test out roles, leadership, behavioural norms
and ideas?
a) Norming
b) Forming
c) Adjourning
d) Storming
e) Performing

23. The first action a procurement specialist should take when planning to
effectively manage stakeholders is to undertake stakeholder mapping.
Which of the following models is used to perform this process?
a) Force field analysis
b) Mendelow’s power interest matrix

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 c) Carter’s 10Cs
d) Kraljic matrix

24. In connection to question 4 above, what is stakeholder mapping?

a) Process of identifying and classifying suppliers into four quadrants
bases on their product’s level of risk and expenditure to the
organisation
b) Process of identifying and classifying suppliers into four quadrants
bases on their level of interest and influence to the organisation
c) Process of ranking stakeholders beginning with the most important
to the least important
d) Process of determining the amount of dividends to be paid to each
shareholder

25. Identify the major forces analysed by the Cart Lewin’s Force Field
Analysis model when managing conflicts during a change program in
order to influence movement of stakeholders towards the intended
goal?
a) Restraining forces
b) Stakeholder interest
c) Stakeholder influence
d) Driving forces

26. Using Mendelow’s power interest matrix, which of the following would
be an appropriate strategy to manage a stakeholder who has both
high level of interest and influence on procurement plans?
a) Keep informed
b) Keep satisfied
c) Involve
d) Ignore

27. Which among the following is an example of connected stakeholder?

a) Government
b) Shareholders
c) Marketing function
d) Private Media

28. According to Kubler-Ross, suspicion, scepticism, frustration and isolation

are found ion which stage of the change process?
a) Anger & Depression
b) Acceptance & Integration
c) Anger & Denial
d) Shock & Denial

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 29. Which among the following are considered as part of the seven areas
of waste identified by Taichi Ohno?
a) Inventory
b) Transportation
c) Motion
d) Machine

30. Which of the following are recognised conflict resolution approaches

when dealing with key internal stakeholders, where a resolution must
be agreed? Select TWO that apply
a) Avoiding
b) Compromising
c) Accommodating
d) Maintaining
e) Defending

31. Which of the following are the critical variables used by Thomas
Killman in his conflict resolution model?
a) Completion and avoidance
b) Competition and assertiveness
c) Cooperative and compromise
d) Mediation and arbitration

32. According to Kotter, which among the following is not a source of

resistance to change?
a) Top Management Support
b) Parochial self-interest
c) Misunderstanding and lack of trust
d) Low tolerance of change

33. In the context of procurement and supply, risk management is

concerned with which of the following?
a) Demand risk
b) Supply risk
c) Financial risk
d) Competition risk

34. The response to a risk identified as low likelihood but high impact should
be to?
a) Terminate
b) Treat
c) Ignore
d) Create a contingency plan

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 35. The correct response to a risk that is classified as low impact and low
probability of occurrence is:
a) Terminate
b) Treat
c) Ignore
d) Create a contingency plan

36. Use arrows to link the descriptions to the correct conflict resolution
method in teams in the table 2 below:
Table 2
Method Description
Avoiding trying to satisfy the other person’s
concerns at expense of your own
Accommodating trying to satisfy your concerns at the
expense of others
Compromising trying to find an acceptable settlement
that only partially satisfies both people’s
concerns
Competing trying to find a win-win solution which
completely satisfies both people’s
concerns
Collaborating sidestepping the conflict
Mediation and Arbitration Engaging a third party expert to guide
stakeholders through to an agreement

37. Paul & associates enjoyed a good commercial relationship with

Sewagodimo steel Manufacturers for five years until the economy of
the country started to show indicators of recession. Sewagodimo Steel
Manufactures was then sold to Swart Co initially a competitor who later
decided to terminate the relationships with Paul & Associates who is
believed to have been failing to remit payments according to
agreement as adopted by the new supplier. Which among the
following could be the reason for termination of relationships? Identify
Two.
a) Completion of performance
b) Relation violation
c) Economic reason
d) Change of ownership
38. Which among the following are two characteristics of partnering
relationships?
a) Joint performance measurement
b) Co- maker ship of products
c) Win- lose for the buying entity
d) Early supplier involvement
39. The first stage of the partnership lifecycle is

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 a) Initiation
b) Introduction
c) Start
d) Embryonic

40. The decision about which type of partnership is appropriate will

depend upon:
a) Strength and number of Drivers and facilitators both partners have.
b) Spend and risk for the buyer only
c) External and Internal Environment for both partners
d) Company strategy and Procurement maturity

Mini- Case Study- Application of the Kraljic portfolio matrix

Buying entity A takes advantage of its spending power in the market and
decides to use competitive bidding as sourcing strategy because the items
are of high spend and low supply risk. Buying entity B intends to purchase
High spend, high supply risk items while buyer C chose to buy items as and
when required without any future commitments with suppliers. Use the
information in this Mini- case study to answer the following questions:
41. Which of the buying entity is best suited to engage into a partnership
relationships with the supplier?
a) Entity A
b) Entity B
c) Entity C
d) Entity A and B

42. Which quadrant do we place products bought by entity C?

a) Routine
b) Leverage
c) Strategic
d) Bottleneck

43. Which of the buying entities offer greater opportunity to maximise

profit?
a) Entity A
b) Entity B
c) Entity C
d) Entity A and C
44. Which quadrant do we place products bought by entity A?
a) Routine
b) Leverage
c) Strategic
d) Bottleneck

45. The Kraljic matrix would suggest that partnerships may be suitable for:
a) Leverage

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 b) Bottleneck
c) Strategic
d) Routine

46. Which among the following is a reason for failure of partnership?

Identify two.
a) Availability of resources
b) Lack of value-added benefits
c) Logistics and distance barriers
d) Effective conflict management

47. Partnership arrangements may be suitable where there is:

a) Restricted markets
b) Growing markets
c) Fast Changing technology
d) Stable technology
e) A need for new products and services
f) Technically complicated supplies
g) Many suppliers
h) Low

46. Which of the following is a situation best suited for an alliance?

a) Price Volatility
b) Synergistic collaborative design opportunities
c) Demand Volatility
d) High switching likelihood with high switching costs
e) No Partnership Alliance capable supplier for the item

46. Partnership arrangements may be suitable where there is:

a) Restricted markets
b) Growing markets
c) Fast Changing technology
d) Stable technology
e) A need for new products and services
f) Technically complicated supplies
g) Many suppliers
h) Low risk
47. Which of the following are outcomes that collaborative relationships
tend to foster
a) Longer term contracts
b) Short term contracts
c) More suppliers
d) Reduction of risk for suppliers
e) Reducing total costs
f) A focus on price
g) Improvement of processes
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 h) Use of international standards

48. A key difference between a partnering relationship and traditional

relationships is:
a) No tendering
b) No contract
c) No disagreements
d) No Negotiations

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