Question 1

According to studies completed by Reeves, Moose and Venema in 2014, which of the following was proven to be true with regards to the BCG matrix?

Accepted Answer

B

Explanation: Reeves, Moose and Venema (2014) established that products move through the four quadrants of the BCG matrix more quickly in the modern business environment compared to the past. This is a reflection of faster innovation cycles, market saturation, and increased competition. The other three statements are the opposite of what their research proved. Reference: CIPS L5M6 Study Guide, p.120

Question 2

A 'should cost' analysis and value analysis can be completed on items procured by a buyer. Which of the following categories of spend are these tools most applicable for?

Accepted Answer

C

Explanation: These tools are most applicable for leverage items, which typically have high spend but low supply risk. Buyers can use cost breakdowns and value analysis to reduce prices and improve cost-efficiency. Reference: CIPS L5M6 Study Guide, p.103

Question 3

What can the IACCM help a Category Manager with?

Accepted Answer

C

Explanation: The International Association for ContractCommercial Management [IACCM], now known as WorldCC, provides frameworks to help organisations select the most suitable sourcing and contracting models. For category managers, this is particularly valuable when deciding whether a transactional, relational, or investment-based model best fits the organisation’s needs. It does not directly choose suppliers or perform market analysis; rather, it guides decision-makers on the structural relationship with suppliers. For example, IACCM provides tools to decide whether to adopt outcome-based contracts, performance partnerships, or traditional transactional agreements. Benchmarking may be a separate exercise, but sourcing models determine the governance and risk- sharing approach that underpins supplier relationships. CIPS encourages procurement professionals to be familiar with IACCM’s role, as it reinforces the need for strategic selection of sourcing models rather than a one-size-fits-all approach. [Ref: CIPS L5M6 Study Guide, p.31 – IACCM and sourcing model selection]

Question 4

What is contract leakage?

Accepted Answer

D

Explanation: Contract leakage refers to the difference between the benefits forecasted before awarding a contract and the actual benefits realised during its execution. For example, savings predicted during tendering may not materialise due to supplier underperformance, scope creep, or poor contract management. This phenomenon highlights the importance of post-contract management and continuous monitoring of supplier performance. Category managers must ensure that expectations set during procurement are followed through by tracking delivery, compliance with terms, and value creation. Tools such as KPIs, SLAs, and audits help minimise leakage by ensuring accountability. Ultimately, failure to address leakage can lead to financial loss, reduced trust, and missed opportunities for improvement. By focusing on contract outcomes as well as initial savings, procurement ensures that strategic objectives are consistently met. Reference: CIPS L5M6 Study Guide, p.145

Question 5

Which category of spend item would be most suitable to purchase through an e-auction?

Accepted Answer

B

Explanation: Leverage items [low supply risk, high financial impact] are best suited for e-auctions. Buyers can use competitive bidding to drive down prices when multiple suppliers exist. By contrast: Bottleneck items [low value, high supply risk] are not suited as choice is limited. Strategic items require partnership and collaboration, not price-only competition. Non-critical items don’t justify the effort of auctions. [Ref: CIPS L5M6 Study Guide, p.97 – Kraljic Portfolio Matrix]

Question 6

Teddy Ltd has created a virtual cross-functional procurement team across divisions. What could become a barrier to success?

Accepted Answer

B

Explanation: The key barrier is language and the use of acronyms. In cross-functional, international, or virtual teams, communication challenges can hinder collaboration. Procurement often uses specialised terminology and acronyms that other functions or non-native speakers may not fully understand. This can create confusion, misalignment, and inefficiency. Geography is less of an issue in virtual teams, as digital platforms enable collaboration across locations. Time and cost can be challenges, but the study guide specifically identifies language and acronyms as barriers. Effective category managers overcome this by using clear, simple communication and ensuring shared understanding of procurement terms. This reduces misunderstandings and ensures that all team members—finance, engineering, operations—can contribute effectively. Cross-functional teamwork is central to category management success, but only if barriers to collaboration are proactively addressed. [Ref: CIPS L5M6 Study Guide, p.64 – Cross-functional teams and barriers]

Question 7

SIC codes are sets of four-digit codes used to classify what?

Accepted Answer

D

Explanation: SIC [Standard Industrial Classification] codes are numerical codes used to classify industries. For example, 1000 = mining, 1500 = construction. These codes help in categorising spend, benchmarking, and market analysis but are not intended for memorisation. [Ref: CIPS L5M6 Study Guide, p.82 – SIC codes]

Question 8

DRAG DROP
Randoxx Ltd is a manufacturing company which has four main categories of expenditure:
Category 1: The market of this category is highly innovative and has rapidly changed over the past
five years. There are many suppliers who provide similar products at similar price points.
Category 2: This category of spend is for highly specialised products and it is important to Randoxx
that the products are carbon neutral. Because of this, there is a reduced number of suppliers who
provide products to this category and Randoxx has little influence over the price that they pay.
Category 3: This category of spend is for natural resources which are only found in very few parts of
the world. Because of this Randoxx imports all of these items from one country abroad and currency
fluctuations have a huge impact on the profit margin of this category spend.
Category 4: This is a highly technical product which has a patent. It is used in the creation of laptops
and phones and it would be impossible to make these with a different product. Due to the growing
population Randoxx forecasts that demand for this product will increase.
Task:
Complete the table below by identifying each category’s Porter’s Force driver and STEEPLE factor
challenge. Each response should be used only once.
L5M6 practice exam questions

Accepted Answer

Explanation: https://kxbjsyuhceggsyvxdkof.supabase.co/storage/v1/object/public/file-images/_CIPS_L5M6/page_37_img_2.jpg Category 1: Highly innovative, many suppliers with similar products at similar price points Porter’s Force: Competitive Rivalry – High STEEPLE Factor: Technological Explanation (150–200 words): Category 1 operates in a market that is highly innovative and subject to rapid technological change. Innovation means suppliers are constantly developing new features or solutions, making technology the primary STEEPLE factor. Additionally, because there are many suppliers offering similar products at similar price points, competitive rivalry is intense. Buyers can switch easily, and suppliers must compete aggressively on features, pricing, and differentiation. This combination of high rivalry and technological change creates both opportunity and risk for Randoxx. On one hand, innovation drives new solutions that can be leveraged; on the other hand, it increases pressure to manage supplier relationships strategically. Randoxx must monitor technological trends closely while maintaining competitive sourcing strategies to manage this highly dynamic category. (Ref: CIPS L5M6 Study Guide – Porter’s Five Forces, p.112–116; STEEPLED Analysis, p.109)

Question 9

When completing a tender exercise, in addition to price and quality, which factors may also be considered?

Accepted Answer

A

Explanation: The correct answer is CSR [Corporate Social Responsibility]. In modern procurement, tenders are no longer evaluated solely on price and quality. Organisations increasingly consider ethical, environmental, and sustainability performance as part of supplier evaluation. CSR factors include labour practices, carbon footprint, use of sustainable materials, and compliance with ethical trading standards. Other options represent different procurement tools but are not additional evaluation factors: TCO [Total Cost of Ownership]: A financial analysis tool, not a tender factor. ITT [Invitation to Tender]: A formal document, not a factor. PQQ [Pre-Qualification Questionnaire]: Used for initial supplier screening, not tender evaluation. Integrating CSR into tenders reflects the wider move towards responsible procurement. It ensures suppliers align with the buyer’s values and long-term risk management priorities. [Ref: CIPS L5M6 Study Guide, p.39 – CSR considerations in tenders]

Question 10

BikeFace is a leading manufacturer of bicycles. Which of the following would be considered direct costs for this organisation? Select TWO.

Accepted Answer

Explanation: Direct costs are those directly attributable to the production of goods or services. For BikeFace, raw materials such as rubber (used in tyres) and labour (workers assembling bicycles) are direct costs because they contribute directly to finished products. By contrast, advertising spend and IT systems are indirect costs as they support operations but do not directly form part of the bicycle. Category managers must distinguish between direct and indirect costs to design effective sourcing strategies. Direct categories often warrant closer supplier collaboration and longer-term contracts due to their critical role in production. Reference: CIPS L5M6 Study Guide, p.83 Thank you for your visit.

Question 11

The process of designing a product with a trusted supplier in order to eliminate costs that may appear at the delivery stage is known as which cost management strategy?

Accepted Answer

D

Explanation: The correct term is Cost Out, a proactive cost management approach where the buyer collaborates with the supplier during the design phase to eliminate unnecessary costs before they arise. This ensures efficiency and value creation throughout the product lifecycle. For example, designing packaging to minimise waste or using standardised components to avoid expensive customisation. This differs from: Cost acceptance, where the buyer accepts the supplier’s price without analysis. Cost engineering, a broader process of optimising costs through design and process evaluation. Cost down, which typically involves reducing costs after production by analysing processes, renegotiating contracts, or improving efficiency. Cost Out is especially relevant for strategic or high-value categories where innovation and collaboration with suppliers can generate long-term savings. It is consistent with category management’s emphasis on strategic supplier partnerships. [Ref: CIPS L5M6 Study Guide, p.80 – Cost Out vs Cost Down strategies]

Question 12

Ted is a potato farmer from Devon. He sells his potatoes to many local customers including
restaurants, wholesalers and manufacturers. For one customer, Ted is keen to drive a premium price
for his potatoes as he is confident the customer can afford to pay more. What type of customer is this
to Ted?

Accepted Answer

B

Explanation: This is an exploitable customer, according to the Supplier Preferencing Model. Suppliers may attempt to increase profit margins with customers they perceive as less important but who have fewer alternatives and can afford to pay more. Reference: CIPS L5M6 Study Guide, p.99

Question 13

What form of procurement is Category Management?

Accepted Answer

A

Explanation: Category Management is a strategic approach to procurement. According to CIPS, it is defined as “a rigorous fact-based, end-to-end process for proactively collaborating with stakeholders to develop and implement sourcing strategies that deliver significant value from an organisation’s external spend.” Unlike tactical or reactive procurement, which focuses on immediate needs or firefighting, category management emphasises long-term planning, data analysis, supplier relationships, and alignment with business objectives. It goes beyond simply planning purchases in advance [which could apply to “planned procurement”] by integrating market intelligence, risk assessment, and value optimisation. Being strategic means that category management seeks not only cost savings but also innovation, sustainability, and resilience. It requires cross-functional collaboration and the use of analytical tools like Kraljic matrices, total cost of ownership, and supplier segmentation. Therefore, the most accurate categorisation is strategic procurement, not merely tactical or planned. [Ref: CIPS L5M6 Study Guide, p.2 – Category Management as a strategic approach]

Question 14

What is a 'black swan' event?

Accepted Answer

B

Explanation: A black swan event is an unexpected and rare occurrence with significant impact. Examples include the 2013 horse meat scandal in the food industry, which was unforeseen and highly disruptive. Reference: CIPS L5M6 Study Guide, p.104

Question 15

In which section of a balance sheet would you find the term “goodwill”?

Accepted Answer

B

Explanation: Goodwill is found under Non-current assets in a balance sheet. Goodwill arises when one company acquires another for a value greater than its tangible assets, reflecting intangible benefits such as brand reputation, customer loyalty, patents, or strong supplier relationships. For example, if a company is valued at £10 million based on tangible assets but is purchased for £15 million, the £5 million difference is recorded as goodwill. This asset remains on the balance sheet until impaired [e.g., if the acquired brand loses value]. It is not a current asset because it cannot be quickly liquidated within one year. Nor is it a liability [current or non-current] since it represents value, not debt. For procurement and category managers, goodwill can signal a supplier’s market position, brand strength, and long-term stability. It highlights how intangible assets, though harder to measure, play a role in supplier evaluation and business acquisitions. [Ref: CIPS L5M6 Study Guide, p.183 – Financial terms and balance sheet analysis]

Free CIPS L5M6 Actual Exam Questions