CIPS Level 4 – Diploma in Procurement and

Supply
Module 1 – Scope and Influence of Procurement
and Supply

SAMPLE EXAM QUESTIONS

Leading global excellence in procurement and supply

INFONT is a reputable logistics company with headquarters at its multimillion dollar Distribution Centre located just
ten miles from the country’s main sea port. The port handles all bulk imports and exports of its clients. INFONT also
owns two warehouses within the country and has contracted an agent in each of the other five countries in the
region. The services INFONT provides to its clients include warehousing, packaging and transportation of their
finished products or production materials. It owns and operates transport vehicles, folk lift trucks and other material
handling equipment (MHE). INFONT uses 10% of its warehouse space for its maintenance, repair and operational
(MRO) requirements such as oils and tyres for the vehicles; pallets and plastic sheets for repacking split deliveries to
clients; etc. In order to maintain the high level of service to its clients, a substantial part of the operating
expenditure budget is allocated to staff and consultancy expenses. In addition significant capital expenditure is also
spent on a range of storage and handling equipment, vehicles and IT infrastructure. INFONT’s agents are
contractually required to maintain the same level of space for their MRO requirements.

Some well-known retailers and manufacturers are loyal clients and they rely on INFONT’s high quality logistics
services for their own successful competition in the market. INFONT’s business is therefore stable and growing as
exemplified in the data below extracted from its accounts and budgets:

Extracts from the Financial Statements and Budgets: Infont Logistics International Ltd
Year 1 $000 Year 2 $000 Next Year (Plan) $000
Turnover 33400 32800 30000
Gross Profit 9350 9840 9000
Operating Expenditure 4010 4920 6500
Capital Expenditure 1110 2060 9850

However, due to concerns over deteriorating agency service levels, INFONT has decided that next year it will not
renew the contract with its agent in the neighbouring country. Instead it will purchase and directly operate its own
warehouse in that country. This is a major decision that will require a complex analysis of INFONT’s budget which
involves many categories of spend to be considered in acquiring and operating the new warehousing facility.

Describe FIVE distinctive features of capital procurements, using examples from INFONT scenario.

[25 marks]

LO: 1
AC: 1.1

2
L4M1 Exam Exemplar Questions Dec 2018
Q2

(a) Identify the main stages of a sourcing process (also known as the purchasing or procurement cycle).

[9 marks]

LO: 2
AC: 2.1

(b) Describe FOUR benefits of using electronic systems in the sourcing process.

[16 marks]

LO: 2
AC: 2.3

Q3 Explain FIVE reasons why it is important to maintain effective governance standards within the procurement
function.

[25 marks]

LO: 3
AC: 3.1

3
L4M1 Exam Exemplar Questions Dec 2018
Q4 Milkshake Press

The executive board at Milkshake Press set its new three year business strategy to “increase profitability by
improving effectiveness and efficiency across all business areas”. To help achieve this, a new head of procurement,
Martina Schweer, was appointed to ensure that procurement activities were aligned to the new strategy. Martina
arranged a meeting with the procurement team to start discussions about the strategy, but was surprised to learn
that the team had not previously considered overall profitability beyond negotiating the lowest price with suppliers.

Milkshake Press is a brand of milkshake mix sold in cafes and retail outlets in the United Kingdom and China. With
offices in China and the UK, Milkshake Press directly employs 250 staff and has a procurement team of eight, three
of whom are based in China.

As part of the strategy Milkshake Press have developed a business plan which focussed on innovation. The most
popular flavours were chocolate, banana, and strawberry and the brand has successfully increased its market share
by 5%, by introducing new flavours like lime and cherry. They also undertook a successful re-branding exercise which
increased their market share in China by 15%.

Discuss FIVE ways in which the objective of profitability at Milkshake Press, might impact on its procurement
activities.

[25 marks]

LO: 4
AC: 4.3

4
L4M1 Exam Exemplar Questions Dec 2018