CIPS Updated L4M6 Exam Questions and Answers by vincenzo

Profitability is impacted when product costs rise without corresponding price adjustments. Understanding cost-price relationships is key to managing profitability in procurement.

Explanation

The correct answer is ‘The CEO is a key player- so it is important he is involved early in the process’. The CEO has high power and high interest which puts him in the top right-hand corner of Mendelow’s Stakeholder Matrix (p.81). CIPS says Key Players should be involved early in the procurement process (p.82).

Internal stakeholders are individuals or groups within an organization who are directly involved in its operations and decision-making processes. The finance director plays a crucial role in budgeting and financial planning, while maintenance engineers are essential for ensuring equipment functionality and efficiency. Both are integral to the organization's internal operations, as outlined in the CIPS L4M6 study materials.

Explanation

Fred should hold a competition as this is a ‘key way of achieving value for money’ p.67. Fred shouldn’t put a business case together to make the product in-house without doing a make vs buy analysis, and that analysis showing make is the way to go. As the firm buy in 100s of components, it’s very unlikely that making the component in-house would bring ‘value for money’. He should also be careful of only looking at current suppliers or known suppliers- the best supplier of this new component might be unknown to the engineering firm at present.