CIPS Updated L4M2 Exam Questions and Answers by jad

Explanation

In the scenario, ABC Ltd has the following characteristics:

- Large investment in facilities and machinery

- Access to skilled workforce

- Mass production.

This company is a manufacturer. Manufacturing is an industry that makes products from raw ma-terials by the use of manual labour or machinery and that is usually carried out systematically with a division of labour.

Manufacturing requires investment in machinery and access to a suitably skilled workforce as well as materials and components.

Detailed Explanation:

Dual or multiple sourcing introduces competition, reducing the sole supplier's bargaining power and leading to cost reductions. Framework agreements (A) or economies of scale (D) may not address the immediate need to reduce rates. Reference: CIPS Level 4, Sourcing Strategies.

Explanation

The instrument plays a crucial role in steel manufacturing because it presents in the majority of products, in which case lacking this instrument would have significant impact on the organisation's output (production lines stop or damaging other machine). Otherwise, the risk of supply is high because there is limitation in supply. Therefore, it is considered as a strategic item in term of Kraljic's portfolio matrix. Procurement manager should form partnership with suppliers to maximise the value.

The following graph illustrates Kraljic's portfolio matrix:

Comprehensive and Detailed Explanation (from CIPS L4M2 – Market Management)

The number of suppliers and market concentration determine competitiveness.

A market with many suppliers tends to be more competitive; fewer suppliers increase supplier power and reduce price competition.

Hence, Option C correctly identifies a key factor in market competitiveness.

Relevant L4M2 references:

Section: “Assessing supply market structures”

Model: “Porter’s Five Forces – Supplier Power”