CIPS L4M2 Practice Exams
Last updated on Oct 23,2026- Exam Code: L4M2
- Exam Name: Defining Business Needs
- Certification Provider: CIPS
- Latest update: Oct 23,2026
Which of the following might be the consequences of under-specification? Select TWO that apply:
- A . Few suppliers can supply the full range of features
- B . Additional cost to rework
- C . Unfit products or services
- D . Poor competition between suppliers
- E . Higher cost due to inessential features
B, C
Explanation:
Main risks involved in an under-specified requirement
• The product or service is not fit for use since it does not match the actual needs
• Higher cost due to corrections or reworks (proposal evaluations, scope or work monitoring, change in insulation materials or systems, reduced productivity, etc.).
• Higher operating cost on many fronts: process control, energy consumption, maintenance, etc.
• Other problems like corrosion under insulation, mold development, safety-related concerns, etc. LO 3, AC 3.3
Which of the following factors might prompt an organisation to procure an alternative product?
Select THREE that apply:
- A . Brand loyalty
- B . Relative value to money between options
- C . Buying organisation’s propensities to change
- D . Easy access to distribution channel
- E . Threat of retaliation
- F . Switching cost
B, C, F
Explanation:
According to Michael Porter, the threat of substitution, is a function of three factors:
• The relative value/ price of a substitute compared to an industry’s product
• The cost of switching to the substitute
• The buyer’s propensity to switch
(Porter, Michael E.. Competitive Advantage: Creating and Sustaining Superior Performance (p. 278). Free Press. Kindle Edition.)
Reference: CIPS study guide page 92-97
LO 2, AC 2.2
When analysing competitive forces in a market, which of the following can be seen as a supplier having low bargaining power? Select TWO that apply.
- A . Low switching costs between products
- B . A high number of substitutes available
- C . Low competition in the marketplace
- D . High quality products
- E . Low levels of innovation
A conformance specification with designs should contain more detail than a performance specification with outputs. Is this statement TRUE or FALSE?
- A . True, the supplier will need to know exactly what is required
- B . False, outputs are usually easier to describe than designs
- C . False, the outputs should include detailed drawings of the requirement
- D . True, the supplier will need to allow for innovation
A conformance specification with designs should contain more detail than a performance specification with outputs. Is this statement TRUE or FALSE?
- A . True, the supplier will need to know exactly what is required
- B . False, outputs are usually easier to describe than designs
- C . False, the outputs should include detailed drawings of the requirement
- D . True, the supplier will need to allow for innovation
GE has developed TurboProp engine that is made from over 850 metal parts. These parts are sourced from many suppliers. Value of spend on these parts make up 73% of total spend. Any delay in receiving a part will cause a bottleneck around the production of the engine.
Which of the following should be the best course of action of GE’s CPO?
- A . Drive down prices by using market competition
- B . Increase production
- C . Part standardisation
- D . Reduce delivery cost
C
Explanation:
In this scenario, the final product has vast range of parts. The second problem is lacking any part can cause disruption to the production process. So GE has 2 things to do: to reduce the part varieties, and secure the supply. Part standardisation is the best option here. It can simplify the range of parts or materials used, and simultaneously, it expands the supply base of GE. If a supplier fails to deliver the part, the company always has other options to replace.
Costs are also a concern, but bottleneck in production imposes a serious risk to the organisation.
Driving down costs using market competition cannot be a foremost priority.
Increasing production may help to reduce bottleneck. However, it will also increase the inventory of finished products and unnecessary upkeep costs.
LO 3, AC 3.4
GE has developed TurboProp engine that is made from over 850 metal parts. These parts are sourced from many suppliers. Value of spend on these parts make up 73% of total spend. Any delay in receiving a part will cause a bottleneck around the production of the engine.
Which of the following should be the best course of action of GE’s CPO?
- A . Drive down prices by using market competition
- B . Increase production
- C . Part standardisation
- D . Reduce delivery cost
C
Explanation:
In this scenario, the final product has vast range of parts. The second problem is lacking any part can cause disruption to the production process. So GE has 2 things to do: to reduce the part varieties, and secure the supply. Part standardisation is the best option here. It can simplify the range of parts or materials used, and simultaneously, it expands the supply base of GE. If a supplier fails to deliver the part, the company always has other options to replace.
Costs are also a concern, but bottleneck in production imposes a serious risk to the organisation.
Driving down costs using market competition cannot be a foremost priority.
Increasing production may help to reduce bottleneck. However, it will also increase the inventory of finished products and unnecessary upkeep costs.
LO 3, AC 3.4
Which of the following is a social factor that a buyer should take into account when reviewing responses to a specification?
- A . The age of the machinery being used by the supplier
- B . The emissions produced by the supplier’s machinery
- C . The available labour in the supplier’s geographic location
- D . The logistical infrastructure available to the supplier
Which of the following can directly affect labour variance? Select TWO that apply:
- A . Wage rate per hour
- B . Inflation
- C . Company’s budget
- D . Overhead expenditure
- E . Overtime
A, E
Explanation:
Labour variance refers to a situation in which actual costs of labor differ from projected or budgeted labor costs. This concept is most commonly applied in manufacturing environments.
Labour variance either results from efficiency or rate discrepancies. Efficiency variance results when actual time worked is more or less than budgeted time for a project. Rate variance means you paid more per hour worked than expected. This may occur with overtime pay or when you have higher paid employees on a project than projected. Labour variance is fairly typical, but modest variance is usually not a big factor in manufacturing, because materials and other production costs are often much higher.
LO 1, AC 1.4
Which of the following can directly affect labour variance? Select TWO that apply:
- A . Wage rate per hour
- B . Inflation
- C . Company’s budget
- D . Overhead expenditure
- E . Overtime
A, E
Explanation:
Labour variance refers to a situation in which actual costs of labor differ from projected or budgeted labor costs. This concept is most commonly applied in manufacturing environments.
Labour variance either results from efficiency or rate discrepancies. Efficiency variance results when actual time worked is more or less than budgeted time for a project. Rate variance means you paid more per hour worked than expected. This may occur with overtime pay or when you have higher paid employees on a project than projected. Labour variance is fairly typical, but modest variance is usually not a big factor in manufacturing, because materials and other production costs are often much higher.
LO 1, AC 1.4