L4M4 Ethical and Responsible Sourcing Question and Answers

Explanation

Request for Quotations can include more details than just prices. They can include specs and technical drawings and samples. It's like saying 'we can give you this price with these conditions'.

The other no answer is wrong because RfQ don't always include samples. A sample wouldn't be possible for a quote for an IT consultancy piece of work.

Explanation

The lowest risk to the buyer is 'delivered duty paid'. This is because the supplier does all the work transporting the items to the buyer's premises. Incoterms_2020_chart | Intersped

Explanation

they are stock markets.

What is the FTSE 100 Index? Complete Beginner's Guide (moneycheck.com)

BSE SENSEX – Wikipedia

Explanation

Pregnant women and children are considered 'disadvantaged' by the UN. The other groups the UN call disadvantaged include; the elderly, the immunocompromised, those with disabilities and those living in poverty. This is the list given in the study guide.

A company could help disadvantaged groups in several ways. Firstly by offering employment (obviously not to the children). It could also include helping these groups as part of a Social Value out-come or community benefit scheme.

Explanation

A risk of pre-planning an audit is the supplier has time to prepare for it. It's a good thing in that they can get their paperwork in order but the downside is they can overprepare so you don't get a realis-tic representation of what they're doing. One way they can do this is coaching staff in what to say to the auditors.

Explanation

Raja should send out a RFI- request for information; this will allow him to gain feedback from the marketplace prior to tender.

Speaking only with current suppliers will not provide all the information Raja requires.

He should not send out a request for quotation since he is still conducting market research

An open competition would be how he can procure, after he's completed his research

Explanation

A RFI typically finds the following information from potential suppliers; ethical and sustainability policies and their capacity / capability to fulfil a contract. It could also include financial position, mission and vision.

Explanation

The correct answers are innovation, on time in full deliveries and sustainability.

The other options are pricing mechanisms rather than 'added value'. Added Value is giving the buyer something extra that's not necessarily financial. It can be as simple as delivering orders quicker than expected, or having a dedicated customer service phone line. Something that makes their lives a little easier.

Explanation

Intracompany trading is when two departments in the same company do trading. AND when two companies owned by the same parent company do trading.

INTRA means 'within' - so it's doing business with yourself.

Explanation

The correct answer is 'no- quoting in the supplier's currency increases the risk for the buyer'. This questions comes up in a variety of formats in the exam. Remember; if the price is in your own currency (most examples in the exam are given in £) there is less risk than if the prices are quoted in a foreign currency. This is because exchange rates fluctuate; if the price is in £ you always know what you're paying, if it's in another currency the price can change daily depending on if the exchange rate compared to £ has gone up or down.

Explanation

Exchange rates and tariffs are associated with international sourcing.

The other options are concerns for both local sourcing and international sourcing.

Explanation

Greg needs to use a gearing ratio. Gearing is a measure of how the business is being funded and is based on the ratio of debt to equity Gearing comes up a lot in the exam. Also make sure you know what Return on Investment, Acid Test and EBITDA are.

Return on Investment (ROI): How to Calculate It and What It Means (investopedia.com)

EBITDA: Definition, Calculation Formulas, History, and Criticisms (investopedia.com)

Acid-Test Ratio: Definition, Formula, and Example (investopedia.com)

Explanation

the correct answer is 'marketplace competition'.

Ethical practice is about prohibiting corrupt and unfair practice, rather than issues of supply and demand. Although being in a cartel is 'unethical behavior' this option doesn't fully answer the question which talks about limiting supply- this is related to marketplace competition.

Explanation

The correct answer is 'gearing ratio'.

Gearing measures how much of a company's funding is based on long-term debt or loans- this would be affected by a steep rise in inflation. If a company has a mortgage on their offices or facto-ry and they need to remortgage and inflation has gone up a lot- they'll be paying a lot more on their mortgage. This will severely effect the gearing ratio as they'll have more outgoings than incoming.

Gross profit margin COULD be affected by inflation, for example if you've got hyper-inflation and the country goes into recession and people stop buying your product. However, this answer isn't al-ways right and depends on many factors- the industry, the product, the company etc, so for the purpose of CIPS should be discounted. There are many industries which are immune to inflation.

Explanation

A supplier who follows the CIPS Code of Conduct is more likely to meet the buyer's needs is the correct answer.

The other options are wrong:

1) Compliance with Codes of Conduct from professional bodies is optional. E.g. CIPS - no organi-sation is forced to comply with CIPS.

2) Unethical behaviour is not impossible to detect, it may be difficult but with correct due diligence and things like audits it's completely possible

3) ISO 14001 is quality management so is irelevent.

Explanation

Social value is about benefitting the local community / society. Therefore of those options listed, use of local labour is the most appropriate to consider.

Explanation

If tenders are received by electronic submission exclusively, the buyer can reduce the timescale. On average the time for a standard tender submission can be reduced by 5 days if bids are submitted electronically.

*Note* this is based off current PCR Regs 2015 which are being superseded in October 2024 by new legislation. We currently don't know what the new regs will say on this. If it's different, my best guess is CIPS will remove any question about it from their exam- because the study guide would be wrong and that would lead to complaints.

Explanation

you would use a restricted approach when interest is likely to be high. The buyer needs a method of de-selecting unsuitable bidders and creating a shortlist of acceptable organisations.

For complex requirements you could use both an open or restrictive tender- the difference between the approaches is about how many bids you're likely to get rather than the complexity of it.

Explanation

96 is the correct answer- weighted point systems should add up to 100 (as in 100%)

Explanation

The three pillars of sustainability are profit, people and planet. This may also be referred to as social, economic and environmental.

Explanation

The correct answer is 'the supplier has a lot of long-term debt'. Gearing is a measure of how the business is being funded and looks at the ratio of debt to equity. For example if they have taken out lots of loans and mortgages, this would equate to a lot of debt which means a poor gearing ratio.

Gearing is a hot topic for the exam.

Explanation

The correct answer is importation rules and tariffs. This is because in offshoring some of the manufacturing will be done in another country then shipped back to the UK. The products will have to go through customs so may be subject to tariffs and duties.

Steff's not exporting anything in the scenario and paying electronically and getting lower costs are not RISKS.

Explanation

ABC should do a 'root cause analysis' to find out where the issue has come about, and why. From there, once they know what the breach is and how serious it is, they can suggest corrective action.

They can't jump straight to terminating the contract or seeking damages as it's not the supplier itself but rather the subcontractor. Also that would be really hasty considering we don't know what the issue is and what the market conditions are like. That supplier may be the only one who can provide the product. We also don't know if the supplier knows about the issue themselves.

Explanation

Continuity of supply for the buying organisation is an advantage of TUPE regulations.

TUPE is the Transfer of Undertakings (Protection of Employment). It's when the workforce / em-ployees of one company go to work for another one, usually after their company is bought out. They're transferred to the new company along with the furniture and buildings.

TUPE is UK specific. You don't need to know too much details about it for this exam - just what it is and the benefits. The main benefit is people don't lose their jobs when their company gets bought out. Basic guide to TUPE (pinsentmasons.com)

Explanation

Shareholder Equity = Total Assets - Total Liabilities

Explanation

A bribe is anything that is of value to the recipient. It’s commonly money, but could also be an item such as a car, or doing someone a favour such as hiring their son.

Explanation

The Pareto Principle can be used when considering changing a supplier. It helps to categories suppliers by how strategically important the item is that they provide to the business.

Explanation

economic indices and comparison websites are secondary sources of data. The other three are examples of primary sources of data.

Primary= you get the data yourself

Secondary = you find the data from somewhere else

Explanation

An ITT would include details on the awarding body (usually a brief overview of the buyer), the deadline (bids must be received by a certain date) and qualifications required (such as ISO requirements or competency certificates of staff members if it's a service contract). You wouldn'tfind pricing schedules in an ITT (this would be provided by the supplier in response to the ITT), nor would you find risk assessments (a supplier might be asked to provide one as part of the quality assessment of the tender though).

Invitation To Tender Simply Explained I Thornton & Lowe (thorntonandlowe.com)

Explanation

The correct answers are; suspiciously low labour costs, workers living on site and poor quality products (as this signals that the workforce may be unskilled).

A low score on the CPI is a good thing (high scores are more likely to signify slavery concerns) and just because someone speaks English as a second language doesn't mean you automatically need to be suspicious. That would be prejudice.

Explanation

Coercion is not a type of fraud. The other three are.

Explanation

At supplier selection stage, unsuitable suppliers should be removed (those that do not add value or pose a risk). At develop strategy stage you're not even looking at suppliers yet- you're just deciding what you need. At contract award and asset management it's too late.

CIPS procurement cycle - Procurement Supply Cycle | CIPS